Task 1

Identify the porter’s generic strategy adopted by Family Dollar Stores and it been successful in achieving expected competitive advantage?

Task 2

Critically evaluate the resources of Dollar Stores using VRIN framework and identify the key resources that help in achieving competitive advantage.

Task 3

What is stakeholder’s analysis?Analyse the stakeholder’s position of Family Doller Store using stakeholder’s mapping.           

Task 4

Critically evaluate the vision and mission statement of Family Doller store and suggest some relevant modifications in vision and mission statement of Family Doller.

Family Dollar Stores, Inc.

As the economy limps along in mid-2009 and pushes more households into lower incomes, Family Dollar Store’s CEO Howard R. Levine is overseeing continued expansion and growth. His father, Leon Levine, founded the company when he was in his early 20s in 1959, and the elder Levine now sports the title Chairman emeritus. Family Dollar offers customers a variety of high quality, good-value merchandise. The company caters to the low- to low-middle income group (defined as households under $30,000 or $35,000 of annual income) with offerings of competitively priced merchandise in convenientneighbourhood stores. Family Dollar Stores has 31 percent of its items priced at a dollar or less.

For 2008, the Dow Jones Average was down 34 percent, the worst year since 1931. Of the S&P 500 stocks index, only 24 stocks were up in 2008. Family Dollar Stores led the way with an increase of 35 percent. Will this solid performance continue?

History

In 1959, when Family Dollar opened its first store in Charlotte, North Carolina, Leon Levine offered customers a varied of good-valued merchandise for under $2. The concept was simple, “The customers are the boss, and you need to keep them happy.” Family Dollar went public in 1970, achieved annual sales of $100 million with just under 300 stores by 1977, opened its 1,500th store in 1989 and its 2,500th store in 1996, and grew to nearly 5,000 stores and sales approaching $5 billion when he retired as chairman in 2003. In his high school and college years, his son Howard Levine worked for Family Dollar. Howard was named CEO in 1998, and when his father retired in January 2003, he became chairman and CEO. At age 49, he continues today as chairman and CEO.

Today’s Facts and Financials

Family Dollar operates more than 6,600 stores in 44 states plus the District of Columbia. The company does have a small role in international business because about 51 percent of its merchandise procured from international manufacturers often through agents but also from direct importing from the manufacturers. No single supplier accounts for more than 8 percent of the merchandise purchases. Family Dollar Stores ranked number 359 on the Fortune 500.

Family Dollar continues its strategy of geographic expansion and new store openings. Headquartered near Charlotte, North Carolina, Family Dollar employs 44,000 people, about 25,000 full time and the others as part-timers. Family Dollar’s revenues of $6.984 billion in FY2008—the 12 months ended August 2008—showed an increase of 2.2 percent over the year ending.

Divisions of the Company

For FY2008, Family Dollar Stores broke revenues into four broad product categories: consumables, home products, apparel and accessories, and seasonal and electronics. The company has provided quarterly cash dividends to its shareholders since May 1998. The amount per share of these dividends has increased each year (from 4.5 cents per share on July 15, 1998, to 13.5 cents per share on July 15, 2009). This latest dividend yield is about a 1.7 percent return per year, well ahead of the industry average.

Family Dollar continues to seek good locations and contractors to build and maintain stores. The company is involved in real estate management, construction, and store maintenance. Family Dollar has about 15 to 20 percent of its stores up for lease renewal each year. On February 28, 2009, Howard Levine said that the company would definitely try to “leverage the current market to negotiate better rents.”

In 2008, Family Dollar opened 205 new stores, closed 64 stores, relocated 17 stores within the same shopping area or market area, and expanded 80 stores. In 2007, the company opened 301 new stores and closed 43 stores.

Competition and Industry

The small-box discount retailers industry reported strong performance in the last half of 2008 and the first half of 2009.The three largest small-box discount retailers are Dollar General, Family Dollar, and Dollar Tree. These three-dollar stores realize that they are different from the giant Wal-Mart in many ways, including offering lower prices.

