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The Business Block

Strategic Business Assessment of Dick’s Sporting Goods, Inc.

Spring 2016

Kyle Polman, Kristine Kliphouse, Jordan Hawkins, Stephen Lukridge

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Table of Contents

A. Executive Summary ……………………………………………………………………..3

B. Overview of Dick’s Sporting Goods, Inc. ………………………………………………4

C. Functional Competitive Analysis ……………………………………………………….6

1. Financial History and Status ……………………………………………………….6

2. Strategic Marketing Analysis ……………………………………………………...10

a. Immediate Environment, Segmentation, Targeting and Positioning ……………10

b. Macro-environmental Forces ……………………………………………………25

c. Strategic Marketing Mix ………………………………………………………...27

d. Isolated Sales Forecasting………………………………………………………..30

3. Strategic Assessment of Operations, Supply Chain, Technology, and

Infrastructure ………………………………………………………………………31

a. Key Order Winners and Qualifiers………………………………………………31

b. Supply Chain Integration and Outsourcing………………………………………34

c. Operational Technology and Systems…………………………………………...36

d. Processes, Facilities, and Location…………………………………..…………..40

e. Changes in Infrastructure………………………………………………………...42

f. Sustainability and Corporate Social Responsibility………………………….......44

4. Managerial Accounting Analysis ………………………………………………….47

a. Analysis of Cost Behavior and Process Cost Analysis…….…………………….47

b. Dick’s Sporting Goods Strategy Map……………………………………………49

c. Dick’s Sporting Goods Balanced Scorecard……………………………………..51

D. SWOT Analysis, Summary, and Recommendations ………………………………...54

1. Final Recommendation……………………………………………………………..57

Bibliography……………………………………………………………………………………..58

Sources for Visuals and Diagrams……………………………………………………………….62

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A. Executive Summary

This strategic business assessment of Dick’s Sporting Goods, Inc. evaluates and analyzes the

following components of the organization: Finance, Accounting, Marketing, and Operations & Supply Chain. After a financial evaluation from years 2012-2014, mixed in with a strategic

marketing analysis, a strategic assessment of operations, supply chain, infrastructure, corporate social responsibility, and finally with a managerial accounting analysis, it is concluded that common stock of Dick’s Sporting Goods is a recommended buy for any potential investors.

Some critical findings that this decision is based upon consist of the company’s targeting

strategies, positioning, and strategic marketing mix all within the arena of the sporting goods industry. Dick’s Sporting Goods strategically focuses on its brand exclusivity and addition of

private label brands. According to Dick’s, these factors offer its customers a wide assortment of products at an exceptional quality and price that cannot be found among its competitors. These factors directly correlate to some of Dick’s strengths, consisting of a dominant position in the

marketplace, which includes a deep assortment of products, competitive prices among other retailers, and the ability to adapt to changing trends in the marketplace.

Other findings suggest many new opportunities for future growth. Some of these areas include

the company’s expansion of its e-commerce platform coupled with its expanding network of brick-and-mortar stores. The advantages of these developments contribute to its efforts in

downsizing some of its brick-and-mortar stores to reduce costs and specialize the retail experience. As strengths and opportunities are relevant for Dick’s Sporting Goods, some weaknesses and threats were also found. Investigating Dick’s corporate culture, further evidence

reveals an inadequate investment in employees, resulting in poor customer service and employee performance.

After tallying all of Dick’s Sporting Goods’ current strengths, weaknesses, opportunities, and

threats, this strategic assessment of the company leads to a conclusion that potential investors should buy the stock. With earnings projected to increase 3.28% by 2017, and a steady history of increasing revenues, the financial position of the firm is better off than reflected in the 2012-

2014 analysis. With investments in e-commerce, new technology, and expansion of stores, Dick’s is reacting to the changes in the marketplace and planning ahead for long term growth.

All of these signs are significant indicators that Dick’s will maintain its dominant position in the market and outlast any fading competitors such as Sports Authority. Potential investors should buy and expect to see a rise in the purchasing of stock from Dick’s Sporting Goods as a direct

result of the firm’s financial position, marketing strategy, operational efficiencies, and cost behavior.

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B. Overview of Dick’s Sporting Goods, Inc.

Every season starts at Dick’s, just like every story starts with a vision.

What began in 1948 as nothing more than a small vision has now become a leading omni-

channel sporting goods retailer offering an extensive assortment of authentic sports equipment, apparel, footwear, and accessories. Dick’s Sporting Goods, Inc (NYSE: DKS) was founded in

1948 when an 18 year-old Dick Stack was approached by a store owner of an Army surplus store in Binghamton, New York. The store owner requested that young Dick invent a list of products necessary for expanding the store into a fishing tackle business. Once Dick presented his

suggestions, the owner belittled him and caused him to quit. Dick then went to his grandmother, who in return presented him with her life savings of $300 and told him “do it yourself.” Dick

would go on to open up his own bait-and-tackle shop, and by late 1970’s, expanded his product line to include most of what Dick’s Sporting Goods appears like today.

Dick’s Sporting Goods is today run by Dick’s son, Edward W. Stack. Ed and his brothers bought the bait-and-tackle shop from their father, and have expanded the business to nearly 644 Dick's

Sporting Goods stores in 47 states, 73 Golf Galaxy stores in 29 states, and 19 Field & Stream stores in 9 states. The sporting goods company went public on the New York Stock Exchange on

October 15, 2002 under the ticker DKS.

Headquartered in Coraopolis, PA, Dick’s Sporting Goods seeks to build leading brands that serve and inspire athletes and outdoor enthusiasts around the world to achieve their personal best

through a blend of dedicated associates, in-store services and unique specialty shop-in-shops dedicated to Team Sports, Athletic Apparel, Golf, Lodge/Outdoor, Fitness and Footwear. It creates value for shareholders through the relentless improvements of everything it, along with

the individuals who make it up, does.

Dick’s Sporting Goods also owns and operates Golf Galaxy, Field & Stream, True Runner and Chelsea Collective specialty stores. Dick’s offers a large lineup of products through a content-

rich e-commerce platform that is integrated with its store network and provides customers with the convenience and expertise of a 24-hour storefront.

Within a highly competitive market, Dick’s Sporting Goods must not just be a team player, but be an individual leader. It focuses on what differentiates itself from top competitors within the

sporting goods industry. The company competes with other sporting goods retailers on all fronts, including large, traditional, specialty, online, and catalog-based sporting goods retailers. It

focuses its intentions on enhancing customers' performance and enjoyment of athletic and leisurely pursuits, rather than solely concentrating its merchandise on the latest fashion trend or style.

From a financial standpoint, Dick’s currently holds a 10% market share of the current $67 billion

U.S. sporting goods industry (Dick’s Investor Relations), outweighing other top sporting goods retailers, mass merchants, and the entire rest of the market. The company’s 2015 total sales

consisted of $7.3 billion, a leading quantity among the industry.

The ultimate logistical goal for a large retailer such as Dick’s is for minimal amounts of products to rollover into store-bound inventory, whereas the right amount of goods will be available to the

customers purchasing disposal at the right place at the right time. This poses a logistical

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challenge for Dick’s, due to the company’s heavy reliance on nearly 50 suppliers, 1,600 vendors, outreach of nearly 650 store locations, and an expanding e-tailing platform. To cover this breadth

of locations, Dick’s Sporting Goods must rely on all of its suppliers, distributors, and manufacturers to provide it with sufficient quantities of inventory in a timely fashion. It extends

its reach to nearly 50 suppliers including distinguished name brands such as Nike, Under Armour, North Face, Adidas, Columbia Sportswear, Asics, Callaway, Puma, and Fitbit, to name a few.

As Dick’s Sporting Goods remains one of the leading omni-channel sporting goods retailers in

America, the utilization of various technologies and systems presents a new challenge for its remaining at the top, primarily since the company is seeking to expand its e-commerce

magnitude in the industry. E-commerce is one technology growth area that a company like Dick’s Sporting Goods cannot afford to ignore. The surge in e-shopping is arguably the most influential ingredient that can drive Dick’s sales up and its technology systems forward.

Through sustainability and corporate social responsibility efforts, Dick’s Sporting Goods yearns to make a lasting impact in its communities through sport. The company believes in the value of every single athlete no matter what age, gender, or skill level. Through matched donations and

sponsorships, Dick’s Sporting Goods is able to fund numerous underprivileged or under budgeted teams, leagues, or associations with the resources and equipment they need in order to

not only make an impact in the community, but become better leaders and lesson-learners to impact the world.

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C. Functional Competitive Analysis

1. Financial History and Status

The global sporting goods industry has witnessed changes in the evolution of physical activity

trends, and is struggling to gain the attention of the younger millennial generation adapting to the digital age. The rise in technology, electronics, online media, and internet accessibility continues to thrive and modernize every day, which poses a large challenge for all retailers within the

sporting goods industry. While some of the industry’s major drivers such as disposable income, government campaigns, and health-conscious trends have grown over the last decade, younger

customers are straying away from sporting goods and spending more on electronics, fashion, and entertainment (Yahoo Finance). Additionally, with recent safety concerns in contact sports such as football, there has been a slight decline in participation. According to an industry overview on

Yahoo Finance, sporting goods makers and distributors are uniting to increase sports participation by launching promotional campaigns and forming lobbying groups in hopes of

reaching out to a broader customer base. For Dick’s Sporting Goods, a large retailer focusing on athletic footwear, apparel, and equipment, this could have significant implications such as net losses after a previously steady period of gradually increasing profits. In analyzing critical data

for Dick’s Sporting Goods over a three-year term from 2012-2014, interpretations can be contextualized whether to buy, hold, or sell common stock. Through the computation of values

in the numerical analysis, it is possible to conclude where Dick’s Sporting Goods is positioned amongst its competitors, as well as the direction in which it is headed.

First, the liquidity ratios for Dick’s Sporting Goods over the last three fiscal years have been significantly lower than those of its competitors. With an average current ratio of 1.73 and an

average quick ratio of 0.60 over the last three years, Dick’s Sporting Goods trails the industry averages by 44.7% and 62.4% respectively. Additionally, the quick ratio for Dick’s Sporting

Goods has fallen in each of the years since 2012 resulting in a total decline of 57.1%, while the industry has consistently maintained its position. These low figures suggest that Dick’s Sporting Goods has less liquid capital to pay off its short-term liabilities than its competitors. This may be

the result of a macroeconomic factor influencing a certain category of products that is offered more extensively by Dick’s than its competitors. For Dick’s Sporting Goods, the explanation

likely originates in the recent stagnation of sales in golf equipment over the past several years in its brick-and-mortar stores and its Golf Galaxy operations. According to articles from the Wall Street Journal and Business Insider, Dick’s Sporting Goods stores have laid off hundreds of golf

specialty employees as golf sales fell approximately 10% in the second quarter of 2014. With fewer numbers of people actively playing golf each year (reference Marketing section I), Dick’s

is beginning to reduce floor space for golf merchandise and expand its women’s and youth apparel sections in many stores. This downward trend in golf sales is noteworthy because of the potential effects on Dick’s Sporting Goods’ current ratio; where high cost golf merchandise is

sitting around in the company’s inventory. SportsOneSource sporting goods analyst, Matt

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Powell, noted in a Victorville Daily Press article that Dick’s has a long way to go in terms of marking down golf inventory to clear its abundant backlog. This analysis can be conducted more

accurately by evaluating asset management ratios for the firm and its competitors.

