The document provides an overview of Dollar Tree's business strategy. It analyzes Dollar Tree's financials, products/services, competitors, and external environment. It then proposes developing "Dollar Dome" vending machines for college campuses, arguing it would provide a new customer base and revenue stream while aligning with opportunities around convenience shopping trends. Strengths include entering a new market with little competition and appealing to cost-conscious college students.

1. Market Analyst: Julie Bergman
Strategy Analyst: Emilie Dalavai
Financial Analyst: Andrew Dibert
Operations Analyst: Maddie Ledbetter

2. COMPANY HISTORY, MISSION, VISION AND
COMPANY OBJECTIVES

3. COMPANY HISTORY
K. R. Perry opened a
Ben Franklin variety
store
Brock, Perry, and
Compton started
Only $1.00
with 5 stores
Dollar Tree went
public on the
NASDAQ exchange
at $15 a share.
Only $1.00 Company
changed to
Dollar Tree Stores
Dollar Tree acquired
The First Distribution
Center opened
Dollar Express
(DollarTree.com)

4. MISSION AND VISION
• Mission: We will operate profitably, empower our associates to share in its opportunities,
rewards and successes, and deal with others in an honest and considerate way.
• Vision: Dollar Tree is focused on potential growth through increasing our relevance to
customers. They plan to continue expanding the business by providing even more value to
a broader range of customers.
• Objectives for 2014:
• 375 new stores and 75 relocations for a total of 450 projects across the U.S. and
Canada.
• Expand in the areas of Stationery, Candy, Health and Beauty Care, Frozen and
Refrigerated products, Home and Household Products, and Seasonal and Party
products
• Expand geographical reach and add channels of distribution
(Dollar Tree About Us, Dollar Tree Annual Report, 2013)

5. STRATEGY SELECTION
OVERVIEW

6. DEVELOP THE DOLLAR DOME
Strategy: Market Development
Explanation: Create a Dollar Tree vending machine that will be in college dorms.
The “Dollar Dome” will hold toiletry, travel size and convenience items for a dollar
or less
• 40 vending machines will be installed on each of the 5 Midwest college
campuses that partner with Dollar Tree.
• Dollar Tree anticipates making $20 million in revenue by the fifth year
(Hoovers)

7. DOLLAR DOME

8. M&A TARGET: AMERICAN VENDING MACHINES
• American Vending Machines is a privately held
company that provides vending machines, vending
equipment and vending machine parts.
• Founded in 1997
• About 15 employees
• Located in St. Louis, Missouri, American Vending
Machines is well positioned to drop ship to
anywhere in the United States
• The company earns about $1.5 million in sales
(AmericanVendingMachines.com)

9. INTERNAL SCAN: FINANCIAL ANALYSIS

10. INCOME STATEMENT AND BALANCE SHEET
(IN MILLIONS)
2013 2012 2011
Income Statement
Gross margin 35.58% 35.87% 35.87%
Net sales $7,840 $7,395 $6,631
Cost of sales $5,051 $4,742 $4,252
Operating income $970 $920 $782
Balance Sheet
Cash and cash equivalents $268 $400 $288
Long term debt $757 $257 $250

11. COMPETITOR ANALYSIS
Ratio Family Dollar
Dollar
General
Dollar Tree Industry
Net Profit Margin 4.24% 6.47% 7.61% 3.06%
Gross Margin 34.21% 31.05% 35.58% 23.98%
Current Ratio 1.72 1.77 2.10 .97
Market Cap 8.93 B 19.67 B 12.76 B
Earnings per Share $3.83 $3.57 $2.87

12. INTERNAL SCAN:
PRODUCT/SERVICE ANALYSIS

13. BCG MATRIX AND ANALYSIS
High Low
High
Low
Market Growth Rate
Relative Market Share
• Dollar Tree is a star because it is still in a growth market. With smaller stores growing in
popularity, Dollar Tree still has potential growth.
(DollarTree.com)

