Dollar General Corporation's Porter’s Five Forces and SWOT Analysis
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Table of Contents
TOC o ;1-3; h z u HYPERLINK l ;_Toc516011009; 1.Introduction PAGEREF _Toc516011009 h 3
HYPERLINK l ;_Toc516011010; 2. Porter’s Five Forces PAGEREF _Toc516011010 h 4
HYPERLINK l "_Toc516011011" 2.1 Threat of New Entrants: low PAGEREF _Toc516011011 h 4
HYPERLINK l "_Toc516011012" 2.2 Bargaining power of suppliers: low PAGEREF _Toc516011012 h 5
HYPERLINK l "_Toc516011013" 2.3 Bargaining power of buyers: high PAGEREF _Toc516011013 h 6
HYPERLINK l "_Toc516011014" 2.4 Threat of substitutes: low PAGEREF _Toc516011014 h 6
HYPERLINK l "_Toc516011015" 2.5 Intensity/ threat of rivalry: high PAGEREF _Toc516011015 h 7
HYPERLINK l "_Toc516011016" 3. Dollar General strategic response. PAGEREF _Toc516011016 h 8
HYPERLINK l "_Toc516011017" 3.1 Threat of new entrants PAGEREF _Toc516011017 h 8
HYPERLINK l "_Toc516011018" 3.2 Bargaining power of suppliers PAGEREF _Toc516011018 h 9
HYPERLINK l "_Toc516011019" 3.3 Bargaining power of buyers PAGEREF _Toc516011019 h 9
HYPERLINK l "_Toc516011020" 3.4 Threat of substitutes PAGEREF _Toc516011020 h 10
HYPERLINK l "_Toc516011021" 3.5 Intensity/ threat of rivalry PAGEREF _Toc516011021 h 11
HYPERLINK l "_Toc516011022" 4. SWOT Analysis PAGEREF _Toc516011022 h 12
HYPERLINK l "_Toc516011023" 4.1 Strengths PAGEREF _Toc516011023 h 12
HYPERLINK l "_Toc516011024" 4.2 Weakness PAGEREF _Toc516011024 h 13
HYPERLINK l "_Toc516011025" 4.3 Opportunities PAGEREF _Toc516011025 h 13
HYPERLINK l "_Toc516011026" 4. 4 Threats PAGEREF _Toc516011026 h 14
HYPERLINK l "_Toc516011027" 5. Recommendations based on Porter’s Five Forces and SWOT Analysis PAGEREF _Toc516011027 h 15
HYPERLINK l ;_Toc516011028; 5.1 Expanding their operations into the internet PAGEREF _Toc516011028 h 15
HYPERLINK l ;_Toc516011029; 5.2 Expansion of its stores both locally PAGEREF _Toc516011029 h 16
HYPERLINK l ;_Toc516011030; References PAGEREF _Toc516011030 h 18

1.Introduction
Dollar General Corporation is popular for its cost saving approach as it operates within the scope of discount and variety stores. This strategy has appealed to most of its shoppers as they are able to not only save on time but also money. This has resulted in the retail store growing to the position of sixth leading mass merchandiser and the fourth biggest discount store in the USA. The company in 2013 had 17.5 billion dollars in sales and had expanded their distribution channel to 12. The aim was to ensure that they are able to efficiently cater for the over 13,600 branches located in Canada and USA (Bice, 2014). Moreover, the retail store has divided its operations into one-dollar stores like those for Dollar Bill and Dollar Tree. This stores target the low-income earners with its price range of $1 or less. Additionally, the company focuses on having multi-price-point retail chain stores that target both the fixed and middle income earners who believe that price reflects the quality of the product (Peluso, 2010).

