3 1 situational analysis and target market summary

Running head: 3-1 Situational Analysis and Target Market
3-1 Situational Analysis and Target Market Summary
Lacey Bailey
Southern New Hampshire University
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Situational
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Situational Analysis and Target Market Summary
Situational Analysis
Company’s Product Line.
The Dollar General offers value and convenience to customers by providing name and private
brand items such as food, cleaning supplies, apparel, and everyday living essentials at a very
affordable price. You can find name brand items such as Clorox, General Mills, energizer
batteries and Procter and Gamble and the Dollar general even has its own private brand food.
Seasonal products are important for the target they serve, and many people come to shop for just
seasonal items alone. For the product line in China, we would include the most well-known
brands and essential products that China uses every day but also keep American products that we
have always had. In a recent survey, Chinese consumers prefer buying local brands over foreign
competitors in most sectors including food and beverages, home appliances and healthcare
because of lower prices, sound services and a combination of development trends and traditions.
(Global Times Research Center and DATA100, 2021) China has a lot of opportunities in rural
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Analysis3
areas that they could expand their stores, still being able to serve smaller towns and strategically
placing their stores near their target market and away from competition. DG Market + Popshelf,
a store within a store, sells home decor, beauty items, cleaning supplies and party goods, with all
items costing $5 or less. I think these products will sell very well in China. They have added this
to offset the consumer demographics and start to serve middle- and higher-income shoppers. DG
Market was a way to introduce more fresh produce and meats into the store. Dollar General,
which is a discount retailer offers quality, low-cost products that are sourced directly from some
of the most trusted manufacturers and their supply chain network has been extremely successful
in the US, Supplying approximately 12,000 products in more than 16,000 stores in 44 states.
They currently have 28 distribution centers strategically placed all over the US and I know that a
global supply chain would be successful if they use the same strategy in China. Dollar general
already has its own team for global supply chain and has a dynamic group of tractor trailers,
ocean carriers, international containers, and Dollar General’s own private fleet of companyowned trucks. Rivalry between existing competitors is high and in China, there will be even
more competition with stores like the dollar store called “10 quai” stores, at least in Beijing; they
have products such as slippers, watches, small souvenirs items for the equivalent of a dollar.
However, they are not like dollar general where you can buy household cleaners, cosmetics, and
food and the products are cheaper quality which will be great when we come in with our
products that are quality and name brand items at a savings and DG believes in their products so
much that they offer a money back guarantee. In China, Walmart is their biggest competition. If
they can position themselves correctly and away from big stores such as Walmart, I think they
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would thrive over in that environment and save on tariff tax and shipping prices for some of the
items they are already sourcing from there in the first place and include popular Chinese
everyday essentials and brands, The only negative affect would be the China – US trade war that
affects not only consumers but also the pricing and products as well. The trade dispute has
already diminished trade flows between the United States and China and in a recent article it
states that “the tit for tat finally stopped in January 2020, when both sides signed what is known
as the Phase One trade deal. In it, the Trump administration said China committed to buy an
additional $200 billion worth of American exports in 2020 and 2021” (Pak, 2022)
Demographics and Composition. Dollar General targets low and fixed-income shoppers
who live in rural areas with an annual household income of $40,000 or less, who are often
underserved by other retailers. DG places its businesses stragically around the US in rural areas
that do not have many options for essential items and to make it geographically accessible to
customers in smaller towns. Keeping this same strategy for China would benefit them
immensely. More recently, DG continues to gain ground with a range of demographics and
income groups. It recently introduced Popshelf in 2020, a new chain aimed at higher-income,
suburban customers which would better fit the target market in China. Its target customer has an
annual household income ranging from $50,000 to $125,000 — higher than the $35,000 to
$40,000 annual household income of a typical Dollar General customer, according to the