Asset management ratios for Dick’s Sporting Goods’ suggested generally positive findings. Inventory turnover ratio is slightly higher than the industry average, which suggests that its total

sales are competitive with the industry leaders. Dicks’ average days to sell inventory was also lower over the course of the last three years. Based on the calculations, Dick’s is able to replace inventory and sell it to customers more times per year than its competitors. This constitutes an

ability to rapidly turn assets into cash and pay off debts relatively easily. The firm’s average collection period is also at equilibrium with the industry average of 2.81 days. The ability to

quickly collect cash payments on account sales is crucial for any retailer. Dick’s Sporting Goods demonstrates this by managing its assets through a firm credit policy to ensure customer payments and minimize uncollectible accounts. Fixed asset turnover was one ratio that does not

seem to be a relevant indicator of market positioning for Dick’s Sporting Goods because reported net fixed assets on the balance sheet are book values, which may differ from the current market

values. In lieu of this, looking at total asset turnover allowed for the quantification of how Dick’s Sporting Goods manages its assets to generate revenues. Once more, Dick’s has a slightly higher average total asset turnover ratio than its main competitors at 1.93. This means Dick’s generates

more revenue per dollar of total assets, indicating favorable profit margins for the firm, and possibly a higher volume of sales. However, this assumption is not completely accurate because

the total asset turnover ratio is a measure of efficiency used to generate sales, not a measure of cost efficiency. Because the prices of similar goods offered by Dick’s and its competitors within the sporting goods industry are extremely competitive and often established by the vendor, these

results suggest that Dick’s Sporting Goods sells more goods relative to total assets than its competitors.

Debt management is another key factor in analyzing a firm’s performance. In terms of total

liabilities relative to total assets, Dick’s Sporting Goods has incurred lower amounts of debt over the last three fiscal years than the industry average. However, the industry average was brought up significantly by Sportsman’s Warehouse, which had higher debts than asset values in 2012

and 2013. With this in mind, Dick’s Sporting Goods has maintained an unchanging debt ratio over the last three years, which indicates stability in the firm’s propensity to finance its assets.

Low long-term debt ratios over the last three years ranging from .14 to .10 place Dick’s among the industry leaders in this category, which means Dick’s is not very dependent upon loans to expand the chain. A better indicator of a firm’s debt management is determining how assets are

purchased, which can be measured by the equity multiplier formula. With a steady average equity multiplier of 1.83 over the last three years, Dick’s Sporting Goods is doing significantly

better than the average of its competitors, which averages out at 2.28. Because most of its product offering is in the price range of $20 to $200, Dick’s Sporting Goods does not likely have to finance its inventory purchases, which keeps the firm out of debt relative to its total assets.

The final debt management ratio that is essential in this analysis is the times-interest-earned ratio. If Hibbett Sports (an extreme outlier) is eliminated from the industry average, Dick’s

Sporting Goods becomes the clear industry leader. From 2012 to 2014, the company’s ability to cover its interest costs surged by nearly 500%, increasing from 30.99 to 185.90. This increase is a considerable indicator of the economic health of Dick’s Sporting Goods. Not only did Dick’s

boost revenues, resulting in a 26.7% growth in earnings before interest and taxes from 2012 to

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2014, but it also reduced its overall interest costs by 78.9%. This can likely be attributed to paying off debt holders and incurring less debt over the previous three years.

Profitability ratios for Dick’s Sporting Goods displayed no significant variances from year to

year, nor are there any alarming deviations from the industry averages. While the firm’s revenues increased by about $1.2 billion, expenses grew at a proportional rate, which left profit margins

unchanged. However, in analyzing first quarter data from the current year (2016), profits fell 17% and shares in the company fell 7.5% since the end of 2015 (Steele, 2016). According to Dick’s CEO, Edward Stack, these first quarter losses can be attributed to challenging conditions

including unseasonably warm weather and rapid expansion plans in new partnerships and product lines, which may have resulted in greater expenditures. Despite these figures, Dick’s

Sporting Goods’ executives expect to see rapidly increasing profits from such efforts, which also include plans to acquire capital from closed Sports Authority stores, a top competitor that recently filed for bankruptcy.

Figure 1. A time graph illustrating the growing trend in revenues for Dick’s Sporting Goods leading into 2017.

In addition to these ratios, earnings per share and dividends per share on common stock, as well as the price-to-earnings ratio were calculated for the past three years for Dick’s and its

competitors. No substantial changes were apparent in the analysis relative to the market. However, dividend payouts did undergo an unusual pattern at the end of 2012. Dick’s Sporting

Goods offered its first dividend payout on common stock at the end of 2011 with a $0.50 single payout. Shortly after, Dick’s began a series of $0.125 quarterly payouts until December 2012. With stock price jumping from $45.05 to $47.97 between 12/24/2012 and 12/31/2012, Dick’s

Sporting Goods dispensed a special, one-time payout of $2.00 per share. With this time of year being extremely busy for retailers, excessive Christmas holiday shopping is a likely cause for

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such an increase, which allowed the company to reward its investors. This could have had positive or negative repercussions on future investment. On one hand, investors may have been

incentivized to reinvest more money into Dick’s Sporting Goods because of the unusually large dividend. Dicks’ executives presumably announced the special dividend in order to establish

favorable expectations for the following quarter. Alternatively, investors may have been unhappy when dividends returned to a more normal amount at the end of the next quarter. Finally, earnings per share increased 27.9% from 2012 to 2014, indicating higher future profitability

relative to its competitors and the industry average growth of 14.8%.

Based on the overall ratio analysis of Dick’s Sporting Goods, it can be concluded that Dick’s is in a healthy position among top sporting goods retailers in the market. Over the past three years,

revenues and earnings have increased. This directly correlates with maintaining a high inventory turnover rate, indicating that they are still selling high volumes throughout the year, which enables them to operate without incurring debt expenses. Unfortunately, due to socioeconomic

macro-environmental forces and expansion expenses, Dick’s Sporting Goods did not experience increasing profit margins. For these reasons, it may seem logical for investors to hold their

current shares in the short run and consider purchase of additional common stock to continue reaping the benefits of consistent dividend payouts and profitable projections that come with future expansion. Looking at future long-term trends, however, tells a different story.

There is significant room for Dick’s to grow on multiple platforms. With the growing trend of omni-channel “e-tailing” along with a rise in health and fitness trends, Dick’s is in a comfortable position where expansion of brick-and-mortar stores, an expanding e-commerce platform, and a

generally healthy balance sheet are reasonable enough to suggest a buy for potential investors. Due to a consistently dominant price-to-earnings ratio well above its competitors in the sporting goods industry, Dick’s investors should be willing to pay more for a growth in anticipated

earnings. Until sales fall or market conditions change, there is no strong evidence that Dick’s Sporting Goods will lose market share or diminish in value, but rather grow. Therefore, we

conclude that buying is the most reasonable action for long-term investors.

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2. Strategic Marketing Analysis

a. Immediate Environment, Segmentation, Targeting and

Positioning

As a leading competitor with the largest market share in its industry, Dick’s Sporting Goods

must focus in on its ability to play the best offense, so-to-speak, when placed into the competitive arena of other retailers. The immediate environment for Dick’s Sporting Goods consists of key competitive factors such as the company’s target customer base, the competitive

arena in which it positions itself, and the partners to whom it links with. The company’s long-term strategy is designed to gain, maintain, and enhance loyalty for the Dick’s Sporting Goods

brand while also promoting its broad assortment of sporting goods equipment, apparel, and footwear to its current and potential target consumer base. Building this unique brand passion and scrutinizing today’s diverse market segments does not draw out so easily, because within the

competitive arena of the sporting goods industry, the game being played for retailers like Dick’s spells out more like an ascent against a tall mountain compared to a one-mile jog.

In regards to its consumer base, Dick’s Sporting Goods pinpoints its attention toward an

audience that possesses specific needs based upon the type of outdoors and/or sporting lifestyle people identify with. In other words, Dick’s main sales categories break down its target consumers based on the active participation lifestyle that targeted and potential customers

classify with. Thus, it is important to first look at what exactly Dick’s Sporting Goods actively pursues among its target customers. This approach may link directly and accordingly with

activity participation across the United States. A factor like participation levels helps determine how much revenue Dick’s can expect to earn given the market segment it seeks. Figure 2, on page 11, represents the percentage of people ages 6+ participating in some sort of physical

activity. According to the 2016 Physical Activity Council Report, this chart shows the potential customers Dick’s can gain from individuals in this current generation. Generation Z (years

2000+) has lower inactivity percentages than the previous three mass-labeled generations (Generation Y, years 1980-199, Generation X, years 1965-1979, and Baby Boomers, years 1945-1964). Although the total percentage of inactive customers is relatively low compared to other

generations, Dick’s Sporting Goods must maintain a watchful eye on this statistic, which exhibits a completely inactive population of 18.2% of Americans. This could negatively impact Dick’s in

the long run if this statistic does not continue to decrease. However, with activity levels increasing among all age categories, sporting goods retailers are innovating new ways to meet customer demands.

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Figure 2. A division of different activity participation levels throughout time.

The primary factors that have historically influenced the company's profitability and success have been the growth in its number of physical locations, increasing same store sales, and positive gross profit margins. For example, over a five-year period, the company has expanded

from 419 Dick's Sporting Goods stores at the end of fiscal year 2009, to 603 Dick's Sporting Goods stores at the end of fiscal year 2014. As a complement to the firm’s store growth, Dick’s

has also modernized its e-commerce platform year after year. Over the past three years, the company has innovated its e-commerce sites with enhancements in customer experience, a new release of its mobile site, and the development of capabilities that integrates Dick’s online

presence with its brick and mortar stores. These include ship-from-store, buy-online, pickup in-store, return-to-store and multi- faceted marketing campaigns that are consistent across stores and

e-commerce websites. The firm's store network remains fundamental to the strength of its omni-

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channel platform, and it continues to expand its presence through the opening of many new stores. In other words, Dick’s Sporting Goods aims to find a competitive “sweet spot” advantage

where physical store growth, offering a physical presence to better serve customers, will go hand-in-hand with an expanding digital platform, offering a gateway into maximizing more

profits.

Dick’s Sporting Goods’ executive team believes it has the potential to reach approximately 1,100 locations, including smaller-market shops across the United States. The expansion of its store network will also promote growth in e-commerce sales, as Dick’s continues to deliver a premium

omni-channel shopping experience for all of its customers.

Within a highly competitive market, Dick’s Sporting Goods must focus on what differentiates itself from top competitors within the sporting goods industry. The company competes with other

sporting goods retailers on all fronts, including large, traditional, specialty, online, and catalog-based sporting goods retailers. It focuses its intentions on enhancing customers' performance and

enjoyment of athletic and leisurely pursuits, rather than solely concentrating its merchandise on the latest fashion trend or style. One unique attribute is Dick’s Sporting Goods’ "store-within-a-store" concept that allows brand name exhibits to dwell underneath the Dick’s Sporting Goods

umbrella, an example being Nike’s ‘Field House.’ This physical design feature creates a distinctive shopping environment for designated customers by combining brand name sporting

merchandise with access to a sporting goods multi-marketplace.

Within Dick’s Sporting Good’s Annual Report (Fiscal Year 2015, Form 10-K) the company makes note of its private brands that provide unique value and quality that customers cannot find anywhere else. Products and brands such as Adidas baseball, CALIA, DBX, Quest, Reebok,

Slazenger, Top-Flite, Umbro and Walter Hagen are not commonly distributed to many of its retail competitors. This speaks loudly to Dick’s large inventory and exclusive product offerings.

Additionally, other popular brands such as Nike, Under Armour, and Titleist maintain a strong presence on the shelves at Dick’s Sporting Goods in order to reach out to a wider array of consumers. This multitude of available brands allows its target market of physical activists and

sport enthusiasts to find exactly what they looking for and when they wish to find it. Furthermore, Dick’s Sporting Goods does not only seek to carry leading brands, but to diversify

a large range of these brands. A wide breadth of sporting goods product selections, spread among different categories will ultimately give its consumer a better range of products to choose from.

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Fiscal Year

Categories 2015 2014 2013

Headlines(1) 45% 44% 44%

Apparel 35% 36% 35%

Footwear 19% 19% 20%

Other 1% 1% 1%

Total(2) 100 100 100

1. Includes items such as sporting goods equipment, fitness equipment, golf equipment and hunting and fishing gear.

2. Includes the company's non-merchandise sales categories, including in-store services and shipping revenues.

Figure 3. Segmented revenues among different product categories, including headlines, apparel, and other.