14. GE MATRIX AND ANALYSIS
GE Matrix
Cash
Generation
Withdrawal
(Hoovers, Walmart and Yahoo! Finance)
Phased
Withdrawal
Try Harder
Double or
Strong Average Weak
Low Medium High
Industry
Attractiveness
Competitive Position
Quit
Proceed
with Caution
Phased
Withdrawal
Leader Growth

15. VRIO CHART
Valuable Rareness Imitability Organization
Competitive
Implications
Economic
Implications
Dollar Tree Yes++ Yes++ Yes Yes
Sustained
Advantage
Above Normal
Family
Dollar
Yes Yes Yes No
Temporary
Advantage
Normal
Dollar
General
Yes Yes Yes No
Temporary
Advantage
Normal
• Dollar Tree’s fixed price of $1 for every single item in the store differentiates their brand from the
competitors and gives then a competitive advantage.
(Mergent)

16. 4 P’S OF MARKETING
Marketing Mix Variables Dollar Tree Family Dollar Dollar General
Product
Consumable merchandise, variety
merchandise, and seasonal goods
Consumable merchandise, variety
merchandise, and seasonal
goods
Consumable merchandise, variety
merchandise, and seasonal
goods
Place Retail; online Retail Retail; online
Promotion Advertising; coupons Advertising; coupons Advertising; coupons
Price Everything for $1 Low Cost Low Cost
Strength/Weakness
Strengths: customer can always count
on products to be $1
Weakness: buyers are highly price
sensitive; similar products to
competitors
Strengths: low priced products
Weakness: buyers are highly
price sensitive; similar products to
competitors
Strengths: low priced products
Weakness: buyers are highly
price sensitive; similar products
to competitors
Market Position: Dollar Tree differentiates itself from other discount variety store competitors by offering all products for $1. Unlike Family Dollar, Dollar
Tree also sells their products online. Buyers are highly price sensitive so a better deal at a competitor may take away some of Dollar Tree’s business.
Market Segmentation: Dollar Tree targets low income to middle class consumers. These consumers value low costs over quality of products.
(Mergent)

17. PRODUCT LIFE CYCLE
Sales
Intro Growth Maturity Decline
Seasonal Goods
Consumable &
Variety Goods
• Dollar Tree’s seasonal goods do not follow the typical product life cycle that
their consumable and variety products follow.
(DollarTree.com)

18. DOLLAR TREE’S BUSINESS
MODEL
Efficiency Model:
• Dollar Tree sells low-cost household items to consumers
• Who it serves: low to middle income Americans
• What it provides: low-cost household items
• How it makes money: buy large quantities cheaper than sells individual units
• How it differentiates and sustains competitive advantages: combines
convenience of drugstores and supermarkets with low prices
• How it provides its products/services: in retail stores and online
(Dollar Tree About Us, Dollar Tree Annual Report and Marketline)

19. DOLLAR TREE’S BUSINESS
MODEL
Strengths:
• Extensive retail network across the US with well supported logistics and
distribution infrastructure
• Efficient pricing structure sustains business: single price point $1
• Retail technology systems to support Dollar Tree's business model
Weaknesses:
• Low customer loyalty
• Smaller operations in size compared to other competition
(Dollar Tree About Us, Dollar Tree Annual Report and Marketline)

20. VALUE CHAIN ANALYSIS FOR INTERNAL
OPERATIONS: PRIMARY ACTIVITIES
Inbound Logistics:
• Dollar Tree’s supply chain relies on strong vendor partnerships
• Its inbound transportation utilizes PowerTMS
Operations:
• China accounts for 80% of all the company’s imports, making it dependent on outsourced manufacturers.
Marketing and Sales:
• The Dollar Model - “Everything’s $1” slogan draws customers hunting for deals and savings.
• In-store events, specials, seasonal promotions, and featured products through its website
Outbound Logistics:
• The company operates 10 distribution centers across 48 states.
• Great direct relationships with manufacturers
(Dollar Tree 10-K, Dollartreeinfo.com, Forbes and Social Science Research
Network)

