MBA FPX 5006 Assessment 1 The Strategic Process

Student Name

Capella University

MBA-FPX5006 Business Strategy

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Date

Executive Summary

Strategy refers to the actions taken by a company to achieve and maintain superior performance relative to its competitors (Rothaermel, 2017). Crafting a strategic plan that endures through change is critical to a company’s success. Companies that fully understand the fundamental components of a strategic framework can make informed decisions to ensure long-term growth. Dollar General exemplifies a company that has successfully developed and maintained its competitive strategy. The company began in 1939 as J.L. Turner and Son, a family business. Recognizing the need for lower prices and expansion, CEO J.L. Turner rebranded the company as Dollar General Corporation in 1955. The company went public in 1968 and was recognized by the Fortune 500 in 1999, ranking #112 in 2020. Dollar General has since become one of the most profitable stores in the U.S., generating approximately $27 billion in revenue by 2019. Dollar General’s ability to innovate and evolve its business model enabled it to expand from one store to a national chain (Dollar General, 2020).

AFI Framework

The AFI Strategy Framework is a model that links three core strategic management tasks: analysis, formulation, and implementation, which help companies develop strategies to improve performance and gain a competitive edge. The analysis includes both internal and external assessments using tools such as PESTEL, Porter’s Five Forces, and VRIO. This analysis allows companies to understand the challenges they face and develop effective strategies. Formulating the strategy involves incorporating the company’s mission, values, and employee engagement to foster performance and productivity (Rothaermel, 2017). Once the strategy is formulated, it is ready for implementation, aligning the company’s actions with its strategic goals (Jurevicius, 2013).

Leadership in the Strategic Planning Process

Dollar General employed the AFI Framework as early as 1955 when it rebranded and adopted a new business model. Through analysis, management identified the need for lower prices and expansion, which differentiated Dollar General from its competitors. By offering items for one dollar or less and expanding to over 16,000 stores, Dollar General gained a competitive advantage. The company implemented strategies to keep up with market demands, such as increasing product lines, introducing edible items, and focusing on rural areas where competitors like Walmart were absent, further strengthening its competitive position.

Internal Environment of Dollar General

The VRIO framework assesses whether a company’s resources provide a sustained competitive advantage by evaluating their value, rarity, imitability, and organization. Dollar General’s store locations in rural areas, patents, financial resources, distribution network, employees, and product offerings are key strengths (McGreal, 2018). However, the company’s cost structure and research and development are areas of competitive disadvantage (Barney, 1991).

External Environment of Dollar General

PESTLE analysis examines the political, economic, social, technological, legal, and environmental factors affecting a company. Political factors include regulations, employment laws, and trade restrictions. Economic factors such as interest rates, inflation, and wage rates also influence Dollar General’s operations. Social factors, including demographics and health consciousness, shape consumer behavior. Technologically, Dollar General has embraced innovations like digital coupons and online shopping. Legal considerations, such as competition and employment laws, along with environmental concerns like recycling and sustainable practices, play an essential role in the company’s strategy (Bush, 2016).

Porter’s Five Forces is another tool used to analyze an industry’s profitability. Dollar General faces high competition from companies like Dollar Tree and Family Dollar. The threat of new entrants is low due to high barriers, and suppliers have low bargaining power due to the competitive pricing in the industry. Customers, however, have significant power, as they can easily switch stores for better prices (Mind Tools, 2020).

Recommended Course of Action

Dollar General’s competitive advantage is largely derived from its strategic store locations and low-cost operating model. Based on the AFI framework, VRIO framework, and PESTLE analysis, Dollar General should continue

Executive Summary

Strategy involves goal-directed actions taken by a company to enhance and maintain superior performance relative to its competitors (Rothaermel, 2017). A company’s success or failure often hinges on its ability to develop a strategic plan that adapts to change. Firms that grasp key strategic framework components are better equipped to make informed decisions that foster long-term success. Dollar General exemplifies a company that has effectively executed and sustained its competitive strategy. Founded in 1939 as J.L. Turner and Son, a family-owned business, the company evolved as CEO J.L. Turner identified a need for lower prices and business expansion. In 1955, the company was renamed Dollar General Corporation and went public on the New York Stock Exchange in 1968. By 1999, it was recognized by the Fortune 500, and by 2020, it ranked #112. Dollar General’s revenue reached around $27 billion in 2019, making it one of the most profitable stores in the United States. Through innovative changes to its business model, the company grew from a single store to its current prominence (Dollar General, 2020).