Figure 3 above illustrates how Dick’s approximate sales are distributed among four main categories of its product offerings. The categories Dick’s has listed, including hardlines, apparel,

and footwear, help define the generic buying behavior of its target market. Branding itself at the sporting goods industry, the company knows that equipment must be at the top of the line.

According to the company overview originating from the corporate website, Dick’s Sporting Goods attempts to “serve and inspire athletes and outdoor enthusiasts to achieve their personal best.” Having extraordinary quality equipment allows athletes to not only participate in a sport,

but to perform at the most elite level.

Dick’s Sporting Goods tags itself as “the largest full- line U.S. retailer in the sporting goods industry,” (investors. dicks). For its respective segments of apparel and footwear, Dick’s

competes with top competitors including Footlocker, Champs and Finish Line, which are traditionally known for larger selections of footwear. Retailers such as Cabela’s, Academy Sports and Outdoors, Sports Authority, and Hibbett Sports compete with Dick’s in the sports

equipment and athletic apparel segments. As illustrated below in Figure 4, Dick’s Sporting Goods currently holds the largest individual market share in the full- line sporting goods industry

with a 10% market share, versus a 23% share divided among its five main competitors.

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(1) DICK’S market share includes FY2014 sales from Golf Galaxy and Field & Stream. (2) Estimated $67 billion U.S. sporting goods market based on 2013 NSGA Equipment,

Footwear and Apparel sales and 2013 NBDA Bike sales.

Figure 4. An estimated market share of the current sporting goods industry.

Taking a closer look at various competitors within the sporting goods industry will propose a framework for just how Dick’s Sporting Goods is relatively positioned. The competitive

environment consists of game-players such as Cabela’s, Hibbett Sports, Foot Locker, Finish Line, and Sports Authority.

Cabela’s

Cabela’s revenues fell behind Dick’s Sporting Goods for fiscal year 2015. Dick’s turned $7.3

billion in revenue and a net profit of $2.1 billion, while Cabela’s reported $3.9 billion in revenue, which is a 43% lower than Dick's Sporting Goods. A $1.7 billion net profit, however, is a more accurate figure for comparison with

expenses accounted for as well. Cabela’s retains a 5.8% share of the sporting goods market as of the end of fiscal year 2015.

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Hibbett Sports

Hibbett Sports reported a revenue of

$943 million, 87% less than Dick’s Sporting Goods. Hibbett’s net profit of $332 million is 84% less than Dick’s Sporting Goods’ profit.

However, its profit margin ratio has consistently exceeded the industry average in recent years.

Hibbett Sports holds a relatively small market share for a major competitor at only 1.4%.

Foot Locker

Foot Locker had a revenue of $7.4 billion in

fiscal year 2015, a 2% margin on Dick’s Sporting Goods’ reported revenue. Fortune 500

lists Foot Locker’s market value at $8.7 billion, which is 23% greater than that of Dick’s Sporting Goods. Foot Locker’s profit rang in

slightly above Dicks’, at $2.5 billion. Foot Locker is the only major competitor with a

stronger market share, edging out Dick’s by 0.1% (Finance.yahoo).

Finish Line

Revenue for Finish Line totaled $1.8 billion in 2015, leaving a 73% gap between itself and

Dick’s Sporting Goods. Additionally, its net profit of $583.3 million fell short of Dick’s by 72%. Finish Line reserves a 2.7% market share in the sporting goods industry; however, the firm is much more selective in its locations and offers a fraction of the products carried by total sporting

goods retailers like Dick’s Sporting Goods.

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Sports Authority

Sports Authority

was ranked #123 in Forbes list of America’s Largest

Private Companies for fiscal year

2015. Having a recorded revenue of $3.5 billion,

Sports Authority clinched a

respectable market share of 5.2%. However, according to a recent article from the Wall Street Journal, this long-standing competitor filed for bankruptcy in March of 2016, claiming it will be closing nearly 140

stores. The result will directly impact Dick’s market share, as decreased competition and potential acquisition of business and capital look to be in the near future for Dick’s Sporting

Goods. This also indicates more room for stock growth as more traffic will be directed toward a local Dick’s brick-and-mortar store that has outlasted the foreclosed Sports Authority locations.

The table below sums up the competitive landscape for Dick’s Sporting Goods, as it displays different measures between the top competitors within the sporting goods industry.

Competitors 2015 Total Sales (in

billions)

2015 Profitability (in

billions)

2015 Market Share

(%)

Dick’s Sporting Goods

$7.3 $2.1 10.9%

Cabela’s $3.9 $1.7 5.8%

Hibbett Sports $.943 $.332 1.4%

Foot Locker $7.4 $2.5 11%

Finish Line $1.8 $583 2.7%

Sports Authority $3.5 N/A 5.2%

Table 1. A look at three distinctive competitive measures that adhere to the line-up of top

competitors within the sporting goods industry.

Brand Partnerships

Dick’s Sporting Goods counts its relevant brand partnerships as part of the lure for fitness and

sports enthusiasts. It carries a wide variety of well-known and trusted brands including Nike, Adidas, Asics, Callaway Golf, Columbia Sportswear, Remington, The North Face, and Under Armour. The retailer sells more Nike and Under Armour items than any other national store.

Dick’s has also developed original content series and films to celebrate the power of sports and

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build long-lasting relationships with its customers through their many different tastes and interests. The company taps into unique partnerships for value-added attributes like shared cost

efficiencies, leverage over competitors, new product launches, access to athletic brand ambassadors, and exclusive new products making it an authentic omni-channel provider of

certain licensed sporting goods and merchandise on ESPN.com and other digital channels.

The Consumer and Competitive Environment

Understanding the framework set forth for the both the competitive sporting goods arena along with targeted customers gives insight as to which contenders in the field play the game, so-to-

speak, versus those who may be progressively losing yardage. The market for sporting goods retailers is highly fragmented and intensely competitive. By offering a wide range of products both in-store and online, Dick’s seeks to attract potential customers by creating a unique omni-

channel retail experience.

North America currently dominates the market for sporting goods retailing. The sporting goods industry is comprised of establishments engaged in the manufacturing and retailing of sporting

goods, camping equipment, exercise & fitness equipment, athletic uniforms, specialty sports footwear, apparel, and accessories. Approximately one quarter of sporting goods equipment sales

in the U.S. is handled by chain sporting goods retailers like Dick’s Sporting Goods, Bass Pro Shops, Cabela’s, and Sports Authority. In total, sporting goods revenues exceeded $43 billion in 2013 in the United States (Statista).

There are several current factors that accelerate the velocity of the sporting goods industry.

Major components include growth in disposable income, increasing consumer spending habits, governmental promotion of sports activities and participation, and the skyrocketing health and

fitness boom (“Global”). This last factor is really driving the bus for the growing demand in this industry, where a rise of health-conscious people in the last few years Additionally, an increasing popularity for both American and international sporting events is projected to encourage more

people to participate in sports and outdoor activities. This behavior consequently drives demand for the essentials of sports - equipment, apparel, footwear, and accessories. The expanding

market is forecasted to reach an estimated $266 billion by 2017, with a compound annual growth rate of nearly 4% from years 2015-2020 (Reuters).

In this industry, focusing attention on the consumer and absorbing buying behavior is a critical piece of information. This approach allows a retailer like Dick’s to make better, more strategic,

and more ingenious decisions that will ultimately decide where and to what extent its target consumers purchase their sporting goods equipment among the competition. The current

situation of the sporting goods industry is one where competitors may just be sweating to stay in the game. A key halting feature can be attributed to the bottom line decline in sports participation among youth. A number of today's children in the U.S. and Europe choose video games over

physical and outdoor activities, setting a trend that has shifted the sporting goods industry's core customer from the adolescent to the adult (Yahoo!-Sporting Goods). The consumers’ changes in

sports activity has also led to a change in fashion interests, where here again companies like Dick’s must adjust and respond to the ever-growing fitness boom. New trendy yet casual sports-logoed looks have overshadowed a generic, moderate look in traditional fashion wear.

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In a relatively new phenomenon, sporting goods retailers are beginning to unite to increase sports participation and promote a healthy, active lifestyle. Some competitors have formed specialized

lobbying groups while others have launched promotional campaigns. The sporting goods industry can only benefit from persuading more people to leave the couch for the court. In other

words, more sweat from more people could equal more revenues for companies like Dick’s. All things being considered, top channels like Dick’s Sporting Goods must begin to look for new strategies that will increase spending from both existing customers, as well as the more

unintended, “sedentary” counterparts into the purchasing premises. Although Figure 5 (below) illustrates a steady, consistent growth in sporting goods sales over the years, sporting goods

retailers must counteract the pace at which this trend is slowly flattening.

Figure 5. Illustrates overall U.S. consumer spending trend on sporting goods from 2002-2015.

The figure above illustrates how demand for sporting goods has increased over the last decade.

Yet the trend is slowly decelerating, so more strategical methods must be implemented for retailers like Dick’s in order to play the game and hit homerun sales.

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The sporting goods industry has yet to find a place on the once-burgeoning online frontier. In fact, sporting goods equipment continue to rank low on the list of consumers' favorite products to

buy on the Internet (Yahoo!-Sporting Goods). This coupled with the competition from sport-specific specialty e-tailers (like those that are golf or fishing-focused), has driven many of these

sporting goods retailers to outsource its digital online platforms (Yahoo!-Sporting Goods). According to Dick’s Sporting Goods’ Annual Report, this is just the case. The statement reads:

“We [Dick’s Sporting Goods] have contracted with a single third party to operate and host our www.DICKS.com E-Commerce website and provide related fulfillment and customer service. We

rely on that party's operational, privacy and security procedures and controls to operate and host our www.DICKS.com E-Commerce business. Failure by such third party to adequately

service these aspects of our www.DICKS.com E-Commerce business could result in a prolonged disruption that affects our customers' ability to utilize our website or receive product in a timely manner. As a result, we may lose customer sales and/or experience increased costs, which could

materially affect our reputation, operations or financial results (Dick’s Sporting Goods, Inc. Annual Report Form 10-K).”

Dick’s main goal now should be investing more efforts into its e-commerce platform. Since more

and more people are shifting their shopping experience to computer screens, Dick’s and its competitors have no choice but to adapt to this e-tail trend. In recent years however, Dick’s

Sporting Goods has brought innovation to the table as its e-commerce sites have been enhanced through customer experience, new releases of mobile and tablet sites, and development of capabilities that integrate the its online presence with its brick and mortar stores, including ship-

from-store, buy-online, pick-up in-store, and return-to-store. From a numerical standpoint, the company's e-commerce sales penetration to total net sales has increased from 2.8% in fiscal 2010, to 9.2% in fiscal 2014, and to 10.3% in fiscal 2015 (Dick’s Sporting Goods, Inc. Annual

Report Fiscal Year 2015, Form 10-K). In the last quarter of 2015 alone, e-commerce consisted of 15.7% of total net sales, compared to 14.4% during the same quarter in 2014. These increases,

however, may be seen as a direct result from a transparent showrooming effect beginning to take place within stores, as more and more customers place an opportunity cost on buying in store vs online. As more and more shoppers shift their purchasing focus online due to showrooming, in-

store sales may even be at risk for cannibalization. Nonetheless, Dick’s has reported that it hopes to increase total e-commerce revenue anywhere between $1 billion and $1.2 billion for fiscal

year 2017, up from $628 million in 2014 (Germano).

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Figure 6. Representation of Total and E-Commerce purchasing trends of sporting goods ranging

from 2004-2013.

With this discussion of an increasing e-tail platform at hand, it is important to take a step back and evaluate this growth industry-wide. The figure above illustrates the growing trend of e-

commerce that sporting goods consumers have been shown to adapt to as time has elapsed. From years 2004 to 2013, a slow and steady increase in e-commerce sales as a fraction (in billions) of total sales is evident for sporting goods sales in the U.S. Although this time graph excludes years

2014-2015, our assumptions based on our analysis thus far would lead us to conclude that the number of e-commerce sales accounting for total sales has only increased since 2012-2013, and

will ultimately continue to do so.

