Dollar Tree Essay

Dollar Tree’s competitive strategy, when measured by Porter’s strategic typology, is low-cost with focus. Being a dollar store, Dollar Tree has a strategy of offering its customer low-priced merchandise and is focused on budget-conscious customers and customers with limited incomes. According to Parnell (2014), low-cost with focus firms must ensure the company controls costs in order to continue to operate while offering low prices, leaving it exposed price competition (p. 188). According to Miles’ and Snow’s strategy, Dollar Tree’s competitive approach is analyzer. Dollar Tree has been quite successful with its growth and acquisition, however as a dollar store, Dollar Tree must ensure their costs are controlled in order to be profitable.

(2016) states that it differentiates itself from by offering quality merchandise at a low price in clean, conveniently-located retail spaces (p. 11). In line with the low-cost with focus type, it is imperative that Dollar Tree continue to stay with the one dollar scheme. According to Pederson (2012), Dollar Tree alienated some of its customers when it deviated from the dollar pricing (para. 31). In order to serve its target customers, those with low incomes, Dollar Tree must stay control their costs so they are able to offer low prices. Continued growth through the addition of stores and distribution centers and acquisitions of other firms allow Dollar Tree to offer competitive pricing. Dollar Tree can take advantage of economies of scale, which permit it to benefit from declining per-unit costs due to increase of volume purchases and increase profit margins because the increase of retail capacity and distribution space for merchandise (p. 38). Distribution centers also enable the stores to maximize the use of retail space by freeing up storage areas. In 2015, the average Dollar Tree utilized almost 99% of the retail space for selling (Dollar Tree Inc., 2016, p. 10). Retail firms pay a premium for their retail space so using as much of it for selling is the most efficient use of the space, which demonstrates one way Dollar Tree is managing its costs. With this in mind, Dollar Tree is very strategic in picking locations. In order to attract shoppers, Dollar Tree selects locations in strip malls with larger retailers with the purpose of winning customers over by undercutting the competition (Pederson, 2012, para.