Company analysis on Dollar General Stores expanding into Britian - Research Paper Example

? Company Analysis: Dollar General Stores’ Business Expansion Introduction Dollar General Corporation is the United s’ largest small box discount retailer headquartered at Goodlettsville in Tennessee. The corporation operated over 9,300 stores in 35 US states as per the data of January 2011. Generally, the Dollar General stores are located in small shopping plazas and it typically deals with communities that are too small for Wal-Mart. Periodical acquisitions have greatly assisted the company to expand its geographical area and to boost business growth. The company attained a net income of $33.442 million in 2010. Presently, it works with 79,800 employees. Recently, in 2011, the Dollar General stores announced its plans to expand the business by hiring 6,000 employees and adding 625 stores in Connecticut, Nevada, and New Hampshire in addition to the 35 states. This paper intends to analyze the scope of Dollar General Stores’ expansion to Britain. Global Competence The first Dollar General store opened in 1955 at Scottsville in Kentucky was based on the central concept that all items in the store would cost less than one dollar (“The founding family”). Within two years of it business commencement, the organization earned an annual sales of $5 million from its 29 stores. Four years after the death of the co-founder J.L. Turner, the company went public as Dollar General Corporation with more than $40 million annual sales and net income in excess of $1.5 million. In 1983, the company acquired the 280 stores of the P.N. Hirsh Division of Interco, Inc and subsequently in 1985, the company added 206 stores and warehouse of Eagle Family Discount Stores by another acquisition process. The recent practices show that the company is constructing more stand-alone stores in remote areas where another general merchandise services are not reached. The most attractive feature of the Dollar General is that it offers both name brand and generic merchandise within the same store or even sometimes on the same shelf. The company mainly competes with national chains Family Dollar and Dollar Tree in the dollar store format whereas its regional competitors include number of independently owned stores. By the beginning of 21st century, the company launched “Dollar General Market” which is a store that carries a wider selection of grocery items. The developing home cooking trends helped the company in selling its grocery items. The Dollar General stores has grown notably within the short time period of 55 years. One of the major strengths of the company is that it has different potential customer groups that assist the organization to experiment with new business concepts. Newly emerging market segments also effectively contribute to company’s global competence. Similarly, the Dollar General maintains an efficient liquidity position which aids the organization to effectively and timely respond to unexpected contingencies. In addition, the firm performs well in all areas wherever it has business interests. Dollar General performs outstandingly in the ‘backyard’ of large SuperCenters and hence time and saturation pressures are reduced to a large extent. Business efficiency and operational regulations are found to be some of the competitive advantages of the Dollar General as these features significantly add to the organization’s market attractiveness. The company employs most recent developments of e-commerce in order to provide improved services to its customers. Recently, the Dollar General stores announced that it has selected Aldata Solution, a global leader in retail and distribution improvement software to meet the needs of the company’s next generation integrated supply chain solution (“Dollar general selects Aldata “). In addition, the firm makes use of satellite facilities to transmit selling information to the headquarters each evening. The e-trade techniques and the resulted global interconnectedness would greatly aid the organization to operate efficiently in global levels. Moreover, the Dollar General maintains good reputation in the United States. In other words, the company possesses ranges of potential competitive features to enter the global business market. Entry to British Market Although the Dollar General Stores could achieve significant business growth in the US retailer sector during the last few decades, the organization’s entry to a new market would not be an easy task. Hence, the firm must conduct a detailed market study before entering the British market. It would help the organization to discover potential customer groups, changing customer needs, and other market factors. This is important because Britain’s every market segment may not fit with Dollar General Corporation’s business concepts. While fixing the target market, the organization must ensure that the targeted region is potential enough to meet its future plans of expansion. Firstly, the Dollar General Stores has to take into account the size as well as the growth rate of the British market. It is obvious that a huge market size would be capable of serving the firm’s interests effectively as this attribute may aid the organization to get access to large number of customers. However, sometimes huge market size may not contribute to profitability since large market segments will likely face more tough competition. Economic indicators point that growth rate of the market can have a great influence on a newly introduced business. The company should also consider the intensity of competition in the British market and potential competitor’s expenditures. By analyzing this data, the Dollar General Stores can determine whether the company would be able to confront with its