CEO Edward Stack has addressed investor concerns that Dick’s will be hurt by Nike’s pledge to grow its online sales six-fold in the next five years, simply because the retailer will not have as

much product exclusivity. Dick’s has been experiencing a cost disadvantage to other expanding e-commerce retailers like Nike. Even Nike and Under Armour, two of the company’s major suppliers, are increasingly advancing its direct-to-consumer operations, as seen by expanding

factory outlets and growing e-commerce platforms, making them rely less and less on Dick’s brick and mortar stores as a mechanism of sales (Germano). Dick’s has been hurting in the past

few years from online retailers, once more pushing the demand to improve its e-commerce digital platform further.

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“This is a bit overblown right now from the investor community,” Mr. Stack said, adding that the retailer will still provide a service in being a showcase of products across the industry. “The

thing we have over the brands themselves is that customers are looking for selection across brands (Germano).”

With this in mind, Dick’s may just be at a cost disadvantage to most other e-commerce retailers.

Even Nike and Under Armour, two of the company’s major suppliers, are increasingly advancing its direct-to-consumer operations like expanding factory outlets and growing e-commerce platforms, making them rely increasingly less on Dick’s brick and mortar stores as a mechanism

of sales. For instance, Under Armour's most recently reported direct-to-consumer sales as a percentage of total revenue increased 28% from a year ago, while Nike's was up about 29% from

a year ago (Rossolillo). Dick’s has been hurting in the past few years from online retailers, once more pushing the demand to improve its e-commerce digital platform further. With its 644 massive stores, the company also has large infrastructure expenses that put it at risk for

showrooming effects.

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Perceptual Map

Figure 7. A perceptual map that balances price against customer satisfaction. Customer

satisfaction ratings obtained from J.D. Power & Associates customer reviews.

The perceptual map above illustrates a clear spectrum for where each company is positioned

within the sporting goods retailing industry relative to its competitors. Consumer reports and

feedback are instrumental factors in determining why certain athletes and outdoor enthusiasts

choose to buy products at one company over another. Interestingly enough, price ultimately may

not be the determining cause for specific positioning for companies like Dick’s Sporting Goods,

Sports Authority, Academy, Cabela’s, and Foot Locker. Another measure such as customer

satisfaction can give a clearer picture of the magnitude of appraisal by the customer. This

variable can highlight a more significant competitive advantage amongst competing retailers.

Pricing

INEXPENSIVE

EXPENSIVE

HIGH

LOW

Customer Satisfaction

HIGH

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The horizontal axis of the perceptual map examined seven different products that can be found across each competing retailer in the industry. These products included Nike’s Air Max 2016

Running Shoe, Nike’s Brasalia 6 L Duffle Bag, a Schwinn 430 Elliptical, a Columbia Sportswear Men’s rain weather jacket, Nike Men’s 6-pack Dri-Fit crew socks, Under Armour Core

Performance sunglasses, and a Spalding NBA Street basketball. Some products such as the basketball and elliptical machine will not be available in stores like Cabela’s or Foot Locker. Therefore, pricing assumptions for each product based on the store they are actually found in,

helped get a more accurate idea of where each company should be positioned. Due to the extremely competitive nature of the industry, almost every product offered nearly identical sales

prices across the line. For example, a Nike Air Max 2016 Running shoe retails at $189.99 at each company. Cabela’s also shares a similar pricing range with these companies where a Columbia Men’s Rain Jacket is sold for $39.99, the same price offered at Dick’s Sporting Goods,

Academy, and Sports Authority. The exception to this relatively linear relationship was Wal-Mart. Wal-Mart was placed on the lower left end of the pricing spectrum because most of its

products generally sell at a lower price than its competitors. For instance, a Spalding basketball can be purchased for $12.99 at Wal-Mart compared to $17.99 at Dick’s Sporting Goods. Because of its consistently low pricing, consumer behavior tends to migrate towards Wal-Mart if being

cost conscious is a primary objective. All of these findings resulted in the placement of Dick’s Sporting Goods, Academy, Sports Authority, Foot Locker, and Finish Line in a vertically linear

line for its x-coordinate positioning. Thus, concerning its pricing strategy, Dick’s Sporting Goods cannot conclude that it positions itself considerably better than its competitors’ positions and cannot be placed at a pricing extreme on this perceptual map simply because pricing strategy

does not play to its favor. Overall, Dick’s Sporting Goods does not have any advantages or disadvantages with its pricing strategy. This general neutrality still allows the firm to remain

competitive in the industry, which suggests it should maintain its current pricing model. Any drastic changes of price hiking or discounting could potentially harm the company.

The vertical axis of the perceptual map depicts customer satisfaction. Several factors that helped dictate the positioning of the companies included staffing, labor costs, and facility which came

from J. D. Power and Associates’ Customer Satisfaction Rankings. An extensive examination of customer reviews and complaints from Yelp.com, Glass Door, and Consumer Affairs were

evaluated. The majority of customer reviews were similar to the following: “The associate had no idea where to find a football sleeve with padding or athletic tape” or “It took five minutes to simply find an associate in the entire store” (Yelp, 2016) Countless reviews were of the negative

nature which explains Dick’s Sporting Goods positioning well below average in overall customer satisfaction. Employing knowledgeable associates that have experienced substantial amounts of

training to its associates is paramount if Dick’s Sporting Goods hopes to improve customer satisfaction levels and see customers return to its stores. J. D. Power and Associates further proves this through its findings that employees have a 30% weight of importance in deciding

overall satisfaction, which is the highest percentage of any other determining factors. Excellent customer service is a direct benefactor in increasing sales and maintaining a loyal customer base

who have memorable experiences with the organization, examples being Cabela’s, Chick-fil-a, and Publix.

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BCG Matrix

Figure 8. BCG Matrix balancing Dick’s Sporting Goods’ relative market share against potential market growth, along with associated stars, question marks, cash cows, and dogs.

Figure 8 exhibits a Boston Consulting Group Matrix that is a corporate planning tool used to

portray a firm’s brand portfolio and strategic business units on a quadrant along relative market share axis (horizontal axis) and the speed of market growth axis (vertical axis). It is critical for

Dick’s Sporting Goods to recognize its strengths and weaknesses in its business portfolio to take advantage of market-share growth opportunities. The BCG matrix allows analysts to rank the growth of Dick’s strategic business units and categorize them according to growth rate and

market share.

Sports Equipment Hunting & Firearms

Footwear & Apparel Golf

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The first quadrant in the BCG Matrix is a firm’s “stars”. Stars are products that operate in high growth industries and maintain high market share. Stars are both cash generators and cash users

because they are the primary units in which the company should invest its money. Therefore, stars are expected to become cash cows and generate positive cash flows. For Dick’s Sporting

Goods, its sports equipment segment is a star. This segment generates the largest percentage of total revenue for Dick’s making up 45% of total revenue, as illustrated in Figure 2. This SBU keeps Dick’s Sporting Goods competitive with specific sporting goods oriented competitors like

Academy, Cabela’s and Sports Authority. As illustrated in Figure 2, the consistent performance for this segment allows Dick’s Sporting Goods to estimate how much to invest in it, knowing

that its “star” will bring in roughly 44%-45% of total income. Because this SBU accounts for almost half of total revenue, Dick’s can invest in this segment as much as they deem necessary and expect it to have huge returns. Dick’s Sporting Goods can also use revenue from this SBU to

invest in firearms or footwear. The only concern for Dick’s with its stars is if they might eventually become cash cows. This can happen if the company sustains its success until a time

when the market growth rate declines (Arline, 2015).

The second quadrant contains “question marks”. Question marks are business units that require much closer consideration. They hold low market share in fast growing markets which consumes a large amount of cash and can incur negative losses. They have potential to gain market share

and become a star but they do not always succeed and even after large amount of investments they can still struggle to gain market share and eventually become dogs. Therefore, they require

very close consideration to decide if they are worth investing in or not. Hunting gear and firearms are the “question marks” for Dick's Sporting Goods. Smaller product offerings and fewer specialized employees make Dick's Sporting Goods the least optimal destination to shop

for guns and hunting gear relative to a competitor such as Cabela’s. Because Dick's is widely recognized for its sporting goods, this “question mark” is a wild card for Dick's Sporting Goods,

with many factors that can affect the way this segment performs. Following the Sandy Brook incident and the possibility of regulation on gun laws, Dick's Sporting Goods “inventory of firearms was drastically reduced and many mainstay items came off the shelves” (Carlozo,

2015).

The third quadrant of the BCG matrix is made up of products that are “cash cows”. Cash cows are the most profitable brands and should be given considerable attention to provide as much

cash as possible. Cash Cows have high market share but low market growth, these products or services are believed to “provide the cash required to turn question marks into market leaders, to cover the administrative costs of the company, to fund research and development, to service the

corporate debt, and to pay dividends to shareholders” (Arline, 2015). Therefore, companies should look to invest in its sources of income to maintain the current level of productivity.

Footwear and athletic apparel are “cash cows” for Dick’s Sporting Goods. Second and third to sports equipment, these cash cows bring in 35% and 19% of total revenue for Dick's Sporting Goods, as illustrated in Figure 2. This segment keeps Dick's Sporting Goods competitive with

companies like Footlocker, Finish Line and Hibbett who are more popularly known for athletic footwear. What separates Dick's Sporting Goods from this segment’s competitors are products

like track spikes, hiking boots, golf and football cleats, that customers cannot find a large variation of or if any.

The fourth and final quadrant of this matrix is comprised of the “Dogs”. These are products that

companies should avoid or contemplate divesting because they are low in both market growth

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and market share. “Dogs” are generally considered cash traps because businesses have money tied up in them, even though they generate little to nothing in return. Dick's Sporting Goods’ golf

department is considered a “dog”. It brings in the lowest percentage of revenue for Dick's Sporting Goods as seen in Figure 2 in which it is costing Dick's Sporting Goods more money

than it is generating. Chief Executive Officer Edward Stack said the company now, “expects a downward trend in golf sales to continue for the rest of the year, which forced Dick's to trim its earnings outlook. Shares sank 18%” (Germano & Rubin, 2014). Same store sales also dropped a

sizeable 9.3% at Golf Galaxy this past quarter. Furthermore, the restructuring of its golf business cost Dick’s $20.4 million in the quarter (Lahtinen, 2014). Because of the recent decrease in

golfing, Dick's Sporting Goods fired over 500 PGA Professionals on staff (Covey, 2014).

b. Macro-environmental Forces

Social Trends

As demonstrated below in Figure 8, a recent “fitness” trend has evolved where less people are completely inactive. This means that people are participating more in sports and other exercise

activities. For Dick's Sporting Goods, this trend means that they can expect a growth in its customer base. An increase in demand for sporting goods will correlate with an increase in sport

activities. Figure 1 reveals how the overall inactivity percentage has been decreasing with this generation. This correlates with the financial analysis conducted for Dick's Sporting Goods’ where revenue is increasing from years 2012 to 2014 going from $5,211.814 million to $6,213.2

million (Reference Financial Analysis Part I).

Figure 9. A time graph that compares fitness and activity levels to age from time period 2010-2015.

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Economic Situations

The study from Aspen Project Play in Figure 9, presented evidence that certain team sports have

high percentages of their players coming from high income households. “Families that can afford more, play more,” (aspenprojectplay.org). With this being said, higher income families have the means to invest more in sports participation. This reflects in the purchasing of quality equipment

and apparel.

Figure 10. Income levels impacting participation among different sports.

