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 of it. 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.