Furthermore, the company competes in the low-end-retail sector with its low price strategy. This means that companies like Nordstrom, Bergdorf Goodman, J.C Penney, and Lord ; Taaylor department stores will not be included in the analysis as they focus mostly on the high-end and middle income earners. The company’s focus on the low-end retail sector exposes it to a number of risks and benefits. In order to remain competitive an organization needs to master how to maximize on the benefits while reducing the risks its exposed to from its environment (Bice, 2014). This has necessitated the need to evaluate Dollar General Corporation continuous progress by focusing on the macro and micro environment. In the macro-environment the Porter Five Forces strategic tool will be used. Moreover, in the micro-environment the SWOT analysis will be used to address the company’s expansion strategies in response to the industry by constantly offering products at competitive and effective pricing.

2. Porter’s Five Forces
14001752032000Threat of new entrants is low
Economies of scale is high
Capital requirements are high
Incumbency advantages independent of size are high
00Threat of new entrants is low
Economies of scale is high
Capital requirements are high
Incumbency advantages independent of size are high
-514350196532500According to Shih, Kaufmal and Mckillican (2010), Porter Five Forces Analysis is a strategic management tool that is used to carry out an evaluation of the industry and help in the comprehension of the enablers of profitability that are present in the industry. Dollar General Corporation management team can then use the findings from Porter five forces to formulate progressive strategies that will enhance its competitive edge and long-term profitability in the industry. The five forces are shown in the table below:
240030023812404229100409575Bargaining power of Buyers: high
Concentration of buyers relative to suppliers is low
Switching costs is high
Product differentiation of suppliers is high
0Bargaining power of Buyers: high
Concentration of buyers relative to suppliers is low
Switching costs is high
Product differentiation of suppliers is high
-476249342900Bargaining power of suppliers: low
Concentration relative to buyer industry is low
Availability of substitute products is low
Switching costs of buyers are low
Differentiation of the suppliers’ products is low
00Bargaining power of suppliers: low
Concentration relative to buyer industry is low
Availability of substitute products is low
Switching costs of buyers are low
Differentiation of the suppliers’ products is low

160020012700Threat of Internal Rivalry: high
Number of competitors is high WMT, Target, Family general
Growth rate in the industry is low
Differentiation of products is low
Switching costs are low
00Threat of Internal Rivalry: high
Number of competitors is high WMT, Target, Family general
Growth rate in the industry is low
Differentiation of products is low
Switching costs are low
37338005175250
10001256350
25431752387600
155257513334Threat of substitutes of services: low
The differentiations of the substitute products are low
Changes of strategy in other industries to attract customers is high
00Threat of substitutes of services: low
The differentiations of the substitute products are low
Changes of strategy in other industries to attract customers is high

Figure 1: Porter’s Five Force for Dollar General
2.1 Threat of New Entrants: lowThe threat of new entrance in the industry is low according to figure 1. Dollar General Corporation delivers its products and services at low-cost pricing model by capitalizing on economies of scale. This offers the company a competitive advantage which serves as a barrier to new entrants in the industry because it is able to weaken their price. In addition, it helps the retail store to increase their profit margins. Moreover, large size of financial resources is required for a new entrance to compete in this industry (Shih et al., 2010). Moreover, the company has incorporated technology in its operations at wider scale. The aim is to streamline its operations ensuring that the operations and mechanical aspect of the business are intertwined for efficiency. A new entrant will find it challenging to match the same level of technology expertise that is present in Dollar General Corporation’s wide distribution channel (Bice, 2014).

Another barrier to the new entrants is finding the suppliers to supply products to them. The retailers in the industry have managed to attract and maintain a supplier-retailer relationship which will serve as a hindrance for new suppliers to penetrate. This aspect provides confidence to the low-priced retail company in the industry like Dollar General Corporation to continue their operations without having the fear of new entrants. Moreover, a company like Dollar General Corporation has been in the retail industry for many years. This means that they have been able to deliver a seamless distribution and logistics network. This serves as a barrier to a company that wants to join the low-priced retail industry as they will have to struggle before they find stability in delivering their products to their stores (Peluso, 2010).

