_28Group 10_29 Dollar General

8/13/2019 _28Group 10_29 Dollar General

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Dollar General: Heavy on Organization, Light on Systems

Dollar General Corporation, headquartered in Goodlettsville, Tennessee, is an aggressivecompetitor in the deep discount retail industry, fighting for position with other stores such as

Family Dollar, Fred's, 99 Cents Only tores, and Dollar Tree, as well as with retailers such as!al"#art, $mart, C%, and &ite id( Dollar General stores offer a product line of generalmerchandise that includes housewares and cleaning supplies, health and )eauty aids, clothing,pac*aged food, stationery, seasonal offerings, and other household consuma)les( The companyhas )een operating since +99(

Dollar General's most recent annual sales figures total -.(/ )illion, placing the chain at the top ofthe dollar store category of discount retailers( omewhat surprisingly, the chain is not achievingits success )y following the e0ample set )y other successful discount retailers( !hereascompetitors such as 99 Cents Only tores consider middle" and high"income customers to )e *eycontri)utors to their profits, Dollar General caters specifically to customers with low, middle,

and fi0ed incomes( ccording to data from C 1ielsen, in 2334 5.6 of Dollar General'scustomers earned less than -3,333 per year, and 2/6 earned less than -23,333(

Dollar General has *ept away from the )ig )o0 supercenter store model used )y !al"#art and$mart( This type of store is often located on the outs*irts of cities or outside of particular townsto draw customers from a )road area( !hen placing new stores, Dollar General prefers to locatethem within communities, often targeting municipalities that are home to fewer than 23,333residents( 7n early 233/, over 5,433 Dollar General stores were in such communities( Thecompany )elieves that filling the role of neigh)orhood store is a )ig part of its success( s such,stores follow a fi0ed, even"dollar pricing schedule with a)out one"third of all merchandise pricedat -+ or lower( The ma0imum price for a Dollar General product is generally around -4(

!hen it comes to total revenue, the dollar store cannot really *eep up with the superstore( !al"#art's most recent annual sales figures were over -+4 )illion( 8owever, where Dollar Generalcan ma*e its mar* is in getting the )iggest )ang for its )uc*( #any supermar*ets struggle to *eepup with !al"#art )ecause the retail giant earns a higher percentage on each dollar of sales (4cents in recent years: than most retailers are a)le to achieve( Dollar General has surpassed !al"#art's )enchmar* )y earning 5( cents for every dollar of sales(

8ow Dollar General accomplishes this is )y rapidly opening stores and running each store at thelowest operating cost possi)le( s of 1ovem)er 233/, Dollar General operated .,2;/ stores with/5,433 full" and part"time employees in 5 states, with ;5 new store openings in 2334 alone(ince +999, when there were ,/.; stores, the chain has dou)led in si


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reveal the )asics of the typical Dollar General store opening, as well as how the operation fits inwith the manner in which the store is run after opening( 7n )oth cases, a strict )udget influencesevery step from hiring to implementing information systems(The average Dollar General retail store occupies /,.33 square feet of space( The company viewsleasing space as the most favora)le financial practice( The ma=ority of stores are placed in either

shopping centers 426: or freestanding )uildings 5/6:, with a handful housed in ur)anstructures 26:( The opening of a new store is a chain reaction of events that )egins with adistrict or area manager hiring a construction team to perform any wor* necessary for the site toserve as a Dollar General store( This can include putting in new floors or creating access fordelivery truc*s(

s this wor* )egins to wind down, the Goodlettsville office authoriO: terminals from 7?#, with the stipulation that 7?# deliver the terminals on the secondday of the upcoming store opening process( The >O purchase is the cue for Dollar Generalheadquarters to notify its satellite lin* provider, pacenet, to schedule an installation at the newstore( The satellite lin* connects the 7?# terminals to corporate headquarters so that the store

can report sales data( pacenet is contracted to perform the installation on the fourth or fifth dayof the store opening process(

The opening of Dollar General stores falls under the direction of a store merchandiser, also*nown as a setter or an opener( etters coordinate the entire process as it happens and theirresponsi)ilities include everything from managing employees and installing the 7?# terminals to)uilding shelves and stoc*ing the shelves with products( They also test software and lin* up withheadquarters( 7n a way, setters are li*e hired guns even though they wor* full"time for DollarGeneral( They spend most of their time on the road, traveling to different locations whereverthey are needed: to open, close, and reorganiogs aree0tremely detailed, right down to instructing employees that products must )e positioned so thatthey are even with the front edge of a shelf( Corporate headquarters maintains close control overevery aspect of operation( The company distri)utes hand)oo*s to employees that direct themhow to communicate with each other and with customers(Over the ne0t several days, the setter receives and sets up the 7?# point"of"sale terminals, thecrew sets up a stoc* room for surplus inventory, and a small manager's office is constructed( ?ythe third day of the setup process, appro0imately 43 percent of the store's opening inventory

