Business Policy & Strategy Case Study Assignment

For the final assignment of this course, you will continue your work with Dick Sporting Goods (see attached). For this project, you will complete the final components of your implementation plan. You will focus on the following points:

internal and external issues,

competition,

future outlook for the organization, and

implementation of tools for measuring business success.

Much of the information you will need to complete this segment can be found in the case study attached to this question. However, you will also need to conduct some outside research. For the future of the organization, you may be creative and add your own insight on where you see the company going. You will need to reference your textbook and at least one outside source for this assignment. You are encouraged to utilize the CSU Online Library, but you may also use external sources, as long as the source is reliable. Your project must be a minimum of three full pages in length, not counting the title and reference pages. Make certain to include an introductory paragraph. 

Dick’s Sporting Goods—2018

www.dickssportinggoods.com (DKS)

Headquartered in Pittsburgh, Pennsylvania, Dick’s Sporting Goods (Dick’s) is a large chain of brick-and-mortar retail stores that offers a wide selection of sporting equipment, footwear, apparel, and accessories such as tennis rackets, weights, outdoor cooking equipment, bicycles, sports clothing and much more. By some accounts, Dick’s is the largest sporting goods store in the United States based on 2017 revenues, larger than Bass Pro Shops, Academy Sports, and Big 5 Sporting Goods. Dick’s also operates Golf Galaxy, Field & Stream, and Dick’s Team Sports HQ. Dick’s Team Sports HQ is targeted at youth sports and provides league management services free of charge including scorekeeping, scheduling, and custom uniform designs.

Competition is intense in the retail business, especially in the brick-and-mortar sporting goods retail business. In 2017, for example, Gander Mountain filed for bankruptcy and closed most of their stores. Dick’s is counting on its 1) updated website, 2) store-in-a-store concept, 3) talented sales people, 4) in-store demonstrations, and 5) a wide range of products at different price points. However, brick-and-mortar retailers are struggling so Dick’s faces a precarious future and needs a clear strategic plan.

In May 2018, Dick’s Sporting Goods hired three lobbyists to push Congress for gun control measures, irritating many of its gun enthusiasts’ customers. Specifically, Dick’s hired two Democrats and one Republican from the Washington-based public affairs firm Glover Park Group, with the only specific lobbying issue listed for their work is “lobbying related to gun control.”

History

In 1948, an 18-year-old named Richard “Dick” Stack was working for an army surplus store in Binghamton, New York, and was assigned to research and develop several tactics for adding fishing and camping product lines to the business. Upon presenting his research and suggestions, the owner rudely called Dick a “dumb kid,” rejecting his work and ideas.

Distraught, but convinced he was right about the fishing market in Binghamton, Dick consulted with his grandmother. She asked: “Dick, how much would it cost you to build the store yourself.” Dick responded, “It will cost me $300.” His grandmother then went to the cookie jar where she kept her life savings and gave Dick $300 and told him “Do it yourself.” Dick used that money to rent a storefront and purchase inventory for a new bait-and-tackle shop in Binghamton.

Dick was determined to succeed despite the first few years of mediocre sales. By the 1960s however, Dick had two stores and formally named the company Dick’s Sporting Goods. Dick Stack served as CEO of his company until his retirement in 1984, passing the torch to his son Edward (Ed) who is currently the Chairman and CEO of Dick’s Sporting Goods. However, when Ed took the reins from his father, there were still only two Dick’s stores in operation. Young and energetic and having worked his way up the chain since 1977, Ed quickly put the business on an expansion route, opening multiple stores in the early 1990s, and ultimately moving the headquarters to Pittsburgh in 1994.

Dick’s Sporting Goods went public on the New York Stock Exchange on October 15, 2002, under the ticker symbol DKS. As of February 3, 2018, the company operates 716 Dick’s Sporting Goods stores in the United States.

Vision/Mission

Dick’s has the following mission statement on the corporate website (paraphrased):

We strive to be the #1 sports and fitness specialty omnichannel retailer that serves and inspires athletes and outdoor enthusiasts to achieve their personal best. Basically, Dick’s is on a mission to exceed the expectations of athletes and outdoorsmen around the world by providing quality name brand products, an excellent selection, fair prices, and a knowledgeable and helpful staff of employees.

Dick’s does not have a formal vision statement, but the company strives to serve customers in a manner that they will recognize Dick’s as the number-one sports and fitness retailer that serves a wide array of athletes and outdoor enthusiasts.

Code of Business Ethics

Dick’s Sporting Goods provides separate codes of conduct for associates, vendors, and directors. As CEO Ed Stack mentions in a letter to teammates, he is on a mission to ensure Dick’s plays the game fairly while continuing to offer shareholders value, rewarding loyal customers, and treating associates fairly. Mr. Stack suggests all associates, vendors, and directors read their respective codes and the codes of the others as an athlete would read a playbook or game plan for an athletic event. All team members are expected to prevent unfair play and report any occurrences to their HR representative or anonymously on Dick’s Ethics Hotline. Dick’s ensures protection for whistle blowers promising there will be no retaliation on your employment.

Internal Issues

Organizational Structure

Dick Stack’s (founder) son, Ed Stack has served as chairman and CEO of Dick’s Sporting Goods since 1984, having started with the company full-time in 1977. Based on the executive titles illustrated in Exhibit 1, it appears that Dick’s operates from a divisional-by-product type structure composed of three segments: softlines, hardlines, and team sports. Hardlines are basically anything except footwear and apparel. However, since an official organizational chart is not made public, likely only insiders know exactly who reports to who in the company.

