Company Background Case Study Sample
99 Cents Store
The 99 Cents Store is a retailer that offers discounts for its customers. The company has established a chain of retail stores across the United States. As of 2006, the 99 Cents Store operated 232 retail stores in different states. The majority of the company’s stores are located in California. 99 Cents Store meets the demand of its customers by working with various brands to offer a wide variety of products from beauty to health, and hardware materials to clothing, among others. The company works with major trusted brands including Johnson & Johnson, Unilever, and Colgate. The 99 Cents Store’s revenue has steadily increased in the past decade. To continue the company’s growth, the 99 Cents Store is planning to gain competitive advantage by opening more stores across the US and establishing a wider presence in various markets over the competition.
The 99 Cents Store is also aware of the company’s need to expand to continue growing. To accomplish this objective, the company began to adopt Information Technology (IT) to allow it to take advantage of existing opportunities. The company saw the necessity of adopting technology in its warehouse inventory system to establish a more efficient supply chain, particularly in the transport and delivery of products to stores and ultimately to customers. Despite the company’s efforts to improve its service, the 99 Cents Store faces difficult challenges that the management must aim to address in the coming years. Considering this issue, the succeeding discussion is an analysis of the 99 Cents Store’s structure and operations towards the objective of determining existing problems and issues, as well as possible solution to improve the company’s performance.
Analysis of the 99 Cents Store
One of the ways to analyze the operations and practices of a company is to conduct value chain and competitive forces analysis. Essentially, the value chain refers to the series of steps or operations that a company follows in order to deliver goods and services that are valuable to the target market segments. The components of the value chain include two groups – primary activities and support activities. Primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and service. On the other hand, support activities include those within the organization, in human resources, in relation to technology, and purchasing.
In terms of the value chain, 99 Cents Store’s inbound logistics pertain to the company’s receipt of goods from collaborating brands. As formerly noted, the 99 Cents Store works with various brands to deliver different goods to customers. The way that 99 Cents Store sources its products from various brands determine the efficiency of its inbound logistics. The company’s relationship with existing suppliers is crucial to 99 Cents Store’s success. Since the company has been working with brand suppliers for decades, however, we may conclude that this aspect of the value chain is efficient and economical. The 99 Cents Store’s relationship with brand suppliers allows the company to create value for customers by providing goods needed by the market and offering options for customers through the availability of various brands for every product line.
Furthermore, inbound logistics is satisfactory at 99 Cents Store because various stores may easily restock its products. The delivery of products from suppliers occurs at regular intervals, which means that the company’s supplies are always adequate to meet the needs of consumers. This also illustrates 99 Cents Store’s ability to meet the demands of the market, which is one of the company’s strengths.
The 99 Cents Store’s warehouse system contributes to the company’s efficient operations. Although the company has adopted technology, it still aims to keep the cost of operations low so that it would have adequate budget to implement its other strategies such as expanding its spaces in physical stores.
The 99 Cents Store is also constantly exploring various strategies for the company to improve its services and operations for customers. The company accomplishes this objective by expanding some of its stores annually so they would be able to accommodate a wider range of products for customers.
The company’s warehouse management system consequently influences the company’s outbound logistics. The 99 Cents Store is able to maintain an efficient inventory system that allows it to replenish products and goods immediately. The outcome of which is the company’s timely and adequate delivery of services to customers in its outbound logistics operations. The 99 Cents Store’s presence across various states in the US also contribute to the company’s efficient outbound logistics because its target market segments have wide access to its goods and services.
The 99 Cents Store’s main marketing strategy is part of the company’s marketing mix – pricing. The company employs various strategies but the 99 Cents Store is known for its pricing strategy that meets the needs of many market segments including its suppliers and large scale brand names. The 99 Cents Store’s main selling point is that it offers a variety of products at a low cost compared to the competition. Considering the impact of the global economic recession in 2008, many customers would prefer low-cost goods over expensive ones. Similarly, the 99 Cents Store’s selling point is its access to a variety of brand names. As formerly noted, the company works with several brands that supply a variety of products. This allows the company to cater to the customers’ diverse needs.
The 99 Cents Store’s place of distribution also contributes to the company’s services. At present time, there are hundreds of 99 Cents Store across the US. This means that the place of distribution is accessible to various market segments because they are located in almost all states in America.