Weather Patterns

As stated in an article by Market Watch, Dick's Sporting Goods did not meet its sales projections for 2015. Additionally, shares of Dick's Sporting Goods “fell more than 7.5% in premarket trade

after the company missed profit expectations for the fourth quarter. Same-store sales also declined 2.5% in the fourth quarter. The sporting goods retailer CEO, Ed Stack attributed these

misses due to unseasonably warm weather (Williams 2015). Other sporting goods retailers felt the pressure from changes in weather. After the long stretch of consistently warmer temperatures, retailers are buried in inventories of seasonal apparel, from sweaters to boots to

scarves and hats, that shoppers just have not been buying (Rubio, 2016.) Weather is a factor that often goes overlooked, but in instances such as this, can largely influence consumer demand and

therefore impact profitability. Dick's Sporting Goods offers equipment for various sports, which

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means weather plays a huge role in the business. With different weather comes different seasons and different sports. Therefore, Dick's Sporting Goods purchases merchandise with regards to

the weather conditions so customers can feel warm or cool during changing seasons and temperatures.

Regulations

Variation in gun laws across the United States has enormously affected the stability in the sales

of firearms. This is partially a reason for this segment being labeled a “question mark” for Dick’s Sporting Goods in its BCG Matrix from Figure 5. As previously mentioned, Dick’s stopped

selling semi-automatic firearms in the wake of the Sandy Hook Elementary School shooting spree on December 14, 2012. Dick’s inventory of firearms was also drastically reduced and many mainstay items came off the shelves (Carlozo, 2015). Dick’s Sporting Goods recently

released press statements explained, “In connection with the sale of firearms in our stores, we must comply with a number of changing federal and state laws and regulations related to the sale

of firearms and ammunition,” (Dick's Sporting Goods Annual Report Fiscal Year 2015, Form 10-K). Factors like these play a huge role in this segment and create room for unpredictability in analyzing whether they want to continue investing in this segment or consider other options.

c. Strategic Marketing Mix

Product

Dick's Sporting Goods is relatively competitive when it comes to its product offerings. Since it is a retailer in a large industry that does not manufacture its own products, many products are

similar to those offered by its competitors ranging from Nike running shoes to Gamo Air Rifles. This illustrates a strong level of reliability Dick's Sporting Goods has with its suppliers. Having the same products as competitors constitutes Dick's Sporting Goods selling them at the price

range as shown in Figure 4. However, Dick's Sporting Goods offers “a wide variety of private brands and products through exclusive licenses, that customers cannot find anywhere else,”

(Dick's Sporting Goods Annual Report, 2016). Dick's Sporting Goods has a competitive advantage over its competitors with brand exclusivity for its customers through these private label brands such as Calia, DBX, Quest, Lady Hagen, and many other brands that consumers can

only find at Dick's Sporting Goods.

Price

Dick's Sporting Goods is very competitive within the sporting goods market seeing as how its

competitors sell a number of the same products from manufacturers. Referring back to Figure 4, with the exception to Wal-Mart, all of the retailers that sell the same products as Dick's Sporting Goods offer them at a considerably close price, if not the same price. As mentioned earlier, the

Nike Air Max 2016 sells at all different stores at a consistent $189.99 price tag. However, Dick's Sporting Goods attempts to stay competitive with its price matching policy exhibited in Figure 8.

This marketing strategy explains, “If you find a lower price on an identical item (brand and

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model number) currently available for sale at a local retail store, we will match it. Just bring in the retailer’s ad at the time of purchase (dickssportinggoods.com).”

Figure 11. Dick’s Sporting Goods Price Guarantee for its customers.

Place

According to its most recent Annual Report, Dick's Sporting Goods has operated 741 stores in 47

states (Dick's Sporting Goods Annual Report, 2016). The firm’s headquarters in Pennsylvania also has the most locations with 52 stores total, including Golf Galaxy, Field & Stream and other

specialty concept stores. Its four distribution centers are located in Arizona, Pennsylvania, Georgia and Indiana. The facility located in Arizona is the only one owned by Dick's Sporting Goods while the remainders are held on leases (Dick's Sporting Goods Annual Report Fiscal

Year 2015, Form 10-K). Dick's Sporting Goods has its sights set on growth opportunities through the addition of more stores and expanding its E-Commerce platform. The Pittsburgh-

based sporting goods and apparel retailer will drive profitability by investing $1.8 billion in capital expenditures over the next five years, primarily by adding physical stores, stores remodels, expanding its e-commerce platform and growing its Field & Stream outdoor specialty

brand (Kulikowski, 2013). With such a big investment in expansion, Dick's Sporting Goods made this move “after forecasts of sales increasing up to $9 billion annually by 2017,” (Torres,

2015).

One relevant trend seen in Dick's Sporting Goods’ annual report, is that most stores are located in densely populated states. California occupies 43 stores, Ohio has 50, and Pennsylvania has 52 stores. Dick’s is ranked third in having the top number of stores in which all are ranked in the top

7 states with the largest population. California has a population of 39,144,818, Ohio: 11,613,423 and Pennsylvania: 12,802,503 (infoplease.com). Dick's Sporting Goods anchors some stores near

shopping centers or inside malls, where large numbers of people shop. For instance, Dick's Sporting Goods stores can be located in the St. Johns Town Center in Jacksonville, FL or in Town Center Commons in Kennesaw, GA. Dick's Sporting Goods is attracting customers that

are already in a shopping mood and strategically placing its stores where people who are ready to spend money can see them.

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Promotion

The promotion strategy of Dick's Sporting Goods is to “build loyalty for the Dick's Sporting

Goods brand while promoting our broad assortment of brand name sporting goods equipment, apparel and footwear in a specialty store environment,” (Dick's Sporting Goods Annual Report

Fiscal Year 2015, Form 10-K). Dick's Sporting Goods attempts to achieve this goal through leaning more towards digital marketing. On its YouTube channel, Dick's Sporting Goods has an array of commercials that circulate around unique taglines such as ‘Sports Matter’ and

#WhoWillYouBe. Dick's Sporting Goods’ ‘Who Will You Be’ commercials champion the hard work that is invested by athletes and how sports are a test like no other “where the decisions you

make, make all the difference” (Youtube). Showing different athletes perfecting the craft, working out or playing in a game, suggests that the moments created by sports during in game situations and offseason training have athletes answering this question that “demands an answer

and lies to no one.” Promotional campaigns such as these want to target and encourage this athletic consumer. Additional commercials like these involve famous professional athletes like

Robbie Ray of the Arizona Diamondbacks and Quarterback Robert Griffin III. In doing this, Dick's Sporting Goods is demonstrating the passion they have for athletes and sports while showcasing its broad assortment of sporting goods.

Another promotional method implemented by Dick's Sporting Goods is its loyalty programs.

Dick’s looks to “expand the customer relationship marketing database from our "ScoreCard" loyalty program” (Dick's Sporting Goods Annual Report, 2016). Dick’s ScoreCard is free to sign

up for and is intended to benefit loyal customers. ScoreCard members get one point for every dollar spent at DICK'S Sporting Goods, Field & Stream, Golf Galaxy, and online stores where they can also earn a $10 Reward for every 300 points and get exclusive discount coupons via

mail and e-mail (My Scorecard Account).”

According to its annual report, Dick's Sporting Goods believes it is, “actively involved in communities, sponsoring thousands of teams in various sports at the local level,” (Dick’s

Sporting Goods Annual Report, 2016). Dick's Sporting Goods’ engages promotional opportunities through its community program, which has a website for sport teams to sign up for and receive donations or sponsorships (Dick's Sporting Goods’ community.sponsorport). Dick's

Sporting Goods has the Tournament of Champions for lacrosse and a National High School Basketball tournament for nationally ranked teams (dicksnationaltournament).

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d. Isolated Sales Forecasting

Figure 12. Revenues originate from Bloomberg Terminal data while GDP data (in billions) for

years 2011-2015 relative to DICK'S Sporting Goods. Source: www.tradingeconomics.com.

The regression analysis for Dick’s Sporting Goods uses Gross Domestic Product as the independent variable, over the same five-year period. The results revealed that a gradually

increasing GDP was followed by an increase in sales revenue. The coefficient of determination, also known as r-squared, was .9871. The close proximity to 1.00 indicates that the regression line is almost a perfect fit with the data provided. This positively correlated relationship between

annual sales revenue and GDP can suggest that the same macro-environmental factors directly influence this relationship between retail sales and GDP.

Gross Domestic Product is an economic indicator of the total dollar value of all goods and

services produced in one year. Over the last five years, GDP has been steadily increasing, providing adequate indication of good economic health and a continuous output of products. In

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other words, consumers are purchasing more. As a result, retail sales in stores such as Dick’s Sporting Goods are increasing alongside a growing GDP (Trading Economics, 2016).

In the next four years, GDP is projected to grow from $17.419 billion to $20.188 billion (Trading

Economics, 2016). Based on the findings in the regression analysis, this would suggest Dick's Sporting Goods retail sales should increase at a similar rate. However, some unpredictable

macro-environmental forces such as competition, weather variations, household income, or law regulations as seen in Figure 11, could facilitate deviations from either side of the relationship.

3. Strategic Assessment of Operations, Supply Chain,

Technology, and Infrastructure

a. Key Order Winners and Qualifiers

When identifying key winning traits, or “order-winning” criteria for a company like Dick’s Sporting Goods, it is important to realize the strengths it possesses. In broad terms, Dick’s taps

into the sports, outdoors, and camping markets by offering an array of firearms, hunting and fishing gear, golf equipment, tailgate necessities, while in the meantime directly targeting outdoor enthusiasts, amateur athletes, sports fans, and active women and children. But with such

an extensive customer base and such a wide array of product offerings, it may seem slightly unclear in how Dick’s win orders in the sporting goods arena. The company must align its focus

on a competitive strategic advantage that differentiates itself from numerous competitors, who either offer the same variety of products or specialize in one or more of Dick’s core “shop-in-shops” departments. Various competitors like Cabela’s, Foot Locker, Finish Line, Sportsman’s

Warehouse, and Hibbett Sports offer many of the same products, which either can attract or deter customers based on subjective order qualifiers, and ultimately close transactions as a result of

unique order winners.

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Figure 13. Order-winning criteria for Dick’s Sporting Goods.

Order qualifiers are a set of offerings that grant a company entry into the competitive arena and maintain the company’s position, but are not reasons a customer makes his or her final decision.

While these qualifiers tend to have order-losing characteristics, they have the potential to become order winners. In the case of one winner, Dick’s Sporting Goods offers a wide selection of equipment for athletes, fans, and outdoor enthusiasts. A wide and versatile variety of product

goes a long way in the sporting goods retailing world. Dick’s Sporting Goods’ current 644 retail stores stock many products for beginner-level users at affordable prices for low-to-moderate

income customers, as well as higher-priced models for elite level athletes. Old and out-of-season inventory are often available at clearance prices, usually up to 50% off, to keep customers returning and increase add-on sales. Dick’s incorporates diverse products that appropriately

highlight the upcoming sports season. Its promotional newspaper ads often include seasonal coupons for footwear, apparel, and equipment as well. But it could also be the retailer’s close

scrutiny to the way it offers these merchandising needs that keep customers coming through its doors. Dick’s “store-within-a-store” concept may just be what keep these people coming back. Although this approach has been emulated by retailers like Best Buy in electronics, it serves

unique to a sporting goods store like Dick’s. For example, popular brands like Nike and Under Armour help shape the edgy interior design and fixtures throughout the store layout with

apparatuses like the “Nike Field House” or “Under Armour All-American. (Howland). Product versatility and store concept design may be described as “order-winners” for a retailer like Dick’s.

Typically, Dick’s Sporting Goods retail stores are conveniently located in higher socioeconomic

regions where shopping malls or populated plazas within suburban areas drive in customers from different destinations. This strategic placement of 644 total stores across the US adds convenience and accessibility to Dick’s brand image, and ultimately gives way to another order-

winner. Additionally, Dick’s Sporting Goods is credited with creating its memorable and impactful tagline, “Every season starts at Dick’s,” which has been featured in many national

television and newspaper advertisements. The omni-channel retailer’s commercials feature

E-Tail Mobility

Locational Convenience, Accessibility,

and "grit"

Deep Product Assortment/unique store

concept

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elements that may be appropriate to describe as intense, motivational, and gritty. From the trained pro-athlete to the aspiring young kid, these promotional advertisements serve a unique,

deep, and heartfelt message to a vast range of people susceptible to media, something that no other sports retailer can say it accomplishes to the caliber in which Dick’s does.

