Custom «Analyzing Company Competitive Situation» Essay Paper Sample

Dollar Tree’s portfolio analysis will focus on four critical products in its market specialization areas. According to Pickton (2010) “the Boston Consulting Group (BGC) portfolio matrix shows the relationship between cash generation products and cash eaters” (p.229). In this regard, the BCG matrix classifies products based on four main categories: dogs, problem child, stars, and cash cow. These are plotted in the BCG matrix in two axes: the relative market share and market growth rate (Pickton, 2010). In this regard, Dollar Tree’s product portfolio analysis will consist of the following:

Health & Personal Care Products: the dog

Dollar Tree’s entry into the health and personal care products is showing tremendous growth potential. As such, more needs to be done to groom this product line by sourcing items at the most affordable prices in the market in order to stay profitable.

Art & Crafts: the problem child

Traditionally, art and craft items are known to be expensive products on the shelf. Art galleries and exhibitions usually price the items very expensively. This pricing structure may not work well with Dollar Tree’s non multi-level pricing mechanism. As such, Dollar Tree will invest heavily into art and crafts, but the turnover will be extremely low given its low and middle class earners target group.

Toys & Games: the star

Dollar Tree offers an extensive list of toys to its customers at the lowest prices. This being the case, Dollar Tree has gained popularity for its toys and games, which are cheaply priced to suit its target client group.

Food: the cash cow

Food forms Dollar Tree’s cash with the store recording booming sales in the recent years. Dollar Tree stores recorded massive profits in its food products in the ending year of 2011. According to Family Dollar reports in January 2012, the profits went up by a significant 11% leading to realization of $134.9 million in profits, which was attributed to increasing sales in consumables with food leading (Hines, 2012). In essence, this implies that the amount of investment that goes into the food consumables is relatively low, but the returns are massive such that they are enough to sustain the stores earnings at a good level. The forecast carried out by the department of Agriculture shows that the Consumer Price Index for take home groceries.

BGC Matrix Illustration

SWOT analysis for company

Strengths

Dollar Tree has a constant appeal through effective pricing such that most of items in the counters are at the value of a dollar (Tom, 2011).

Dollar store has a single pricing mechanism compared to its competitors who have a multi-level pricing mechanism; hence, in such an arrangement items are priced at more than a $1 (Tom, 2011).

The image of shopping at a dollar is strongly embedded in its faithful customers.

Dollar Tree has a relatively stronger financial standing compared to its competitors, and this has enabled them to stay in business despite harsh economic times.

Weaknesses

Dollar tree has a poor inventory management system, which leads to poor tracking of part of its asset portfolio.

The pricing framework of a dollar sometimes does not effectively reflect the surrounding economic conditions. For instance, pricing AA batteries at than a dollar sounds a low price index compared to other stores (Hitt, 2011). However, it is not very recommended for business unless sale volume is high to recoup the investment.

Opportunities

The onset of a depression in the American economy saw spending patterns change; however, Dollar Store can still manage to stay afloat in business by taking advantage of their unique pricing method. This is reflected in Dollar Tree’s corporate strategy, which intends to increase accessibility to consumables, consequently putting them in a perfect position for business. For instance, they can now competently compete for the shrinking disposable income of its middle class customers (Hitt, 2011).

The acquisition of Deal$ was a positive move in Dollar Tree’s business prospects. This is because Deal$ uses a different pricing arrangement; hence, the management can choose to maintain this pricing arrangement so that they can sell their products at prices slightly higher than their traditional $1 with little negative impact on their branding strategy.

Dollar stands to gain from the acquisition of Deal$ by expanding this subsidiary under its current structure. In 2008, Deal$ actually outperformed the sales accrued from Dollar Tree’s traditional stores. Hence, this will be their next cash cow if it is well utilized through expansion.

Dollar stands the chance to move into the electronic production domain by using its newly launched affordable refrigerator/freezer brand (Tom, 2011). With proper management and marketing strategy, this can boost Dollar Tree’s sales given the declining consumer expenditure on electronic goods.

The recent move of Dollar stores into the online sales domain implied that it had to develop a friendlier payment platform like its competitors. In this regard, Dollar Tree recently included the credit card payment system, which has an impact of improving accessibility to a wider clientele group.

Threats

The fact that Dollar Tree sources majority of its products from other offshore markers, changing currency exchange rates may affect its gains. This is because Dollar Tree extensively uses foreign currency such that 40% of items are actually imported from these offshore markets (Ashworth, 2011).

The current declining economic prospects may actually shrink consumer expenditure, which may lead to low sales on chosen products due to changing customer preferences (Ashworth, 2011).

The occurrence of cut throat competition between Dollar Tree and its competitors implies that price wars may begin leading to a situation in which competitors decrease their prices dramatically.

The Most Significant Macroeconomic Factor Facing the company for each of the 6 categories covered

Dollar Tree’s macro-environment is strongly influenced by the following factors:

Culture: The US culture represents a diverse culture with different consumer tastes. In as much as there are wide variations, culture plays a less significant role in Dollar Tree’s context.

Demographics: The location of Dollar Tree’s stores in numerous states and cities implies that location is less of an influential variable with regard to trade. In addition, the Dollar Tree’s clientele is not effectively segregated to certain demographic groups.

Social: The American society has a hierarchical structure with limited social barriers. However, this does not necessary affect Dollar Tree given its focus on low and middle class earners.

Technology advancement: Dollar Tree has recently allowed credit card processing and opened an online store, which gaining popularity.

Economy situation: In today’s economy, most countries are to make ends meet. This does not exclude the United States. As a result, consumers at the moment do not want to spend a lot; hence, they are constantly looking for the best deals. In this regard, this is the most significant macroeconomic factor.

Political/regulatory environment: Dollar Tree has little or no political interference. In addition, it abides well to the regulatory framework used to control trade activities.

Description of three (3) Company Competitors

Family Dollar

This company officially began its operations in 1959. Presently, it is the nation’s second leading store in terms of sales. Family Dollar has over 6,500 stores located in more than 44 states (CNBC, 2011). This implies that it has an extensive network that gives it trade advantage over other stores. The main products sold by the company include food, household items, beauty products, health products, shoes, and clothing (CNBC, 2011). Family Dollar uses a similar strategy to Dollar Tree by locating its stores in low and middle class neighborhoods, where they get majority of their clientele. In addition, they also offer lower prices due to changing economic conditions.

99 Cent Only

This company has a special pricing mechanism in which all its merchandise sells at 99 cents (CNBC, 2011). This being the case, they are a main competitor to Dollar Tree because they offer a lower price. Presently, the company has more than 280 stores located in limited cities such as Vegas, Texas, and California (CNBC, 2011). The company is a mission to expand its operations to other cities in order to access more clients.

Dollar General

This company is the leading $1 dollar store with more than 8,200 stores located in around 35 states (CNBC, 2011). It uses a different strategy whereby stores are located in smaller towns. This is done at a considerable distance from large discount stores to avoid direct competition (CNBC, 2011). Recently, the store underwent an acquisition program during which it was acquired by Goldman Sachs and an affiliate groups called JJR (CNBC, 2011).