Aside from the company’s use of technology, which is part of its support activities in the supply chain, 99 Cents Store also operates efficient purchasing of goods. The 99 Cents Store works with many brand names as suppliers of a wide variety of products. Although the company purchases goods in bulk or wholesale from suppliers, 99 Cents Store is capable of replenishing stocks at once. Regardless of the volume of load considering the demand for specific products, the 99 Cents Store is able to meet it due to the company’s efficient purchasing and delivery system.
In terms of Michael Porter’s Five Forces model to analyze the competition, the 99 Cents Store is capable of thriving in a competitive environment. Five Forces include different factors – the threat of new entrants in the industry, the bargaining power of buyers, the bargaining power of suppliers, rivalry among existing competition, and the threat of substitute products or services. Establishing a business in the same industry is challenging, which is why there exists no threats of new entrants. Furthermore, the 99 Cents Store is already a large-scale business. New entrants would find it difficult to compete with the 99 Cents Store. Since the company already offers goods at a low cost, buyers lost their bargaining power. The company has already lowered the cost of goods or products, which means that buyers can no longer make bargains because the 99 Cents Store has already offered various goods or products at bargain cost. Since the company delivers different products for its customers, the 99 Cents Store would be less affected by threats of substitute. The 99 Cents Store already offers a wide array of products or goods. Hence, it would be difficult to compete with the company using threat of substitute.
The 99 Cents Store needs to focus on rivalry among existing competition and the bargaining power of suppliers. As formerly mentioned, the 99 Cents Store sources its goods and products from suppliers. Since the company is dependent on the goods offered by various brands, the 99 Cents Store is susceptible to the bargaining power of suppliers. Suppliers may choose, for instance, to increase cost of goods or products and delivery, especially if there is a high demand for their products. In this situation, 99 Cents Store would find it difficult to decline the offer because the company depends on suppliers’ goods. Rivalry is another problem that must be addressed by the 99 Cents Store. Other companies have the same business model and has established ties or partnerships with various suppliers to obtain goods and products. The company needs to look for a unique selling point that sets it apart from the competition.
The Current Business Strategy of the 99 Cents Store
Cents Store continues to grow because of the company’s commitment to expanding existing stores. The 99 of the company’s stores in various locations allow the company to expand its offering to customers, and therefore, revenue. Furthermore, expansion allows the company to increase the number and kinds of products or goods offered at 99 Cents Stores nationwide. When a 99 Cents Store expands with the addition of spaces, the company is able to acquire more goods and products for selling to customers. In this way, 99 Cents Store is able to provide a wide selection of goods. Consequently, the 99 Cents Store would eventually be capable of accommodating the diverse needs of customers at low cost.
As formerly noted, the 99 Cents Store responds to the competitive environment by adopting new strategies to improve its operations and services. Adopting an information technology infrastructure, for instance, improved the company’s warehouse inventory system. In this way, the company is able to manage operations in its stores across America and keep down the cost of delivering products to different states. At first, the 99 Cents Store only maintained a database to make it easy to calculate revenue and track the rates of sale. Nonetheless, the company figured out that a database system would also help the company conduct transactions and deliver goods and services to customers within a timely and appropriate time.
The 99 Cents Store’s IT Infrastructure Investments
The 99 Cents Store’s IT infrastructure investments include the development and incorporation of systems linking with all of the company’s stores nationwide. As formerly noted, the 99 Cents Store takes advantage of a robust IT infrastructure to improve its operations. Nonetheless, the company attempts to save on cost by limiting its budget for IT. In 2003 alone, the 99 Cents Store only spent less than $5 million. Another strategy that allows 99 Cents Store to lower the cost of its IT infrastructure is sourcing skill and talent in technology from within the company. David Gold, the founder and chairman of 99 Cents Store once allowed his son, Jeff, to establish the company’s warehouse inventory in the 1980s. Since then, the company relies on its in-house IT experts to constantly improve its warehouse system.