2.2 Bargaining power of suppliers: lowThe bargaining power of suppliers is low according to figure 1. The concentration of the buyers with regard to the suppliers is low. This is because there is a form of dependency in the industry where the suppliers depend more on the retailers for them to sell their products which decreases their purchasing power. Moreover, the threat of substitution in the industry is low. This is because the extreme-value retailers like Dollar General Corporation offers a focused collection of small-box format, which allows the customers to come in and out of the stores quickly. In addition, the differentiation of products in the low-priced market is low. This is because the number of suppliers offer the same products in the industry and are many when compared to the retail stores. The means that their switching costs are low as they fight to offer the right prices to be maintained by the retail stores.
2.3 Bargaining power of buyers: highAccording to Shih et al (2010), buyers have a high bargaining power in this highly competitive market. The buyer needs to get the best products present in the retail stores by paying the least price as possible. This means that a lot of pressure is placed on Dollar General Corporation where the concentration of buyers to suppliers is low decreasing its profitability. The switching cost in the industry is high because the retail stores are not located far apart from each other. Moreover, the price sensitivity nature of the buyers is comparatively high because they have inadequate financial means causing them to look for the best discount and offers in the industry.

2.4 Threat of substitutes: lowAccording to figure 1 the threat of substitutes is high. Even though retail stores in the low-priced market offer similar products at nearly the same price. The cost of the buyers switching to substitute products is relative high since they can always purchase other products from other retail stores like Walmart that offer better quality and branded items if they are willing to part with more finances (Bice, 2014).

Moreover, changes in other industries have an impact on the retail stores. Online retail stores are penetrating the market, which pose a challenge to Dollar General Corporation. Moreover, the Target Corporation has decided to concentrate its focuses on the USA market after failure of its launch in Canada. This presents a warning sign for Dollar General Incorporation, especially in the TargetExpress stores that target the low and middle income earners (Bice, 2014).

2.5 Intensity/ threat of rivalry: highDollar General Corporation is the fourth largest discount and variety retail store in the USA which means that the threat of rivalry is high. Dollar General faces competition from stores like Family Dollar stores, Target Corporation, Burlington Stores, Costco,Wal-Mart, and Dollar Tree when it comes to general products. In the clothing sector it faces stiff competition from online retail stores like Fab.com that offers low-priced apparel to their customers. Moreover, these competitors have nearly the same capacity and power. The competition in the retail sector especially in the low-priced market is narrowed to factors like price, location, customer service, and the quality of the merchandiser (Shih et al., 2010).
Moreover, the high threat of rivalry decreases the profits, which has the impact of slowing the growth of the industry. The sale of undifferentiated products is low, which increases the buying power of the customers increasing the rivalry threat. Switching costs among the customers is low because the retail stores have to keep the price of the products closer to the margin as they can. In addition, the switching costs are low because the merchandise being offered to the customers are liquidated easily. These aspects mean that the retail stores in the industry are competing on the effectiveness of their operations, which accelerates the intensity of competition (Bice, 2010).
-Dollar General Corporation numerical scores based on the Porter’s Five Forces Analysis
1-High 2- Somewhat high 3- Average 4- low 5- Somewhat low
Threat of new entrants 4
Bargaining power of suppliers 5
Bargaining power of buyers 2
Threat of substitution 5
Intensity of rivalry 1
Table 1: Numerical scores
3. Dollar General strategic response.The Porter’s five forces has highlighted the strengths and opportunities that Dollar General Corporation managements needs to concentrate their attention on. Moreover, it has highlighted the risks that are prone to affect the progress and long term profitability of the company in the industry. This section will address each of the five forces providing recommendations to the management to implement for their future success.