21. VALUE CHAIN ANALYSIS FOR INTERNAL
OPERATIONS: SUPPORT ACTIVITIES
Firm Infrastructure:
• Strategy for primary growth involves same-store sales and new store openings
• Shifting merchandise mix to more consumables with the addition of frozen and refrigerated foods
HR Management:
• Half of the company’s 2,300 employees who submitted online employee reviews are unsatisfied with wages
• Manager in Training (MIT) Program that runs from 7-8 weeks
Technology Development:
• investments in its inventory management system
• Dollar Tree Direct
Procurement:
• About 80% of Dollar Tree’s imports are from suppliers in China
• Competitors also obtain most imports from China, lessening Dollar Tree’s opportunity for supplier exclusivity
(Indeed.com, Marketline, S&P Capital IQ and Social Science Research Network)

22. DOLLAR TREE DIRECT
(DollarTree.com)

23. IFAS TABLE: STRENGTHS
Internal Factors:
Strengths
Weight Rating Weighted
Score
Comments
Well supported logistics and distribution
center
0.08 5 0.40
The company has an extensive retail network across the US with efficient,
well-functioning distribution centers
Supply chain management and cost control 0.07 3 0.21 Excellent as evidenced by current ratio of 2.01
Sustained discount pricing structure 0.10 5 0.50
By purchasing goods in huge quantities, maintaining strong relationships with
vendors and suppliers, and by purchasing manufacturers' over-runs
Tailored information technology (IT)
infrastructure
0.04 3 0.12
Investments in its inventory management system have enhanced supply
chain efficiency and merchandise flow and increased inventory turnover
Best industry operating margin 0.04 3 0.12
This is due to a significant portion of its product mix consisting of
discretionary goods
• The company’s logistics and distribution center contribute heavily to its profitability
• The discount pricing structure is a powerful marketing tool that brings in many customers
seeking deals
(10-K, Dollartree.com, Marketline, Mergent, S&P Capital IQ)

24. IFAS TABLE: WEAKNESSES
Internal Factors:
Weaknesses
Weight Rating Weighted
Score
Comments
Lack of global penetration 0.04 1 0.04 Despite strong presence in the United States
Lawsuits concerning wage violations 0.07 1 0.07 The company has been involved in litigations from thousands of employees
Lack of scale compared to competitors 0.05 3 0.15
Operations are smaller in size compared to Dollar General (10,557 stores in 40
states)
Lack of quality products due to pricing
strategy
0.09 4 0.36
Dollar Tree does not draw in some customers simply because some of its
products are not great quality
Smaller revenue than others in industry 0.06 3 0.18
Revenue was about $9.5 million less than competitor Dollar General, who
outperformed them in many categories
Decrease in fixed asset turnover of 10.7%
from 2011 to 2013
0.05 3 0.15
Decrease indicates that new assets have not generated as much revenue as
assets previous years
• Dollar Tree does not draw in customers because some of its $1 or less products are not great quality
• Good relationships with its suppliers and vendors allows buying at inexpensive prices
(10-K, Dollartree.com, Marketline, Mergent, S&P Capital IQ)

25. EXTERNAL SCAN: INDUSTRY
ANALYSIS

26. PORTER’S FIVE FORCES
+ indicates high power
- Indicates low power
Supplier
Power
Customer
Power
New Entrant
Power
Substitute
Product
Power
Competitive
Rivalry
Seasonal Goods - + -- + -
Consumable and
- + -- ++ -
Variety Goods
Family Dollar - + - ++ +
Dollar General - + -- + +
• Bargaining Power of Suppliers: Low
• Bargaining Power of Customers: High
• Threat of New Entrants: Low
• Threat of Substitute Products: High
• Competitive Rivalry Within the Industry: Low
(Dollar Tree About Us, Dollar Tree Annual Report, 2013, Marketline)

27. INDUSTRY AND ECONOMIC TRENDS
Highlighted Opportunity:
• Recessions happen every 5-10 years
Highlighted Threats:
• Inflation: A problem because of our fixed price scheme
• Minimum wage: recent strikes are raising awareness among politicians
Industry Trend:
• Convenience involves fast-paced shopping and on-the-go tactics meant to
save the consumer time.
• Dollar Tree’s smaller store format can take advantage of this trend because
people need to get in and out of the store fast. Larger stores such as
Walmart take longer to shop because the store is so big.
(Aboutnews, Bloomberg, USA News)