The 99 Cents Store adopted a database management software license. To save on cost, Robert Adams, the vice president of information services at the company, looked for low cost licenses online. In this way, the company was able to choose from efficient yet affordable programs or software for the company’s database system instead of directly adopting the most accessible yet expensive license used by majority of the competition. According to the management of 99 Cents Store, delivering products and services is important, which is why it has adopted a robust IT infrastructure. Nonetheless, spending on a sophisticated infrastructure does not mean that the company can trade its spending. 99 Cents Store understands that its stakeholders, even successful and wealthy brands or suppliers also want to save on cost. For this reason, the company aims to lower spending at all cost to ensure that both suppliers and customers or end users would also gain the best deal of the bargain when it comes to spending.
Part of the 99 Cents Store’s investment is the company’s purchase of the HighJump package. Essentially, the High Jump package is a software that facilitates the efficient implementation of plans and initiatives in the workplace. The company mandated people from its online IT team to redevelop HighJump and make adjustments to ensure that the software meets the needs of the company. Aside from the HighJump software, Adams also worked with the company’s in-house team to incorporate new technologies in the design such as Radio Frequency Identification (RFID). The company also invested in a warehouse management system called the Warehouse Advantage.
Overall, the 99 Cents Store’s IT infrastructure has received a small budget considering the cost of installing, monitoring, and maintaining an efficient system. Once the 99 Cents Company sets the cost of operations (i.e. delivery of goods, etc.), leaders must fulfill or accomplish all assigned tasks and responsibilities within the given budget. The 99 Cents Store’s investment on infrastructure, therefore, is a strategic way to save on cost while tapping into the skill and talent of the company’s employees to improve its IT system and infrastructure.
The 99 Cents Store has an information database and a database management system that reads, stores, and retrieves data about the company’s products and transactions. The company’s warehouse IT infrastructure, for instance, allows it to track products or goods as they are shipped and distributed. In this way, the company is able to plan delivery or distribution in a timely manner, based on the demand of customers. The company’s information system also improves the delivery of services by means of helping delivery trucks reach their destination on time. The company’s information system collates information about the location of warehouses and 99 Cents Stores. Delivery trucks then use the information system to access the map, which tracks their location and provides directions to their destination. Within this context, the 99 Cents Store’s information system that aids logistics in the company allows it to meet scheduled shipments, and therefore, meet the needs of customers on time.
The 99 Cents Store’s information system also helps the company make informed decisions. As one of the people in charge of the company’s IT infrastructure, Adams uses existing systems to measure and weigh risks. The outcomes of assessment allows the company to make crucial decisions, particularly when it comes to spending. For one, Adams used the company’s information system to measure the cost of purchasing software for the company’s database and warehouse system versus the cost of allowing its in-house team to develop the code for the software. Through a programming code, Adams was able to weigh the advantages of allowing the company’s in-house team to code the software. This situation alone proves that the 99 Cents Store’s information system allows the company to make valuable and informed decisions that affect company operations and practices. Growth amidst tight competition is another point of conflict that creates challenges for the 99 Cents Store.
Addressing the 99 Cents Store’s Recent Struggles
Based on the case, the 99 Cents Store has been experiencing some problems and issues that affect its operations. One of the main issues faced by the company is its receipt of wrong goods or products. When this happens, the company is left with no choice but to sell them to customers. To address this problem, the company purchased the HighJump software and incorporated it in the company’s database management system. To address this issue, the company needs to continuously expand its property and product offering.
Another problem the 99 Cents Store faces recently is the challenge of competing with online stores and the opportunities that exist in social media. Many online stores thrive because many people have become dependent on technology. In addition, online stores provide convenience for customers without the need for them to visit 99 Cents Stores physically. The challenge, therefore, is for 99 Cents Store to use its existing IT infrastructure to incorporate its business model online and tap into an existing market segment of online users. The 99 Cents Store must also adopt marketing strategies using social media to expand its market segments.
The foregoing discussion illustrates the overall analysis of the 99 Cents Store, a chain of retail outlets that offer goods or products at a considerably low cost that competes with other brands or companies with a similar business model. Based on the analysis of the 99 Cents Store internal and external environment, as well as the position of the company compared to other companies with the same business model, the outlook for the company remains positive. Only a few threats exist for the 99 Cents Store. On the contrary, the market remains appealing for the company due to the far-reaching effects of the global economic recession. Moreover, many people, including brand suppliers, want the best deals and value for their money. Furthermore, the 99 Cents Store also has existing capabilities such as a solid supply chain, particularly relationship with brand names, cost leadership, and a robust IT infrastructure that would allow it to gain competitive advantage over other companies.
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