3.1 Threat of new entrantsThe first is that Dollar General Corporation needs to invest in research and development. This will enable them to diversify its operations and take advantage of opportunities that present itself in the market. Moreover, new entrants are unlikely to enter into an industry where the companies present are altering the standards set through research and development. This is because it creates diversity eliminating certainty that the new entrants need to earn profits, hence discouraging their entrance in the industry.
Secondly, the company needs to focus on increasing their product portfolio. Dollar General Corporation need to bring new products to attract new customers but also increase the reasons for the old customers to continue their purchases within the Dollar General Corporation’s retail stores. Lastly, the company needs to continue building its economies of scale. The economies of scale provide more opportunity for a retail store, especially in the low-priced industry to control the cost of its products. Dollar General Corporation implementing this strategy will enable them to decrease their fixed cost per unit. This will provide them with stability in the industry making it difficult for new entrants to find the market appealing.
3.2 Bargaining power of suppliersIn order to maintain the bargaining power of the suppliers at a low level the company needs to implement the following strategies:
Firstly, Dollar General Corporation needs to build an efficient supply chain network that has a number of suppliers. This will ensure that if one of the suppliers decides to fail to supply the operations of the company will not come to a halt. Moreover, the strategy will prevent the suppliers from increasing their prices at will as they can easily be replaced by others. Secondly, the company needs to try experimenting with new products in their retail stores. The reason for doing this is to ensure that if the price of one of the products they have been using increases they can shift to the product and still maintain their customers.

Lastly, the company needs to focus on creating and maintain supplier relationship. Nike and Wal-Mart have built supplier relationship where the success of the suppliers depends on the company and vice versa. This creates a form of dedication from the suppliers to ensure the success of the enterprise in the industry. Moreover, the relationship helps the suppliers to advise the company on the changes in the industry to protect them as they feel part and parcel of the success of the company.
3.3 Bargaining power of buyersIn order for Dollar General Corporation to control the high bargaining power of buyers. They need to:
Firstly, the company needs to focus on widening their customer base. The importance of this strategy is that a higher number of customers will help reduce the effect of customers shifting because they are not comfortable with the price or products offered at the retail store. In addition, it will help Dollar General Corporation to streamlines its operation process as they are able to increase their product range, hence streamlining their sales. Secondly, the company needs to focus on introducing new products to their existing product portfolio. The aim for doing this is that it will reduce the defection of customers that the company has to their competitors.

Lastly, the Dollar General Corporation needs to focus on coming up with new discounts. Customers in the market are looking for ways to reduce their expenses, hence they look for discounts and offers. If the company focuses on doing this, they will be able to attract new customers and maintain their present ones. In other words, offering customers what they need has the positive effect of reducing their bargaining power.
3.4 Threat of substitutesIn order for Dollar General Corporation to maintain the threat of substitutes at its present low level they need to:
Firstly, the company needs to focus more on being service oriented rather than product oriented. This will provide them with a level of differentiation in an industry with many competitors offering similar products within the same price range. Moreover, offering the best services will not only maintain their present customers but also attract new customers as it will improve their shopping experience.
Secondly, Dollar General Corporation needs to alter their focus from what the customer is purchasing to their core needs. The assumption that the customers are price rather than quality oriented has the impact of increasing their shift to their competitors. Moreover, the company needs to ensure that despite them offering low-priced products they should also focus on the quality. Lastly, the switching cost in the company needs to be increased for their customers. This will decrease their desire for them to shift to their competitors as they will be getting the best products, prices, and services.
3.5 Intensity/ threat of rivalryIn order for Dollar General Corporation to reduce the high threat of rivalry that they face from competitors, they need to implement the following strategies:
Firstly, the company needs to focus on carrying out a sustainable differentiation that will set them apart from their competitors. The company can focus on positioning and improving the services that they offer their customers. In positioning the company has managed to position themselves in areas where customers can access the stores at the shortest time possible this is unlike their competitors. Moreover, in the service sector the company needs to focus on educating employees to treat their customers well. This will improve the image of the retail stores attracting a lot of customers and maintain the ones that they have.
Secondly, the company needs to focus on working together with their competitors instead of competing for small markets. The aim of this is that it will decrease the threat of rivalry as the competitors work together to increase the market size of the industry. Lastly, the company needs to focus on increasing their scale of operations to enhance their competition in the industry. Dollar General Corporation can increase the products present on their shelves. In addition, it can increase the number of stores it has and position them closer to their target market. This will improve their operations in the market, hence reducing the threat of high rivalry that they are presently facing in the industry.

