The third factor affecting Dollarama’s competitive environment is the threat of substitute products. Although Dollarama offers consumers a broad range of over 3500 everyday products, its rivals have the ability to offer customers the same or similar assortment of goods at similar price points. Therefore, the threat of substitute products in this industry is high primarily because the propensity for customers to substitute products is high, switching costs are low and customer loyalty towards a particular retailer is moderate. The last factor affecting Dollarama’s competitiveness is the high bargaining power of its customers. Buyer power in this industry is high due to the low differentiation of products the organization sells from its competitors. In other words, there are many retailers selling the same or similar products, so customers have more buying power in selecting alternative products and retailers. Additionally, low customer volume buying and low customer’s switching costs all contribute to high buyer power for customers in this industry. Macros Environmental Analysis Based on Dollarama’s SWOT analysis (Appendix C), the following are the key macro environmental conditions threatening the organization: Dollarama’s ability to provide quality merchandise at low price points is subject to a number of economic factors which are beyond their control and could negatively impact their cash flow and profitability. For instance, recent adverse global and economic conditions have affected consumer disposable income. High unemployment and consumer debt levels, lack of available credit, high fuel and energy costs and high interest rates have all contributed to reduced consumer spending or have caused consumers to shift their spending to other products. In addition, poor economic conditions have also adversely affect the company’s suppliers and other business partners by reducing their ability to provide credit. Furthermore, fluctuations in foreign exchange rates have a material impact on the cost of merchandise. Since the majority of purchases are transacted in the U.S. dollar, an increase in other foreign currencies such as the Chinese currency against the U.S. dollar would increase the cost of merchandise the company purchases from China. Similarly, increases in inflation and adverse economic developments in Canada and in
8 other parts of the world, where a large portion of goods are imported had a negative impact on the company’s margins, profitability and cash flows. Other economic factors such as increases in labour costs, occupancy costs, and fuel costs for transportation could also have adverse impacts on Dollarama’s profitability (Dollarama, 2011). Dollarama depends on their information technology systems for the efficient functioning of their business across all business segments and geographic locations. Difficulties with their technology platforms could disrupt operations, timely delivery of orders and eventually service to customers. Prolonged disruptions to Dollarama’s information
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