28. EXTERNAL SCAN: COMPETITIVE
ANALYSIS

29. SNAPSHOT OF COMPETITION IN INDUSTRY
• Dollar Tree is in the basic discount consumer goods market, a market highly competitive in price, store location,
merchandise quality, assortment and presentation, in-stock consistency, customer service.
(Dollar General, Family Dollar, Dollar Tree)
Market Cap: 19.67 Billion
Employees: 100,000 +
Stores: 11,000 +
Market Cap: 8.93 Billion
Employee: 50,000 +
Stores: 8,000 +
Market Cap: 12.76 Billion
Employees: 87,000 +
Stores: 5,000 +

30. DOLLAR TREE V. COMPETITORS
Sales
Company 2013 2012 2011
Dollar Tree $7.8 $7.4 $6.6
Dollar General $17.5 $16 $14.8
Family Dollar $10.4 $9.3 $8.5
Profit Margin
Company 2013
Dollar Tree 8%
Dollar General 6%
Family Dollar 4%
in Billions
(Dollar General, Family Dollar, Dollar Tree)

31. BCG MATRIX: COMPETITORS
High Low
High
Low
Market Growth Rate
Relative Market Share
Dollar Tree
Family Dollar
Dollar General
Walmart
(Hoovers, Walmart and Yahoo! Finance)

32. EFAS TABLE
External Factors Weight Rating Weighted
Score
Comments
Opportunities:
Expansion of the store network
0.3 5 1.5
Dollar Tree has the smallest number of stores compared to Dollar
General, Family Dollar and Walmart, so there is room for growth
Recessions 0.05 3 0.15
People try to save money during these times which allows Dollar Tree
to market as a cheap alternative
Growing E-commerce market 0.3 5 1.5
Dollar Tree can capitalize by its improving online store, Dollar Tree
Direct
Customer focused shopping experience 0.06 4 0.24
Dollar Tree is working to differentiate itself by enhancing the ‘shopping
experience’ for its customers
Threats:
Inflation
0.02 3 0.06 Could become a problem because of the fixed price scheme
Rising labor wages in US and Canada 0.1 5 0.5
Increased labor costs can lead to high operating costs
Walmart, Dollar General, Family Dollar and CVS/Walgreen/Rite
Imports from China 0.1 3 0.3
Dollar Tree imports approximately 40% to 42% of its merchandise from
China. Steady economic growth and increased employment has
increased the wage levels in China in the last two decades. This threat
will lead to an increase in sourcing cost of imports coming from China.
(Marketline)
Not as convenient as competitors 0.07 4 0.28 Aid have a larger market share than Dollar Tree

33. STRATEGY SELECTION AND
DESCRIPTION

34. STRATEGY SELECTION: DEVELOP DOLLAR
DOME
• Strategy: Market Development
• Explanation: Create a Dollar Tree vending machine that will be in college
dorms. The “Dollar Dome” will hold toiletry, travel size and convenience items
for a dollar or less.
• Strengths: Entering into a new market with little to no competition. College
students value convenience, and will not have to drive to get good deals on
commonly used items. Vending machines provide steady income and are
easy to operate
• Weaknesses: Potential problems from university bookstores that sell similar
items
• Opportunity: Customer-focused shopping experience
(Hoovers, AmericanVendingMachine.com)

35. STRATEGY SELECTION: DEVELOP DOLLAR DOME
• Rationalization:
– Provides long-term consistent, measurable and profitable growth
– Focuses on potential to grow through increasing our relevance to
customers
– Follows the trend of convenience especially among college-aged
demographic
• Expected Outcomes: Increased annual income, increased market share,
new customer base
• TOWS Alignment: Strength/Opportunity Strategy
– Strengths- well supported logistics and distribution centers, sustained
discount pricing structure, and supply chain management and cost control
(Hoovers, AmericanVendingMachine.com)

