DOLLAR-GENERAL-CASE-report

1、Executive summaryThis report is based on the case entitled Dollar General-Todays neighbourhood Store. Dollar General is the largest discount retailer in the United States. Dollar stores including Dollar General, Family Dollar, and Dollar Tree have been operating in the deep discount segment by offer

2、ing low priced merchandise in convenient small-store formats. Dollar General concentrates a lot in offering guaranteed low prices to its customers ranging from $1 or less. It targets the population group from lower and middle classes. But during the recession breakdown, issues such as unemployment r

3、ate doubled. This report further depicts the assessment of its current mission, vision, objectives and corporate governance. Since Dollar General has been the first mover in the industry, it has had some benefits from getting products from its suppliers. On the external analysis, we have analyzed th

4、e retail industry as a whole through PEST+I and PORTERs 5 forces and we found the opportunities and threats. One example would be the unemployment during the recession which had an impact within the industry as it created an opportunity for the company to hire the employees with a low wage. On the i

5、nternal analysis, we analyzed the resources and core capabilities using the VRIS framework. Unfortunately, there is not been any resources that met the four criteria of the VRIS framework to achieve a sustainable advantage. We also have analyzed the value-chain analysis, where we laid out the differ

6、ent areas of the company where they put more focus and resources in Dollar General. The Swot matrix will give us a guide on some of the strategic actions that can be implemented in opposition of external and internal analysis. Dollar General is more focused on the cost leadership since it is price-c

7、onscious. The debt level seems to be very high in this case, but as long as Dollar General is able to manage its debts, it will be considered as cash-cow. At last, we will analyze some of the possible alternatives, the pros and cons. Then we shall choose the best options to implement for the welfare

8、 of Dollar General in future. It would be reasonable for Dollar General to implement a stability strategy since it is a short-term strategy.推荐精选Introduction-BackgroundDollar General was emerged in 1939 by J.L. Turner and his son Cal Turner as a wholesaling business. It was first opened in June 1, 19

9、55 in Scottsville, Kentucky. The concept of the store was that item would be priced at $1 or less. By 1965, the company grew rapidly and it was operating in 255 stores. As Cal Turner took over the business, he achieved rapid growth in the chain, increasing sales through opening new and larger stores

10、 and by changing the merchandise mix. Based on the customer demand, they wanted to find a conventional assortment of items at the stores, including brand-name merchandise; then it increased the amount of consumable merchandise in the stores. It also added coolers and refrigerators so that its stores

11、 could carry fresh food items. In the early 1991, there were 1,461 Dollar General Stores, and then by the end of 2002, the chain had 6,113 stores and sales in excess of $6 million. Due to the accounting errors that had increased its reported income, the company planned to restate its financial state

12、ments for the three preceding years. In the same year, Turner family ended its leadership in the business, and then David Perdue replaced Cal Turner as CEO and board chairman. The company continued to open new stores and expand its offerings of consumable. But in 2005, Dollar General experienced a d

13、ecrease in customer traffic and same-store sale declined for two/quarters. This decrease was due to the fact that seasonal, home and apparel were stored away and then returned to the sales floor the next year. In 2006, Dollar General took mark-downs to eliminate most of its outdated merchandise. Mor

14、eover, the project Alpha included changes to the companys remodeling decisions, store-site selection, and lease renewal. The Dollar General identified and started closing approximately 400 underperforming stores, resulting in slower growth of number of stores for 2006, compared to company performanc

15、e over the last years. In 2011, Dollar General, was leading in the dollar store retail sector with sales of more than $13 million. In the same year, it was the largest retail discount retailer in the US of more than 9,800. There are different branches such as Dollar General, Family Dollar, and Dolla

16、r Tree which offer low-priced merchandise in convenient small-store formats. Lets now analyze some of the strategies of the case. This paper will further analyze the mission, vision objectives, external and internal side of the company, and assess the strategies used, some financial ratios, and asse

17、ssment of alternatives and make an implementation plan.推荐精选Analysis of External Environment PEST+I and Porters five forces analysis (exhibit 2)Pest analysis will be used to analyze the retail industry based on political, economic, socio-cultural, technological and international. The analysis of the

18、external environment has allowed us to identify five important threats such as laws and recessions, wage rate and gender discrimination, unemployment, and culture barriers when going into international market. On the other hand the five important opportunities are government imposing fair labor prac

19、tices, target people of different income level, and expanding internationally, and price sensitive customers. For more information on the PEST+I analysis, refer to exhibit 2. On the other hand, we have the porters 5 force analysis which is used to analyze the task environment of the industry. The fi

20、ve areas are the threats of new entrants, threat of substitutes, bargaining power of buyers, rivalry and bargaining power of suppliers. Exhibit 2 explains the areas where the high is high, low or moderate. The threat of new entrants is high since the new entrant can offer more attractive products mi

