Business
Assignment 2
The financial statement for the last seven years of the company shows improvement in earnings or revenue of the company every year. From 2009-2016, the revenue of the company showed significant improvement. This fact is also evident from ratio analysis of the company. The profitability of the company has increased from 2009-2016, return on equity in percentage has shown improvement in seven years, and in the same manner return on invested capital in percentage has increased. Further, return on assets in percentage has also increased, and interest coverage has also shown remarkable improvement. Growth has also been observed in the gross margin and operating margin. The efficiency ratios of Dollar General Corp also indicates positive trend of the company as asset turnover has increased, and also fixed asset turnover showed an increase, further, inventory turnover of the company shows consistent turnover. The financial health of the company is also satisfactory in ways that total current assets and total stakeholders equity has shown significant growth.
The liquidity position of the company is showing varying trends as quick ratio is indicating variations. Quick ratio of the company has increased in the year 2011, then it decreased in 2012, again shown improvement in 2014-2015, and in 2016, it has again decreased. Current ratio of the company is showing somewhat consistent trend, financial leverage, and debt to equity ratio of the company is also showing an increase. Cash flow of the company is also showing significant improvement every year. The financial position of the company is, however, pointing out towards the fact that the strategy of the company is working as most of the ratios of the company are showing satisfactory results. From the above analysis, the issue seems to be with capital structure. The company has to focus on its structure of capital as well as credit metrics in order to adopt consistency in its operations, and to improve quick ratio. The company should focus on investment so that further improvements can be ensured. In this regard, the reader should be aware of analyzing the financial strengths of the company by considering cash flow, income statement, and balance sheet of the company.
SWOT Analysis
The SWOT analysis of Dollar General Corp can be explained with the help of following table.
Strengths
The existence of the company in several locations serves as strength of the company because customers find it easy to visit the store of company in order to get products of their choice, which help in increasing repute and profitability of the company as more and more customers like to visit the stores. There are more than 90,000 employees working in the company. The workers are skilled, and are assisting the organization to provide quality products to the customers, which is also ensuring profitability of the company. The company is providing affordable products to customers as a result of which majority of customers like to make their purchase, contributing to the profitability, and hence to strength of the company. The company is maintaining effectual sales and distribution system because of which it is ensuring timely delivery of products to the customers, which is enabling the company to enjoy high growth, ensuring strength of the company. Furthermore, the barriers to entry are high for new entrants as a result of which Dollar General Corp can get remarkable advantages from the market, which is also strength of the company.
Weaknesses
Research and Development is essential for success of an organization, Dollar General is not investing much in Research and development as a result of which the company is unable to achieve desired results. The company is facing many challenges from the labor unions as a result of which operations of the company are affected because it is increasing employee turnover; the operating cost of company is high, which is exerting negative influence on total revenue of the company. Furthermore, inconsistency is observed in the marketing strategies as well as policies of Dollar General Corp stores, which is reducing attractiveness of the organization for consumers; the company is also penetrating less at a global level as a result of which it is unable to ensure awareness at the global level. Additionally, the size of stores of Dollar General Corp is small, now customers want to shop from megamalls; all of them are weaknesses of the company because of lack of attention paid by the company to these factors.
Opportunities
Entrance into the international market such as in the emerging economies is an opportunity for the company because it enables the company to achieve more profitability, and also help in creation of awareness. The company should invest in Research and Development, and should ensure visibility through advertising so that more people can be attracted, and also become aware. The company can acquire small retail chain in order to ensure expansion can help the company to increase its profitability.
Threats
The increase in competition from local players makes it difficult for the company to retain its customers as competitors adopt new strategies such as reduction of price for attracting customers, which is a threat for Dollar General Corp; the increase in opportunity cost is a threat because it indicates increase in cost to end-consumers. Further, changing economic conditions such as inflation because of increase in price of fuel and unemployment make it difficult for the company to conduct operations in smooth manner. The advancements in technology and changing regulations of the government make it difficult for the company to conduct its business, creating threat for the company.
Corporate Strategy Analysis
The generic strategies that fit best to what company is doing are entering into new or international market, merger and acquisition, and strategic alliance and partnership. Merger and acquisition helps in improving status quo of the company, and also helps in improving efficiency of operations of the company. Strategic alliance and partnership helps in creation of business friendly environment, and also paves the way to bringing improvement in the quality of amenities of life that the organization was seeking. The company has to ensure creation of a balanced portfolio in order to implement generic strategies in an effectual manner.
Entering into New/International Market
In my opinion, the most effective strategy for Dollar General Corp is entering into new or international market. It is because, this strategy will provide improved distribution efficiencies, higher penetration of private as well as source label merchandize, growth of non-consumables, and enhancement of position as a low-cost operator. Entry into new and international market is easy for Dollar General Corp, because it is following small format. The international marketplace, however, provides several opportunities to organizations. It will help Dollar General Corp to increase its sales, improve profits, ensure security on short-term and long term basis, increase innovation, provide exclusivity, and help in achieving economies of scale, all of which enable the company to conduct business in an effectual manner. Moreover, it will also help the company to access many new customers, and diversify the risks associated with business.
Recommendations
In order to achieve more growth and profitability, the company should continue to compete in the existing market, and should ensure entry into the international market. Since, the company is facing threat from local players so it should focus on its current competitors and not on the big ones. It should also focus on expansion in the current market so that profitability can be increased by making people aware. The company is also facing threat from technological revolution, so, it should respond to technological advancements and should adopt changing technology in order to facilitate customers in an effective manner. It should invest on advertising and marketing by using social media, and market store locations. Additionally, it should pursue new format of stores so that profitability can be ensured from grocery items, capability for explosive growth can be made certain, and a shift from the previous model can be encouraged. The company should ensure product differentiation in order to create better image in minds of customers as compared to customers. The company can achieve differentiation by providing more service-based items such as wire transfer, and should increase selection of moderately priced products.
