Dollar Tree (DLTR) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Department & Discount)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Dollar Tree (United States)
Based on various researches at Oak Spring University , Dollar Tree is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, there is increasing trade war between United States & China,
increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Dollar Tree can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Dollar Tree, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Dollar Tree operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Dollar Tree can be done for the following purposes –
1. Strategic planning of Dollar Tree
2. Improving business portfolio management of Dollar Tree
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Department & Discount) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Dollar Tree
Strengths of Dollar Tree | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Dollar Tree are -
Cross disciplinary teams
– Horizontal connected teams at the Dollar Tree are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Low bargaining power of suppliers
– Suppliers of Dollar Tree in the Services sector have low bargaining power. Dollar Tree has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Dollar Tree to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Dollar Tree is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Dollar Tree is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Dollar Tree emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Dollar Tree is present in almost all the verticals within the Retail (Department & Discount) industry. This has provided Dollar Tree a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to recruit top talent
– Dollar Tree is one of the leading players in the Retail (Department & Discount) industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Dollar Tree has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Dollar Tree to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Dollar Tree in Retail (Department & Discount) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Dollar Tree is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Retail (Department & Discount) industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy of Dollar Tree comprises – understanding the underlying the factors in the Retail (Department & Discount) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Effective Research and Development (R&D)
– Dollar Tree has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Dollar Tree staying ahead in the Retail (Department & Discount) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Retail (Department & Discount) industry
– Dollar Tree has clearly differentiated products in the market place. This has enabled Dollar Tree to fetch slight price premium compare to the competitors in the Retail (Department & Discount) industry. The sustainable margins have also helped Dollar Tree to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Dollar Tree has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Dollar Tree has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses of Dollar Tree | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Dollar Tree are -
Workers concerns about automation
– As automation is fast increasing in the Retail (Department & Discount) industry, Dollar Tree needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to strategic competitive environment developments
– As Dollar Tree is one of the leading players in the Retail (Department & Discount) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Department & Discount) industry in last five years.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Dollar Tree is slow explore the new channels of communication. These new channels of communication can help Dollar Tree to provide better information regarding Retail (Department & Discount) products and services. It can also build an online community to further reach out to potential customers.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Dollar Tree supply chain. Even after few cautionary changes, Dollar Tree is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Dollar Tree vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Dollar Tree has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
No frontier risks strategy
– From the 10K / annual statement of Dollar Tree, it seems that company is thinking out the frontier risks that can impact Retail (Department & Discount) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Ability to respond to the competition
– As the decision making is very deliberative at Dollar Tree, in the dynamic environment of Retail (Department & Discount) industry it has struggled to respond to the nimble upstart competition. Dollar Tree has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on Dollar Tree ‘s star products
– The top 2 products and services of Dollar Tree still accounts for major business revenue. This dependence on star products in Retail (Department & Discount) industry has resulted into insufficient focus on developing new products, even though Dollar Tree has relatively successful track record of launching new products.
Aligning sales with marketing
– From the outside it seems that Dollar Tree needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Department & Discount) industry have deep experience in developing customer relationships. Marketing department at Dollar Tree can leverage the sales team experience to cultivate customer relationships as Dollar Tree is planning to shift buying processes online.
Employees’ less understanding of Dollar Tree strategy
– From the outside it seems that the employees of Dollar Tree don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Interest costs
– Compare to the competition, Dollar Tree has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Dollar Tree Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Dollar Tree are -
Manufacturing automation
– Dollar Tree can use the latest technology developments to improve its manufacturing and designing process in Retail (Department & Discount) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Dollar Tree in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Department & Discount) industry, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Dollar Tree has opened avenues for new revenue streams for the organization in Retail (Department & Discount) industry. This can help Dollar Tree to build a more holistic ecosystem for Dollar Tree products in the Retail (Department & Discount) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Dollar Tree can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Retail (Department & Discount) industry.
Leveraging digital technologies
– Dollar Tree can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Department & Discount) industry, but it has also influenced the consumer preferences. Dollar Tree can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Dollar Tree is facing challenges because of the dominance of functional experts in the organization. Dollar Tree can utilize new technology in the field of Retail (Department & Discount) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Department & Discount) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Dollar Tree can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Dollar Tree can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Dollar Tree can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Dollar Tree can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Dollar Tree to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Dollar Tree to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Using analytics as competitive advantage
– Dollar Tree has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Department & Discount) sector. This continuous investment in analytics has enabled Dollar Tree to build a competitive advantage using analytics. The analytics driven competitive advantage can help Dollar Tree to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions in Retail (Department & Discount) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Dollar Tree in the Retail (Department & Discount) industry. Now Dollar Tree can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Dollar Tree External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Dollar Tree are -
Regulatory challenges
– Dollar Tree needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Retail (Department & Discount) industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Dollar Tree may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Department & Discount) sector.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Dollar Tree will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Shortening product life cycle
– it is one of the major threat that Dollar Tree is facing in Retail (Department & Discount) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Dollar Tree can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Retail (Department & Discount) industry.
Technology acceleration in Forth Industrial Revolution
– Dollar Tree has witnessed rapid integration of technology during Covid-19 in the Retail (Department & Discount) industry. As one of the leading players in the industry, Dollar Tree needs to keep up with the evolution of technology in the Retail (Department & Discount) sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Dollar Tree.
Increasing wage structure of Dollar Tree
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Dollar Tree.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Dollar Tree can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Dollar Tree prominent markets.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Department & Discount) industry are lowering. It can presents Dollar Tree with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Department & Discount) sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Dollar Tree in Retail (Department & Discount) industry. The Retail (Department & Discount) industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Environmental challenges
– Dollar Tree needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Dollar Tree can take advantage of this fund but it will also bring new competitors in the Retail (Department & Discount) industry.
Consumer confidence and its impact on Dollar Tree demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Retail (Department & Discount) industry and other sectors.
Weighted SWOT Analysis of Dollar Tree Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Dollar Tree needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Dollar Tree is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Dollar Tree is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Dollar Tree to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Dollar Tree needs to make to build a sustainable competitive advantage.