company. China has about 914 million people living in urban regions in China and 598 million
in rural. Rural areas are making progress, and the emerging lower to middle class is expected to
become a significant driver for the continuing growth of the Chinese economy. In contemporary
Situational
Analysis5
China, the state of inequality is determined by regional differences and the countrywide urbanrural divide. The national economic growth rests on rural industry. A little under half the
population makes up the rural area and about 55 percent live in urbanized areas. Pei, Changhong;
Yang, Chunxue; Yang, Xinming (4 July 2019) states The Fourteenth Five-Year Plan (2021–
2025) is currently being implemented, placing an emphasis on consumption-driven growth and
technological self-sufficiency while China transitions from being an upper middle-income
economy to a high-income economy. Despite the global recession triggered by the Covid-19
pandemic, China has managed to avoid the economic fallout. It reported a rise in GDP (Gross
Domestic Product) of 7.9 per cent for the second quarter of 2021 compared to the same period
the year before – much higher than most developed nations. (Calcea et al., 2021)
Sociocultural Environment. The Chinese have a different way of doing business. The
culture dimensions, personal and professional etiquette, and communication are different than
ours. The Chinese have a distinct culture that is influenced by traditions that have been passed
down through the generations. In their culture it is best to arrive well prepared and early and
never to hand out gifts or leave a tip at a restaurant. The official policy in Chinese business
etiquette forbids gifts. The gesture is considered bribery, which is illegal in the country. The
Chinese tend to extend negotiations far beyond the given deadline, so be prepared just to accept
their delays and do not mention the deadlines. A significant characteristic of Chinese culture is
its social nature as opposed to western culture which is hugely individualistic. Chinese culture
has a strong focus on society, and the values of respect, honesty, kindness, and strong family
values are held in high regard. Handshakes are common in the culture, but always wait till they
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Analysis6
give the gesture. In Chinese culture the question ‘Have you eaten yet? Or where have you been,
is equivalent to saying, “how are you?” Just be brief and answer yes or simply say thank you.
Common themes in China are art, scenery, landmarks, climate, and geography. Try to avoid
political-related discussions, such as the Cultural Revolution or Chairman Mao, the “Tibet” and
“Taiwan” questions, human rights, animal treatment. Chinese people are incredibly careful about
strong negative statements. For instance, negative answers are considered impolite, so find
alternatives (“I’ll think about it”/” maybe”/” we will see”) instead of a blunt “no.” Many of their
philosophies they get from Confucius and have been passed down through generations.
External Macroenvironmental Risks and Opportunities. The external
macroenvironmental risks and opportunities include political, economic, social, technological,
legal, and environmental. Rules and regulations are not applied consistently or equitably in
China, and companies often are not treated the same as Chinese companies regarding regulation
and implementation, which leads to discrimination. Caution must be used due to differences in
the political environment. The political environment can create risk and pose uncertainty for
foreign investors but that is not stopping the success of the political environment. Over 190
countries from around the world invest in China, which includes 450 of the Worlds Fortune 500
companies and 58% being foreign trade. China has an enormous potential for economic growth
offering access to a large market and considerable savings in labour and supply costs. Currently
the Trade war going on between the US and China affects product prices and the price at which
we are getting our supply. If we were to move internationally to China, we would be sourcing
some of our products locally. There is also some geographical inequality which is important for
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the Dollar General. Social equality and the socialist system need improvement and is a risk to the
dollar general who conducts business based on social equality and producing discount wholesale
items for the lower to middle class. Working through an intermediary is crucial as they like
doing business with companies they trust and know. Sourcing Products locally will also be
greatly beneficial for DG. There is a massive market and growth potential, but the socialist
system poses a risk with China being able to control the business and regulations. China is ahead
of other countries as far as technological advancements but access to technology is a concern.
They spend a lot of time and money on research and development which is a strength for Dollar
General and getting market research for the products and has plenty of room for tech growth.