21、x with pricing and selection. The threats of substitutes are low because there are not many substitutes that offer low prices and convenience to customers. The bargaining power of buyers is relatively low since it is fairly easy for customers to switch from one store to another. The rivalry is moder

22、ate or high intensity since cost conditions are low throughout the industry. There are numerous competitors as well as e-retailers that are entering the market rapidly. The power of suppliers is low due to the cheap product selection and high availability. Industry Attractiveness: For the retail ind

23、ustry it seems that there is low to moderate attractiveness because new competitors can easily enter the market, and substitutes exist based on the brands and prices. Also the rivals are capable of imitating other retail stores strategy.Stage of development: The industry is at maturity level. Since

24、the market growth rate is low to moderate. In the industry, the buyers behaviour is at mass saturation, repeat buying and choosing among the brands. The product design is low to moderate, process design is high emphasis. The Dollar Generals products are in the declining stage, since there is fewer b

25、uyers purchasing the products, less differentiation compare to the maturity level. As the industry retail stores become successful, there are more chances of being copied or laid out by the rivalry. 推荐精选The key success factors and the driving forces for the industry are that there are new marketing

26、methods and managerial practices as well as technical innovation. The value proposition of dollar stores is very unique. This helps dollar stores serve consumers who are on budgets. The consumables category is the main driving force behind the solid results. Moreover, the distribution centre is wher

27、e the stores receive merchandise from the nearest centre, which allows the retail stores to decrease the transportation costs. These retail stores which provide easy access to the consumers are beneficial since it reduces the cost. Targeting the lower income consumers is also another success factor.

28、 Opportunities and threats (exhibit 3)INTERNAL ANALYSISThe tangible resources for Dollar General are the selected national brand products, store brands (private label brands). (See exhibit 5 on brands) The store brands offered higher gross margins than national brands. There are a total of 85,900 em

29、ployees both full-time and part-time. Dollar General focuses on its employees and customers. On the other hand, the intangible resources of Dollar General are the $4.3 billion in goodwill and other intangible assets of more than doubling the assets on Dollar Generals balance sheet. (See appendix 1 f

30、rom “Dollar general-Todays Neighborhood Store”) Core competencies: In order for the company to achieve sustainable competitive advantage, it has to meet the four criteria which are valuable, rare, costly to imitate and non-substitutable. Lets analyze some of the core competencies of Dollar General,

31、first, the ability to form basic consumable product at very low price and create a fast convenience shopping experience is imitable and substitutable as other retail stores are capable of doing this. By making a sound operational, logistical and HR decision to keep overhead cost low is valuable and

32、inimitable but not rare or non-substitutable. The location of the dollar stores are valuable and rare but they can easily be imitated and substituted since other retail may want to settle in those specific locations. From our analysis, we did not find any resource that meets the four criteria in ord

33、er to gain sustainable competitive advantage. (Exhibit 4)Strengths and weaknesses推荐精选The analysis of the internal environment by value chain analysis (exhibit 5) has allowed us to identify several most important strengths, such as Dollar General is a niche market, and weaknesses. We have analyzed th

34、e firm infrastructure, human resource management, technology development, procurement, inbound logistics, operations, outbound logistics, marketing and sales, and services. From these sections, we have pointed out the strengths and weaknesses (exhibit 6). For the strength, Rick Dreiling, the CEO was

35、 able to manage the low initial capital expenditures, locations and national /private brands. The company maintained the low-priced products to provide convenience and lower cost distribution. The management team was well experienced. Dollar General can even go in neighborhoods community with smalle

36、r populations where stores like Wal-Mart cannot. The most important weaknesses such as, General Dollar is smaller operating styles. It lack of differentiation in competitions against store of similar style and nature. General Dollar has limited brand categories. In addition, it had some accounting e

37、rrors, and lawsuits which led to poor wage rate. Financial ratio analysis (exhibit 7)SWOT MATRIX and APPROPRIATE STRATEGIC ACTIONS (See exhibit 9)The SWOT matrix will provide us with appropriate strategic actions that can be implemented in the strengths, weaknesses, opportunities and threats.Ø

38、(SO) Because of the recession, the Dollar General can increase their product range to attract more customers to gain profit, and their cost leadership also can attract more customers. At the same time, they can hire the employee with the low labour cost. Moreover, they can optimize the supply chain;

39、 like improving the supply chain to minimizing the cost and shorten the production cycle.Ø (ST) The company has unique brands such as, Clover and Valley; they can increase private label brands with low price. Secondly, lease the place to others so that minimize the cost of owning buildings. Pro

40、vide simple product designs throughout the year to accommodate the demand for low cost merchandise. Dont because of recent company developments, while discarded the lowest level items, lost the market.Ø (WO) Merging of some stores to acquire profit. Reduce the amount of input costs by managing

