Aaron's: Household Goods for the U.S. Base of the Pyramid SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Aaron's: Household Goods for the U.S. Base of the Pyramid
To maximize their effectiveness, color cases should be printed in color.With $2.5 billion system-wide revenues, Aaron's, a major rent-to-own supplier to the US 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 US 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 US is coming under attack by consumer advocates and politicians as the nation continues to battle a deep economic crisis.
Authors :: Michael Chu, Charles Smithgall
Topics :: Leadership & Managing People
Tags :: Ethics, Recession, Social enterprise, Social responsibility, Strategy execution, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis
Swot Analysis of "Aaron's: Household Goods for the U.S. Base of the Pyramid" written by Michael Chu, Charles Smithgall includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aaron's Rent facing as an external strategic factors. Some of the topics covered in Aaron's: Household Goods for the U.S. Base of the Pyramid case study are - Strategic Management Strategies, Ethics, Recession, Social enterprise, Social responsibility, Strategy execution and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Aaron's: Household Goods for the U.S. Base of the Pyramid casestudy better are - – geopolitical disruptions, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google,
customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, etc
Introduction to SWOT Analysis of Aaron's: Household Goods for the U.S. Base of the Pyramid
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Aaron's: Household Goods for the U.S. Base of the Pyramid case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aaron's Rent, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aaron's Rent operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Aaron's: Household Goods for the U.S. Base of the Pyramid can be done for the following purposes –
1. Strategic planning using facts provided in Aaron's: Household Goods for the U.S. Base of the Pyramid case study
2. Improving business portfolio management of Aaron's Rent
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Aaron's Rent
Strengths Aaron's: Household Goods for the U.S. Base of the Pyramid | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aaron's Rent in Aaron's: Household Goods for the U.S. Base of the Pyramid Harvard Business Review case study are -
Learning organization
- Aaron's Rent is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Aaron's Rent is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Aaron's: Household Goods for the U.S. Base of the Pyramid Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Leadership & Managing People industry
– Aaron's: Household Goods for the U.S. Base of the Pyramid firm has clearly differentiated products in the market place. This has enabled Aaron's Rent to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Aaron's Rent to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Aaron's Rent has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
High brand equity
– Aaron's Rent has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aaron's Rent to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Aaron's Rent
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Aaron's Rent does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Aaron's Rent is one of the most innovative firm in sector. Manager in Aaron's: Household Goods for the U.S. Base of the Pyramid Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Aaron's Rent are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Highly skilled collaborators
– Aaron's Rent has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Aaron's: Household Goods for the U.S. Base of the Pyramid HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Aaron's Rent is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Michael Chu, Charles Smithgall can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Diverse revenue streams
– Aaron's Rent is present in almost all the verticals within the industry. This has provided firm in Aaron's: Household Goods for the U.S. Base of the Pyramid case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy in the Aaron's: Household Goods for the U.S. Base of the Pyramid Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Superior customer experience
– The customer experience strategy of Aaron's Rent in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Aaron's: Household Goods for the U.S. Base of the Pyramid | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Aaron's: Household Goods for the U.S. Base of the Pyramid are -
High operating costs
– Compare to the competitors, firm in the HBR case study Aaron's: Household Goods for the U.S. Base of the Pyramid has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Aaron's Rent 's lucrative customers.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Aaron's Rent supply chain. Even after few cautionary changes mentioned in the HBR case study - Aaron's: Household Goods for the U.S. Base of the Pyramid, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Aaron's Rent vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Aaron's Rent has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Aaron's: Household Goods for the U.S. Base of the Pyramid, it seems that the employees of Aaron's Rent don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Increasing silos among functional specialists
– The organizational structure of Aaron's Rent is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Aaron's Rent needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aaron's Rent to focus more on services rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Aaron's Rent has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Skills based hiring
– The stress on hiring functional specialists at Aaron's Rent has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Products dominated business model
– Even though Aaron's Rent has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Aaron's: Household Goods for the U.S. Base of the Pyramid should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Aaron's Rent has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Aaron's Rent even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High bargaining power of channel partners
– Because of the regulatory requirements, Michael Chu, Charles Smithgall suggests that, Aaron's Rent is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Lack of clear differentiation of Aaron's Rent products
– To increase the profitability and margins on the products, Aaron's Rent needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Aaron's: Household Goods for the U.S. Base of the Pyramid | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Aaron's: Household Goods for the U.S. Base of the Pyramid are -
Better consumer reach
– The expansion of the 5G network will help Aaron's Rent to increase its market reach. Aaron's Rent will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Learning at scale
– Online learning technologies has now opened space for Aaron's Rent to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Developing new processes and practices
– Aaron's Rent can develop new processes and procedures in Leadership & Managing People industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Building a culture of innovation
– managers at Aaron's Rent can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Leadership & Managing People segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aaron's Rent is facing challenges because of the dominance of functional experts in the organization. Aaron's: Household Goods for the U.S. Base of the Pyramid case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– Aaron's Rent can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aaron's Rent can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Aaron's Rent to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Aaron's Rent to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Aaron's Rent has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Aaron's: Household Goods for the U.S. Base of the Pyramid - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Aaron's Rent to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Aaron's Rent has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Aaron's Rent in the consumer business. Now Aaron's Rent can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Aaron's Rent in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Aaron's Rent to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Threats Aaron's: Household Goods for the U.S. Base of the Pyramid External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Aaron's: Household Goods for the U.S. Base of the Pyramid are -
Technology acceleration in Forth Industrial Revolution
– Aaron's Rent has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Aaron's Rent needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Consumer confidence and its impact on Aaron's Rent demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aaron's Rent in the Leadership & Managing People industry. The Leadership & Managing People industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Stagnating economy with rate increase
– Aaron's Rent can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Regulatory challenges
– Aaron's Rent needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Leadership & Managing People industry regulations.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– Aaron's Rent needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Aaron's Rent can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Aaron's Rent needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Aaron's: Household Goods for the U.S. Base of the Pyramid, Aaron's Rent may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Aaron's Rent will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Aaron's Rent can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Aaron's Rent with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Aaron's: Household Goods for the U.S. Base of the Pyramid Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Aaron's: Household Goods for the U.S. Base of the Pyramid needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Aaron's: Household Goods for the U.S. Base of the Pyramid is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Aaron's: Household Goods for the U.S. Base of the Pyramid is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Aaron's: Household Goods for the U.S. Base of the Pyramid is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Aaron's Rent needs to make to build a sustainable competitive advantage.
