Their concept has been copied, so their competitive advantage and their strategy are no more as efficient as in the beginning. Competitors have also learnt form the Company’s experience.
3. External Analysis a. Competitors According to the case the two major competitors of Dollar General Corporation are: Family dollar Dollar tree These two companies have adopted the same strategy than Dollar General. Their expansion has been fast, they have the same customers, and the same core business. Although they have many customers such as The Tallboys, Inc.
Fried’s, 7-Eleven, Sears Roebuck, Wall Mart, 99 Cents Only Stores, Smart or Target (2002) The following chart shows the differences between those three companies. Comparison criteria – 2- 1 01 2 Minus real t Equipment (mummer AT stores, Lustrous on center.. ) Wide of product range Productivity Profitability Pricing Image Penetration rate Revenue Growth over the past year Dollar Tree Family Dollar Dollar General Following this graph study it seems Dollar General generally remains the most impressive competitors of the sector.
G remains the best in term of image, penetration rate (even if it is only present in 27 states whereas the others are present in about 40 states), financial position (they have the best Net Income 265 millions Lars, Dollar Tree: 155 millions and Family Dollar: 217 millions) and in term of selling force thanks to its still greater number of stores (6,113 stores for 54,000 employees, Dollar Tree: 2,263 stores for less than 9,600 employees and Family Dollar: 4,616 stores for less than 22,000 employees).
In 2004, Dollar Tree has got 9,600 employees and Family Dollar 22,000 employees according to Yahoo. Com so we can guess that it was inferior in 2002] Nevertheless G has to take care not to lose its leadership concerning the wide of product range proposed. And even if the target household income is not exactly the name than Dollar Tree, G has also to pay attention to the politic pricing implemented by Dollar Tree, which is in fact the best of the sector thanks to products price at $1 or less than $1. But generally, G remains really well positioned among its competitors. B.
Opportunities and threats analysis New distribution centers Business less susceptible to slowdown in consumer spending Stores expansion in new states Size of the stores New competition People qualification Dependency to suppliers Opportunities The Company is dependent upon the smooth functioning of its distribution network ND upon the capacity of its distribution centers.
The Company relies on the ability to replenish depleted inventory through deliveries to its distribution centers from suppliers. New distribution centers are expected in the end 2004 or in 2005 in order to support continued growth.
The dollar business is less susceptible to a slowdown in consumer spending compared with other retail operations because over a third of its stock costs $1 or less. This will mean that Dollar General’s business will not be affected as much as other high cost and high margin led retail operations, as in times of economic sisters consumers will look to save money by purchasing goods that are perceived to offer better value from retailers such as Dollar General. So they have the possibility to gain market share if the economy slowdown.
The stores are located in only 27 states so they have the possibility to open new stores and to expand into additional states.
It will depend on factors that are beyond the Company’s control such as: the ability to negotiate favorable lease terms; the ability to hire and train new personnel, especially store managers; the ability to identify customer demand in different geographic areas. The size of the stores is from 5,000 to 6,800 square feet, whereas Family Dollar stores’ size is from 7,500 to 9,500. It shows that G can extend the size of their stores in order to grow their sales.
Threats The discount retail merchandise business is subject to excess capacity and some of the Company’s competitors are much larger and have substantially greater resources than the Company. The competition for customers has intensified in recent years as larger competitors, sun as Wall-Mart, nave move Into ten company’s geographic markets. The Company remains vulnerable to the marketing power and high level of nonuser recognition of these major national discount chains, and to the risk that these chains or others could venture into the “dollar store” industry in a significant way.
The Company’s success depends to a significant extent upon the abilities of its senior management team and the performance of its employees. The loss of services of key members of the Company’s senior management team or of certain other key employees could negatively impact the Company’s business. In addition, future performance will depend upon the Company’s ability to attract, retain and motivate lifted employees to keep pace with its expansion schedule.
The Company’s business is dependent on its ability to obtain attractive pricing and other terms from its suppliers. The Company believes that keeping good relations with its suppliers is generally a good way to obtain attractive pricing. If the Company fails to maintain good relations with its suppliers, it may not be able to obtain attractive pricing with the consequence that its net sales or profit margins would be reduced.
4. Problem identification Dollar General’s strategy is based on low prices and convenience. That is what fraternities this Company from another.
They had the ability for delivering value to their customers and for placing many stores where other big-box retailers will not is well-deserved. The new CEO, David Purdue, which has no experience in retail industry, has to go on the expansion. But he has to face the problem of a harder competition.
Indeed, the success of dollar stores attract big firm such as Wall-Mart and Smart on this market. So where will he decide to open new stores? He will probably has to expand new stores in new states but he might not find a location without competitors.