41、leases, buildings, and warehouse in an efficient manner. Dollar General can expand categorise on line, not just four categories. Strengthen customer service, which can help Dollar General get more demand, and more sales.推荐精选 In case of overflowing of inventory, try to improve the efficiency of its s

42、tores.Ø (WT) Acquisition of smaller retail chains. Strengthen the quality of product to increase the demand. Make the company indispensable, progressive in locating cities with low population to target the market there. The new software system is to help management to monitor and improve distri

43、bution and stock turnover. And increase intangible asset. Monitoring accounting and HR ensure no errors will occur. Enhance the image of the company, to grow brand awareness, cultivate guest loyalty. Functional Strategic actions (exhibit 8)Corporate and business level strategies:We will be using the

44、 following frameworks in order to analyze these strategies, the miles and snows strategies and porters generic competitive strategies. (Exhibit 11)Assessment of current mission, vision, objectives, strategies, and corporate governance (see exhibit 1, 10)Ø Current mission: Dollar Generals missio

45、n is to serve others, such as customers, for convenience, quality, and great prices; treat employees with respect and provide opportunity. For its shareholders, it provides a superior return and at last it provides a better life for communities. This mission statement focuses on the needs of these f

46、our different groups of people that it deals on a daily basis. It provides values such as providing opportunity of growth, and development, in a friendly and fun environment. We used exhibit 1 to assess the mission statement of the company. Dollar Generals overall mission statement score is 5 with a

47、n overall percentage of 71.43 which is moderate mission statement. There are few areas which the company should consider, such as the products and services offered, the technology and innovation and compare its resources to its rivals. Its objectives are to have its stores at convenient locations, t

48、ime-saving shopping experience, and everyday low prices on quality merchandise.推荐精选Ø Current vision: The current vision is that, “Todays neighborhood general store, serving the needs of our customer by providing convenience, value, and service every day.” (Dollar General Case) This vision state

49、ment is specific to this retailer. The word “neighborhood” clearly provides a cordial feeling to the managers and customers. Also, this vision is consistent with the companys operating priorities and culture to “serving others”. This statement seems a bit generic and it could be used by other stores

50、 in general. However, it does show where it wants to be in the future. Current strategies: From the Miles and Snows strategy, we found that Dollar General is an analyzer since it has both the prospector and defenders attributes. The company has been the first mover, and has introduced the dollar ide

51、a, and gained a lot of customers ranging in the lower income bracket. Dollar General has been taking the products from different brand companies and trying to make it a private brand. It also brought into their store, national brands in order to achieve more customers. Moreover, it has a very limite

52、d product line for a narrow segment of total potential market. Dollar General tries to do whatever necessary to aggressively prevent competitor from entering the market. From the competitive strategy, Dollar Generals main competitors are Dollar Tree, Family Dollar, Wal-Mart and other discounted vari

53、ety stores. The company has come up with different types of stores within the discount retail industry. Most of the firms competing in this industry have found a niche in small towns due to the low and middle class population. Through this, Dollar General has found an opportunity to grow. Wal-Mart t

54、ends to draw some of the same customers as Dollar General. Porters Generic Competitive Strategies: Dollar Generals main key success focuses on focus and cost leadership. It maintains its cost leadership through its pricing system, as well through the reporting of building leases. In addition, Dollar

55、 General serves a niche market offering low prices by managing and implementing companywide low-cost strategy. Stocking minimum inventory, hiring adequate number of staff, keeping real estate costs low, and achieving organic growth through expansion, and keeping the overheads low has given Dollar Ge

56、neral a focused cost leadership strategy in its industry. Moreover, Dollar General focuses on low cost efficient production and distribution. They only use suppliers that can maintain a low cost on products and delivery. Currently Dollar General is trying to improve the efficiency of its stores. The

57、y are closing a few stores in less productive areas and spending money to remodel, advertise, and develop a more efficient means of distribution. They hope to improve the quality of existing stores to maintain their slightly higher position in the industry. 推荐精选Corporate strategies: Dollar General u

58、ses renewal strategy and growth strategy. The previous CEO of the company, David Perdue, had implemented a growth strategy towards a merger that resulted in the company being a subsidiary of the Buck Holdings, LP. Later on, under the leadership of Dreiling, he implemented the renewal strategy-a turn

59、around strategy which identified the four operating priorities for the companys operations. Moreover, the company is more specifically on the growth-concentration, since it focuses on the market-development of Dollar General. The company opened new stores in order to reach the new markets with current products.Portfolio Grid: Dollar General has good cash flow hence it is a cash-cow. The company is considered to be a cash cow as long as the debt load can be managed and eliminated. We will eva