family dollar

FAMILY DOLLAR, 2009

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OVERVIEW

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COMPANY OVERVIEW

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History

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The Founder

Leon Levine ◦In 1959, Leon opened first Family Dollar

store in Charlotte, NC◦In 1998, Handover the business to his

son Howard Levine.

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Growth1970 had gone to PublicSingle distribution center in Charlotte delivering to

Carolinas and neighboring states 1977 there were 300 stores with an annual sale of

$100 Million1989, opened its 1500th store1996, opened its 2500th store2003, introduced New Distribution centers and POS

systems.2003, 5000th store with an annual sale of $5 Billion .

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2009 50th Anniversary6600 stores in 44 states14% market share among “Dollar

Stores”44,000 employees.

Full time (25,000) Part-time (19,000)

Target CustomerCompany Caters to the low-to-low

middle income group ($30000 or $35000 of annual income)

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Organizational Chart

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11 person Board

CEO & CHAIRMAN OF THE BOARD

EVP SUPPL

Y CHAINDC

MANGERS

DC MANGERS

EVP STOR

E OPERATION

S

REGIONAL MANAGERS

STORE MANGERSSTORE MANGERS

SVP GLOB

AL SOURCING

SVP INVENTORY OPTI

MIZATION

SVP REAL ESTATE AND FACILITIES

SVP CUSTOMER MARKETING

SVP FOOD

SVP FINAN

CECFO

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4,141

4,616

5,027

5,466

5,898

6,394

6,834 6,983 6,984

Store Count Revenue

COMPANY PRODUCTS

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Existing vision

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To be the best small-format convenience and value retailer serving the needs of families in our neighborhoods

Existing Mission

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

For our customers, we offer a compelling place to work 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. 18

Vision (proposed)

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Family Dollar Stores, Inc. brings valued merchandise

to its loyal customers

Mission (Proposed)

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At Family Dollar, we strive to bring the best to our customers, offering everyday items at everyday low prices (1). We seek to meet our customer’s basic needs, providing them with common household products (2) at affordable prices while maintaining our growth and profitability to our loyal stockholders (5) utilizing the latest technology and through dedicated employees (4, 9). Our purpose has been to open stores where we strongly believe we can be competitive while meeting the demands of our customers (3). We continue to be responsible by contributing back to communities, society and charitable events (6, 7, 8).

1. Customer2. Products or services3. Markets4. Technology5. Concern for survival,

profitability, growth6. Philosophy7. Self-concept8. Concern for public image9. Concern for employees

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Strategy-Formulation Analytical Framework

Stage 2:The Matching

Stage

Stage 1:The Input

Stage

Stage 3:The Decision

Stage

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External Factor EvaluationMatrix (EFE)

Internal Factor EvaluationMatrix (IFE)

Competitive Profile Matrix(CPM)

Stage 1:The Input Stage


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External Factor Evaluation MatrixKey External Factors Weight Rating Weighted

Score

Opportunities

1. The income for the middle class is diminishing, causing them to be more cautious with their expenditures 0.1 4 0.4

2. The average household income is dropping due to weak economy 0.1 3 0.3

3. The demand for low-priced items is growing 0.07 3 0.214. The unemployment rate is increasing 0.09 4 0.365. Smaller retailers are closing their stores and some have filed for

bankruptcy 0.08 3 0.24

Threats 1. High competition among large discount retailers 0.1 3 0.32. Dollar General has higher market share compare to Family

Dollar 0.09 2 0.18

3. Per square foot, Dollar General is creating more sales 0.07 2 0.144. The industry is sensitive to economic conditions 0.08 3 0.245. Change in demographics due to purchasing habits 0.05 3 0.156. Increase in tariffs and trade barriers 0.07 1 0.077. Lack of quality control in products due to being imported from

other countries 0.1 1 0.1

TOTAL 1.00 2.69

INTERNAL AUDIT

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Internal Factor Evaluation Matrix

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Key Internal Factors Weight RatingWeighted

Score

Strengths

1. Sells essential items with relatively inelastic demand 0.05 3 0.152. Healthy gross profit margin 0.05 3 0.153. Accepts food stamps 0.08 4 0.324. Lower than industry average leverage ratio 0.05 3 0.155. Being able to raise its dividends 0.03 3 0.096. Better than industry average total asset turnover 0.03 3 0.097. Its return on assets of 1.84% is higher than the industry average 0.02 3 0.068. Its return on equity is 4%, higher than the industry average 0.03 3 0.099. Approximately 90% of the company’s products are priced below $10 0.07 3 0.21

10.In the past year, the company’s stock has outperformed the average retail industry . 0.03 3 0.09

Weaknesses1. Does not do much advertising 0.07 2 0.142. Limited market share……! 0.08 2 0.16

3. In the year 2008, the company's market share dropped from 1.85% to 1.75% 0.08 2 0.16

4. The company's EPS is only 72% of the industry average and is not growing as quickly as the industry average 0.05 1 0.05