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arrives( On the fourth or fifth day, a pacenet technician arrives to install the store's satellite dishon the roof and a satellite modem inside that connects to the 7?# terminals( pacenet isreceiving -53 million over +3 years to fill this role for Dollar General(Once the technician esta)lishes a satellite lin* with corporate headquarters in Goodlettsville,corporate management )egins to transmit pricing data and product codes to the 7?# terminals(

The store can )egin sending payroll information )ac* the other way( pacenet also tests thepoint"of"sale software, called Triversity, which the store will need to run to authori


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headquarters gathers from store cash registers each night, which indicates how many of a productwere sold and at what price(

Dollar General has an increasing shrin* rate, which refers to the percentage of total sales that thecompany writes off as losses resulting from theft of product or other mishap( Dollar General's

shrin* rate has grown steadily from 2(/ percent in +99. to (. percent in 233/( The company'sgoal is to *eep shrin* rates to no more than +(;4 percent to 2 percent( tore managers )elieve thatmost of the company's losses are caused )y merchandise )eing stolen during shipping, whichgoes undetected )ecause there is no scanning upon receipt, and )y shoplifting in the stores(Corporate headquarters has chosen to focus on the employees as the root of the pro)lem( Themeasures that headquarters has ta*en to counter the shrin* rate include deploying loss preventionsoftware, which identifies unusual cash register transactions, and installing video cameras tomonitor the registers, the stoc*room, and even the store manager( These measures apparentlyhave not made a dent in the shrin* rate(

!hile Dollar General continues to watch the )ottom line carefully, its )usiness continues to

grow( 7n 233, the chain e0perimented with two larger, grocery"oriented stores under the DollarGeneral #ar*et name( )y the first quarter of 233/, 55 Dollar General #ar*et stores were inoperation with plans to add 3 more( t the same time, the chain has continued to achievegrowth through new stores and from increases in same"store sales(

The question is, 8ow long can this strategy wor* for Dollar GeneralA Can the company *eepramping up its )usiness without ramping up its technology )udgetA Crac*s )egan to show whenthe company reported a net loss of -4( million for the third fiscal quarter ended 1ovem)er ,233/( On the heels of the report, Dollar General announced a restructuring plan that aimed to sellinventory more quic*ly, slow store growth, and shut down 533 underperforming stores( Thelatter move would cost -+. million( The plan called for the discontinuation of a Bpac*awayBstrategy for inventory in favor of dissolving lagging inventory through sharp discounts andsimply disposing of it( -;9 million charge for getting rid of old inventory was largelyresponsi)le for he -4( million third"quarter loss( s a result of recent performance, DollarGeneral's stoc* dropped 236 while its competitors were en=oying gains of 236"36( omeanalysts remained optimistic enough a)out the company to declare the stoc* a )argain at thereduced price( Dollar General hoped to recoup some of its losses and test out its new inventorystrategy )y launching the largest clearance sale on seasonal items in its history on Decem)er 2/,233/(

ources mil Eee, BDollar General hares on ale,B www(fool(com, Decem)er +, 233/BDollar General @ps the nte for fter"Christmas hoppers,B ?usiness !ire, accessed viaahooH Finance Decem)er 2;, 233/ BDollar General &eports Third"Iuarter 233/ Financial&esults,B ?usiness !ire, accessed viawww(shareholder(com, Decem)er +2, 233/ $im ( 1ash,BDollar General . Days to GrowB and B&oad)loc* 5,+;3 1ew)ies,B ?aseline #aga


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?usiness!ire, ugust 4, 2335, home()usinesswire(com BDollar General Corporation Factheet,B 8oover's Online, www(hoovers(com Dollar General Corporation +3"$ Form,www(sec(gov,accessed Decem)er 2/, 233/ and www(dollargeneral(com, accessed Decem)er2;, 233/(

This activity contains 5 questions.

1- Describe Dollar General's business strategy. Why has the company been sosuccessful?

2- Describe the role of management, organization, and technology in DollarGeneral's business strategy.

3- How well do information systems support Dollar General's business strategy?Eplain your answer.

4- Does Dollar General miss out on any business opportunities as a result of itsapproach to information technology? !f so, what are these opportunities?

5- Do you thin" Dollar General can continue growing at it current rate? Eplain youranswer.

Good Luck!

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_28Group 10_29 Dollar General

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