4. SWOT Analysis
According to Adam (2011), the SWOT analysis is a micro-environment analysis. It identifies the strengths and weaknesses, then associates them with opportunities to help them tackle the threats present. This will help Dollar General (DG) Corporation to identify the specific vital catalyst and drivers in their company. The Dollar General SWOT analysis is based on Adam (2011) and Mbaskool (2013) evaluations;
4.1 Strengths
First, Dollar General Corporation has a solid brand portfolio as a low price retail store that it has built over the years. This has enabled its extensive spread to over 13600 stores in USA and Canada. Moreover, the company has diversified its operations to not only focus on the low income earners but also the fixed and middle income earners by introducing multi-point shopping stores. Secondly, the store has good returns on capital expenditure. It acquires revenues over $11.796 billion with a total net of nearly $340 million on an annual basis.
Thirdly, productive track record of engaging complimentary companies through mergers ; acquisition. It has productively integrated numerous technology firms in the recent past to help its operations run smoothly and to construct a dependable supply chain. Fourthly, greatly skilled labor force by way of productive training and education programs. DG is investing huge assets into education and maturation of its staff that is not only highly experienced but also motivated to accomplish more. Last but not least, Dollar general has a strong distribution network coupled with dependable suppliers. This has ensured that their shelves are always full with products not only for a dollar but also the price range is flexible in their multi-price-point retail chain stores.
4.2 Weakness
First, it has unproductive research and development which is slow when compared to their competitors in the industry. Albeit Dollar General Corporation expenses are above the market average on research and development, they haven’t been able to contend with the top competitors in the market in terms of innovation. It has come about as an established company searching to bring out products that are grounded on tested features in the industry. Secondly, the product demand forecasting is not sufficient to support its operations. This leads to higher rate of missed opportunities contrast to its competitors. Dollar General Corporation is not the best at demand forecasting therefore they keep higher inventory both in-house and in channel.

Thirdly, Dollar General has difficulties when it comes to integrating companies with a dissimilar work environment. This results in inconsistency in the strategies and policies in ensuring that the companies they acquire are at per with their other retail stores ending up in losses. Fourthly, although the products are doing well in terms of sale however its positioning and distinctive selling plan is not clearly understood, which can encourage attacks from the market players. Lastly, the company has inadequate success with external core companies. Although Dollar General Corporation is one of the principal firms in its market, it has faced problems with moving to other product markets.
4.3 OpportunitiesFirst, the company needs to take advantage of the development in the retail industry. This will not only encourage the dilution of opposition advantage but also increase the competitiveness of Dollar General in contrast to the other market players. Secondly, there is an increase in consumer purchases and slow expansion rate in the market which means that there is an opportunity for Dollar General to obtain new shoppers and increase its return on investments. Thirdly, the investment in online markets provides an opportunity for the company to tap into a new clientele. Dollar General Corporation can leverage invested this opportunity by understanding its customer more and serving their desires utilizing analytic information.
Fourthly, there are new technological advancements opportunities in the retail industry that Dollar General Corporation can apply in its differentiated cost strategy in the new industry. This will permit the company to sustain its loyal consumers with premium service and attract new consumers by other value oriented. Lastly, the company needs to take advantage of social media platforms to increase their visibility via marketing and offering customer oriented services.
4. 4 Threats
The first threat is that the shoppers have a constant change in their purchasing habits to online avenues makes it difficult for the company to maintain its market share and profit margins. Secondly, Dollar General does not keep a constant supply of innovative goods. The company has developed many products excluding those that are often a result of the development by other competitors. Furthermore, the supply of new goods is not common idea therefore leading to up and down swings in the sales over time.
Thirdly, the labor unions are exerting a lot of pressure on the company. This has resulted in the need for the Dollar General Corporation to raise its minimum wage, however this has the negative effect of interfering with not only the profit margins but also the expansion goals of the company. Fourthly, there is intense competition from companies like Wal-Mart which is the leading retail store in America. Moreover, the continuous growth of online retailing companies like Amazon.com poses a large threat for the company. Lastly, the decline of the dollar has resulted in the increase in the cost of raw materials, which threatens the productivity of Dollar General Incorporation.
5. Recommendations based on Porter’s Five Forces and SWOT Analysis
5.1 Expanding their operations into the internetAmazon.com has dominated the online retail market and has managed to draw customers from the traditional retail stores to this model. Dollar General Corporation needs to invest in the online retail stores to increase their sales and market share. The company will be able to reach more customers while decreasing its operational costs.
5.1.1 Measuring the success
The success will easily be measured by the number of sales that the online retail stores generate. Moreover, the visitor metric that measures the number of customers who visit the website either to purchase or view the products will indicate the success of the venture. Last but not least the conversion rate of visitors will also determine if the online stores are achieving their goals of stimulating increase in sales for Dollar General Incorporation.

