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Dollar General SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Dollar General managers to do a situational analysis of the organization . It is a useful technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Dollar General is facing in its current business environment.
The Dollar General is one of the leading companies in its industry. Dollar General maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework enables an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Dollar General to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The central purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Dollar General strengths, and eradicate its weaknesses.
Step by Step Guide to Dollar General SWOT Analysis
Strengths of Dollar General – Internal Strategic Factors
As one of the leading organizations in its industry, Dollar General has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Dollar General are –
- Strong distribution network – Over the years Dollar General has built a reliable distribution network that can reach majority of its potential market.
- Strong Brand Portfolio – Over the years Dollar General has invested in building a strong brand portfolio. The SWOT analysis of Dollar General just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Successful track record of developing new products – product innovation.
- Good Returns on Capital Expenditure – Dollar General is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Highly successful at Go To Market strategies for its products.
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
- Highly skilled workforce through successful training and learning programs. Dollar General is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Weakness of Dollar General – Internal Strategic Factors
Weakness are the areas where Dollar General can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Dollar General is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Dollar General is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Dollar General is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- The profitability ratio and Net Contribution % of Dollar General are below the industry average.
- Limited success outside core business – Even though Dollar General is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
Opportunities for Dollar General – External Strategic Factors
- The market development will lead to dilution of competitor’s advantage and enable Dollar General to increase its competitiveness compare to the other competitors.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Dollar General to capture new customers and increase its market share.
- Government green drive also opens an opportunity for procurement of Dollar General products by the state as well as federal government contractors.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Dollar General. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- The new technology provides an opportunity to Dollar General to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Dollar General in other product categories.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Dollar General an opportunity to enter a new emerging market.
Threats Dollar General Facing - External Strategic Factors
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Dollar General
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Rising raw material can pose a threat to the Dollar General profitability.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
Limitations of SWOT Analysis for Dollar General
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Dollar General
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Dollar General
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Dollar General managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Dollar General
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
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References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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