One last order-winning criterion is Dick’s Sporting Goods’ “all-in” commitment to omni-channel growth and mobility. Over the past few years, Dick’s has embraced new opportunities to build

upon its e-tail platform with sales fulfillment methods like ship-from store, buy online-pickup in store, and in-store returns for online purchases (Howland). Scott Galloway, a New York

University Stern marketing professor, places Dick’s Sporting Goods at the pinnacle of his top-10 “retailers playing offense” list in context of Dick’s e-commerce efforts and expansion. Galloway puts it this way – Dick’s is becoming the “cross-fit of industry,” where technology and e-

commerce is becoming the means for meeting the actual needs for a company like Dick’s, while the physical brick-and-mortar part is essentially the giant warehouse referred to as a “store”

meant for showrooming, display, and enticing marketing capabilities.

Figure 14. 3 order-qualifying criteria for Dick’s Sporting Goods.

Conversely, Dick’s Sporting Goods portrays a few distinctive characteristics aligning with

customer experience that are not quite as favorable when compared to competitors within the industry. Ironically, most common complaints extend to the associate himself. For Dick’s, average customer service and basic associate knowledge gear the overall retailing experience

toward an order-qualifying rather than a winner. Multiple customer reviews illustrate the apparent lack of human capital from both managerial staff and hourly associates Dick’s may

indeed be known for, as one customer writes,

Customer Service/

Human CapitalPricing

Product Specialization

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“We wanted the manager to tell his associates that they need to be more careful and pay attention to the customer’s request (Stacey),” while another claims,

“This company must have no idea about what customer serve is or how to make us

happy. I’m now going to tell everyone I know not to do business with them (Kenneth).” As Dick’s does have an extensive selection of inventory to purchase from, more inventory also

results in a lack of specialization, which can even translate to a negative perception of quality by some consumers. Ultimately, a consumer will not choose Dick’s over a store like Academy,

Sports Authority, or even Foot Locker solely based on price alone. Keeping all things equal, price does not drive the bus for Dick’s Sporting Goods. Its pricing strategy is relatively similar, if not equivalent to competitors. These “order-losers” do not necessarily deviate from the

company’s main goal of maximizing shareholder wealth while satisfying individual consumer’s demands. Dick’s Sporting Goods may, in fact, win customer orders by appealing to the largest

customer base in the sporting goods and outdoors market. A customer can determine his or her individual needs and make a decision based on quality, price, or another variable, and Dick’s will likely have the desired product available. While specialty shops may offer standard customer

service or perceived quality, Dick’s selection is unmatched in terms of quantity, availability, and versatility making Dick’s Sporting Goods an industry leader with a unique strategy to not only

gain, but maintain customers.

b. Supply Chain Integration and Outsourcing

The logistics behind a supply chain for a retailer like Dick’s Sporting Goods are no less than imperative means for inventory and product tangibility. In essence, the ultimate goal for a large retailer such as Dick’s is for minimal amounts of products to rollover into store-bound inventory,

whereas the right amount of goods will be available to the customers purchasing disposal at the right place at the right time. This poses a logistical challenge for Dick’s, due to the company’s

heavy reliance on nearly 50 suppliers, outreach of nearly 650 store locations, and an expanding e-tailing platform. To cover this breadth of locations, Dick’s Sporting Goods must rely on all of its suppliers, distributors, and manufacturers to provide it with sufficient quantities of inventory

in a timely fashion. According to Bloomberg, it extends its reach to nearly 50 suppliers including distinguished name brands such as Nike, Under Armour, North Face, Adidas, Columbia

Sportswear, Asics, Callaway, Puma, and Fitbit, to name a few (Bloomberg SPLC). Because of the distinguished nature of its suppliers, Dick’s Sporting Goods controls only a small portion of the overall chain, excluding transportation and distribution.

Dick’s Sporting Goods purchases its merchandise from approximately 1,600 vendors (Bloomberg-DKS SPCL). Dick’s claims that Nike – its largest vendor – accounted for

approximately 20% of total merchandise purchases, while Under Armour accounted for around 12% of merchandise purchases, respectively (Dick’s Sporting Goods, Inc. Annual Report Form 10-K). Intuitively, this latter piece of information seems highly askew due to the deep assortment

and wide variety of merchandise Dick’s carries throughout its stores. Coming from the annual report, perhaps the company over-emphasizes this fact primarily to enhance the outward-

looking- in view upon its relationship with these popular vendors. Nonetheless, Dick’s

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acknowledges the risk involved with heavy vendor reliance, and therefore eliminates issuing any long-term binding contracts with any single vendor. Instead, Dick’s issues short-term contracts

among its suppliers based on short-term purchasing order basis. The company’s revenues, demand satisfaction, and supply chain fluidity could potentially all take major hits if any of its

key vendors fails to supply what is needed. This poses one of the threats that Dick’s faces, which is a heavy reliance on its vendors.

After raw materials have been transformed into products and the manufactured products have

been purchased, vendors in the supply chain ship floor-ready merchandise to one or more of Dick’s four main distribution centers, where the goods are then inspected for damage or

defection. Common carriers under contract like UPS then deliver the processed goods to each store location. The way in which this supply chain flows must facilitate prompt, efficient, and effective means of transshipment in order for Dick’s to minimize its travel and freight costs and

improve overall inventory mobility.

Figure 15. A diagram illustrating a basic logistical flow of goods within Dick’s Sporting Goods’ supply chain.

The various manufacturing processes of Dick’s products available to sell are fully operated and

controlled by its providers, while the profitability margins of these suppliers is partially a result of the efficiency in Dick’s management of quick transportation and distribution channels. Here is where Dick’s controlling power in the supply chain comes into play. In one scenario, if suppliers

fail to meet transportation requirements, serious financial consequences are subject to rise because of certain products’ inabilities to be placed for release. The magnitude of suppliers serves as a protective cushion and power tool for Dick’s Sporting Goods knowing the retailer’s

revenues and cost of goods purchased are not tied up within a single supplier. With this

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knowledge, Dick’s Sporting Goods has been known to invest in healthy relationships with its suppliers. In 2015, Dick’s invested over $331 million dollars into just three of its suppliers: Nike,

Under Armour, and Jarden. This was almost three times the amount relative to competitors such as Cabela’s (Bloomberg-DKS SPCL).

Furthermore, in May of 2015, Dick’s Sporting Goods was the recipient of the annual “Shipper Partner of the Year” award given by Manhattan Associates, Inc. (GlobeNews). By earning this

award, Dick’s portrays the face of carrier-friendly practices, valuing driver needs, and understanding transportation from both shipper and carrier perspectives. Thirty-six other finalists

including top-tier retailers, grocers, manufacturers, distributors and wholesalers were enlisted for this award behind Dick’s. The key ingredient to the retailer’s success in its supply chain is thus fostering these healthy relationships with suppliers. On the other hand, Dick’s susceptibility to

weakness in the supply chain lies within the speed in which the supply chain operates, coordinating to avoid inventory shortages and surplus, and forecasting demand. Instant

gratification has become a norm for customers in the current sporting goods sector. For a retailer like Dick’s, keeping up with persistent consumer demand for timely order

placement and subsequent shipment is one of the biggest challenges it faces in terms of overall customer satisfaction – tracing back to operations. Common knowledge illustrates that customers

want their items almost immediately after they place an order. Their expectations call for fantastic service and efficient delivery. Therefore, the supply chain has no choice but to work faster than ever. For a company that controls little of the supply chain, this can be largely

problematic. Another problem Dick’s may face lies in its planning and forecasting efforts that ensure proper inventory stock matches with changing demand. When outsourced logistics enter

into the frame, globalization and thus variability in shipments from locations like Asia and Europe can expose Dick’s supply chain to inconsistency, which leads to concerns with inventory. In order to ensure this inventory meets demand, Dick’s strives to strike a balance between

keeping an adequate inventory stock on hand without having too much in case demand is weaker than expected. In this case, Dick’s must anticipate seasonal changes in demand based on seasonal

variances. The retailer may choose not to hold onto too much stock of a certain seasonal product due to changing styles with changing seasons. On the contrary, Dick’s cannot afford to hold too little inventory in a rising demand situation, as it may miss out on potential revenues. In order to

avoid getting stuck with old seasonal inventory and equipment, Dick’s may choose to either sell rolling product at discounted prices, or even taper inventory in collaboration with its supply

chain when a season winds to a close. All things considered, Dick’s Sporting Goods can avoid most of these supply chain problems by

remaining knowledgeable about the best channels for its products, by working with trusted suppliers and other retailers for the most efficient results, and by actively understanding and

adapting to seasonal consumer demand, global transactions, product order patterns, delivery schedules, and inventory turns.

c. Operational Technology and Systems

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Technology and innovation have continuously changed the landscape of the retail marketplace. The industry trend has shown that more and more retailers are using solutions that emphasize

mobility, efficiency, and sustainability. As Dick’s Sporting Goods remains one of the leading omni-channel sporting goods retailers in America, the utilization of various technologies and

systems presents a new challenge for its remaining at the top, primarily since the company is seeking to expand its e-commerce magnitude in the industry. E-commerce is one technology growth area that a company like Dick’s Sporting Goods cannot afford to ignore. The surge in e-

shopping is arguably the most influential ingredient that can drive Dick’s sales up and its technology systems forward. The company has found that today’s consumer will spend

approximately three-times as much on its online platform than those who shop at a brick-and-mortar location, mainly due to promotional deals and unlimited access to content (2). Dick’s must continue to harness this digital strategy in tandem with its physical brick-and-mortars to

win orders on its product availability platform. In context of this need for an e-commerce pulse, Dick’s realized a significant 28% gain in online sales for fiscal year 2014, with a 31% gain in the

fourth quarter alone (Davis). By 2017, Dick’s will attempt to bring all e-commerce operations in house on an internal platform (Davis). Incremental costs for the e-commerce shift will inevitably rise - approximately four cents per share or $3.7 million in the upcoming year, yet “the

investments are substantive,” says CEO Edward Stack in a statement. “We are bringing a very large site on to become independent. It is the right thing to do. We have a growth business that

continues to grow quarter in and quarter out (Davis).” Dick’s Sporting Goods has also been focusing its efforts on integrating a mobile capability

strategy into both the in-store and online shopping arenas. The company believes that this new user-friendly interface will, by design, improve accessibility to its products and prompt its

customer base to utilize a progressing omni-channel experience.

Figure 16. A look at Dick’s Sporting Goods mobile ScoreCard Rewards Program

with additional promotions and discounts.

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As aforementioned, a paradigm e-shopping shift has taken over much of the brick and mortar shopping platform that America has adapted to over many years, and Dick’s understands the

necessity for this shift. Dick’s must be aware of emerging mobile-savvy shoppers, and must find innovative mechanisms, like its mobile app, to keep its customers engaged and satisfied. It must

place an emphasis on how the customer’s mobile device can enhance the in-store shopping experience and ensure they have the ability to shop when and where it is convenient. The updated app allows consumers to have unlimited access to Dick’s ScoreCard Rewards Program,

which features important criteria like current inventory, special offers, ad campaigns, and personal points (Samuely).

