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99 Cent Store Case Study

Essay by 24  •  October 30, 2010  •  745 Words (3 Pages)  •  1,693 Views

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99 Cent Only Business Strategy v. The Competition

David Gold, founder and CEO says the 99 Cent strategy is "to create the shortest path possible between the customer and the sale" (Rae-Dupree, 2004). This is important in deep discount retail in order to purchase close-out and other special-situation merchandise at prices substantially below wholesale that sell at prices significantly below regular retail (Symplicity, 2005).

Over the past two years, the company has suffered a $17.00/share loss on its stock (from $30 to $13.00) mainly due to declining operating margins (Domash, 2004) caused by over-optimism in the Texas market. Competitors were more deeply entrenched than their research had shown, and reduced earnings forecasts combined with declining operating margins were the sell signal for many investors in the company. Also, the need to upgrade their IT infrastructure to support expansion in its California base market was the second company downfall. The following is a summary of the company strategy:

1. Focus on brand name consumables.

2. Broad selection of regularly available merchandise.

3. Attractive and well-maintained stores.

4. Strong supplier relationships.

5. Focus on larger stores and wider demographic of value-conscious customers.

6. Welcoming and Flexible Store Hours and Policies

The Role of IT Infrastructure in Operations and Business Strategy

CEO DISCONNECT WITH TECHNOLOGY

99 Cents Only strategy is supported by various technologies that must always fall into line with David Gold's theorem that the company will not spend money on technology to gather information it will not utilize (Symplicity, 2005). Gold's comments that he does not even have a computer in his office seems to make him technologically reluctant. The psychology of the CEO is certain to permeate the thinking of those under his leadership. His attitude may have contributed to the company's policy of writing its own software and its reticence to upgrade technology sooner. The operations failure in the California distribution center and the bad entry into the Texas market were both likely the end result of the CEO's influence on corporate thinking about the role of technology in operations and profitability.

CIO ANGST

Robert Adams, in charge of the company's IT articulates their company philosophy on IT when he says, "If the ROI is obvious, the implementation is straightforward, and it gets the product to the customer faster of better (Rae-Dupree, 2004)." In Adams, you here the owner's "shortest path to the customer and sale" outlook being spin doctored into corporate political correctness. In an interview with CIO Insight Magazine (Rae-Dupree, 2004), Adams says that he has no budget for IT and manages within "a streamlined approach" to technology and operations within a "family owned business." This likely means that IT projects begin and end within the Gold family's outlook on technology--period.

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