- Business and Employment»
- Business Management & Leadership
Business Strategy Analysis: Anti-Gun Statement by GE Capital?
Today, April 26, 2013, GE Capital announced that it would no longer finance gun sales through stores that exclusively sell firearms. This article examines the strategy conclusions that can be made regarding this strategic decision. Arguing for or against gun control is not the object of this article. At the bottom of this article are links to news services regarding this story.
The Initial Story
In 2008 GE Capital (GEC) made a decision to stop financing firearms through gun dealers. This decision did not affect stores that sold other products in addition to guns such as Wal-Mart. Since that time, GEC has been phasing out the financing and had less than 75 guns stores that still were clients.
The financing by GEC is not for the stores themselves, but for the customers of the store who needed financing in order to purchase a firearm. A customer would came into a gun store, find a firearm to purchase, and then go through a credit check to determine eligibility for credit. If approved, GEC would pay the gun store and the customer would make payments to GEC.
In its announcement the spokesperson for GEC did not state why the policy was enacted. As a result, rumors have begun to float about this being a anti-gun political statement. Since this customer segment was insignificant to GEC's operations, speculation exists that GEC could afford to make a very visible statement for gun control while not affecting its bottom line.
There are several strategy lessons that can be learned from this decision. This list is not exhaustive and, if the reader wishes to add to the list, then commenting on this article is certainly an option. The four conclusions that can be reached are as follows:
- Gun shops are not a major customer in the industry. While the news accounts below state this, it was not necessary for them to do so. One of Michael Porter's five competitive forces is buyer power. This force exists when buyers exert such considerable influence over a market that firms in the market increase rivalry to accommodate these buyers. GEC is not just ignoring the gun shops as a customer but GEC is eliminating them as a customer. Thus, gun shops do not have significant influence in the capital market.
- The competitive intensity of the capital market is not extreme. If the capital industry were extremely competitive, firms in the industry would be fighting over every customer, no matter how small of a segment. GEC obviously is not concerned about how losing the gun shops will affect its bottom line; it does not need to fight for this customer.
- There is now an opportunity for another firm to fill the gap. A previous article discusses the SWOT analysis and the need to identify opportunities in the market. Another capital firm might look at this as an opportunity to gain the gun shops as customers. An early mover to court the gun segment might reap other profound benefits explained in point number four.
- GEC may have taken a gamble that either it does not know it is taking or does not think is relevant. As discussed before, there does not seem to be much competition in the capital markets because customers are fragmented and do not come together in an organized block. But by making what seems to be a political statement about guns, GEC runs the risk of offending two groups of its remaining customers. The first group is customers that feel business is business and politics should stay out. The second group is customers that are pro-gun and disagree with GEC's decision. If these two groups become unified into a single voice that shows anger at GEC, GEC might see a major loss in its customer base. It is at this point GEC might be forced to reconsider its position and allow the gun shops to stay as customers. It is also at this point that the opportunistic capital firm could siphon away a significant number of customers from GEC.
GE Capital has certainly demonstrated it freedom to make a strategic decision. There are several things that can be learned about the capital market from this decision. However, GE Capital may also be risking part of its customer base by seemingly making a political statement against guns. This industry might be interesting to watch in the next few months.
- GE Capital Cuts Off Lending for Gun Shop Purchases - NYTimes.com
The company, headquartered in Connecticut, made the move after the Sandy Hook elementary school massacre.
- GE Capital Stops Lending To Gun Shops: WSJ | Fox Business
General Electric Co' financial unit, GE Capital, is cutting off lending to guns shops, according to a report Wednesday in the Wall Street Journal that cited letters sent by the company to several gun shop owners.
- GE Halts Financing for Firearm Retailers as Gun Lenders Vanish - Bloomberg
General Electric Co., whose Connecticut headquarters is about 35 minutes by car from the site of the Newtown school massacre, said it tightened rules against providing consumer financing to firearms retailers.
Additional Articles on Strategy
- Business Strategy: You Can't Play Baseball Blindfo...
Strategy is a life or death issue for organizations. Without strategy an organization has no sense of what actions to take.
- Business Strategy: "This Is a Football", Part 1
This article is the first in a series on developing a strategy. Developing a good mission statement forms the basis for everything the firm does.
- Business Strategy: "This Is a Football", Part 2
This article looks at the second step in developing a business strategy: determining the strengths and weakness of the firm.
- Business Strategy: "This Is a Football", Part 3
This article is third in a series about actions needing to be performed before creating a business strategy. Specifically, the firm needs to examine opportunities and threats in the market.
- Business Strategy: "This Is a Football", Part 4
This article is the conclusion of a four part series on laying the foundations before developing a business strategy. This development includes a mission statement and a honest SWOT analysis.