Not only is mobile technology beginning to prompt Dick’s Sporting Goods’ into better connecting the customer to merchandise, it is also beginning to re-shape the way Dick’s connects

the customer to the actual transaction. This trend as of late has redefined traditional POS (point of sale) methods most often used by retailers. Traditional POS has been about simply taking

money from customers and tracking down reduced inventory as a result. But now POS is becoming more of a mechanism for things like customer loyalty, customer relationship management (CRM), back office transfers and receiving, time-keeping, scheduling, and task

management through the world of mobility (Delgado). Dick’s sporting goods is just one example of a retailer that has begun to jump on top of mobile POS. Smartphones and tablets have

revolutionized the way customers shop at retail stores, while the retailers themselves are beginning to want to replace big clunky hardware machines for mobile transaction methods. The ability for a customer to pay for a transaction with a smartphone is beginning to change the retail

experience across all industries, since eventually people will not even need wallets anymore. According to the Retail Technology Group, the smartphone will have ultimately replaced the

wallet within 3 years (Delgado). And as more and more brick-and-mortar retailers begin to accept this mobile e-commerce boom, mobile payment and checkout will eventually become the norm. Even though mobile devices are no longer cutting-edge, the boom in mobile e-commerce

certainly is; it is estimated by the end of 2016, 25% of all U.S. retail sales will take place via mobile devices (Goldman). Even though there will always be customers who prefer the fixed

POS purchasing method, sporting goods retailers like Dick’s are beginning to ride with the new shift. Mobile POS options give a better meaning to customer service beyond the point of physical transaction, i.e. the relationship can be furthered by add-on sales, more convenient e-receipts,

confirmation updates, and future deals or incentives. Ultimately, retailers are fighting in changing the nature of how they achieve customer service. Finish Line, for example, is one of

the only sporting goods retailers in the country to implement mobile POS technologies in almost every store it operates (Delgado). Competitors like Finish line with its quickly expanding technology efforts are what Dick’s needs to preempt and “out-innovate” in order to stay alive in

this expanding world of “e-tailing.”

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This internalized focus on both mobile and omni-channel mechanisms is what is fueling Dick’s to further bridge the gap between its physical and digital layout, since e-commerce sales

have been shown to grow by 50% in markets where a brick-and-mortar store exists (Samuely). The company realizes that perhaps a portion of its consumer base finds value in browsing

through inventory in-store, yet simultaneously sees that a shift has occurred where people take advantage of making a purchase either online or through their mobile devices. Investing in technology is the new trend for brick-and-mortar retailers like Dick’s, and to become a leader in

the industry, sometimes adapting to new trends is the only answer. Dick’s Sporting Goods will ultimately not cease in continuing to expand its physical brick-and-mortar store distribution, yet

the company is doing itself a favor by realizing the value in expanding its brand through an online and mobile e-commerce extension.

Figure 17. ComputerWeekly.com estimates for the percentage

of retailers planning to invest in certain areas in 2014.

In reference to store-level

execution, Dick's Sporting Goods implements the use of Reflexis Task Manager, an industry

leading task management solution from Reflexis Systems,

in all of the stores in its chain. This technology enables Dick’s to better manage task execution,

monitor ongoing merchandising and promotional efforts, leverage

real-time metrics, ensure consistency from enhanced store walks and audits, and optimize

labor schedules (Reflexis). This is an important feature for the

company, since without these kind of leveraging analytics, Dick’s workforce would

otherwise not be able to quickly adapt and react to fast-changing store and customer needs. Another in-store “tech technique” is

what Dick’s refers to as Endless Isle; a strategy that equips each associate with a mobile device that can be used to provide additional options for customers who are interested in products that are out of stock or only available online. This technique “widens the selection of products

available and provides the convenience of having purchases sent directly to consumers’ homes,” says Rafeh Masood, Dick’s VP of customer innovation technology. Dick’s is also known to

heavily incorporate QR codes (quick response codes) in all of its retail locations. A QR code

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essentially translates a URL into a website on the spot, allocating valuable product knowledge to both an associate’s and customer’s disposal right at the point of sale (Delgado).

Moving forward, systems are just as integral to efficient operations of Dick’s business and future

growth plans. Core retailing systems like space management in stores, pricing controls across all channels, allocation of seasonal and fashion merchandise, and replenishment of perpetual inventory all have an effect in optimizing the core features of Dick’s operations (Giannopoulos).

Dick’s also utilizes more strategic systems in order to better sell its product. For instance, in 2012 Dick’s introduced ship from store, a system that connects online customers with any

inventory in any store (Giannopoulos). This system now operates in every Dick’s store. Some benefits of the system include lower shipping costs, higher delivery speed, and better utilization of stored inventory. Other systems include Dick’s buying online and pickup-in-store method,

ship to store method for large items and cheaper local delivery, and even free shipping for orders placed in-store (Giannopoulos). Systems that work with Dick’s supply chain have also been

deployed to maximize the movement and management of inventory. Such systems are controlled by Intelligrated’s InControlWare software system to better allocate information technology with Dick’s supply chain system. This Intellegrated software communicates with a Warehouse

Management System (WMS), which is located at Dick’s corporate headquarters in Pennsylvania. A brand new conveyor belt system now exists in Dick’s Sporting Goods’ Plainfield distribution

center with little interruptions to Dick’s operations (Intelligrated). This supply chain software system allows Dick’s to further control costs, automate distribution, and provide real-time insight into the productivity of the retailer’s large network.

d. Processes, Facilities, and Location

As Dick’s Sporting Goods operates on a multi-channel retailing platform, its extension of

resources plays a critical role in how it meets its daily demands. These resources consist of physical brick-and-mortar locations, distribution methods, supply chain logistics, brand partners,

e-commerce extensions, and human capital. As of January 30, 2016, Dick’s Sporting Goods operates 644 Dick's Sporting Goods stores in 47 states, 73 Golf Galaxy stores in 29 states, and 19 Field & Stream stores in 9 states (Dick’s Sporting Goods, Inc. Annual Report Form 10-K). In

some specific locations, the company operates two adjacent stores on an identical property with a pass-through for customers. This format is known as a "combo store." The retailer employs

approximately 12,000 full-time and 25,600 part-time associates. Dick’s admits that total employment figures fluctuate throughout the year, while typically peaking during the fourth quarter of every fiscal year. The company also describes the relationship with its associates as

“good” (Dick’s Sporting Goods, Inc. Annual Report Form 10-K). Dick’s Sporting Goods has also capitalized upon additional subsidiary stores like Golf Galaxy, Field and Stream, and

Chelsea Collective, as pictured below. These subsidiary stores are projected to grow in location, according to Dick’s. These specialized concept stores give Dick’s the opportunity to gain a broadened and expanding spectrum of brand development, and open up more avenues for brand

loyalty, customer connection, and new merchandising tactics that it can strategically spread among its entire network of stores.

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Figure 18. An umbrella of acquired subsidiary brands under Dick’s Sporting Goods.

The spread of physical brick-and-mortar stores are also currently leveraged by four distribution centers. Dick’s operates a 914,000 square foot distribution center near Atlanta, Georgia, a 725,000 square foot distribution center in Plainfield, Indiana, a 601,000 square foot distribution

center in Smithton, Pennsylvania, and a 624,000 square foot distribution center in Goodyear, Arizona (Dick’s Sporting Goods, Inc. Annual Report Form 10-K). The company insists that any

sort of natural disaster or other serious disruption to one of these facilities can significantly damage material inventory, impair the ability to adequately stock multiple stores and process returns of products to vendors. All of this to say that a malfunction in Dick’s distribution process

could ultimately affect inventory track, sales, timeliness, and profitability.

Distribution Facility Location Approximate Square Footage Owned/Leased

Atlanta, GA 914,000 Leased

Plainfield, IN 725,000 Leased

Smithton, PA 601,000 Owned

Goodyear, AZ 624,000 Leased

Table 2. A representation of Dick’s Sporting Goods’ 4 primary distribution facilities.

A key component in regards to this locational spread for Dick’s Sporting Goods lies within an

opportunity of the company’s potential for future expansion. Integrating this potential for Dick’s brick-and-mortar store expansion with an opportunity for future growth gives way for the

company’s vision to downsize in new stores it aims to open in the near future.

The various ways in which Dick’s manages its everyday operations give insight into how the company’s accomplishes it daily logistical goals. Dick’s upper-level management uses certain

key indicators to monitor both performance and process across each and every location. The various indicators come directly from the company’s annual report (fiscal year 2015). These

indicators include:

Same store sales performance – Dick’s uses same store sales results to see how costs are

leveraged and how they affect net sales, cash, and working capital in relation to the bottom line.

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Operating cash flow – The company measures newly-generated cash flow as it supports

general operating needs, funds capital expenditures and various facilities, and combats costs associated with improved technology, potential investments, and stockholder initiatives like cash dividends and stock repurchasing.

Quality of merchandise offerings – Dick’s also measures inventory turnover, gross

margins, and markdown rates to better assess inventory levels, improve merchandise flow, and establish appropriate price points to minimize markdowns.

Individual store productivity – To assess store-level performance and efficiency, Dick’s monitors various indicators like new store productivity, sales per square foot, store

operating contribution margin, and individual store cash flow.

When referring to locational strategy, Dick’s brick-and-mortar stores are found to typically be placed within regional shopping centers, malls, and suburban town centers alongside other large stores like BestBuy and Dillard’s. The reason for this may as well be that Dick’s recognizes that

town centers are where people navigate to shop, usually for extended periods of time. With having stores in shopping environments, Dick’s puts its stores in position for people to pass by,

and in effect catching both intended and non-intended customers’ attention. Being located in these developed town centers and plazas, Dick’s becomes a temptation destination for people who are already in a “spending mood.” This helps reach out to people who are not strictly

athletes, such as people who like to run, hike, or play tennis as hobbies, will shop at a town center and come across Dick’s Sporting Goods.

One may also consider interior store layout and design a critical resource component for a competitive retailer like Dick’s. The company sets up its stores in an aesthetically appealing way

so that customers are not having difficulty navigating through the sections. When a customer walks into a Dick’s brick and mortar store, it is split up into sections of different sports such as

golf, football, basketball, baseball, etc. These sections are on the walls around the store, but in the middle of the store is the athletic clothing section for men, women, and youth. With the store setup in this manner, the customer must walk past the sportswear to get to his or her particular

sport section. Since sportswear is extremely versatile, a customer can shop in this kind of section for a Dri-fit shirt, shorts, or tights that they can wear for their particular sport. Dick’s

strategically showcases athletic brand ambassadors, e.g. Stephen Curry or Roger Federer, wearing and promoting the various sportswear and equipment available in order to persuade customers to further cherish his or her inner athletic purchasing power.

e. Changes in Infrastructure

A key component underlying the infrastructure of Dick’s Sporting Goods is its operations as a primarily brick-and-mortar retailer. It sees a big opportunity to increase its store base in new and underpenetrated markets while increasing e-commerce sales. Dick’s believes in the power of its

stores as a gateway for building brand equity, customer loyalty, and vendor partnerships. The company anticipates growing its store base to over 800 brick-and-mortar stores by the end of

fiscal year 2017, and has developed a range of prototypes dependent on market characteristics.

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These include the traditional 50,000 square foot single-level stores, 35,000 square foot smaller market stores, and 80,000 square foot two-level stores (DICKS’s-PR Newswire). Over the next

five years, this expansion strategy of stores aims to increase sales, increase operating profit growth, and boost shareholder value that will develop for the long term.

Dick’s projects to grow its e-commerce platform to nearly $1.1 billion by the end of fiscal year 2017. Starting with internally controlling the platform, this omni-channel growth will be driven

by factors like multi-channel loyalty, driving conversion, and optimizing the supply chain (DICK’s-PR Newswire). The company plans to have the Dick’s Sporting Goods e-commerce

belonging on its own platform in January of 2017, while both the GolfGalaxy.com site and the Field & Stream site were launched in 2015. Dick’s believes that these investments along its e-commerce platform are essential for business growth and prolonged productivity. In terms of its

specialty concepts, Dick’s plans on opening approximate ly 55 Field & Stream stores, along with a projected $750 million in sales by the end of 2017 (DICK’s-PR Newswire). In doing so, the

company reaffirms that these stores will bring something unique to the market that focuses on respected national brands, shop-in-shops, and specialty store level service.