All of the three of these small-box companies have to deal with many rivals, including Fred’s, 99 Cents Only, Wal-Mart, Big Lots, CVS, J.C. Penney, Kmart, Meijer, Sears, Target, Walgreen, Costco, Kroger, and many other small regional chains and one-of-a-kind retailers. Dollar General’s stores are typically located in small towns, but big-city stores (usually situated in lower-income neighbourhoods) account for 30 percent of its total. Dollar Tree stresses the $1 price points and offers a range of merchandise including housewares, seasonal goods, food, toys, personal accessories, healthand beauty care products, party goods, greeting cards, and books, mostly for $1 even. Dollar Tree does offer online sales. Dollar Tree Inc. recently sneaked into the latest Fortune 500, now at number 499.

Mission Statement and CEO’s Comment

Family Dollar’s mission states the three most important relationships critical to making our business successful: our customers, our associates, and our investors.

• For our customers, we offer a compelling place to shop by providing convenience and low prices;
• For our associates, we offer a compelling place to work by providing exceptional opportunities and rewards for achievement;
• For our investors, we offer a compelling place to invest by providing outstanding returns.

Operations

Even compared to Wal-Mart, Family Dollar is considered leader in keeping costs low. The company continues to review and improve each step in the supply chain, from vendor selection to stocking store shelves. Family Dollar has undertaken initiatives to improve supply chain effectiveness.

Nearly all Family Dollar stores range in size from 7,500 to 9,000 square feet and operated in leased facilities. The company pursues this strategy of relatively small stores as a way to open new stores in rural areas, small towns, and large urban neighbourhoods. Whenever feasible, Family Dollar likes to have a parking lot located immediately near the store’s entrance, and nearly all stores have only one entrance. The size of the stores (about 1/22 the square footage of a typical Wal-Mart Supercenter) has appeal to customers who like the convenience and short walk, which cannot be matched by some of the large store chains.

Over the past few years, Family Dollar has improved its logistics network and is moving toward world-class distribution system. CEO Howard Levine said. “It’s a Wal-Mart formula. We have to deliver goods efficiently to the stores, and we’ve been able to do that.”

To support its retail operations, Family Dollar operates nine automated full-service distribution centres (each ranging in size from 850,000 square feet to 907,000 square feet) that ship directly to company stores. The company uses a Web-based transportation management system, voice-recognition software, radio-frequency technology and high-speed sorting systems for better distribution process efficiency. Family Dollar has a strong presence in the southern United States. Seven of its nine distribution centres are located in the South (northern Virginia, western North Carolina, the panhandle of Florida, eastern Kentucky, eastern Arkansas, southwestern Oklahoma, and western Texas); the other two are in upstate New York and eastern Iowa. The company operates few stores in the Rocky Mountain region and only the Nevada stores in the Pacific time zone.

Family Dollar’s transportation technologies include a Web-based Transportation Management System (TMS) that allows vendors to release purchase orders electronically. Family Dollar Trucking, Inc. (FDTI) provides a private fleet of trucks that have received safety rewards. More recently, Family Dollar is beginning to use some of these same systems in international transportation.

Family Dollar is now using POS (point of service) systems that provide access to both centralized and decentralized store applications, enabling higher employee productivity, improved customer service, and some new revenue streams. Family Dollar is working with Toshiba TEC American on this. According to Howard Levine, the company is “accelerating the completion of the POS rollout by January or February of 2010, which we’re well on track of doing.” In these endeavours, Family Dollar continues to partner with Toshiba TEC America and Microsoft.

Family Dollar recently hired Sylvania Lighting Services (SLS) to install new lighting to save energy, reduce maintenance, drive down operating costs, and improve store light (brightness) levels in all its stores. “The new lighting program is a huge win for Family Dollar, which yields a reduction in overall lighting maintenance costs, budget future lighting expenses over four years at fixed costs and allows them to achieve tremendous energy savings while integrating environmental sustainability,” said Scott Agnew, SLS executive account manager. The lighting upgrades also gave Family Dollar some tax breaks.

