If Dollar General wished to raise the prices of an item that was previously priced lower than their competitor, there are a number of steps they should take to maintain control of the process. Perdue has eased the control of prices by building in some slack in the pricing system to allow for raised prices. The first step is precontrol, in this case determination of the appropriate price – i.e. controlling price changes so that they can raise the price of the product without losing too many sales.
This requires analysis of the price elasticity of the item in order to determine how much they can raise the price. The second step is concurrent control – communication of the new price to the stores, which may include provision of new price tags, communication through company channels such as email or generated reports, etc. and monitoring by managers to make sure the price changes are implemented.
The third step, of feedback control, is monitoring the price change in order to make sure that the price change did not produce more than the accepted loss of sales as determined in step one. These steps will allow the stores to implement a higher price on a previously lower-priced product.
‘The CEO should consider the relatively low sales at higher square footage stores to be a symptom of a problem, not a problem in and of itself. Dollar General’s store layouts and inventory assignments are tightly controlled and optimized for maximum efficiency and sales. However, most of their stores are smaller stores, averaging 7,000 square feet or less.
This puts the larger stores at a disadvantage because they are carrying a mix of products that may not be optimal for the store size. This means that the lower sales per square foot is a symptom of a non-optimal inventory mix and layout superimposed on a larger store, not a problem in and of itself. While it should be solved, it can be solved indirectly by analyzing the inventory and layout needs of the larger stores rather than directly tackling the lower sales.
A discount retailer such as Dollar General should use all three types of control (precontrol, concurrent control and feedback control) when attempting to control shrink. Precontrol can include such measures as establishing shrink management practices, such as careful cash control and cash handling training for employees, stock handling procedures, and security, in order to prevent common anticipated problems. Concurrent control, such as monitoring of security systems and active employee observation, can prevent shrink from shoplifting and excess employee waste.
Finally, feedback control in the form of incentives such as bonuses or prizes for stores with low shrink percentages can help to reinforce the precontrol and concurrent control measures taken. Control measures are most effective when all potential routes of control loss are considered and actions are taken at the appropriate level to deal with them. It would not be appropriate or effective for a manager or other controller to attempt to poor cash handling after each incident – it is more effective to develop policies that mandate teaching employees proper cash handling beforehand.
1. Information quality is the degree to which information represents reality. Information timeliness is the extent to which the receipt of information allows decisions to be made in a timely manner in order to allow the business to benefit from its use. Nike is using the information gained from its information systems to determine its required inventory levels, which are dependent on the projected demand for the product.
This means that information quality is important because less than quality information could mean that Nike focuses its manufacturing and distribution efforts in less than optimal areas. The initial implementation of the information system generated more than $100 million in incorrect orders due to lack of information quality.
Information timeliness is also important to Nike. Because the information system is tied to the manufacturing and distribution system, the timeliness of the information provided directly impacts the organization’s ability to produce and distribute the appropriate inventory. If the information is not provided in a timely manner, the manufacturing and sales may appear to be reactive rather than proactive, and Nike may miss the top of their demand curve because information was provided too slowly or because the system generated orders too early.
2. The security issues for Nike’s sales forecasting and factory order system include automated threats such as worms, viruses etc, and internal sabotage by disgruntled employees and external breach by either hackers or industrial spies. Automated threats are a threat at any time when a system is connected to the Internet; while it is less common now than in the past, viruses may also be transmitted via infected media such as CD-Rom or removable solid-state media.
Internal sabotage by disgruntled employees can also be a problem; in order to mitigate this, permissions and access to the system should be handled on a minimum required basis (each employee should be given only the permissions required to perform his or her job, and permissions should be actively managed as employees move from task to task). Outside breaches by hackers or industrial spies is a concern for Nike because they are a high-profile company in a highly competitive business, making them a tempting target for hackers to try to gather lucrative information from their information systems.
3. Currently Nike targets individual groups of consumers with games and information online that is targeted to their special interests, and provides an IM-based game for soccer fans. There are a number of other uses for the World Wide Web that could help Nike communicate with its customers. They could use online surveying techniques and online feedback forums to enhance their market strategies and improve their products and address customer complaints.
They could also utilize the Web as a central platform for their marketing strategy, including running specially designed Web sites for high-profile new products, creating customer contests, games and trivia and building a Nike community around their sites. Nike also has opportunities to create product tie-ins based on the Web. Their IM soccer game is a prototype of a way in which games or custom-branded software can keep the Nike brand in front of their customers all the time. Streaming media allows for music and movie tie-ins delivered via the Web.
Nike could also use the Web for internal purposes. For example, an employee recruiting web site could increase the number and quality of their job applicants, as well as provide a prescreening facility for the HR organization. Skillful use of the Web also portrays the image of a technologically savvy and forward-looking company, which is vital to its market viability.