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Group task report- Dollar General

Background:

Dollar General is...

Question 1: Describe Dollar General's business strategy. Why has the company been so successful?

Whilst Dollar General is unable to keep up with Wal-Mart in terms of total revenue, it makes its mark in earning a greater percentage of revenue on each dollar of sales. Dollar Generals revenue per dollar of sales for the last year was 4.3 cents, compared to 3.5 cents for Wal-Mart.

There are many strategies that been contributing factors in the success of Dollar General. These factors can be as simple as the specific placement of stores to the more complex running of stores; however all of these factors contribute to a business with widely renowned success. The strategies can be divided into three main areas; Stock and merchandise, placement of stores and running of stores.

Stock/ merchandise:

The main mission for Dollar General is serving others. This is reflected through their everyday low prices. Due to the low prices, Dollar General's products are more readily available to customers from many different backgrounds. Competitors, including 99 cents only stores, gain the majority of their revenue through middle to high income earning customers. Dollar General, on the other hand, relies more heavily and caters their products for people with low to middle incomes. The maximum price for any product available at Dollar General is $35, with one third of the stock priced at $1 or lower.

Placement of stores:

The view of "Dollar General" (date) is that the placement of stores contributes highly to the stores success. Dollar General prefers to steer clear of the super centre store model used by leading competitors such as Wal-Mart, and rather/instead establish smaller stores within a community. The majority (56%) of Dollar General stores can be found in shopping centres. 41% of stores can be found in freestanding buildings leaving a mere 3% which are found in urban structures.

Running of stores:

Another contributing factor in the success of Dollar General is the prompt establishment of stores. In order to take full advantage of profits and minimising operation costs, Dollar General has established a system where the process of setting up the store prior to opening day takes just 8 days. Dollar General Stores tend to have between 6 and 10 employees, including management personnel. By reducing the number of staff, it means that the store is functioning at the lowest possible running cost. The majority of new Dollar General Stores are established on leased space. This is seen by the company as the most favourable financial practice.

Question 2: Describe the role of management, organization and technology in Dollar General's business strategy.

Role of Management

The Managers of Dollar General use proactive alternative methods that don't follow the lead of their competitors (e.g. placing stores within local communities rather than the outskirts of large city centres and achieving the most value for its dollar by opening stores rapidly and operating at the lowest possible cost.

The construction, preparing, opening and running of Dollar General stores follows a basic agenda in regards to the input of management on all fronts. Firstly, District/Area Manager is responsible for the hiring of the construction team who perform any necessary work for the site to commence as a Dollar General store. From there Head Office then authorises the sale of POS (Point-of-Sale) IBM terminals (see appendix figure 1.1) which is the queue for the company to get in touch with Satellite Link provider Spacenet which will link them up with Dollar General Headquarters. Once this link is established corporate Headquarters can then begin transmitting price data and product codes to the IBM terminals. Head Office is then responsible for employing "setters" who get the store ready for its official opening. During this time the individual store manager works beneath the setter until he/she departs from which they are then responsible for the full running of the store.

A few weeks prior to the store opening the store or district manager searches for applicants to assist in the 8 day opening process whilst Dollar General Headquarters in Goodlettsville keep a close eye on proceedings. The Store Manager is responsible for training up prospective employees with a maximum of 6 people being employed by the company. Surprisingly, when the managers are preparing the shop for operation they choose clip board and pen over expensive (but time efficient) technology. Their reasoning being that they have a rough estimate of how much of a certain product they are meant to receive so they do not scan or count items. In regards to inventory management, headquarters receive polling data from POS registers each night (showing quantity of units sold and relative pricing data). In recent times Dollar General as a corporation has undertaken severe measures to reduce stock loss. Such measures include installing loss deterrence software and installing video cameras in staff areas as Dollar General senior managers believe the problem is employee related. However, these measures have been unsuccessful and Head Office must now choose a different course of action.

Role of Technology

Technology plays a much lesser role in the running of Dollar General when compared to its fellow competitors. Employees use up to date IBM POS (Point of Sale) terminals to record each purchase and give an accurate account for all sales at each store. Dollar General has employed satellite link provider Spacenet as its service provider when connecting each store with its main office using satellite modem (figure 1.2 of appendix) which connects to the IBM terminals. Such a service costs the company a staggering $40 million over 10 years, but they see it as a small sacrifice for a far more reliable and time efficient service than cheaper methods such as the unreliable dial-up. Transmission of pricing data and product codes are then relayed from Head Office to each individual store that can then send the relevant payroll back to headquarters. Dollar General has also come to implement Triversity software which authorise all debit/credit card transactions and transmit all sales data. Each store also makes use of bar-code scanners which are installed and connected to the POS system for use in processing orders. Dollar General makes no attempt to hide its minor investment in technology when compared