Marketing

While other retailers have courted a more upscale clientele by adding designer clothes and fine jewellery, Family Dollar has stayed true to its roots. A typical shopper earns just $35,000 per year. According to Howard Levine, “We want our customers to know they can afford anything in our store. “Beyond the four broad product categories, Family Dollar’s merchandise assortment is divided into 11 product classifications that include apparel, food, cleaning and paper products, home decor, beauty and health aids, toys, pet products, automotive products, domestics, seasonal goods, and electronics. Family Dollar’s merchandise includes national brands, Family Dollar private labels, and unbranded items that sell for less than $10. Whereas some other discount retailers focus on factory closeouts, this makeup only about 2 percent of Family Dollar’s sales. The company carries many name-brand items found in supermarkets, such as Tide, Colgate, and Clorox. Some analysts estimate that Family Dollar’s prices are 20 to 40 percent cheaper than those found in traditional supermarkets and are roughly on par with big-box discounters such as Wal-Mart and Target or lower.

Family Dollar emphasizes convenience for its customers. It sees the typical scenario as based on easy-to-shop neighbourhood locations that allow “Mom to get what she needs, close to home to take care of her family.” In 2008, the company introduced a new logo to facilitate achieving this emphasis. Along with the new logo, Family Dollar has developed a new tag line: “My family. My family dollar.” These recent updates assist the company toward conveying its commitment to providing value and convenience with a family focus.

Human Resources

About 15 percent of Family Dollar’s top 41 executives are women. Family Dollars’ corporate board of directors has 10 members ranging in age from 47 to 78 (with a mean and median age in the mid-60s), which includes three women but only one insider (Howard R. Levine) with the other nine being nonemployees of the company.

In July 2006, Family Dollar lost a federal court case in Tuscaloosa, Alabama, that amounted to $35.6 million. This decision upheld on December 16, 2008, by the U.S. 11th Circuit Court. The case involved store managers not paid for overtime. The class-action judgment was on behalf of 1,424 managers. The affected managers were awarded back pay. The managers had argued that Family Dollar owed them overtime wages under the Fair Labor Standards Act (FLSA). Family Dollar’s corporate management contended that the managers held executive authority and were thus exempt from the FLSA requirements. Partly because the store managers had no power to hire and fire staff, they reportedly often worked 60 to 70 hours per week doing a variety of nonmanagerial work activities such as operating cash registers and manual labour such as stocking shelves, unloading trucks, and cleaning floors.

Conclusions and the Future

Family Dollar believes it can prosper in a limping U.S. economy and perform even better in a strong economy. But with issues such as litigation, competition, increasing labour costs, and efficiency issues in supply chain management and elsewhere, Family Dollar faces challenges as it continues to grow toward 10,000 stores.

In April 2009 as the economic recession continued, Family Dollar’s Public Relations Manager Josh Braverman said, “Thrift is in. Saving money is in. And it still will be even after the economy recovers.” Although penny-pinching moms are important to Family Dollar, the future is not a sure thing. Can Family Dollar perform well both in good economic times and in bad economic times? Too many business experts, it seems unreasonable to be able to have it both ways.

As indicated Family Dollar’s third quarter (ending May 30, 2009), results were excellent. Compared to one year earlier (May 31, 2008), net sales increased by 8.3 percent, net income increased by 35.6 percent, net income per common share increased from 46 cents to 63 cents. Net sales increased by 12.6 percent for consumables, dropped by 5.0 percent for apparel and accessories, rose by 3.5 percent for home products, and increased by 5.8 percent for seasonal and electronics. The number of “stores in operation” was 6,654 on May 30, 2009, up from 6,545 on May 31, 2008. Sales in comparable stores reported increasing by 6.2 percent. During the quarter, Family Dollar repurchased approximately 1.2 million shares of its common stock at a total cost of $38.5 million.