AFI Framework

The AFI Strategy Framework is a model that links three interdependent strategic management tasks—analysis, formulation, and implementation—that assist companies in developing and implementing strategies to enhance performance and gain a competitive edge. Analysis involves understanding internal and external environments through models such as PESTEL, Porter’s Five Forces, and VRIO. This helps companies identify challenges and opportunities that influence strategic development. After analysis, a strategy is formulated, taking into account company values, mission, and employee involvement, which can improve performance and reduce productivity declines (Rothaermel, 2017). The final task, implementation, involves putting the strategy into action by aligning organizational structures and relationships.

Leadership in the Strategic Planning Process

Dollar General employed the AFI Framework as early as 1955 when it recognized the need for lower prices and expansion, thereby differentiating itself from competitors. By innovating its business model, Dollar General created a unique shopping experience for customers, selling items priced at a dollar or less and growing to over 16,000 stores. Effective implementation of this strategy provided Dollar General with a competitive advantage in the retail industry. The company continues to evolve by increasing product lines, adding edible items, focusing on necessities, and expanding into rural areas, where larger retailers like Walmart are absent.

Internal Environment of Dollar General

The VRIO analysis evaluates a company’s internal resources to assess whether they provide a sustained competitive advantage. Dollar General’s rural store locations, patents, financial resources, and distribution network contribute to its competitive advantage, as do its employees and food products (McGreal, 2018). However, the company’s cost structure and research and development efforts are areas of competitive disadvantage. The VRIO framework highlights the importance of internal factors in sustaining the company’s market position.

External Environment of Dollar General

PESTLE analysis is a widely used framework that assesses external market factors influencing an organization, including political, economic, social, technological, environmental, and legal aspects. These factors, such as employment laws, interest rates, and technological advances, shape the external environment in which Dollar General operates (Bush, 2016). Regularly conducting PESTLE analysis helps the company remain responsive to market trends and external influences that could impact business performance.

Porter’s Five Forces is a tool used to analyze industry profitability by examining competitive forces such as rivalry among firms, the threat of new entrants, substitute products, and the bargaining power of buyers and suppliers. Dollar General operates in a highly competitive discount retail industry, with firms like Dollar Tree and Family Dollar Stores as direct competitors. The company’s success depends on maintaining low prices and overcoming challenges posed by high competition, low switching costs for customers, and the low bargaining power of suppliers (Mind Tools, 2020).

Recommended Course of Action Dollar

General’s competitive advantage stems from its strategic store locations and low-cost operating structure. To retain this advantage, the company should continue utilizing the AFI framework, focusing on brand development, employee engagement, and expansion. Improving its distribution network, technological adaptability, and marketing efforts will also bolster its market position. The company should explore global expansion opportunities while prioritizing diversity in its workforce, as diverse teams enhance creativity and problem-solving capabilities. Furthermore, adopting environmentally friendly practices will help Dollar General maintain a positive ethical standing and contribute to sustainability efforts.

References

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99. Bush, T. (2016). Pestle analysis. Retrieved from https://pestleanalysis.com/pestle-analysis-everything-you-need-know/

Bush, T. (2016). SWOT analysis strengths: Definition & examples. Retrieved from https://pestleanalysis.com/swot-analysis-strengths-definition-examples/

Dollar General. (2020). Retrieved from https://aboutus.dollargeneral.com/

Jurevicius, O. (2013). What are the flaws in a strategic management process? Retrieved from https://strategicmanagementinsight.com/topics/strategic-planning-process.html

McGreal, C. (2018). Where even Walmart won’t go: How Dollar General took over rural America. Retrieved from https://www.theguardian.com/business/2018/aug/13/dollar-general-walmart-buhler-haven-kansas