Dollarama business model makes sense many aspects business
Dollarama Inc Case Study Example
Introduction
The aim of all entrepreneurs when they venture into business is to
operate a successful entrepreneurship. This does not come easily as it
involves making of major critical decisions that affect and add value to
the firm every day.As the model describes, Larry Rossy and Neil Rossy,
once they identified the opportunity in the Dollar stores industry they
ventured and so far they are operating a successful business.
Dollarama business model makes sense in many aspects of business. After
venturing into business,the first thing they did was to identify the
target market and secure a wider share ofit. Dollarama market consists
of those people who are not financially stable. The population of Canada
approximated at 304 million and 40% of these constitute the consumers of
Dollarama’s products. They still have a potential of expanding business
to reach more customers because the business is underdeveloped with
1store:32000 people. The company’s expansion program of 30 to 40 stores
per year is very achievable taking into consideration the large number
of consumers being served averagely by one store.The company also
enjoyed competitive advantage in the US markets and would also secure
markets for its products. Through its well-recognized brand which was
now changed to “1-plus”,the business would be able to continue
increasing its reputability while maintaining brand loyalty
The outsourcing method adopted by the company makes the business model
sensible. The firm enjoyed a competitive advantage due to direct
sourcing of its products from the Asian markets without involving
importers or brokers. Larry and Neil would make this method of
outsourcing more robust by even securing more suppliers to make sure
wide stock is available. The company has also engaged on continuously
adding quality to its products to make sure it maintains a competitive
advantage over its rivals. The firms brand quality was highly recognized
and this would continue at least in the foreseeable future. The CEO
indicated that they would maintain the brand name by improving quality
while maintaining margins
The company’s operational expenses also make the model to be sensible.
The company did not employ huge workforce since they needed to minimize
on the costs of labor and increase earnings. The current workforce would
only need additional few people to handle the new stores that the
company intended to Open. The Company has also minimized its lending and
leasing costs and this would also help reduce operational costs.
According to Larry, as the inflation continue to rise, the company would
keep on re-designing new ways of renting and leasing facilities to
ensure that it gets stores at the cheapest price.
The company’s decision to move to multiple price points was a major
positive move that would see its business grows. The fact that other
retailers in the market were still offering their goods at prices beyond
1 Canadian dollar would still make sure that Dollarama remained on the
lead. When Neil compares the price of a porcelain serving dish with the
prices from other stores, there is a saving margin of about 89% if you
purchased the same product at Dollarama. The company had an innovative
ideas of replacing the items whose prices had increased by new high
quality products and this will make sure that the company continues to
maintain lead over the others in the foreseeable future once the
customers adapts to prices between 1 and 2 Canadian dollars.
The firm’s decision to install point of sale machine would greatly
improve inventory days since the firm’s inventory would be easily
monitored and controlled. This will see profits increase and more and
accurate stock tracking. Its decision to accept credit cards was also a
very positive move and since the firm had planned to continue with this
policy,sales would continuously keep on rising hence profits being
magnified.
The firm has laid a well plan of ensuring that the problems and
challenges that are likely to occur in future are accurately encountered
to reduce their negative impact. The major problem is how to continue
offering lower prices to its customerswhile maintaining reasonable
margins.The company would keep on outsourcing and re-engineering its
products to maintain quality and low costs of production while
maintaining margin.