36. COMPETITIVE ADVANTAGE OF DOLLAR DOME
• Dollar Tree follows a Cost
Leadership Strategy on Porter’s
Generic Strategies
• Target Scope: Dollar Tree
offers a variety of products for
every age and gender
• Advantage: Dollar Tree sells
everything for under $1
• The Dollar Dome allows Dollar
Tree to try to make our low-cost
items easily available to college
students on university campuses

37. AMERICAN VENDING MACHINES PURCHASE
PRICE
• Hoovers estimates that American Vending Machines had $1.5
million in sales in 2013
• Using the average of larger vending machine companies the
average EV to Sales multiple of 3.0 results in acquiring
American Vending Machines for around $5 million
– This company can give us a start to start selling on college
campuses, but since it is so small we can acquire another
company
(Hoovers, AmericanVendingMachine.com)

38. EXTERNAL SCAN: FINANCIAL
ANALYSIS

39. ONE TIME ACQUISITION
American Vending Machines Operating Costs 2013 2014 2015 2016 2017 2018
• One time Purchase Price: $5 Million
• American Vending Machines is a vending machine provider that serves the continental
United States.
– $1.5 million in sales
• Funding Methods
– Pay $5 million in cash
In Millions
AMV Operating Costs 25% 0.3 0.4 0.5 0.6 0.6 0.6
One Time M&A Price 5
(Hoovers, AmericanVendingMachine.com)

40. SYNERGISTIC COST
SAVINGS
Cost of Sales 2013 2014 2015 2016 2017 2018
COGS Ongoing 60% 4,704 4,986 5,286 5,603 5,939 6,295
AMV COGS 50% 0.75 0.83 0.91 1.00 1.10 1.21
AMV Cost Synergies (Economies of Scale) (0.5) (0.5) (0.5) (0.5) (0.5)
New Strategy COGS 60% 0.3 0.5 1.0 1.5 1.9
Synergistic Savings (Restructuring) (0.4) (0.4) (0.4) (0.4) (0.4)
• Restructuring Savings
– Dollar Tree will save money by cutting about 12 of the current 15 employees at American
Vending Machines including eliminating employees from marketing and accounting
departments (about $400,000 in savings).
– American Vending Machines’ marketing and accounting departments will be absorbed into
Dollar Tree’s departments.
(Hoovers, AmericanVendingMachine.com)

41. REVENUE PROJECTIONS
Revenue Projections for Vending Machines 2014 2015 2016 2017 2018
Vending Machines Installed 200 600 1,000 1,400 1,800
Growth Rate 200% 67% 40% 29%
Sales per Machine (in Thousands) $10.80 $10.80 $10.80 $10.80 $10.80
Revenue (in Millions) $2.16 $6.48 $10.80 $15.12 $19.44
(Hoovers, AmericanVendingMachine.com)

42. OPERATIONAL COSTS...FIX!
New Strategy Operating Costs 2014 2015 2016 2017 2018
New Strategy Marketing Costs (sales team, promotion) 0.0 0.0 0.0 0.0 0.0
New Strategy Operational Costs 0.3 0.5 0.5 0.7 0.9
• Dollar Tree will acquire American Vending Machines, and therefore acquire the company’s
operational costs. Dollar Tree will pay American Vending Machines to keep the vending machines
stocked.
– Dollar Dome operational costs are estimated to be around $300,000 the first year.
– The cost for Dollar Tree to stock the machines will increase steadily as American Vending
Machines installs more vending machines on college campuses (approximately 5 campuses
the first year and 10 additional campuses every year following the first).
• Servicing and maintenance are potential and probable operational costs. Maintenance expenses
will include the cost of the parts needed to fix the vending machine.
• Dollar Tree will pay 5% of commissions to each university as royalty payments.
(Hoovers, AmericanVendingMachine.com, Franchise Direct)

43. MARKETING COSTS.. FIX!
Cost of Sales 2013 2014 2015 2016 2017 2018
COGS Ongoing 60% 4,704 4,986 5,286 5,603 5,939 6,295
AVM COGS 50% 0.75 0.83 0.91 1.00 1.10 1.21
AVM Cost Synergies (Economies of Scale) (0.5) (0.5) (0.5) (0.5) (0.5)
New Strategy COGS 60% 0.3 0.5 1.0 1.5 1.9
New Strategy COGS?? 0.75 0.62 0.89 1.47 2.06 2.65
Total Cost of Sales 4,705 4,987 5,287 5,604 5,940 6,296
• By acquiring American Vending Machine, Dollar Tree will absorb their marketing costs
• With the acquisition of American Vending Machine, cost of goods sold will be 60.0%
• We estimate an increase in total cost of sales by $1,591 million over five years
(Hoovers, AmericanVendingMachine.com)