Current Strategies

Dick’s operates in a highly competitive market where customers can purchase from traditional retailers or simply purchase from online merchants including Amazon and eBay where virtually anybody can be a merchant and barriers to entry are slim. However, Dick’s has done well with net income up over 12 percent in the year ending February 2018. The company offers a wide selection of brands ranging in prices (according to Dick’s) from good to excellent, providing customers of all income levels and athletic skill levels attractive products. Dick’s is committed to hiring expert personal in the various departments of the store. For example, if you are in the market for a bicycle, Dick’s has bicycle mechanics on staff who often have the same level of knowledge you would find in a bicycle specialty shop.

Want to hit golf balls? No problem—go to Dick’s golf hitting bay and work with coaches to help select the right clubs for you. Want to shoot a bow or test out new running shoes? Simply shoot a few arrows in the archery lane or hop on a treadmill in the store, all supported by knowledgeable employees. This level of service is one-way Dick’s competes with online merchants as customers are not as likely to “showroom” (browse the store then go buy online for a cheaper source) if they received such personal and dedicated attention. It is also a great way to build customer loyalty and attract people into the store.

In 2017, Dick’s transitioned from outsourcing its e-commerce platforms to performing these tasks in-house in what Dicks hopes will provide increased control and allow the firm to target and interact with customers more effectively. Dick’s is aggressively adding Field & Stream stores inside existing Dick’s Sporting Goods stores in hopes of cross selling fishing gear with other sporting goods products. In addition, Dick’s offers Golf Galaxy stores inside select Dick’s stores. Dick’s markets itself as offering multiple specialty shops inside each store; footwear, team sports, outdoor lodge, fitness, and others are all considered specialty stores by some measures. Adding similar store-in-a-store concepts is a viable strategy many firms are starting to employ in hopes of increasing foot traffic.

Dick’s offers many popular brands including Asics, Adidas, Nike, Columbia, Callaway Golf, TaylorMade, Under Armour, and Yeti. Offering famous brands aids in attracting customers into Dick’s stores. Dick’s also offers several private label brands which tend to have higher profit margins than brand names.

Several private label brands include Field & Stream, Fitness Gear, Lady Hagen, CALIA of women’s athletic apparel, Top-Flite, Quest, and others. Private label brands account for about 10 percent of company wide sales, but Dick’s is planning to aggressively expand private brands, in particular its CALIA line. Dick’s also has agreements from several brand name firms to be an exclusive provider, including Slazenger, Umbro, Reebok, and others.

Dick’s is somewhat dependent on Nike and Under Armour for its products as the two account for 20 and 12 percent, respectively, of Dick’s sales. No other firm accounts for more than 10 percent out of the remaining 1,400 vendors.

Finance

The income statements reveal that Dick’s had a successful year ending in February 3, 2018, with sales up over 8 percent and net income up 12.5 percent. Unlike many firms, Dick’s does not appear to have received a substantial tax break in the latest calendar year stemming from the new corporate tax laws in the United States. Being 100 percent U.S.-based, the new tax laws should benefit Dick’s significantly as all their revenue is from the United States.

The balance sheets reveal that Dick’s remains in the midst of a stock buyback program that is expected to last until at least 2020. The firm’s stock price declined over 50 percent from late 2016 to late 2017 so purchasing stock at low prices and betting on yourself may be a positive move for Dick’s if the firm is able to regain its equity price footing. Signs are positive based on the company’s revenue and net income increases, but most brick-and-mortar retailers are having difficulty competing with Amazon and other online competitors.

Segment Data

Dick’s revenues by product type. Hardlines comprise 45 percent of revenues. Hardlines include fishing rods, basketballs, cookware, bicycles, and any other products that is not considered apparel or footwear. Despite hardlines accounting for a larger portion of revenue, softlines (footwear and apparel) account for a combined 55 percent of revenue. This comes as little surprise if you recall that Nike and Under Armour account for 32 percent of Dick’s sales and both predominantly supply Dick’s with softgoods.

Locations Map

Exhibit 5 reveals Dick’s store locations by region. Both Dick’s Sporting Goods and Specialty Concept Stores are included in Exhibit 5. Specialty Concept Stores account for 15 percent of stores and include Golf Galaxy and Field & Stream with some free-standing and some combined with Dick’s Sporting Goods stores. Dick’s added a net of 55 stores in fiscal 2016. Dick’s home market of the Northeast trails the Southeast in total number of stores by a wide margin.

Exhibit 5 Dicks Store Locations by Region

Northeast: 191

Southeast: 300

Midwest: 186

West: 120

Competitors

In the world of sports retailing, Dick’s Sporting Goods, Academy Sports + Outdoors, Bass Pro Shops, Big 5 Sporting Goods, and Hibbett Sports, are five of the more recognizable names. Dick’s is leader of the group in terms of market capitalization $3.6 billion and sales about $8.6 billion annually, while Academy Sports + Outdoors, Bass Pro Shops, Big 5 Sporting Group, and Hibbett rank second, third, fourth, and fifth respectively in sales. Bass Pro Shops and Academy Sports are privately held firms.

Dick’s is the largest specialty sporting goods company in the U.S. with an impressive market share of 17 percent in 2017. Dick’s market share includes sales from Golf Galaxy and Field & Stream. Academy Sports + Outdoors is similar to Dick’s but includes significantly more fishing and hunting aspects. Bass Pro Shops is also mostly fishing and hunting in nature.

Academy Sports + Outdoors

Headquartered in Katy, Texas, Academy Sports + Outdoors is a privately held company owned by KKR & Company. Founded in 1938, Academy is a sport, outdoor, and lifestyle retailer with a broad assortment of high-quality hunting, fishing, and camping equipment and gear along with sports and leisure products, footwear, apparel, and much more. Academy operates more than 200 stores throughout Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Missouri, Oklahoma, South Carolina, Tennessee, and Texas. Academy revenues have been flat for the last 3 years but are up 60 percent from 2012 to 2017.