This paper examines Family Dollar's corporate-level strategy, focusing on its single-concept retail model, cost leadership approach, and domestic-only market presence. It evaluates the company's financial performance over a five-year period, including revenue growth and earnings-per-share improvements through fiscal 2010. The paper also discusses how Family Dollar achieved growth primarily through organic expansion rather than acquisition, and analyzes the role of strategic alliances with vendors, construction firms, and transportation partners in sustaining low prices and strong product mix. The analysis concludes that the company's deliberate avoidance of marketing alliances further reinforces its low-cost positioning.
Family Dollar has a low level of diversification. The company operates a single store concept — Family Dollar — with stores that share a uniform layout. It operates solely within the United States and does not undertake any ancillary businesses; it is strictly a retailer (Family Dollar.com, 2010). At this point, Family Dollar does not pursue any international strategy and does not appear to have plans to expand, even into Canada.
The company's corporate-level strategy is to embrace cost leadership. This does not specifically differentiate Family Dollar's stores from those of other dollar chains, nor from Walmart or Target — two giant competitors that also compete as cost leaders in general retail. Success of this strategy can be measured in a couple of ways: first by market share, and second by financial performance. With respect to market share, Family Dollar controls approximately 16% of the dollar store market (Sharon, 2010), which does not include Walmart or Target. The company also experienced a 4% increase in same-store sales in 2009 (Reeves, 2009), evidence of strong growth in the face of a difficult economy.
Financially, the cost leadership strategy has translated into strong revenues and earnings. Family Dollar saw its revenues improve consistently over the previous five years, including a 6.3% increase in fiscal 2010. The company's profits also increased steadily. In fiscal 2010, net income rose 22.9%, delivering earnings per share of $2.64, compared with $2.10 the prior year (MSN Moneycentral, 2010). This strong financial performance can be attributed in part to sector-wide strength in the dollar store industry (Lipton, 2009), but it also indicates that the firm is well-positioned to capitalize on opportunities arising from the slumping economy.
"Vendor, construction, and logistics partnerships supporting operations"
"Alliance outcomes reinforce low-cost brand positioning"
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