The Market for Prisoners: Business Crime and Punishment in the American Dream Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

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Introduction

Corrections Corporation of America (CCA) is a private prison operator in US and is listed on the US stock exchange. CCA has been managing its own and some of the government owned prison facilities in US; meanwhile, CCA also provided the facility of rehabilitative, education and religious programs in order to develop a social friendly behavior of offenders, who have been in prison for whatever crime. During the year 1984, for the first time CCA entered into a contract with State of Tennessee in order to manage their prison facility, since, then CCA grew rapidly and during the year 2008 it had become a market leader with 50% share of private prison market. Furthermore, CCA staff was highly qualified and accredit by American Correctional Association (ACA).

CCA had been expanding its prison facilities by adding more beds and through construction of new prison facilities, which made it raise substantial debts.

Due to the high proportion of incarcerated population in US, higher spending in prison facilities and deteriorating economic conditions in US, the US government has taken measures towards reducing crime levels through sentencing procedures and early release of prisoners with good habits reasonably reduced the demand of CCA’s prison facilities and CCA beds facilities are underutilized. Moreover, CCA had started construction of another prison facility in US but due to the above issues it has stopped the construction of new facility.

Problem Statement

CCA is concerned about its declining growth in revenues and because of this problem it had to stop the construction of its new prison facility in United States, however, this problem has been raised due to an economic pressure faced by government authorities and their measures in order to cut the operating cost of its owned prisons and reduction in incarceration rate that it had previously offered to CCA.

ANALYSIS

External Analysis

Private prison market had 158 facilities in the SU and 26 prison facilities outside US, which served around 2 million offenders; meanwhile, geographically prison market was mainly distributed into three areas that include: United States, Australia and United Kingdom. In addition to this, currently the prison market is not growing in the US because US government is taking active part in controlling the imprisonment rate through relaxed legislations and early release of prisoners due to good attitude. Furthermore, as shown in exhibit 3 percentage of persons in custody of correction authorities are declining in the US as per the records of 2006.

Meanwhile, the US private prison industry is in the decline stage because the US government is facing budget constraints and in order to cut its spending, US government has reduced its spending on private prison in order remove budget constraints and the key players included Corrections Corporation of America (CCA) and GEO Group.

Industry Economics

The US prison industry is labor intensive and this labor intensiveness of US prison industry had enabled CCA to sign contract with government authorities using skills of existing its existing employees.

Average cost of housing a prisoner under medium security for one day was $44.35/-, whereas, per bed cost for CAA and GEO Group was $49/- and $44.83/- respectively and average cost of housing a prisoner under maximum security was $63.70/- per day.

CCA had achieved economies of scale advantage through gaining state contracts to manage government owned prisons operations, which had given CCA a competitive advantage over its competitor GEO Group.

However, the main competitive advantage GEO Group has over CCA is that GEO Group has international presence, which gives it access to the international market and that is why it incurs lower per bed cost in comparison to CCA cost per bed.

Stakeholders of private prison market are mainly the owners of private prison facilities, moreover, government authorities who hire private prison facilities to take custody of prisoners on behalf of government. Furthermore, the prisoners are also stakeholders of private prison market because they are the ones, who will be treated within these private prisons. In addition to this, society at large is also a stakeholder because the private prison facilities are incarcerating offenders in order to protect the society from being affected by these offenders and provide rehabilitation service for the offender.

Internal Analysis

Financial Analysis

Although, the revenue of Corrections Corporation of America (CCA) has increased to $1,598.90/- million in the year 2008 but growth rate has declined from 12% in 2007 to 10% in the year 2008. In addition to this, gross profit margin is 29.7% in the year 2008, which has grown by 3% in comparison to last year that means that CCA has effectively managed its cost of sales through cost cutting strategies on its operations. Furthermore, operation profit margin and net profit margin has grown by 4% and 3% to 19.1% and 9.4% respectively, which means that CCA has ..................

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In 2010, the Corrections Corporation of America (CCA), the largest private prison operator in the U.S., is considering expansion. Largest clients, the federal and state governments have been under economic pressure to reduce the rate of imprisonment and lower operating costs, potentially jeopardizing profit CCA. If the CCA in the footsteps of its competitors and expand abroad? Or, can rely on an ever-growing population of prisoners in the U.S. to fuel future growth? "Hide
by Rafael Di Tella, Laura Winig Source: Harvard Business School 29 pages. Publication date: Mar 12, 2010. Prod. #: 710042-PDF-ENG