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Dollar Tree SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Dollar Tree managers to do a situational analysis of the company . It is a useful technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Dollar Tree is facing in its current business environment.
The Dollar Tree is one of the leading organizatations in its industry. Dollar Tree maintains its dominant 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 organization such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework helps 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 Tree 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 primary purpose of SWOT matrix is to identify the strategies that an organization can utilize to exploit external opportunities, counter threats, and build on & protect Dollar Tree strengths, and eradicate its weaknesses.
Step by Step Guide to Dollar Tree SWOT Analysis
Strengths of Dollar Tree – Internal Strategic Factors
As one of the leading organizations in its industry, Dollar Tree 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 Tree are –
- Highly successful at Go To Market strategies for its products.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Successful track record of developing new products – product innovation.
- Strong Free Cash Flow – Dollar Tree has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Strong distribution network – Over the years Dollar Tree has built a reliable distribution network that can reach majority of its potential market.
- Good Returns on Capital Expenditure – Dollar Tree is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Highly skilled workforce through successful training and learning programs. Dollar Tree 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.
Weakness of Dollar Tree – Internal Strategic Factors
Weakness are the areas where Dollar Tree can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
- The profitability ratio and Net Contribution % of Dollar Tree are below the industry average.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Dollar Tree 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.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Dollar Tree
- 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 Tree is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- High attrition rate in work force – compare to other organizations in the industry Dollar Tree has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
Opportunities for Dollar Tree – External Strategic Factors
- The new technology provides an opportunity to Dollar Tree 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.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Dollar Tree an opportunity to enter a new emerging market.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Dollar Tree.
- Government green drive also opens an opportunity for procurement of Dollar Tree 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 Tree. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Dollar Tree to capture new customers and increase its market share.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Dollar Tree to drive home its advantage in new technology and gain market share in the new product category.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Dollar Tree to increase its profitability.
Threats Dollar Tree Facing - External Strategic Factors
- Imitation of the counterfeit and low quality product is also a threat to Dollar Tree’s product especially in the emerging markets and low income markets.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Liability laws in different countries are different and Dollar Tree may be exposed to various liability claims given change in policies in those markets.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
Limitations of SWOT Analysis for Dollar Tree
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 Tree
- 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 Tree
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 Tree 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 Tree
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.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
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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