Aaron's: Household Goods for the U.S. Base of the Pyramid

Michael  Chu; Charles Augustus Smithgall IV

Case | HBS Case Collection | September 2010

Aaron's: Household Goods for the U.S. Base of the Pyramid

by Michael Chu and Charles Augustus Smithgall IV

Abstract

With $2.5 billion system-wide revenues, Aaron's, a major rent-to-own supplier to the U.S. base of the pyramid, continues to grow in the recession, but CEO R.C. Loudermilk, Jr. wonders how long the company can sustain the fast growth rate of its past. Founded in 1955, and publicly listed since 1982, Aaron's success has paralleled the emergence of the rent-to-own industry as a major channel for the lower income U.S. population to access durable household goods. In this space, Aaron has only one other large national rival, Rent-A-Center. As he faces Aaron's future growth, Loudermilk must consider continuing with the basic business model, follow his competitor into expanding the product line, or tap into underserved foreign markets. At the same time, the entire rent-to-own industry in the U.S. is coming under attack by consumer advocates and politicians as the nation continues to battle a deep economic crisis.

Keywords: Fairness; For-Profit Firms; Renting or Rental; Financial Crisis; Demand and Consumers; Social Enterprise; Income; Goods and Commodities; Competitive Strategy; Growth and Development Strategy; Consumer Products Industry; United States;

Format: Print

28 pages

Educators Purchase

Citation:

Chu, Michael, and Charles Augustus Smithgall IV. "Aaron's: Household Goods for the U.S. Base of the Pyramid." Harvard Business School Case 311-047, September 2010.

After long dominating Mexican microfinance, Compartamos Banco faces the emergence of fintech, just as for the first time its loan portfolio and clients have declined. Enrique Majós, CEO of GENTERA, the bank´s parent company, is keenly aware of the profound changes since the Compartamos IPO in April 2007, when it was valued at $1.5 billion and became the first bank wholly dedicated to microfinance to be quoted in a major stock exchange. Since then, the market has become intensely competitive, with both large established institutions and new entrants vying for the same customers. Simultaneously, the digital era has spawned fintech, threatening to disrupt Compartamos’ highly successful model but also providing opportunities for the bank to reshape it. While challenged to manage key innovation within a leading incumbent, Majós must consider whether to commit his team to a major cost reduction in the next few years to his board of directors at their next meeting at the end of the month.

With a breakthrough cure for Hepatitis C listing in the U.S. at $1,000/pill, Gilead must now solve the issue of making it available to patients across the world, much as it did for its blockbuster HIV/AIDS antiretrovirals. For Erik Musalem, the new general manager of Gilead Mexico, the challenge was complicated by operating in a middle-income country, where Gilead’s terms for more vulnerable nations did not apply. For all practical purposes, Musalem had only one customer for his company’s Hep C medicine: Mexico’s public health system and the National Pricing Commission that set prices annually for the entire sector. With no lack of priorities competing for the finite resources of the public health sector, Musalem’s charge was to devise the strategy that in the long run would maximize access to the cure in Mexico while protecting the financial strength of Gilead Sciences, Inc.

Faculty & Research

Aaron's: Household Goods for the U.S. Base of the Pyramid

Abstract

Citation:

About the Author

More from the Author