Dollar General Analysis

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From:Date: [ 11/10/2010 ]
Re:Competitive strategy
Over the last several years Dollar General has seen great success with the strategies currently in place. With potential changes in the economy and some situations presently in the company Dollar General must plan for the future. This memo was put together to identify our strengths and weakness, analysis the external factors of the company, and find options for the future. The options of where to invest our time and effort are; Geographic expansion within the U.S, Improve Merchandising Productivity, and Expand into Services. The recommendation chosen for the Dollar General was to pull back slightly on the current plan of expanding through building new stores. Instead, a recommendation for the company would be focusing on the current stores and concentrating on the customer’s image of Dollar General. With this memo you will be able to see a summary of what is going on in the company and should be able to solve the problem of where to invest Dollar Generals time, energy, and money.

“Ironically, small-box retailers like Dollar General owe their growth to the success of our big-box rivals. The dominance of big-box retail fuels the demand for a convenient alternative.” -David Perdue, Chairman and CEO, Dollar General

The quote above can be seen as a paraphrase of the backbone of your company. Dollar General has is gone into the very competitive and ruthless market of retail and carved out a very attractive niche. Your strong efforts over the past decade have given this company a great reputation. Dollar General has become the pioneers of the dollar store industry as a result of their innovative ideas and well executed plans. By combining the “Knick Knack” items of the old stores with highly consumable items of today’s mass retail stores, the company has transformed the image of dollar stores. Dollar General is currently ranked sixth among the top mass merchandisers in the U.S. and ranks fourth in top discount stores. The problem they face as a company is where they should go next. We want to figure out where the best place is to invest Dollar General’s money, time, and energy to take this company to the next level. The following is an analytical breakdown of the company, options of what the company could potential set their eyes on in the future, followed by recommendations on how to complete these options. Internal Analysis

Over the last several years the company has seen a steady increase of its success. From a financial point of view the total sales have increased from $6.1B in 2002 to $9.169B in 2006. Within these years the average total sales growth was 9%. During this period they were one of only three companies to have outperformed Wal-Mart in both sales and profit growth. Also from 2002 to 2006 the number of stores increased from 6113 to 8260, and they have now have spread their operations to 35 different states. Within these states the stores have been strategically located in areas with similar demographics that will be drawn to the marked down prices. Statistics show that 41% of our customers have a yearly income of $30,000 or less, and an estimated 24% have a yearly income of less than $20,000. Due the size of the stores and staff they are able to go into the smaller communities and produce good revenue. Dollar General has the ability to go into communities with a population of 20,000 or less whereas Wal-Mart wouldn’t want to touch any area with a population of 50,000 or less. Dollar General is often the only retailer in rural communities, and if there isn’t one, they usually have a request for one from a customer. Dollar General stores are also located in specific areas not only for convenience, but to also intercept traffic from the bigger retail stores like Wal-Mart and Target. Instead of traveling 30-40 miles to Wal-Mart, customers can drive a much shorter distant of an average...
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