MBA FPX 5006 Assessment 2 Strategic Analysis

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Capella University

MBA-FPX5006 Business Strategy

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Date

Introduction

Dollar General’s history traces back to 1939, with the establishment of J.L. Turner and Son Wholesale. The company transitioned from wholesaling to retailing, achieving annual sales above $2 million by the early 1950s. This success led to the opening of the first Dollar General store, where all items were priced at a dollar or less. The concept was well-received, and by 1957, J.L. Turner and his son Cal Turner Sr. had expanded to 29 stores with an annual revenue of $5 million. In 1968, the company went public as Dollar General Corporation, with annual sales exceeding $40 million and net income surpassing $1.5 million. Today, Dollar General is a leading discount retailer with more than 16,000 stores across 46 states. It was first recognized by the Fortune 500 in 1999 and reached #112 in 2020. Dollar General has grown to become one of the most profitable retailers in the U.S., with revenue nearing $27 billion in 2019. Despite its growth, the company maintains the founding family’s ethos of hard work and friendly customer service. Approximately a quarter of Dollar General’s merchandise still sells for a dollar or less (Dollar General, 2020). This report explores Dollar General’s business strategy.

Business Strategy

Dollar General’s expansion from a single wholesale store to one of the largest small-scale retailers in the U.S. is attributed to its focused low-cost strategy. This strategy allows the company to sell comparable products at lower prices, boosting revenue and gaining a competitive edge in its market niche. Dollar General succeeds by focusing on rural locations, often far from competition. While companies like Walmart only service about 40% of the population in these areas, Dollar General operates near 75% of the American population (Garcia, 2020). By focusing on towns with fewer than 20,000 residents, largely made up of lower- to middle-class individuals, the company caters to local needs, ensuring stores are stocked with affordable household goods and produce.

In addition to low-income sectors, Dollar General attracts a broader customer base with value items from national brands that are not restricted to a $1 price point. Customer experience is a key priority for Dollar General, with store layouts designed to be easily navigable and welcoming. The company also plans to remodel 1,000 stores and open 975 new locations in the coming year (Bhattacharya, 2019). Technology also plays a role in improving efficiency, with the launch of the DG GO! app, which facilitates scan-and-go payments. The app is available in 250 stores, with over 140,000 downloads and 25,000 monthly active users (Bhattacharya, 2019). As stated on its website, Dollar General’s foundation for growth lies in its dedication to serving customers, employees, and communities (Dollar General, 2020).

Business Model

Dollar General operates a closeout retail business model, selling products at clearance prices until inventory is depleted. This retail model creates value for customers while generating value from the markets. The company optimizes its model through “customer discovery” techniques, identifying customer preferences, dislikes, and shopping patterns (Ramos, Souza, & Esquivias, 2020). Dollar General has successfully adapted to customer needs over time, offering a wide range of products, including household supplies, food, beverages, and health products. They carry trusted brands like Clorox, Procter & Gamble, Coca-Cola, Nestlé, and more. Dollar General also offers private brands such as Clover Valley and DG Home, providing cheaper alternatives to national brands. Stores are designed for a hassle-free shopping experience, with curated merchandise selections to meet customer demands (Dollar General, 2020).

Dollar General’s customer base primarily consists of low- to medium-income families who shop on a budget, and its stores are mainly located in small rural towns. The company benefits from close-knit relationships between customers and employees, which helps foster customer loyalty. While the majority of its revenue comes from in-store purchases, Dollar General is expanding into online shopping. Approximately 75% of the items sold in stores are priced at five dollars or less, with much of the revenue generated from low-cost household goods and branded items. The company’s products are supplied by 15 distribution centers, with most deliveries managed by third-party vendors. The link between Dollar General’s business model and its strategy lies in location—having a large number of stores in rural areas makes shopping convenient for its customers, which in turn supports customer retention (Dollar General, 2020).

Corporate Strategy

Since 1939, Dollar General has grown into one of the most profitable U.S. retailers, with revenue reaching around $27 billion in 2019. Recognized by the Fortune 500 in 1999, Dollar General ranked #112 in 2020. By continually evolving its business models, the company progressed from a single store to a major retail chain (Dollar General, 2020). Dollar General employs a conglomerate diversification strategy, expanding its product offerings and markets to meet customer needs. A key addition has been DG Fresh produce, which caters to the growing demand for healthy eating and has contributed to business growth. The introduction of DG Fresh has also reduced costs for the company. In addition, Dollar General has partnered with Federal Express to offer package drop-off and pick-up services, increasing foot traffic (Bells, 2017). Geographically, Dollar General opened 500 new stores, remodeled 973, and relocated 43 stores in 2020. For the fiscal year 2020, the company aims to open 1,000 new stores, remodel 1,670 stores, and relocate 110 stores, totaling 2,780 real estate projects (Russell, 2020). In 2004, Dollar General established an office in Hong Kong to oversee global sourcing through the import and export of products related to the company’s business (Trade India, 2020).

Corporate Structure

Dollar General operates with a hierarchical corporate structure, with senior management and executives at the top, followed by general employees. The company’s executive team includes the CEO, Executive Vice Presidents, Vice Presidents, and Directors. Dollar General employs over 90,000 people, with most roles in customer service. Each Executive Vice President manages a specific line of business, and with the company’s expansion, employee growth continues to rise (Dollar General, 2020). The company sources products from suppliers and third-party distributors but is moving toward vertical integration in distribution and warehousing. Dollar General once imported products from China, but this became less viable after the U.S. imposed tariffs. The company now focuses on vendor negotiations, product substitutions, reengineering, and diversifying the origin of its goods (Garcia, 2019). While Dollar General has no stores outside the U.S., it is actively building international relationships.

Strategic Fit

Dollar General’s business strategy centers on customer satisfaction. By operating in rural areas with little competition, the company successfully captures its target market. Additionally, Dollar General prioritizes the in-store experience with inviting layouts and careful merchandising strategies. It also uses technology to improve efficiency and is actively renovating stores to maintain customer engagement. The company’s business model, which is flexible and customer-focused, has made it a destination for both low-income and other demographics. Dollar General’s partnership with Federal Express added a valuable service, increasing foot traffic in its stores. By continually adding new products and pursuing innovative strategies, Dollar General remains positioned for growth and success (Garcia, 2019).

References

Bhattacharya, S. (2019). A ‘savvy operator’: Why Dollar General dominates the discount retail category. Retrieved from https://digiday.com/retail/savvy-operator-dollar-generaldominates-discount-retail-category/

Bells, S. (2017). Understanding Dollar General’s Business Strategies. Retrieved from https://marketrealist.com/2017/04/understanding-dollar-generals-business-strategies/
Dollar General. (2020). Retrieved from https://aboutus.dollargeneral.com/

Garcia, T. (2019). Dollar General, PVH, other retailers adjust their outlooks to soften the blow of tariffs. Retrieved from https://www.marketwatch.com/story/dollar-general-pvhotherretailers-adjust-their-outlooks-to-soften-the-blow-of-tariffs-2019-08-29.

Ramos, P., Souza, R., & Esquivias, P. (2020). The Elements of a Retail Business Model. Retrieved from https://www.bcg.com/publications/2010/strategy-elements-retailbusiness-model