5. Limited in variety of products being offered 0.08 2 0.16

6. For the year 2008, the company's overall sales only grew by 2.18% whereas the average industry sales grew by 5.31% 0.07 2 0.14

7. Does not generate enough sales from its web site due to limited technology 0.08 2 0.16

8.Higher than industry average quick ratio, indicating lack of long term re-investment 0.03 2 0.06

9.The company's long-term debt to equity ratio is only 31.4% of the industry average 0.02 1 0.02

TOTAL 1.00 2.45

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Competitive Position

Family Dollar

Dollar General Dollar Tree

Year Started 1959 1939 1953

2009 Annual Sale $6,984 m $9,454 m $4,645 m

2009 Net Income $233 m $13 m $230 m

No. of Stores 6,600 8,400 3,600

No. of States 44 35 48

No. of Employees 44,000 71,500 46,000

Fortune 500 Rank 359 357 499

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Competitive Profile Matrix

Family Dollar Dollar Tree Dollar General

Critical Success Factors Weight RatingWeighted

ScoreRating

Weighted Score

RatingWeighted

Score

Store Locations 0.12 3 0.36 2 0.24 4 0.48

Merchandise Variety 0.12 2 0.24 1 0.12 3 0.36

Advertising 0.08 2 0.16 1 0.08 3 0.24

Customer Loyalty 0.09 2 0.18 1 0.09 3 0.27

Market Share 0.11 2 0.22 1 0.11 3 0.33

Customer Service 0.09 2 0.18 3 0.27 1 0.09

Product Quality 0.15 2 0.30 1 0.15 3 0.45

Price Competitiveness 0.15 2 0.30 1 0.15 3 0.45

Technology 0.09 1 0.09 2 0.18 3 0.27

Total 1.00 2.03 1.39 2.94

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SWOT Matrix

SPACE Matrix

IE Matrix

Grand Strategy Matrix

Stage 2:The Matching Stage


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Strengths Weaknesses1. Sells essential items with relatively

inelastic demand2. Healthy gross profit margin3. Accepts food stamps4. Lower than industry average

leverage ratio5. Being able to raise its dividends6. Better than industry average total

asset turnover 7. Its return on assets of 1.84% is

higher than the industry average8. Its return on equity is 4%, higher

than the industry average9. Approximately 90% of the

company's products are priced below $10

10. In the past year, the company's stock has outperformed the average retail industry

1. Does not do much advertising2. Limited market share3. In the year 2008, the company's

market share dropped from 1.85% to 1.75%

4. The company's EPS is only 72% of the industry average and is not growing as quickly as the industry average

5. Limited in variety of products being offered

6. For the year 2008, the company's overall sales only grew by 2.18% whereas the average industry sales grew by 5.31%

7. Does not generate enough sales from its web site due to limited technology

8. Higher than industry average quick ratio, indicating lack of long term re-investment

9. The company's long-term debt to equity ratio is only 31.4% of the industry average

Opportunities S-O Strategies W-O Strategies1. The income for the middle class is

diminishing, causing them to be more cautious with their expenditures

2. The average household income is dropping due to weak economy

3. The demand for low-priced items is growing4. The unemployment rate is increasing5. Smaller retailers are closing their stores and

some have filed for bankruptcy

1. Implement some price cuts to improve sales (S2, O1, S9, O3)

2. Advertise to improve product variety and offerings (S1, S2, S3, O4, O5)

1. Increase number of stores in low income areas (O2, O1, W3, W2)

2. Expand product offerings such fruits and other perishable products (W3, W5, O3, O4, O5)

Threats S-T Strategies W-T Strategies1. High competition among large discount

retailers2. Dollar General has higher market share

compare to Family Dollar3. Per square foot, Dollar General is creating

more sales 4. The industry is sensitive to economic

conditions 5. Change in demographics due to purchasing

habits6. Increase in tariffs and trade barriers7. Lack of quality control in products due to

being imported from and other countries

1. Due to better return on assets ratio, the company can invest in technology, promoting online selling (S6, T1, T5)

1. Increase advertising by offering discounts, coupons, and other special offerings (W1, W2, W3, T1, T2, T3, T4)

SWOT

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SWOT Matrix

SPACE Matrix

IE Matrix




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Internal Dimensions External Dimensions

Financial Strength (FS)

Competitive Advantage (CA)

Environmental Stability (ES)

Industry Strength (IS)

Space Matrix

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Financial Stability (FS) Environmental Stability (ES)Return on Investment 3 Unemployment -1Leverage 2 Technological Changes -2Liquidity 3 Price Elasticity of Demand -3Working Capital 2 Competitive Pressure -1Cash Flow 3 Barriers to Entry -2

Financial Stability (FS) Average

2.6 Environmental Stability (ES) Average

-1.8

Space Matrix

FS = 13/5FS = 2.6

ES = -9/5ES = -1.8

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Space Matrix

Competitive Advantage (CA) Industry Stability (IS)Market Share -4 Growth Potential 4Product Quality -5 Financial Stability 2Customer Loyalty -4 Ease of Market Entry 5Competition’s Capacity Utilization

