What advice would you give Dollar General about its expensive expansion plans? What do you think are Dollar General’s Greatest strengths and opportunities?
Dollar General’s expansion plans are unnecessarily expensive as of the moment as the bid to acquire Family Dollar Store is more important. Notably, it will open up its markets to rural areas that Family Dollar had acquired customers in. Besides, acquiring the firm minimizes the risk of an ill-informed venture and will also be cost effective as no new stores will have to be opened.
Notably, Dollar General can boast the largest customer base of the industry that earns the company the highest revenue in comparison to its competitors. Dollar General has the competitive advantage of performing high-end tasks than any other variety store in the US that unveils the best opportunities such as the capability to make the better bid for Family Store with a US$1.2 billion difference in their bid prices. Essentially, the expansion plot for the new stores offers a significant opportunity that will open up more of the world to Dollar General’s products. Also, the company is well marketed over the social media thus an opportunity to sell it brand which is one of its major strengths in the industry.
Why would anyone make a bid for Family Dollar Stores after they signed an agreement to be acquired by Dollar Tree?
It was not apparent which company would win the bid to acquire Family Dollar Stores though Family Dollar Stores’ management were more inclined to the acquisition by Dollar Tree more than Dollar General. While the future of the winning bidder remained unclear, investors were most sure that in whichever case Family Dollar Store had its share as the safest to trade with. There were minimal chances of the decrement of the Family Dollar Stores’ share price even if acquired by Dollar Tree.
Notably, none of the three top companies exploit the all similar niches but have differences with some more concentrated in the urban and other in the rural or poor areas. As a result, any of the alliance would open up the company to a new type of market thus improving the customer base of the acquiring company. Therefore, investors assume that Family Dollar carries the fortune in any of the acquiring company thereby buy the share as they expect an increase in share price as a result of increased revenue in the merger.
Why would Family Dollar Stores be trading above the highest price being offered by either potential acquirer?
Having Family Dollar Stores trading at a higher price than any of its bidders means that the investors bought more of Family Dollar Shares as the increase in ask price was eminent. This will improve the brand name and present the alliance as the most stable competitor in the industry. It so happens that the company that loses the bid would find itself in the worst competitive disadvantage owing to the overexploitation of literary all kinds of markets in the different locations of the stores. The increased total revenue, total stores and total employees of the alliance will impact significantly on all stakeholders in the industry with online stores such as Wal-Mart also affected directly or indirectly. The losing bidder will have to get back to the drawing board to formulate new strategies in customer acquisition, branding as well as marketing.
Do you think either proposed merger makes sense? Why or why not? What are Dollar General’s greatest weaknesses and threats?
The alliance of Family Dollar with either of its competitors made sense. An acquisition by Dollar Tree would consolidate the two companies’ revenue posing a great threat to Dollar General and other companies such as Walmart and Target (Much). A merger with Dollar General, on the other hand, would be the biggest merger that would surpass the former merger by a significant margin posing a much greater threat to Dollar Tree than Dollar Tree merger would pose to Dollar General. Essentially, Dollar Tree is desperate and failing to win the bid would eclipse their opportunities for further development.
All in all, Dollar General has several weaknesses in its operations. They include the failure to have a well-defined strategy for its inventory rather than the constantly experimented inventory that does not fit for a company in its highly competitive industry (Hale 12). Its high operating costs also impact significantly on the gross margins and chances of keeping pace with the aggressive thereby raising concerns on the need for controlling the allocation of the operating costs.
Works Cited
Hale, Todd. "Dollar store, no frills: the new retail landscape." Consumer Insight 2004 (2004): 11-13.
Much, Marilyn. "How Much More Muscle Can Dollar Tree Build With Family Dollar?". Investor's Business Daily, 2017, http://www.investors.com/research/the-new-america/how-much-more-muscle-can-dollar-tree-build-with-family-dollar/.
