Cca Case Qs Cca Had Clearly Been

CCA Case Qs

CCA had clearly been pursuing a rather aggressive growth strategy, and its current and past performance suggest both the success and the risk factors of this strategy. Success can be obtained with a high-growth strategy as long as there is ample demand for the product or service being offered, and of the producer (CCA, in this case) can provide a differentiation or, as is the case here, a cost- and/or efficiency-savings when compared to other alternatives. CCA was successful in this regard to a large degree during much of its operation, but the risk factors of a high-growth strategy eventually caught up with the company. A slackened demand led to the company being overextended and unable to effectively meet its obligations, to the point that operations and the very existence of the company were threatened. Aggressive growth depends on ongoing strength in operational revenue to remain current on obligations, and this is something a company does not necessarily have control over. Revenues have increased for the company, but expenses are also currently increasing, showing other risks of a growth strategy -- its growth has outpaced its capacity to truly function efficiently, or else managers have simply stopped worrying about costs as much.

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The balance sheet and income statement of the company clearly reflect the growth strategy and some of the hiccups it can cause. Net income is actually falling slightly despite the fact that assets and revenue are both rising, which shows that as the company continues to expand its operations the rate of growth in its costs is actually outpacing the growth in its revenue, and though this has created some savings in the form of tax breaks it is untenable as a long-term situation for the company. The period examined is one of strong economic growth, however, which means high expenses for raw materials (including food and a variety of other materials needed in the operation and management of prisons), higher costs for labor, higher taxes, etc., as well as lower crime rates and thus lower demand for CCA's "product" or service -- i.e. prisons. Good economic times, all else being equal, are generally bad for CCA, it would seem, and this is another problematic feature of this business.

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