competitors. In addition, the organization must estimate possible net profit margins to evaluate the retail business sustainability in the British market segment. Marketing exeperts opine that buyer intentions, salesforce predictions, testmarketing, and statistical demand analysis are very beneficial for an organization to determine sales potential and thereby to take a decision regarding the proposed market entrance. It is advisable for the Dollar Genreal to assess the possible effects of micro-environmental as well as macro-environmental variables on the selected market segment. While analyzing the targeted market, the management has to evaluate how the market’s structural componets fit the firm’s objectives, resoruces, and capabilities. Similarly, the orgnanization needs to examine whether it can offer superior value to the customers in Britain. For this, it is necessary to comprehend the cultural aspects of the country. The Dollar General must ensure that the firm will get access to potential distribution channels in order to operate in the British market. Finally, the firm has to evaluate whether business operations in the British market would affect its brand image. Some experiences show that thoughtless business activities may lead to a profit decline in the domain country. The management has to decide whether the firm must remain as a public company or operate like a private company while launching its business into Britain. If the management decides to remain as a public company, it should clearly understand the United Kingdom company law related to the formation of a public limited company. Business Strategies As discussed earlier, Dollar General is a retail giant. The organization’s major business strategy is to place the discount stores in small to mid-size communities (“Dollar General Corporation”). Since the Dollar General Stores’ research outcomes pointed that majority shoppers travel fewer than three miles to shop, the company established clusters of stores. For instance, there have been three stores established in Latrobe which is a town of fewer than 9,000 people. In addition, there are 1,013 Dollar General Stores in Texas and 507 stores in North Carolina. The company’s fascinating business strategy has assisted it to achieve notable economic growth. It has been continuing its geographical expansion when many global giants struggled to survive the market fluctuations. Marketing experts argue that the organization’s business model is designed to offer value and smaller stores since they are capable of meeting customer interests. It seems that the company does not allow poor performing stores to continue its operation at the expense of other profitable stores. As part of this strategy, the company closed some unprofitable stores during the past few years and refurbished a few stores in addition to the reintroduction of its private label brands. Another noticeable feature of Dollar General Corporation is that it is a customer-driven distributor of consumable basics. Likewise, the organization’s business strategy gives more emphasis on serving low and middle income consumer groups. The company has set production cost minimization as its major policy to improve net incomes and business growth. The Dollar General Corporation deals with direct importing and exporting practices as part of its service policy. It seems that the organization does not seek the service of intermediaries for importing or exporting practices. The company believes that the direct importing and exporting methods would be beneficial for it to achieve economies of operations. Under its direct import and export policy, the company enjoys greater degree of control over all aspects of transactions. Finally, this strategy assists the company to form a direct and closer relationship with its vendors and ultimate customers. The company imports goods from many countries in order to meet its increasing customer needs. International business plan The Dollar General Stores’ strong corporate control aids the organization to effectively deal with its international business plan. Business acquisitions seem to be the key business strategy of Dollar General Corporation as it enables the company to eliminate risk elements to some extent. This policy also assists the firm to overcome the difficulties associated with product positioning and market building, which involve higher costs. In order to launch the company’s product and services into British market, it is essential to design an effective international business plan that would enable the company to easily integrate its operations with British culture. Executive summary is the central element of an international business plan that lists the competitive features of the company to enter global business. In addition, the international business plan has to include export/international business policy commitment statement that reflects the Dollar General’s potentiality to devote sufficient time, staff, and financial resources to develop international markets. To succeed in international trade, the organization has to ensure sincere support from bottom level to top level employees. For this, the top management has to conduct employee meeting sessions so that the employees would be aware of the scope of the international business expansion. In many cases, it is observed that companies forget their commitment to international market developments while they give priority to domestic market operations. In order to avoid such difficulties, the Dollar General must formulate a written code of conduct so that it can efficiently deal with domestic as well as international market operations. By framing a written export policy commitment as a formal pat of international business plan, the Dollar General management