-3 Resource Utilization 3

Technological Know-How -6 Profit Potential 3

Competitive Stability (CS) -22 Industry Stability (IS) 3.4

CA = -22/5CA = -4.4

IS = 17/5IS = 3.4

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Space Matrix

X-axis = CA+IS

= -4.4 + 3.4

= -1

Y-axis = FS+ES

= 2.6 - 1.8

= 0.8

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Space Matrix

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SWOT Matrix

SPACE Matrix

IE Matrix




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Quadrant (I, II, IV)Company should be the in position to Grow and build

Quadrant (III, V, VII) Company should be in a position to hold and maintain

Quadrant (VI, VIII,IX)Company should be in a position to Harvest or Divest

Internal-External Matrix

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Strong3.0 to 4.0

Average2.0 to 2.99

Weak1.0 to 1.99

High3.0 to 3.99

I II III

Medium2.0 to 2.99

IV IV VI

Low1.0 to 1.99

VII VIII IX

IFE Total Weighted Score

EFE

Tota

l W

eig

hte

d

Sco

re

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SWOT Matrix

SPACE Matrix

IE Matrix




Rapid Market Growth

Quadrant II Quadrant I

Quadrant III Quadrant IV

Slow Market Growth

Weak Competitive

Position

Strong Competitive

Position

Market DevelopmentProduct DevelopmentMarket Penetration

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Quantitative StrategicPlanning Matrix

(QSPM)Stage 3:

The Decision Stage

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Increase number of

stores in low income areas

Increase advertising by

offering discounts,

coupons, and other special

offeringsKey Factors Weight AS TAS AS TAS

Opportunities 1. The income for the middle class is diminishing, causing them

to be more cautious with their expenditures0.1 3 0.3 2 0.2

2. The average household income is dropping due to weak economy

0.1 4 0.4 3 0.3

3. The demand for low-priced items is growing 0.07 3 0.21 2 0.144. The unemployment rate is increasing 0.09 2 0.18 3 0.275. Smaller retailers are closing their stores due to lower sales 0.08 3 0.24 2 0.16

Threats 1. High competition among large discount retailers 0.1 1 0.10 2 0.202. Dollar General has higher market share compare to Family

Dollar0.09 --- --- --- ---

3. Per square foot, Dollar General is creating more sales 0.07 2 0.14 1 0.074. The industry is sensitive to economic conditions 0.08 3 0.24 1 0.085. Change in demographics due to purchasing habits 0.05 3 0.15 2 0.16. Increase in tariffs and trade barriers 0.07 --- --- --- ---7. Lack of quality control in products due to being imported from

and other countries 0.1 --- --- --- ---

TOTAL 1.00 1.96 1.52

Quantitative Strategic Planning Matrix

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Strengths 1. Sells essential items with relatively inelastic demand 0.05 1 0.05 2 0.12. Healthy gross profit margin 0.05 2 0.1 4 0.23. Accepts food stamps 0.08 4 0.32 3 0.244. Lower than industry average leverage ratio 0.05 2 0.1 1 0.055. Being able to raise its dividends 0.03 --- --- --- ---6. Better than industry average total asset turnover 0.03 3 0.09 1 0.037. Its return on assets of 1.84% is higher than the industry

average0.02 --- --- --- ---

8. Its return on equity is 4%, higher than the industry average 0.03 --- --- --- ---9. Approximately 90% of the company's products are priced

below $100.07 4 0.28 3 0.21

10. In the past year, the company's stock has outperformed the average retail industry

0.03 3 0.09 2 0.06

Weaknesses 1. Does not do much advertising 0.07 1 0.07 3 0.212. Limited market, solely in the only 0.08 3 0.24 2 0.163. In the year 2008, the company's market share dropped from

1.85% to 1.75%0.08 4 0.32 2 0.16

4. The company's EPS is only 72% of the industry average and is not growing as quickly as the industry average

0.05 --- --- --- ---

5. Limited in variety of products being offered 0.08 2 0.16 1 0.086. For the year 2008, the company's overall sales only grew by

2.18% whereas the average industry sales grew by 5.31%0.07 2 0.14 3 0.21

7. Does not generate enough sales from its web site due to limited technology

0.08 1 0.08 2 0.16

8. Higher than industry average quick ratio, indicating lack of long term re-investment

0.03 --- --- --- ---

9. The company's long-term debt to equity ratio is only 31.4% of the industry average

0.02 1 0.02 2 0.04

SUBTOTAL 1.00 2.06 1.91SUM TOTAL ATTRACTIVENESS SCORE 4.02 3.43

Recommendations

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(Market Development)Build additional stores in the U.S. Currently, many stores are closing and the price of real estate has dropped, in some areas, as high as 60%. Opening stores in lower priced areas.

Build/acquire 200 stores/year for next 3 years Grow to 7000+ stores till 2013

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family dollar

Documents

family dollar stores

annual income

loyal customers mission

dollar stores44

everyday low prices

customers basic needs

anniversary6600 stores

compelling place