ESP3 || PNL OFFICIAL DOC

I. WARM-UP GAME
Game: Nghĩ từ dây chuyền
Each team will select one representative to participate in the game. The
representatives will stand in a line, forming a group of 9 players.

How the Game Works:

1. The organizers will provide a prompt. For example: “Name an animal that
lives under the ocean.”
2. Representatives will take turns answering in sequence. For instance: dolphin,
shark, whale, octopus,...
3. Any representative who fails to provide a valid answer within the time limit
will be eliminated, and their team will be disqualified from the round.

Game Ending:
The game continues until 6 teams are eliminated. The remaining 3 teams
will be declared the winners.

II. CASE OVERVIEW

Introduction
Today, expanding into international markets is not just a trend but a critical
strategy for businesses to thrive. However, when faced with the question, 'Should
we play it safe at home or take a risk abroad?' The answer is rarely straightforward.
The story of Coe’s—a renowned rent-to-own chain—offers a compelling example of
this dilemma. At the peak of its success in the U.S., Coe’s is weighing the decision to
venture into the promising yet challenging market of Mexico or to continue
maximizing opportunities domestically. Let’s dive deeper into their story and
uncover valuable lessons from their strategic decision-making process. -> XEM
VIDEO

1. Case Summary
> Stan Windham is the CEO of Coe's, a popular lease-to-own retail chain in
the U.S. While at the South Tucson store, manager Aubrey Merrin proposes to Stan
that Mexico as a possible market because of untapped demand and his connections
to the area. Stan considers Mexico due to potential U.S. regulatory risks and market
saturation. Stan can see the opportunities in serving the Mexican market which
lacks credit. In contrast, Stan’s CFO, Carl, is more focused on the expansion of the
business within the United States and trying to warn against repeating the mistakes
of Coe’s failed Puerto Rico venture. Moreover, Stan also listens to his father Terry,
the founder of the company, he considers cautionary advice and must choose
between focusing on daring global expansion or sticking with safer local growth.
 > The key challenges consist of possible regulatory modifications in the U.S.,
restricted domestic expansion prospects, and operational obstacles in venturing
into new markets. Coe's needs to focus on handling cultural disparities, adjusting its
business approach if he decides to expand to Mexico, and ensuring efficient local
administration to prevent payment delinquencies. The situation poses important
strategic inquiries about managing risk and expansion while meeting investor
demands.

Guiding questions

1) Should Stan expand Coe’s into Mexico?

2) If Stan decides to expand into Mexico, how should he approach the
expansion?

2. Lý thuyết Theory
a. SWOT

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and so a

SWOT analysis is a technique for assessing these four aspects of your business. A
"SWOT analysis" involves carefully assessing these four factors in order to make
clear and effective plans. Particularly, we would analyze the internal factors of the
issue that we want to clarify with the Strengths and Weaknesses. Similarly, we
would have the external factors included in the Opportunities and Threats
analyzed.

Outstanding, distinct, and unique factors of a business

Strengths compared to its competitors, such as a loyal customer base,
modern technology, a well-known brand, and unique products.

Factors that hinder the business from operating at its optimal

level. These are areas that the business needs to address and
Weaknesses improve quickly to maintain competitiveness in the market, such
as higher prices than competitors, a small brand presence, lack
of recognition in the market, faulty products.

External factors that have a favorable and positive impact,

Opportunities providing the business with growth opportunities and the chance
to build a competitive strategy in the market, such as: the
potential to develop the brand or increasing customer demand.

Factors that could negatively impact the business, both

Threats currently and in the future, such as: rising raw material costs,
many and strong competitors, or constantly changing customer
shopping trends.
A SWOT analysis can help you to challenge risky assumptions, uncover dangerous
blindspots, and reveal important new insights. The SWOT analysis process is most
effective when done collaboratively.

b. PESTEL

A PESTEL analysis is a framework or tool used by marketers to analyze and monitor

the macro-environmental factors that have an impact on an organization,
company, or industry. It examines the Political, Economic, Social, Technological,
Environmental, and Legal factors in the external environment. A PESTLE analysis is
used to identify threats and weaknesses which are used in a SWOT analysis.
Factors include government policies, leadership, and
Political change; foreign trade policies; internal political issues and
trends; tax policy; regulation and deregulation trends.

