Analysis
Dollar General is one of the large retail outlets that have been a success in the US as highlighted by the company’s CEO- David Perdue. The majority of scholars associated the move to the retailers’ focus on knick-knacks that bore low prices. However, according to the retailer (Dollar General), success was due to a wide range of low priced household consumables.
Since Perdue had taken over the leadership of the company, it experienced a spontaneous growth that led to the increment of more than 2000 stores by the beginning of 2007.
However, this growth was not without various challenges, as the company had to close some 200 outlets that performed poorly back in 2006. The CEO also acknowledged that maintaining such a growth would be a challenge especially in the face of the ever-rising competition in the contemporary market.
In 2007, Dollar General was ranked the sixth among the largest retailers after clocking $9.2 billion in revenue. Dollar General had its client base as low, fixed, and middle-income earners, and had its stores being operational in 35 states within the United States of America.
The company had strategized in a way to meet the needs for basic consumables among customers in the low-income groups as mentioned earlier. The company’s idea of business and the concept was a pioneer model by Woolworth’s, founded in 1878 in New York.
The majority of the target customers were not living in towns, and this aspect depicts the reason why most stores were located at downtown areas of cities and towns in a market penetration strategy. At the beginning, around 1913, stores succumbed to the prevailing high rates of inflation, which saw prices drop to five or even ten cents.
The five-dime concept proved workable as most American stores adapted it during the first part of 20th century. Later, Woolworths developed the five-dime concept to a large discount format, by founding Woolco- a large discount store in 1962.
The move faced stiff competition as competitors opened similar stores, thus leading to spontaneous growth witnessed among the large retail stores. All along, the dollar store had been in the five-dime roots until in 1990s when it broke away, shifted to product mix, and started experiencing growth.
Currently, Dollar Stores houses four types of retailers; first, the five-dime stores that initially sold items for one dollar or less. The second category comprised a segment of close out retailer, stores that sold overstock, discontinued, or even distressed goods usually at a price of one dollar.
However, the quality of goods sold depicted some inconsistency and selection varied each day. Limited assortment grocery retailers formed the third segment, which provided grocery products labeled privately and sold in-store. Extreme value retailers formed the fourth category that everyday low prices products packaged in small boxes.
As opposed to large retailers, these stores focused on an assortment of goods, while stocking a significant number of nationally branded products. With extreme value retailers, they competed on convenience and price as opposed to mass retails that competed on large assortments and price.
Perhaps, this strategy could be linked to the massive growth and expansion among extreme value retail segment currently, which is almost double that of the entire retail sector. During 2007, this growth was attributed to the new bargain mentality harbored by most American consumers and the rising number of households in the lower income and or on a fixed income bracket.
Over years, the Dollar General has been experiencing spontaneous growth, although accompanied by various challenges. The CEO, David Perdue, had to make a decision as to whether to continue the growth through opening new stores or focus on the existing stores and drive growth through merchandizing and in store operational improvements.
However, the CEO recognized the need to leverage the significant growth within the industry in the attempt to avoid marginalization as in the case of the five-dime retailers (Sekhar 2009). The decision to sustain the growth through opening additional stores meant expansion of the business through additional markets.
While the CEO would be hoping for an increment in sales and profit growth, incertitude concerning the future was inevitable. Expansion through opening additional stores meant geographical expansion since those additional stores would be located at different places.
However, there are both positive and negative impacts related to this move. First, having more stores means additional market segment and expansion of client base, since stores would be established at appropriate locations. In additional, this move can be quite lucrative, especially if the additional stores are set up where other stores are non-existent (Rubinfeld & Hemingway 2009).
These locations should entail areas where the concept of the business is already known, but potential customers cannot get those products due to lack of suppliers. Such moves will not only lead to the growth of the entire business, but also the sales volume and profit margin (Sekhar 2009).
On the other hand, expansion through opening up additional stores can yield detrimental impacts to a business. For instance, quite a large amount of money will be required to set up the new stores and make them operational. In additional, such a move calls for the interference on the budget set by the entire organization (Rubinfeld & Hemingway 2009).
Funds must be set aside to cater for the establishment of new physical premises, stocking, and hiring of additional staff. In case of inflation, the entire company suffers a greater loss as compared to operating a small number of stores. The same case applies when it comes to taxation since the more the number of stores, the higher the amount of taxes to be charged on the entire business.
The management of the organization is likely to experience a hectic time while dealing with numerous stores. The trend subsists due to the additional staff and level of activities involved, hence disrupting some aspects of management (Sekhar 2009). For instance, the CEO may find it difficult passing information from one branch to another, especially where modern means of communication are not put in place.
Expansion through focusing on existing stores would be a brilliant idea. Although the company would not stand the advantage of expanded geographical market, the move would be quite beneficial to the entire company. For instance, additional resources pumped to the additional stores would be used to improve the existing stores (Rubinfeld & Hemingway 2009).
In addition, fewer funds would be used to make some improvements on existing stores as compared to establishing new stores, a venture that would cost the entire business (Dollar General) a considerable amount of money. There would also be cost savings since there would be no need for additional staffing as in the case of additional stores.
The management team would not have a difficult time running the stores since the entire structure would remain intact; however, there will be a need to call for implementation of very small changes just to keep the business updated (Sekhar 2009).
Ultimately, the management will have few or no chances of moving the entire business from the original purpose for which it was set up. On the other hand, additional new stores would take quite some time before they could start generating some substantial revenues to the company (Sekhar 2009).
With the existing stiff competition in the business world, businesses managers should adopt various leveraging techniques in order to remain in the industry. For instance, when spontaneous growth was experienced among large retail outlets, the small five-dime stores’ operations were overtaken in their operations and growth.
Various leveraging techniques should be applied to keep the company operational. Innovation must be applied to come up with new concepts in line with products being sold (Margaria & Steffen 2010). The move should also be extended to include measures that the business can implement to maintain its employees, especially top performers.
Remaining focused on the company’s vision will ensure that the company does not start other business outside the initial objectives. On the other hand, the management team can discard the stores that perform poorly and concentrate on the profitable ones.
Surrounding the business with powerful parameters is also a crucial leveraging factor that entails building strong teams and management team that will put in place appropriate measures to capture and utilize opportunities immediately they arise.
Reference List
Margaria, T & Steffen, B 2010, Leveraging applications of formal methods, verification, and validation, Springer-Verlang, Berlin.
Rubinfeld, A & Hemingway, C 2009, Built for Growth Expanding Your Business Around the Corner or Across the Globe, Prentice Hall, Upper Saddle River.
Sekhar, G 2009, Business policy and strategic management, I K International Publishing House, New Delhi.