Industry suppliers and sourcing products directly from China will help with the high tariffs and
costs. Even though they are behind countries for access to technology and the internet, we can
bring a lot of our technological advancement to the Chinese. Doing business in China is easy and
ranks 31 on the ease of business scale. The intellectual property rights pose a threat being how
some of our products are store brand, but I did read an article stating they are doing more to
protect people’s intellectual property rights. They have just recently started taking corporate
social responsibility seriously and are starting to raise their standards with taking care of the
environment and contributing to society. Workers are well protected with the fair standards act.
Even though the supply chain management in China is one of the best in the world, things such
as intellectual property infringements and regulatory compliance and quality failures, companies
are having to find new suppliers and pay outraging shipping prices to get anything to China
causing major supply chain risks. China suffers from notoriously bad air pollution as well and its
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Analysis8
carbon-intensive industries have caused additional environmental challenges, including water
scarcity and soil contamination. This could affect not only our business but everyone. Unlike the
United States who favors CSR (Corporate Social Responsibility), this is something new to the
country. An earthquake really set this movement up and now increased businesses are practicing
social responsibility which is a fantastic opportunity for us to step up and be the leaders in CSR.
International Trade Environment.
The trade relationship between China and the United States has been long characterized by
ongoing trade disputes. This includes intellectual property (IP) theft, forced IP transfer, and
market access issues that impede U.S. firms from operating on equal footing with preferred local
Chinese firms. U.S. trade policy pushed back in recent years. Actions included tariffs, sanctions,
and export controls related to national security and human rights. China has bilateral investment
agreements with over 100 countries and economies, including Austria, the Belgium-Luxembourg
Economic Union, Canada, France, Germany, Italy, Japan, South Korea, Spain, Thailand, and the
United Kingdom. China’s bilateral investment agreements cover expropriation, arbitration, mostfavored-nation treatment, and repatriation of investment proceeds. They are regarded as weaker
than the investment treaties the United States seeks to negotiate. China also maintains 17 Free
Trade Agreements (FTAs) with its trade and investment partners and is negotiating or
implementing an additional eight FTAs. China’s FTA (Free Trade Agreements) partners are
ASEAN, Singapore, Pakistan, New Zealand, Chile, Peru, Costa Rica, Iceland, Switzerland,
Maldives, Mauritius, Georgia, Korea, Australia, Cambodia, Hong Kong, and Macao. In addition,
in November 2020, China and 14 other countries signed the Regional Comprehensive Economic
Situational
Analysis9
Partnership. China announced the ratification of the agreement in early 2021. China continues to
rely upon industrial policy tools, including subsidies, market access restrictions, pressures to
transfer technology, and other support for domestic competitors. These policy tools undermine
the ability of foreign firms to operate on a level playing field in the Chinese market.
Furthermore, the Chinese Communist Party’s control over various economic actors in the market
has increased. United States remains Chinas largest trading partner to date.
Situational Market Summary
See Attached for Tows Matrix
Internal Strengths and External Opportunities S/O
Low-cost discount retailers in China include 10 Yaun Stores, Miniso, Alabia, Costco, and
Walmart. If we can strategically place DG away from these big discount retailers and start
buying out 10 Yaun Stores in China, I think we could compete with Miniso. We could also
consider a joint venture with a local company where they already have established distributors
relationships with suppliers and distribution networks. I also think expanding into eCommerce
and online shopping will benefit Dollar General, and we will be able to compete with Alabia
which is strictly an online ecommerce store.
We will have economies of scale if we go in and introduce a new store in each city and include
our online site for shoppers to choose to get it delivered to their door. We also can introduce new
products including popular name brand items in China for a low cost to consumers.
Situational
Analysis10
Expansion in rural areas and developing nations in China will give Dollar General to really
improve food deserts and give Chinese a place to shop for all their essential items conveniently
located nearby and online. Expanding our brand of Popshelf and DG Market will also give
Chinas Urban areas more options for everyday essential items.
