Case Study: The Rapid Cash Store Needs Ideas
Sam is the CEO of The Rapid Cash Store, a chain of 20 stores whose primary business is to provide payday loans and cash checks for people who typically do not have a bank account. A payday loan is essentially a loan against an upcoming paycheck, such as a person borrowing $100 to be paid when he or she reviews a paycheck within ten days. The paycheck has been signed over to Rapid Cash, and a company representative gives the check to the lender minus the fee charged by Rapid Cash. The checks cashed are often payroll checks for workers whose checks are not directly deposited because they do not have bank accounts.
A criticism of The Rapid Cash Store, as well as other payday lenders, is that their interest rate on loans, if projected on an annual basis, would be about 350 percent. Sam says, "This is an irrelevant criticism. Almost no customer takes out a loan for a year. We provide a useful service at a reasonable fee for people who are strapped for cash. Why look at the annual rate? If you rent a hotel room for one night, it might cost $150. Does anybody complain that the hotel is charging $54,750 per year for the room?" Despite Sam's defense of his company's practices, as well as those of his industry, he is worried that the mounting criticism of his company might result in lost revenue.
Among the criticisms of The Rapid Cash Store is that it exploits the poor. Furthermore, many large discount retailers are getting in to business of payday loans and check cashing. For example, the Money Centers at Wal-Mart stores cash checks for customers at fees much lower than those charged by payday lenders. Sam is so worried about the forces against his business that he decides to work on the problem with his top-management team. Sam said that he has been casually talking about the problem with his team, but he hasn't really put the problem on his agenda. Sam sends has team an e-mail about the necessity of finding new sources of revenue for the firm, and he alerts them to a meetingto work on the problem.
At the meeting, Sam says to the group. "The Rapid Cash Store is in trouble. Our revenues only declined 15 percent last year, but the handwriting is on the wall. The criticism of our business model is getting more vocal, with even local politicians turning against us. The big box stores are breathing down our neck. "I want you as the executive team to come up with of finding new sources of revenue for Rapid Cash."
"No disrespect," said Kim, the director of marketing. "But you are our leader. You are supposed to provide the breakthrough idea that will create a solid future for Rapid Cash. We're often talked about broadening our services, but we usually hit the same brick wall. The most notable idea was the one about installing tattoo parlors in our stores because so many of our customers wear tattoos. "I think the best idea we had was the one about selling lottery tickets in all the stores. But I think we ran into some potential legal problems." Sam then said, I don't disagree that as CEO maybe I should have the next great idea for The Rapid Cash Store. But I don't right now, so that's why I'm asking you for your creative suggestions." Greg, the CEO, said even deeper question than where we can find new sources of revenue. We need to ask where to look and whom to ask about new lines of business.
Questions
1. To what extent do you think it is Sam's individual responsibility to furnish creative ideas for generating new business for The Rapid Cash Store?
2. In response to Greg's comment, where should the management team look for creative ideas for enlarging the revenue of The Rapid Cash Store?
3. From the standpoint of ethics, do you think The Rapid Cash Store should stay in business? Explain your reasoning.