44. FINANCIAL MODEL
• Since vending machines do not have
good profit margins and have high initial
costs the initial financial numbers are
low.
• NPV is positive so the strategy is
profitable.
• After vending machines are in place only
costs will be stocking and repairing
machines which will lead to greater
profit.
WACC 10.48%
NPV 4 million
IRR 31%
Payback
Period
3 years
(Hoovers)

45. FINANCIAL SUMMARY
2013 2014 2015 2016 2017 2018
American Vending Machines Operating Income 1.00 1.21 1.40 1.40 1.56 1.73
American Vending Machines Operating Margin 43% 73% 77% 70% 71% 72%
New Strategy Operating Income (0.11) (0.08) 0.15 0.27 0.40
New Strategy Operating Margin (21.7%) (9.4%) 9.1% 11.2% 12.2%
• Income from American Vending Machines will steadily increase.
• The new strategy will start off with negative income but will steadily increase
to be positive after two years.
• While this strategy does not boost income a lot, it does improve it and gets
Dollar Tree into the vending machine industry.
(Hoovers, AmericanVendingMachine.com)

46. STRATEGY IMPLEMENTATION AND
FEEDBACK

47. Financial
To succeed financially, Dollar Tree will increase
revenue growth.
• Dollar Tree will increase its revenue growth
through the “Dollar Dome” strategy by
increasing product sales by getting them closer
to our customers through vending machines.
Internal Processes
To succeed internally, Dollar Tree will
evaluate American Vending Machines’ corporate
culture as well as its own to efficiently and
effectively streamline business operations.
• This will be accomplished by changing the top
management American Vending Machines and
gaining synergistic savings.
Customer
To achieve customer satisfaction, Dollar Tree must
ensure that its customers as well as American
Vending Machines’ customers are satisfied with the
changes after the acquisition occurs.
• This will be accomplished through talking to
American Vending Machines’ customers and
ensuring that their needs are met under the new
management.
Learning & Growth
To learn and grow, Dollar Tree must understand
the vending machine industry and how to
succeed.
• This will be accomplished employee training,
and sharing information as Dollar Tree and
American Vending Machines integrate.
Vision & Strategy
BALANCED SCORECARD
(BalancedScorecard.org)

48. KEY RESULT AREAS
• Strategy
– Complete the acquisition and merger of American Vending Machines within 2 years
– Stabilize and grow the Dollar Dome product line
• Financial
– Increase revenue of vending machines by $1 million by end of year 2
– Reduce costs of new vending machines by 30%
• Market
– In the first year the Dollar Dome is implemented, earn $400,000 in sales
– Retain 100% of all University accounts throughout the fiscal year
– Increase the number of vending machines sold from 150 in the first year to 300 in the second
year
• Operations
– Vending machines will break even within 6 “active” college months after installation
– Introduce 25 vending machines on 5 college campuses within the first year
(Franchise Direct)

49. GANTT CHART HIGHLIGHTS
Dollar Tree Gantt Chart
Highlights
11/1412/14 1/15 2/15 3/15 4/15 5/15 6/15 7/15 8/15 9/15 10/1511/1512/15 1/16 2/16 3/16 4/16 5/16 6/16 7/16 8/16 9/16
Integration of Dollar Tree and AVM
Let go of unnecessary employees
Raise funds for project through stock
Unify companies’ distribution practices
Rollout Dollar Dome (Pilot Program)
Install vending machines in dorms
Set up accounts for Dollar Dome
Clearly brand machines as Dollar Tree’s
Communicating with universities to
form ties
Hire employees to restock machines
Reach out to new universities to grow
(Franchise Direct)

50. QUESTIONS?