Factors include current and projected economic growth;

inflation and interest rates; job growth and unemployment;
Economic labor costs; impact of globalization; disposable income of
consumers and businesses; likely changes in the economic
environment.

factors include demographics (age, gender, race, family

size); consumer attitudes, opinions, and buying patterns;
Social population growth rate and employment patterns; socio-
cultural changes; ethnic and religious trends; living
styyandards.

Factors affect marketing in new ways of producing goods

Technological and services; new ways of distributing goods and services;
new ways of communicating with target markets.

Factors are important due to the increasing scarcity of raw

Environmental materials; pollution targets; doing business as an ethical
and sustainable company; carbon footprint targets.

Factors include health and safety; equal opportunities;

Legal advertising standards; consumer rights and laws; product
labeling and product safety.

c. Economic Life Cycle Framework

An economic cycle, also known as a business cycle, refers to economic fluctuations
between periods of expansion and contraction which is determined by many
factors (GDP, interest rates, total employment, consumer spending,...).

Objective: Understanding the economic period can help businesses determine when
to make investments and make modifications for their strategies.
A standard Economic Life Cycle include 4 Phases: Expansion, Peak, Contraction
and Recovery
- During Expansion, the economy experiences a rapid growth, interest rates
tend to be low, and production increases
- The Peak of a cycle is when growth hits its maximum rate. Prices and
economic indicators stabilize for a short period before reversing to the
downside
- A Contraction occurs when the growth is slow, employment falls, and prices
stagnate. If the contraction continues, the recessionary environment may
spiral into a depression.
- And as a normal loop, after the contraction, the economy would have
Recovery to grow again and repeated cycle continues
d. Resource-Based View (RBV)
Drawn from the Resource-Based View (RBV) paradigm, the competitive edge of
the organization comes from its unique internal resources which are valuable,
scarce and difficult for competitors to imitate or substitute. According to the
Resource-Based View, strategic policies should not only promote the development
of unique and superior resources but also defend them if they cannot be bought or
sold.
RBV adds that the value of resources and the role of such resources in creating
competitive advantages are important even in managerial decisions of a company
regarding the acquisition or development of resources

Objective: to explain how companies can exploit their unique competencies in the
quest for sustained competitive advantage.
 e. Transaction Cost Theory

Transaction Cost Theory, introduced by economist Ronald Coase, focuses on the

costs of economic exchanges and the decision to perform activities internally or
outsource them. These transaction costs include expenses for information search,
contract negotiation, compliance monitoring, and risk management. The theory
suggests that organizations seek to minimize these costs by structuring operations
to maximize efficiency. Decisions between in-house management and market-
based solutions depend on the relative costs and benefits of each approach,
offering a strategic framework for optimizing resource allo từ cation, particularly in
contexts like franchising and global trade
 III. CASE SOLVING
1. Mexico Market Overview
> PESTLE

MEXICO

Political > The proximity to the U.S. and existing trade frameworks under USMCA could
facilitate supply chain efficiency.
- The U.S.-Mexico relationship is strengthened by cross-border trade and
cultural exchanges, as highlighted by the U.S. Census Bureau (2023). Many
Mexican-American households have relatives in Mexico, which can help Coe’s
leverage existing customer insights for its market entry.

Economical > Income level: The middle and lower-income brackets dominate Mexico's
population, making it a prime demographic for rent-to-own services
- About 45% of the Mexican population is considered middle class, but this
segment has been shrinking in recent years due to economic challenges.
Middle-class households typically have an income of 18,000 to 22,000 pesos
per month, while lower-class households earn between 9,000 to 12,000 pesos
per month, highlighting significant income disparities (Yucatan Times & Mexico
Daily Post)
- 70% of Mexican consumers prefer renting products over outright purchases
due to financial constraints, highlighting a strong demand for Coe's offerings
(Consumer Insights Survey, 2023).
- A population of 126 million, with over 40% living in urban areas where rental
and ownership options for household goods are in high demand (World Bank,
2023)
> Consumer Credit Access: 84% of Mexicans lack job security or stable income,
limiting their access to formal credit systems. This gap in credit access creates a
large potential customer base for alternative payment models like rent-to-own,
which do not rely on traditional banking and credit infrastructure (Mexico Daily Post)
- About 50% of the population does not have access to traditional credit
systems (e.g., credit cards, bank loans), creating a substantial market for
alternative financing models like rent-to-own (National Institute of Statistics
and Geography [INEGI], 2022)

Social > Renting-to-own aligns well with the preference of many Mexican consumers to
avoid large upfront payments, particularly in segments without stable access to
credit.