Successful track record of new products and sales growth for consecutive years has been one of
the Dollar Generals strengths and we can use this opportunity to expand to China. Shifting away
from some of the American products and incorporating Chinese brands and styles is necessary as
the Chinese prefer to buy from local brands and have strong brand loyalty. We also could use our
brand to create new products that would benefit the Chinese.
Finding Reliable suppliers in China will be our top priority. We will need to establish a network
of warehouses and distribution centers in different countries. As it stands, a customer ordering
from DG online would thus have their items shipped from a distribution center in the U.S.,
subjecting the products to high shipping costs and import duties. If we could strategically place
these centers in convenient locations, we would be able to expand in a short period of time
through online sales.
Since one of our strengths is transportation and logistics, we can use this as an opportunity in
foreign countries and expand our centers into other countries and invest in getting more to avoid
high shipping prices and tariffs.
Internal Strengths and External Threats S/T
Providing more fresh produce and meat would be necessary to keep the mayors and governments
happy over in China. As we sit right now, we have some confrontation that we are running out
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supermarkets and for the Chinese I think they would also have some regulations on our stores.
To keep them content we would need to stay away from other supermarkets and keep the Dollar
General in rural areas where a need is present but away from big competitors like Walmart.
To do this we could find more local suppliers and distributors in China to get around the tariffs
and export and import regulations and shipping costs.
Use economies of scale and open more stores to make up for rising pay levels in China.
Be in both Rural and Urban areas spread out strategically to avoid threats
Buy out some of the other discount suppliers such as 10 Yuan stores and expand our expansion
that way.
Internal Weaknesses and External Opportunities W/O
Get own transportation and logistics in China as I was stating earlier would be the best
opportunity for us to avoid our weaknesses of tariffs and shipping costs.
We also could find new China suppliers to try and get around the trade war that is going on
between the US and China to extend opportunities to other foreign countries.
Even though we are worried about the increase of pay raise, one way to overcome our reputation
of selling expired foods would be to include in the job description that all employees need to
keep an eye on inventory and expiration dates.
We could keep sales growth in China growing by taking over other discount retail stores and to
expand in both rural and urban areas.
Internal Weaknesses and External Threats W/T
Situational
Analysis12
Reducing tariffs could happen in a couple of different ways. One way would be to find other
local suppliers and purchase from other discount retailers in the area and keep things local in
China as we have the US with our suppliers.
Include the duty of checking expired foods for all employees and give them more responsibilities
to make up for the pay raise.
Increase transportation and logistics and distribution centers we would also have to hire more
workers but that will help the threat of the trade war, tariffs, and shipping prices.
The one issue we were seeing in the US was the cities were not liking that we were coming in
and taking over local grocery stores and taking control of rural areas. So, for this weakness we
can overcome this threat by not putting a Dollar General next to local market stores and expand
to more Urban areas and not just food deserts and low-income consumers by spreading out our
stores all over to reach economies of scale.
References
Pak, J. (2022, February 25). What has the U.S.-China Trade War achieved? Marketplace.
Retrieved March 29, 2022, from https://www.marketplace.org/2022/02/25/what-has-the-us-china-trade-war-achieved/
Calcea, N., Corcoran, M., Spotlight, Nicu Calcea @nicucalcea Nicu Calcea is a Data Projects
Ed, Calcea, N., & Nicu Calcea is a Data Projects Editor at the New Statesman Media
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Analysis13
Group. (2021, September 4). China’s income inequality is among the world’s worst. New
Statesman. Retrieved March 30, 2022, from
https://www.newstatesman.com/world/2021/08/china-s-income-inequality-among-world-sworst
Times, G. (2021, March 14). Chinese prefer buying local brands due to improving quality:
Survey. Global Times. Retrieved April 5, 2022, from
https://www.globaltimes.cn/page/202103/1218329.shtml
China – trade agreements. International Trade Administration | Trade.gov. Retrieved April 6,
2022, from https://www.trade.gov/country-commercial-guides/china-trade-agreements
…