5.1.2 Achilles heels the recommendation
The best management priority that will ensure the success of the recommendation is advertisement and marketing of their online retail stores in different platforms. The management can focus on social media platforms that have a large number of followers. In addition, they can invest in Google ads, in spreading the information about their online retail store. This will increase the number of customers aware of the information hence stimulating an increase in sales.

5.2 Expansion of its stores both locally
Dollar General Corporation has retail stores in 40 states in the USA. The company needs to focus their expansion to the west coast of the country where it has fewer stores. Nevada, Oregon, California, Washington, and Wyoming have rural communities this means that movement in these areas will increase its sales and market share. The company can maintain their expansion costs at a low-level by opening their retail stores in locations that are second-tier where large mass retailers like Wal-Mart are not interested in venturing.
5.2.1 Measuring the success
The success of the recommendations can be measured by the number of stores that will be opened. Moreover, the level of sales will signify that the stores have been able to make their impact in the areas that they have been opened. In addition, the number of customers visiting the stores will indicate its success rate. Finally, in general the success of its expansion will be measured by calculating the return on investments that are generated by the new stores that will be opened in the suggested areas.
5.2.2 Achilles heel of the recommendation
The best management priority that will ensure the success of the recommendation is the company having sufficient capital to finance its expansion. Finances will help them to find suitable areas to position their stores. In addition, it will ensure that they are able to purchase their products from suppliers in large quantities hence capitalizing on economies of scale. This will end up helping them maintain their one dollar and discounts that it offers its customers.

However, the major hindrance to the implementation of the recommendations is the lack of established supplier and distribution networks. The company will have to work hard to identify suitable and constant suppliers who will meet their price requirements. In addition, they will have to start from scratch when it comes to establishing distribution and logistics networks in this new territories. This will take time and might interfere with the success anticipated by Dollar General Incorporation.
ReferencesAdam, G. (2011). Dollar general SWOT Analysis. Retrieved from HYPERLINK ;http://www.freeswotanalysis.com/retailing-swot/209-dollar-general-swot-analysis.html; http://www.freeswotanalysis.com/retailing-swot/209-dollar-general-swot-analysis.html
Bice, A. (2014). Dollar General Case Analysis. Retrieved from HYPERLINK ;https://prezi.com/m/8vprsb_oynt/dollar-general-case-analysis/; https://prezi.com/m/8vprsb_oynt/dollar-general-case-analysis/
Mbaskool. (2013). Dollar General SWOT Analysis, USP ; Competitors. Retrieved from HYPERLINK ;https://www.mbaskool.com/brandguide/lifestyle-and-retail/4925-dollar-general.html; https://www.mbaskool.com/brandguide/lifestyle-and-retail/4925-dollar-general.html
Peluso, G. (2010). Dollar General Analysis. Retrieved from HYPERLINK ;https://www.slideshare.net.mobile/giantepedino/dollar-general-analysis; https://www.slideshare.net.mobile/giantepedino/dollar-general-analysis
Shih, C. W., Kaufman, S., ; McKillican, R. (2010). Dollar General Analysis. Harvard Business School Case 607-140. Retrieved from HYPERLINK ;https://www,hbs.edu/faculty/Pages/item.aspx?num=34601; https://www,hbs.edu/faculty/Pages/item.aspx?num=34601