> Around 90% of Mexican consumers still prefer physical shopping over online
alternatives, reflecting a cultural tendency to value face-to-face transactions. This
preference suggests that Coe’s physical store model could effectively resonate with
consumers, provided it emphasizes transparent and trust-building practices
(Euromonitor)

Technological > Digital Infrastructure Growth: The growth of e-commerce in Mexico is driving
consumers toward online transactions, presenting significant opportunities for RTO
companies
- Mexico's ICT sector is forecasted to grow by 5.6% in business and government
 spending by 2024.
- E-commerce sales in Mexico grew by 21% in 2022, reaching $28 billion USD.
( (Mexico Business News)
> Digital Payment Systems: The adoption of online payment services (e.g., PayPal,
Mercado Pago) and digital wallets facilitates periodic fee collection
- In Mexico, 42% of the population reported using mobile banking or digital
wallets as of 2023, an increase driven by expanded internet access and
smartphone penetration. (Statista Report on Digital Payments in Mexico, 2023)

Environmental > Waste Management and Sustainability Regulations: Mexico is strengthening

environmental protection regulations to promote sustainable development.

- The country faces significant environmental challenges, including air and water
pollution, loss of freshwater resources, and waste management issues. In 2019,
Mexico City declared a state of emergency due to severe air pollution. (SWOT
and PESTLE Analysis)

> Environmental Consciousness Among Consumers: A growing segment of Mexican

consumers, particularly in urban areas, is increasingly interested in environmentally
friendly products.

Legal > Consumer Protection Regulations: Although Mexico lacks a specific legal
framework for the RTO model and presents a different regulatory environment
compared to the U.S., with less stringent consumer protection laws in some cases.
However, understanding the specific laws governing rental and lease agreements is
crucial
- Consumer Protection Law of Mexico Regulatory (LFPC): LFPC mandates
transparency in pricing, contract terms, and customer rights. This aligns with
Coe’s emphasis on accountability and clarity in transactions.
> Asset Repossession Regulations: Debt collection practices are monitored by
CONDUSEF (National Commission for the Protection and Defense of Users of
Financial Services), which oversees fair treatment of customers.
> Tax Incentives for Foreign Businesses: Mexico offers tax incentives to foreign
companies setting up operations in economically disadvantaged regions, such as the
Northern Border Zones.

2. Expansion into Mexico

SWOT Expansion into Mexico

Lower Production Costs: Mexico offers lower labor and material costs
compared to the U.S., reducing production expenses.

Close Proximity to the U.S.: Being geographically close to the U.S. facilitates
supply chain management and shipping.
Strengths
Market Positioning Insight: Coe's products fulfill an unmet market need, with
few competitors offering similar lease-to-own household goods.
 Cultural Connections: The company can leverage its connections with
customers and employees of Mexican descent to gain insights into the Mexican
market.
Limited Local Market Knowledge: The company may have limited
understanding of Mexico’s consumer culture and regulatory landscape,
Weaknesses requiring adaptation time.

New Risk Management Needs: Expansion brings currency fluctuation risks and
new management challenges in supply chain and staffing.
Emerging and Growing Market: Mexico offers a large, untapped market, with
many people lacking access to formal credit, creating a favorable environment
for Coe's lease-to-own model.

Opportunitie Market Diversification: Expanding into Mexico reduces dependence on the U.S.
s market and opens up growth opportunities in a new region.

Local Partnerships: Collaborating with local retailers and distributors can

boost brand presence and distribution efficiency.
Economic and Currency Fluctuations: Exchange rate volatility and economic
conditions in Mexico can impact costs and profits.
Threats
Local Competition: Domestic companies and international brands may already
have a foothold in the Mexican market, requiring strong competitive strategies.

