Business
Assignment 1
Business Model of Dollar General Corp
The business model can be described in terms of value proposition, market segment, value chain structure, revenue generation and margins, position in value network, and competitive strategy.
Value Proposition
Dollar General Corp is facilitating customers with household needs, and is providing variety of products of general merchandise. It is providing items at everyday low price in small box stores that are conveniently located. The strategy of the company is to satisfy needs of customers by providing them convenience, quality products at low price, and help them in saving money.
The company is serving middle, low, and fixed income families. Majority of its customers are females. About 86% of the customers of Dollar General Corp are females. It is serving customers in the United States, in mid-Western, Southwestern, and Eastern states. Further, impulse buyers, low income shoppers, and high income households are also target market of Dollar General Corp. The company is accomplishing its objectives via convenient locations, everyday low prices on the quality merchandise, and by providing shopping experience that help in saving time.
Revenue Generation and Margins
The company is maintaining its private label brands, and is focusing on their expansion in order to ensure generation of revenue. The profit margin on the private label products is about 10 percent more as compared to similar brands (Duprey). Furthermore, the company is also making more investment, and allocating more funds on consumables.
Position in Value Network
Dollar General Corp is regarded as extreme value retailer in the dollar store market of the United States. Major competitors of Dollar General are Dollar Tree Inc, Wal-Mart, Target Corp, Lowes Companies Inc, Costco Wholes all Corp, Burlington Stores Inc, Family Dollar, and Big Lots Inc etc. In order to deliver more value to customers, the company is focusing on serving low income consumers. It has also adopted a unique as well as exceptional cost efficient approach for the organization in order to ensure efficiency in management and operations.
Competitive Strategy
The competitive strategy of Dollar General Corp can be described in terms of price and convenience for the customers. The company is facilitating customers with the products at low prices, and the prices are available at the stores that can be easily accessed. Further, the company is also providing faster customer service as compared to its competitors.
Value Chain Structure
The value chain structure of Dollar General Corp can be described in terms of:
Supply chain management
Operations
Distribution
Marketing and
Follow-up service
In order to ensure effective management of supply chain, the company has ensured full vertical integration. For achieving efficiency in operations, the company is focusing on lowering costs, product designs, and technological advancements. The company has adopted low cost distribution strategy. Further, it has not adopted any follow-up service.
PEST Analysis of Dollar General Corp
Political Factors
Political environment exerts its influence on the economic environment, and provides discouraging or supportive environment for the organization. The growth of Dollar General Corp is, however, market by political stability. The policies on the economy, and agreements regarding trading such as NAFTA exert their influence on the organization.
Economic Factors
The economic factors help in ensuring stability as well as success of the business. The profitability and sales of retailers such as Dollar General Corp is negatively affected by economic downturn, but Dollar General Corp has the capability of using thus situation as an opportunity. The economic factors that affect functioning of Dollar General are increase in consumption and unemployment rate.
Social Factors
Social factors exert their influence on the retail industry. The business of Dollar General Corp on is affected by the spending habits of individuals, which in turn is influenced by economic conditions prevailing in the country. Further, in this era, there is faster pace of living, in which living efficiency is major element that is presenting several challenges for Dollar General Corp.
Technological
In order to achieve more efficiency, Dollar General Corp is integrating and implementing several new technologies such as it is using IT technologies, and is facilitating customers with online shopping experience.
Five Forces Model
Intensity of Rivalry
The intensity of rivalry is high because of the growth of the industry, lack of product differentiation, low cost of switching, strong competition because of large number of competitors, and high exiting barriers.
Threat of New Entrants
Threat of new entrants is low due to economies of scale, capital requirements, brand identity, and access to the distribution channels.
Bargaining Power of Buyers
The bargaining power of buyers is low because there is large number of buyers in the market. Further, there is no threat of adequate integration, and no substitute buyers are available.
Bargaining Power of Suppliers
The bargaining power of suppliers is low because of low switching cost, and significance of industry to the suppliers. Further, substitute suppliers are available, and there are large numbers of suppliers that are competing in the market.
Threat of Substitutes
The threat of substitute is low, because prices are already low.
Company’s Chief Competitors
Major competitors of Dollar General Corp are Dollar Tree, Family Dollar, and Wal-Mart. Dollar tree focuses on local production; it buys and sells merchandise or products in bulk, and provides the products to consumers at a reduced price. The operating margin of dollar tree is, however, higher as compared to Dollar General Corp. Dollar tree sells every product for $1 or even less. Family Dollar focuses on convenience of customers, and is providing products under $2, the company considers customers as boss, and tries its best in order to make them happy. Further, it is focusing on facilitating poor population of rural and urban areas of the country. Wal-Mart is providing competitive prices, which is everyday lower price of products, high sales mix and low margins. It is pushing and expressing to open several smaller stores.
The threat from Wal-Mart is more as compared to other competitors because it is constantly emphasizing on opening of new stores, on cutting prices, and also targeting low income shoppers. The threat from other competitors is, however, moderate.
Thinking of customers regarding the company, and its competitors can be illustrated with the help of following perceptual map.
Figure: Perceptual Map of Dollar General Corp
The above map is indicating that Dollar General is providing high quality products at low price to the customers as compared to its competitors.
References
Durpey, Rich. "3 Reasons Dollar General Corp.'s Stock Could Rise." The Motley Fool. N.p., 29 Apr. 2015. Web. 16 July 2016