can consider export plans more seriously and hence it can become an integral part of the company’s overall business strategy. Similarly, the organization has to clearly specify its export and import policies before it enters British market. It is advisable for the Dollar General to continue its current export and import strategies as it will benefit the company in long run even though these policies involve more risk elements. Before launching its business into British market, the Dollar General management must take social responsibility policies into account since modern global business operations are greatly influenced by corporate responsibility programs. In short, the management should formulate a comprehensive business framework that will assist the company to systematically deal with British market operations. Industry analysis The Dollar General Corporation operates as a chain of variety stores. A variety store or price-pint store deals with the selling of inexpensive items and often all the items are charged with a single price. Generally, “variety store products include cooking supplies, small tools, personal hygiene supplies, kitchen supplies, organizational supplies, small office supplies, holiday decorations, electronics supplies, home decor, novelties, toys, pet supplies, out of print books, DVDs and VHS tapes, food products, automotive supplies, among other products” (Bayrakci). In a variety store, some items would cost much as compared to prevailing market prices whereas some other items may offer a substantially lower price than usual. Depending on the size of this industry, some variety stores offer frozen food and drink section. For instance, Dollar Tree and 99 Cents Only Store chains in the United States. Likewise, some stores possess a section of expensive merchandise in addition to a single price items selling section. The flagship store of Jack’s 99 and Jack’s World in New York City can be considered as a good example for such a store. In Britain, A&G Homestores Ltd and C W Penny (Canford Cliffs) Ltd are some of the examples of variety stores (“Department & variety stores”). The business’ capabilities Dollar General’s management plays a significant role in developing its business model. The organization keeps a guidebook known as planogram that contains proper positioning and placement of all fixtures and products in order to maintain control over each and every aspect of operations. Since the company follows a strict and systematic approach over organizational matters, the management can put a moral check on its employees which in turn contribute to improved functionality. Such a well disciplined management practice would greatly assist the Dollar General to quickly bring the business operations to a profitable track while operating in British retail market also. In addition, the firm has competitive capabilities in the home market, cost control process, and most importantly in its well executed strategy that enables success in a hyper competitive segment. The organization’s distribution center uses information system to track the inventory they collect and subsequently transfer to store. Expansion of domestic competitors From a detailed analysis of US variety stores industry, it is found that Wal-Mart is the potential competitor to Dollar General. However, it seems that Dollar General could not effectively compete with Wal-Mart retail stores. As per financial data, US gross domestic product of $11.7 trillion represents a 30% contribution from US retail industry. Out of this 30% US retail industry contribution, Wal-Mart account for nearly 7% whereas Dollar General represents a comparatively meager 0.2%. According to recent data, Wal-Mart operates in 15 countries outside the United States with 4,263 stores and 660,000 workers. The company has strong business roots in Argentina, Brazil, Canada, and the UK. In the domestic competition, many of the Dollar General’s competitors focus on California and Los Angeles. PEST analysis for British market A PEST analysis (Political, Environmental, Social, and Technological factors) is necessary to explore the scope for Dollar General in British market. Political factors While evaluating British political spectrum, it is clear that the country has attained political stability. Three major political parties constitute country’s political structure; Labor, Conservatives, and Liberal Democrats. On the ground of electoral success, Britain has been often regarded as a two-party state similar to America. According to Oakland, Britain can be referred to as a classic multi-party state in which a few parties have political significance due to the effect of the “first past the post” system the country follow (103). In addition, the country maintains good relationship with leading countries like United States and Japan. Hence, the Britain’s political stability would greatly benefit the Dollar General to operate its business smoothly in the country. Economical factors In terms of nominal GDP, the United Kingdom’s economy is the sixth largest national economy while the country has achieved seventh position in world by purchasing power parity. London, the capital of the Great Britain, is the world’s largest financial center. Different economic researches show that the country maintains sustainable economic growth that in turn would contribute to buying habits of the individuals. The Britain’s economic structure indicates that the country has potential economic resources such as skilled labor that can survive any unforeseen contingency. Another potential economic feature of the Britain is that it maintains a low unemployment rate. However, cheaper imports from abroad seem to be a potential threat to the businesses as well as the whole economy. In total, the British economy