3. Solution
a. Economic Life Cycle

Coe's has expanded to more than 1,000 locations within the United States, where it
is struggling with the threat of regulatory constraints, market saturation, and
investors demanding further growth. The United States lease-to-own market,
which valued $11.95 billion in 2023, is growing at 6.77% (CAGR) every year. The
market, dominated by big names such as Rent-A-Center and Aaron's Inc., so it can
hardly accommodate more recent entrants or significant domestic expansion.

In contrast, Mexico is an emerging market with limited competition, high demand

for the lease-to-own solution. Mexico's market may still offer growth opportunities
compared with the U.S., where the lease-to-own market seems increasingly
saturated.

With all of the aforementioned and this economic life cycle analysis, our group's
answer for this case question is that Coe should expand into Mexico. And how the
company approach the expansion -> Come to the next one

b. Franchising model

The franchising model is a business structure where a franchisor (brand owner)

grants a franchisee (operator) the rights to use their brand, systems, and practices
in exchange for fees and royalties. The franchisor provides training, support, and
branding, while the franchisee follows established standards to maintain
consistency.
Types of franchise
Single-unit agreement The franchise is allowed to operate one
individual location using the franchisor’s
name, trademarks, system, and
business model. The franchisor gives
support and training in exchange for a
fee and ongoing royalties.

Multi-unit agreements The franchise is allowed to operate

multiple locations, in a territory that
can or not be specified.

Area development agreements The franchisee has the right and

obligation to open a specified number
of locations in a determined area, set
them up according to a schedule and
run them.

Master franchise agreements The franchise has the right and

obligation to open a specified number
of locations in a determined area and is
able to also take the role of a franchisor
in the area and recruit independent
franchisees to operate the locations.

The Area Development Agreement would be the most suitable choice for Coe’s
expansion into Mexico, because it allows for controlled, regional growth with the
help of a local franchisee who understands the market, legal environment, and
consumer behavior. This model minimizes financial risk for Coe’s, as the
franchisee assumes the responsibility for opening and operating multiple stores,
while still ensuring brand consistency and operational control.

c. Principle “Go global, Act local”

This international marketing principle urges companies to have a consistent
strategy when selling internationally (a global strategy) while adapting their
tactical approach to the local market they are targeting (a local approach). It is a
best practice approach used by nearly every successful international brand and
can touch on almost every area of sales and marketing including product features,
packaging, pricing, message, the types of sales channels that are used, etc. When
properly implemented it ensures that companies achieve economies of scale in the
sales and marketing of their brands internationally while at the same time remaining
relevant to the local market audience.

GO GLOBAL:

● Strategic Expansion: Coe's is considering entering a new international

 market in Mexico, which aligns with the company's broader strategy of
growth beyond the saturated U.S. market. By venturing into Mexico, Coe’s
aims to capture untapped demand and reduce dependence on a single
market.
● Core Business Model: Coe’s brings its established lease-to-own model,
which has proven effective in the U.S., into Mexico. The brand’s global
experience in lease-to-own retail offers a strong foundation to meet
demand in a market that lacks traditional credit access.

ACT LOCAL:

● Localized Trial Program: Stan is considering piloting the expansion in

Mexican border cities, which have closer cultural and economic ties to the
U.S. Starting with this limited rollout allows Coe’s to test its approach and
make necessary adaptations for the local context before a broader
expansion. (cái này hình như link với cái franchising model ở trên)
● Cultural and Economic Adaptations: To make the expansion successful,
Coe’s should adapt its flexible payment model to align with Mexican
customers' preferences, behaviors, and economic conditions. This approach
can help reduce payment delinquencies, a significant risk factor. (dẫn qua
phần flexible payment)

d. Resource-Based View (RBV)

RBV adds that the value of resources and the role of such resources in creating
competitive advantages are important even in managerial decisions of a company
regarding the acquisition or development of resources.

Analysis of Coe's Resources and Capabilities

Financial Resources Coe generates over $2 billion in annual revenue, indicating

strong financial stability. This provides the capacity to
support expansion, albeit franchising can lower the
financial burden since franchisees cover most initial costs.

Human Resources and The company boasts experienced leadership and

Organizational Culture employees.

