Analysis Of Porter's Five Forces Model For Dollar General
Porters Five Force Model for Dollar General Corporation.
1. Competition from rival sellers – high
Everyday low prices from small box retailer
Industry growth – Rapid expansion of stores in communities.
Low switching cost due to easily liquidated …show more content…
More chain stores are dominating the retail industry landscape. Therefore, potential new entrants are an issue due to the advantage they have with centralized buying and vertical structure(Investopedia Staff, n.d.). Suppliers have very little power in this industry (Investopedia Staff, n.d.). Buyers, customers demand high quality products at bargain prices. Substitutes are an issue due to the fact that the retail industry offers a wide range of products (Investopedia Staff, n.d.). The Bargaining power of the customer is high, if the products are not differentiated then the customer can switch to another retailer. When the products are similar the customer will compare prices, which increases competition which will increase competition and will lead to lower prices and profits (Investopedia Staff, …show more content…
This helps the company achieve sustained competitive advantage by keeping fixed costs low and providing a no frills shopping environment. Dollar General, made changes to 49 planograms to provide more affordable items across 90 percent of its departments. One example is its opening price point Smart & Simple private brand (Anderson, 2014).
Dollar General is pursuing the low cost provider strategy. Their strategic objective to provide essential consumables at low cost through convenient locations is designed to be successful. With their small-box format and modest “no frills” buildings designed to keep costs low. With economical store format gives advantages of low initial investment, low manpower requirements and proximity to customers enables them to keep costs low, and able to expand locations (Marketline, n.d.).
During harsh economic times consumers are going to the lower cost stores. Dollar General Stores are more convenient and are a “no frills” basic store and they are in the neighborhood. Their stores usually only have 2 to 3 employees. This keeps fixed costs lower than other retail