offers favorable economic situations for new business entrants like Dollar General Corporation. Social/cultural factors The Britain has an excellent education system as compared to most economically developed countries. In addition, the world language English is the primary tongue in Britain. These features greatly add to the market potentiality of the country. The British government has liberalized trade policies in order to improve the trade partnerships and industrial growth in the country. However, the country greatly struggles with the shortage of skilled employees and thereby it is forced to depend on immigrant workers. Finally, demographic and geographic factors of the country offer competitive opportunities to the Dollar General Stores. Technical factors The Britain has attained great technological developments over the last few decades; this change has highly promoted business growth in the country since technological applications aid organizations to reduce cost of production and improve profitability. However, recent trends indicate that the country needs to emphasize on research and development practices. Likewise, poor transporting system of the country hinders trade activities to a large extent; probably, the Dollar General also cannot easily resolve the issues associated with weaker transportation. Market access factors The marketing mix of an organization can have a great influence on its global market expansion process. Hence, it is necessary to consider the marketing mix of Dollar General while dealing with the company’s British market entrance. It has been estimated that the firm has nearly 4,000 SKU’s and many of them are major brand name products (“The new dollar general”). In addition, the organization also deals with private label products as well as some other irregular items. This increased product diversity may be a potential strength for the company to access British market. The Dollar General practices target marketing strategy and its each store focuses on a market of a 5-mile radius of the store. This strategy assists each store to get much closer to customers since it needs to concentrate only on a smaller group of customers. The promotional activities would be very easy for Dollar General Stores as the firm is in close touch with its customer groups. Production and Distribution factors For a company working in the discount retail industry, it is essential to have low operational costs in order to be a cost leader and to attract potential customers. Thoughtful application of inventory management tools as well as supply chain systems along with improved technology aid the Dollar General to cut production costs and increase operational efficiency. The organization keeps good relationship with its suppliers as it believes that this policy would add value to its supply chain operations and ultimately distributional efficacy. The Dollar General has nine distribution centers and its own trucking system to deliver goods to subsidiaries. However, it is observed that the company does not have sufficient trucks to distribute its merchandise and therefore more than 50% of the firm’s goods are distributed by external carriers. The organization also maintains good relationship with carriers and this strategy enables the firm to take advantages of additional discounts. In short, the continuation of its production and distribution strategies may assist the company to quickly dominate the British market. Product pricing The competitive pricing policy helps the Dollar General Corporation to deal with changing market trends. Although the firm contains the word “dollar” in its name, the Dollar General’s products are sold at set price points range from 50 to 60 dollars. The stores do not have ranges of price categories and hence it is easy for the customers to understand the price points (“Family dollar stores, Inc”). In addition, the company’s all products are based on the common unit of a dollar. Approximately, one third of the organization’s product lines charges a price of not more than $1.00. This pricing strategy may greatly benefit the Dollar General Corporation to effectively compete in the British market. In order to survive the British market competition, the company has to minimize its cost of goods sold. Although, the organization keeps production costs lower, it must further cut its operational and manufacturing costs while entering the global market competition. As part of input cost minimization, the organization currently leases out most of its building parts. The cost leadership of the Dollar General has to be marketed effectively so that the organization can successfully launch its operations in the British market. Conclusion Dollar General is a well established small box discount retailer in the United States. The company possesses all potential elements for international expansion. British market will be the most fitted destination for the Dollar General’s global business entrance. Low cost operation and direct importing and exporting practices are found to be the competitive features of the country to enter British market. A detailed PEST analysis shows that British market offers potential opportunities for Dollar General to expand its business territory. In addition, the organization’s pricing strategy, supply chain efficacy, and good supplier relations increase the company’s feasibility in the British market. Works Cited “Dollar general selects Aldata for supply chain services.” Internet Retailer. (January 2011). Web. 30 Aug 2011. Bayrakci, Sami. “The Wharton business school study on something store.” Something Store. Wharton: University of Pennsylvania. (2011). Web. 30 Aug 2011. “Department & variety stores.” Bhlocal.com. (2000). 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