Business Model and Core Differentiated Value Proposition: Coe's "lease-to-own"

Competencies model addresses underserved customer segments, such as
those without traditional credit access. This model aligns
well with Mexico's consumer base, where many lack access
to formal financial services.
Proven Flexibility: Coe's has successfully tailored its
offerings to meet diverse customer needs (e.g., shorter
contracts, flexible payment terms). These competencies
position Coe's to adapt its model for the Mexican market.

Brand and Reputation Coe's has strong brand recognition among immigrant
 communities in the U.S., including Mexican-Americans,
which can be leveraged to build trust with Mexican
consumers.

Based on RBV, Coe possesses valuable, rare, and hard-to-imitate resources that
position the company for success in the Mexican market. Its strong financial
position, proven business model, cultural expertise, and operational experience,
combined with a franchising strategy, create a powerful competitive advantage.

e. Transaction Cost Theory

Franchising aligns with TCT principles as it minimizes transaction costs associated
with direct market entry strategies like wholly-owned subsidiaries. TCT highlights
three key areas that franchising addresses effectively:
● Lower monitoring costs: Franchising allows the parent company to control
operations at a lower level while aligning franchisee incentives with those of
the parent. With ADA, franchisees are committed to developing multiple
locations in a specific area, reducing the need for extensive oversight.
● Reduced entry costs: Franchising, especially via ADA, requires less initial
capital investment compared to direct investment or joint ventures, and it
reduces the management burden of overseeing operations directly in a
foreign market like Mexico.
● Local adaptation: Franchisees bring local market knowledge, which reduces
the costs associated with adapting to local regulations, culture, and market
conditions in Mexico.

While that we have the USMCA agreement to support our benefits. The USMCA
(United States-Mexico-Canada Agreement) offers substantial advantages for
franchising:

● Intellectual property protection: USMCA strengthens protections for

intellectual property, which is crucial for franchise businesses that rely on
brand, systems, and proprietary assets. This minimizes the risk of
unauthorized use by competitors or franchisees.
● Dispute resolution mechanisms: USMCA offers clearer and more efficient
dispute resolution processes between the U.S. and Mexico. For franchisors,
this means easier resolution of conflicts with franchisees or legal issues that
may arise, reducing ex-post transaction costs.
● Market access and investment: USMCA ensures easier market access for
U.S. companies in Mexico by reducing tariffs and trade barriers, thus
lowering the cost of importing goods, equipment, and services for franchise
operations.
● Protection from unfair trade practices: USMCA protects U.S. businesses
from unfair trade practices like expropriation or discriminatory legal actions,
providing a stable legal environment for franchise expansion in Mexico.
=> Research shows that franchising achieves cost efficiencies by balancing
autonomy with oversight, leveraging both local knowledge and franchisor
expertise.

f. Flexible Payment
CONTEXT:
- The Federal Consumer Protection Law (Ley Federal de Protección al
Consumidor) in Mexico serves as the primary legal framework for consumer
rights and protections. Enacted to promote fairness and transparency in
commercial transactions, this law is enforced by the Consumer Protection
Federal Agency (PROFECO).

→ These responsibilities collectively aim to create a fair marketplace where

consumers can make informed choices without being subjected to exploitation or
deceit. Thus it makes some cons of business:
- Slow Debt Recovery Process: The LFPC places a strong emphasis on
consumer protection, which means businesses have to go through more formal and
regulated channels before taking more aggressive collection steps. This focus
ensures that consumers are treated fairly, but it can lengthen the time it takes to
recover debts, as businesses must first follow prescribed dispute resolution
processes, conciliation, and arbitration before pursuing more formal legal
measures.
→ Hybrid Model, which combines technology for monitoring payments with local
collection agencies for handling late or difficult cases, which is particularly useful
in markets like Mexico, where credit usage is lower, and understanding local
financial behaviors is key.

