Dollar General Case Study Analysis

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Dollar General Case Study Analysis
Background
J.L. Turner and son Cal Turner founded Dollar General in 1939 as a wholesale dry goods retailer. They quickly changed their business to retail and opened their first dollar store in Kentucky, 1955. The company went public 14 years later and eventually Cal took over as president in 1977 and then became chairman in 1989. With the foundation of the company starting from a father and son, it is no wonder why Dollar General has a strong family culture. This is emphasized with their company mission: “To serve others: to provide customers a better life, shareholders a chance for a superior return, and employees respect and opportunity” (Harvard Business Review 2009). Company superiors treat the employees fairly and with respect. And the employees treat customers with that same level of respect. Dollar General works on serving people by focusing their efforts on low-income consumers and providing them with fairly priced consumables in a convenient, small-store format. Cal helped buildup his father’s company by focusing in the beginning on “opportunistic buying”. Cal would buy large quantities of product and attempt to create a very high turnover rate. In the early days of the company, the success mainly fell on the buying decisions of the company owners and merchants. This tactic helped Dollar General but they really hit their stride when they shifted their focus in the 90s with a customer-centric model, which is still in place. Today, Dollar General has a big stake in the extreme value retail segment and from 2002-2007 their revenues increased at an average growth rate of 9%. It is the 6th largest mass retailer in the United States and from 2001-2006 they were one of three companies to have outperformed Wal-Mart in sales growth and profit growth. Since David Perdue became CEO of Dollar General, the amount of stores have increased from 6,273 to 8,260 in just 4 years and in 2007 had revenues of $9.2 billion. Problems

While Dollar General has been one of the best when it comes to the dollar store industry, there have been some noticeable areas for improvement. There have already been a number of structural changes for Dollar General in recent years because of the significant growth they have achieved. In response to these issues, the company has shut down over 200 low-potential stores and gotten rid of a good amount of old inventory. One effort was called Project Alpha and was designed to remodel and relocate a significant number of stores while also eliminating an inventory pack-away policy. This policy had store managers packing away old inventory for seasonal items that were not sold one year to be sold for the following year. It created more clutter in the backroom and more headaches for the store manager. The successful increase in growth of the past couple decades has overshadowed the fact that Dollar General has its fair share of problems preventing it from performing more efficiently. With the concentration of the company focusing on serving low-income folks in rural areas, at some point they will have to move into more urban settings if they want to be a leader in the industry. Dollar General store customers typically live within 5 miles of the store yet half of its stores operate in communities with populations of 20,000 or less. Their stores are located mainly in the southeast, southwest, and Midwest of the U.S. Only 2% of the stores are in urban areas with low-income people where the real estate rent was usually lower as well. With lower rents and the company policy being low cost with a pattern of buying short-term leases for their stores, urban areas might be a way to grow into areas with much higher populations. Dollar General has the majority of their products priced at $10 or less with 30% of the products being $1 or less. They have increased the amount of nationally recognized brands to their stores to compete with the likes of Wal-Mart. With Wal-Mart being a big...
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