- Payment Monitoring via Technology

● Automated Tracking: Using software to track customers' payments in real
time, the system automatically updates balances and payment schedules.
This helps businesses easily monitor who is behind on payments and by how
much.
● Multiple Payment Options: Technology can integrate various payment
methods like mobile apps, online banking, credit card payments, and direct
bank transfers. Providing flexibility in payment methods increases the
likelihood of timely payments, especially in a country like Mexico, where
mobile payments are growing rapidly.
● Data Collection & Insights: By tracking payment patterns, the system can
provide valuable insights into customer behaviors. It can predict when a
customer might miss a payment or when an account is at risk, allowing the
business to take preemptive action (e.g., offering payment plans or
incentives for on-time payments).
- Local Collection Agencies
● Legal and Regulatory Knowledge: Collection agencies in Mexico are
experienced in working within the country’s legal framework and consumer
protection laws, such as the Ley Federal de Protección al Consumidor
 (LFPC). They know the limits of what can be done within the law and can
help avoid reputational damage for the business.
● Debt Recovery: For long-term or unresponsive defaulters, collection
agencies have the resources to take more formal action, which could include
legal recourse or referring accounts to a debt recovery process. They can
also negotiate settlements that are in the best interests of both the business
and the consumer.

→ Thus, although the Hybrid model brings many advantages, it is important to

carefully select reliable collection partners, ensure legal compliance, and ensure
that technology is accessible and adaptable to local market conditions.

IV. GAME FOR REVIEWING: Link câu hỏi

BENCHMARK & CRITERIA

ĐỪNG ĐỘNG VÀO CỦA THUY LE NHAA!!!

1. GO GLOBAL – Strategic Expansion of Core Business Model:

● Coe’s is seeking to expand beyond the saturated U.S. market into Mexico,
where it can tap into an untapped demand for lease-to-own products,
especially in regions with low access to traditional credit.

2. ACT LOCAL – Localized Trial Program and Adaptations:

● Localized Trial Program: Coe’s is considering starting in Mexican border

cities with closer economic and cultural ties to the U.S. This allows Coe’s to
test its business model in a specific region before scaling to other parts of
Mexico.
● Research: As of the latest data, approximately 9.53% of the population
aged 15 and older in Mexico had a credit card, based on figures from 2017.

-> It indicates a growing but still relatively low penetration rate compared to other
countries

Moreover, The Federal Consumer Protection Law in Mexico serves as the primary
legal framework for consumer rights and protections. Enacted to promote fairness
and transparency in commercial transactions.

→ These responsibilities collectively aim to create a fair marketplace where

consumers can make informed choices without being subjected to exploitation or
deceit.
—> Thus it makes a Slow Debt Recovery Process: The businesses have to go
through more formal and regulated channels before taking more aggressive
collection steps. This focus ensures that consumers are treated fairly, but it can
lengthen the time it takes to recover debts, as businesses must first follow
prescribed dispute resolution processes, conciliation, and arbitration before
pursuing more formal legal measures.

Because of the little percentage of customers using credit cards, and the slow debt
recovery process → We have to find a more flexible payment to satisfy the locals.
→ Hybrid Model, which combines technology for monitoring payments with local
collection agencies for handling late or difficult cases.
Payment Monitoring via Technology

● Automated Tracking: Using software to track customers' payments in real

time, the system automatically updates balances and payment schedules.
This helps businesses easily monitor who is behind on payments and by how
much.
● Multiple Payment Options: Technology can integrate various payment
methods like mobile apps, online banking, credit card payments, and direct
bank transfers. Providing flexibility in payment methods increases the
likelihood of timely payments, especially in a country like Mexico.
 ●Data Collection & Insights: By tracking payment patterns, the system can
provide valuable insights into customer behaviors. It can predict when a
customer might miss a payment or when an account is at risk, allowing the
business to take preemptive action (e.g., offering payment plans or
incentives for on-time payments).
- Local Collection Agencies
● Legal and Regulatory Knowledge: Collection agencies in Mexico are
experienced in working within the country’s legal framework and consumer
protection laws, such as the Ley Federal de Protección al Consumidor
(LFPC). They know the limits of what can be done within the law and can
help avoid reputational damage for the business.
● Debt Recovery: For customers who don't pay for a long time or don't
respond, collection agencies can take formal steps, like going to court or
sending the debt to a recovery process. They can also work out payment
plans or settlements that are fair for both the business and the customer."

→ Thus, although the Hybrid model brings many advantages, it is important to

carefully select reliable collection partners, ensure legal compliance, and ensure
that technology is accessible and adaptable to local market conditions.