On the contrary, Dick’s Sporting Goods has been seen to hit major downfalls in sales due to seasonal trends that affect sales. Warmer than expected weather patterns ultimately have been

known to hurt the sporting goods company’s sales during colder time periods. Sales of cold-weather clothing and gear fell in 2015 when a “balmy stretch” in November and December caused Dick’s to cut its earnings forecast for the remainder of its fiscal year in 2015, which was a

disappointing result for the critical holiday quarter (Tenebruso). In a statement concerning seasonality and quarterly results, Dick’s Annual Report in 2014 suggested that business is

subject to “seasonal fluctuations” where “any decrease in fiscal fourth quarter sales, whether because of a slow holiday selling season, unseasonable weather conditions or otherwise, could have a material adverse effect on business, financial condition, and operating results for the

entire fiscal year (Dick’s Sporting Goods, Inc. Annual Report Form 10-K).” The annual report also suggests that variables like changes in inflation, consumer merchandise preference,

consumer spending, economic conditions, or business trends could adversely affect operating results as well as the pace of merchandise for the entire fiscal year. It appears that Dick’s may just be a value trap in this area, but looking closer one must keep in mind many of the problems

it faces are simply structural in nature.

Another key component of the company’s business that may face an organizational decline is golf sales. Golf and hunting are prime activities that run through America’s DNA, and combined have been shown to generate nearly a third of Dick’s revenue. Yet the trends have shown how

U.S. consumers are spending less and less each year on these activities now as they have become shrinking categories for Dick’s as of late 2013. Especially in regards to golf, which the company

believes is on a permanent downward spiral (Wahba). CEO Edward Stack tells analysts “golf continues to be our most challenging business. Golf from a participation standpoint, and how it translates to retail, is in a structural decline. And we do not see that changing (Wahba).” Dick’s

has announced major steps in adjusting its business by cutting jobs in both the golf sections of its stores and headquarters, and also reducing the space it allocates to golf on its actual selling

floors. In regards to job loss due to declining golf sales, Dick’s laid off more than 500 full-time PGA pros that worked in the stores in July of 2014. ESPN analyst Ted Bishop claims that Dick’s

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"aims to have one PGA professional at every store to better differentiate the experience from online retailers that try to undercut brick-and-mortar stores. But the downturn in participation

along with too many products flooding the market cut into Dick's bottom line so much that the company seems to be giving up on winning the golf equipment business (Struggling Golf

Merch).” This is a stunning organizational shift for a retailer that has long rooted golf at the center of its business operations. However, Dick’s selling strategies alone cannot account for this big shift in infrastructure, as a macro-environmental factor of overall declining golf activity plays

into the equation. According to the National Golf Foundation, nearly 400,000 people left the sport in the past year, while an average of 130 golf courses has closed every year for the last

eight years. Multiple macro-indicators like the number of minorities, women, and youth playing, and rounds played, also illustrate the trend that less people are playing golf, according to the figure below.

Figure 19. Time graph illustrating the decrease in golf activity.

f. Sustainability and Corporate Social Responsibility

Sustainability efforts among the sporting goods industry have been primarily viewed as reaching back to supply chain logistics. The sporting goods sector may be characterized by a large volume

of production, a large volume of consumption, and a fairly short product life cycle that can result in higher than normal disposal rates and/or waste (Subic). The environmental impact for the

sporting goods sector depends heavily on how companies like Dick’s Sporting Goods can effectively influence its suppliers in adopting more sustainable technologies and practices.

It is crucial for companies like Dick’s Sporting Goods to work more closely and efficiently with

its suppliers in order to make its value chains more sustainable. This sustainable act will in effect trickle down to the rest of how retailers like Dick’s operate and do business. Methods like

reducing energy consumption, water consumption, and volatile organic compounds in various sports products during manufacturing are just a few environmental objectives companies in the sporting goods industry should consider (Subic). On the other hand, limited evidence exists that

suggests if these principles have actually been adopted.

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Dick’s Sporting Goods has no choice but to rely on its tiered supply chain with nearly 50 suppliers and 1,600 vendors, yet the company’s approach to sustainability efforts is not only

uncertain but also looks slightly unclear. For one, there is no doubt that health among employees is an important corporate social responsibility issue the company issues. Dick’s corporate

headquarters is equipped with a gym, running paths, tennis courts, and soccer fields. The environmental impact for the sporting goods sector depends heavily on how the companies can effectively influence its suppliers in adopting more sustainable technologies and practices.

Dick’s Sporting Goods’ collaborated with a development company named Strada when implementing its new corporate headquarters in Coraopolis, Pennsylvania. This 670,000 square

foot facility incorporates a landscape design with initiatives geared towards preserving a unique blend of naturalized planting, which enhances the quality of the land on which it is developed. In an effort to recycle storm water, both the building itself and the landscape serve as an extensive

storm water recycling system. When rooftop rainwater is collected, it is stored in a 50,000-gallon storage tank that then recirculates through a series of five waterfalls. Excess water flow generates

a supplement to existing runoff.

Dick’s Sporting Goods’ primary approach toward achieving a high standard of corporate social responsibility lies in its efforts in giving back to the sports and outdoors community. It envisions

a better world of sports, and views the concept of adopting corporate social responsibility through a means of enabling and inspiring those who value the Dick’s brand in achieving their

everyday lifestyle goals. For one, Dick’s Sporting Goods is proud to be the official sporting goods retail sponsor of Team USA for the upcoming 2016 Summer Olympic games and Paralympic games. The principle that the company adopts is one in believing that sports

contribute to a better world. Dick’s primary focus in this aspect is geared towards community involvement and engagement. According to Dick’s company website, the company claims that it

is committed to “partnering with and supporting teams, leagues, and athletes in the communities” that it serves (Between 2009 and 2011, it was estimated that nearly $3.5 billion was cut from school sports programs. Another study suggests that by the year 2020, 27% of U.S. public

schools will cease to have sports programs (“Sports Matter”). With underfunded youth programs on the line, Dick’s Sporting Goods steps into the picture. As part of the company’s vision to

make a lasting impact in its community through sport, as well as serving and inspiring athletes and outdoor enthusiasts to achieve their personal best, Dick’s provides donations and sponsorships to organizations that attempts to enable sports participation among many different

communities that surround the company’s stores. This community program is established to proudly support leagues, teams, athletes, and outdoor enthusiasts – placing a big focus on the

customer as well as the community.

Through the generation of the Dick’s Sporting Goods Foundation, a private non-profit corporate

foundation with a mission to inspire and and enable sports participation – the company has established a “sports matter” campaign where access to athletics allows youth to be taught

fundamental and valuable life lessons like strong work ethics, teamwork, and sportsmanship. The mission of the movement lies hand-in-hand with donations to help save teams facing financial challenges. The Foundation operates on a crowdfunding platform and matches donations dollar

for dollar up to $2 million. In 2014, the movement generated $4 million to fund 187 teams in 35 states. Recent examples of this include Dick’s involvement with PACE, a pay it forward

movements, e.g. a Holiday Hoops campaign where 100 Lifetime basketball hoops were donated on behalf of Dicks’ Sporting Goods to more than 50 organizations in need across the U.S. The

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foundation is also known to showcase the power of sports by producing small films that aim to capture the authentic emotions and reactions of those directly impacted by efforts of the

Foundation. Dick’s also employs its Team Sports HQ platform, an all-in-one e-service that equips youth activity programs with the necessary tools they need for success. This online

platform gives league officials the capabilities to create their own league websites, customize team uniforms, and design a fan shop that can further be used to raise money for their league.

With a substantial portion of Dick’s corporate social responsibility efforts aimed toward the local community, another piece of the pie, although a smaller piece, is allocated to the company’s

employees. Dick’s argues that each member of its winning team is connected through passion for its core values, including playing to win, believing in improvement, being focused, skilled, and precise, and living for the sport and the team (“Cultures”). Dick’s expects determination to be a

driving factor in all of its employees, and returns the investment they make in the company’s success by providing a “dynamic work environment full of opportunities and rewards

(“Rewards”). Through rigorous benchmarking, the company assures that an employee’s total benefits are “as competitive as [our] people, and as comprehensive as their skills and knowledge (www.DICK Some offerings Dick’s give to its employees are various training programs, merit,

and flexible work hours. Salaried and full-time hourly associates are given the eligible benefits of life, medical, dental, and vision insurance, store discounts, a 401(k) retirement plan, an on-site

cafeteria, tuition reimbursements, vacations, and even fitness center access (“Rewards”). Lastly, Dick’s sponsors a Wellness Initiative that serves to encourage and empower its associates to enjoy the benefits of an active lifestyle.

Dick’s suppliers and vendors take up almost as nearly the same slice of the pie as the local

community section due to a heavy reliance on these suppliers and vendors. With nearly 50 suppliers and 1,600 vendors, Dick’s has no choice but to allocate as much flow of information, products, communication, training, incentives, and cash flows throughout its supply chain.

Failure for these supply chain members to incorporate proper logistical and inventorial flow could result in major financial and profitable hindrances on both ends of the supply chain. This

reliance on suppliers and vendors does make sense in the grand scheme of things for the company because fostering healthy, functioning relationships that exist on both ends is critical in keeping the logistics side of

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Figure 20. Corporate Social Responsibility Allocations based on Dick’s Sporting Goods subdividing into categories i.e. local communities, suppliers/vendors, owners/stockholders, management, employees, and customers.

Overall, it appears as if Dick’s Sporting Goods cherishes the relationships it shares with local sports communities, its suppliers and vendors, and its employees (through value-added benefits, expectations, and wellbeing programs). Although not much evidence exists for Dick’s

sustainable and social responsibility efforts aimed at its associates and its supply chain, there is plenty of quantitative evidence to go around for the sports teams and communities it sponsors –

heavy emphasis is placed on this piece of the pie. Beyond the whole stakeholder approach towards reflecting quality social and sustainable efforts – which any company can claim and attest to abiding by – along with typical economic, legal, and ethical dimensions of sustainability

and responsibility, Dick’s is involved with making these philanthropic differences because it believes that sports contribute to a better world and that people who take part in sports will learn

essential life skills like leadership, integrity, and discipline. The company also believes that sports helps build character, increase confidence, and motivate kids to stay in the classroom and aim for higher education and success. In this case, this approach makes perfect sense due to the

nature of what Dick’s Sporting Goods is all about – empowering and inspiring people of all ages to embrace their inner goals as well as physical and sports-related lifestyles.

Local Community33%

Suppliers/Vendors29%

Owners/Stockholders4%

Management4%

Employees20%

Customer17%

DICK'S SPORTING GOODS AND CSR ALLOCATIONS

Local Community

Suppliers/Vendors

Owners/Stockholders

Management

Employee

Customer

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4. Managerial Accounting Analysis

a. Analysis of Cost Behavior and Process Cost Analysis

Dick’s Sporting Goods is a leading national retail chain that specializes in sports equipment, apparel, footwear, and accessories. As such, it does not manufacture any of its own goods. With

over fifty suppliers to provide a wide assortment of products, Dick’s Sporting Goods’ major costs are dependent upon how many orders they receive in a given time frame. Based on gross

profit margin, which averaged 31% for the last three years, cost of goods sold is the biggest expense for Dick’s. After all other expenses were accounted for, Dick’s Sporting Goods has been left with a 5% net profit margin over the last three years as well. Its other major expenses, which

total approximately 26% of total revenues, include operating costs (which are comprised of selling, general, and administrative expenses, research and development costs, and interest),

advertising, and fixed and variable overhead. Dick’s employs 12,000 full-time and 25,600 part-time workers with wages ranging from $7.25 per hour to $60 per hour, and an average salary of $30,000 (68% lower than the national average), which makes up the majority of its indirect labor

costs (Career Bliss, 2016). Keeping labor costs down is important for a retailer with slim profit margins; however, it directly correlates to high employee turnover and lower customer

satisfaction. The majority of Dick’s Sporting Goods’ costs are variable because its product costs are variable. Since these costs depend on how many units each store purchases from its vendors, Dick’s retail stores pay on a per-unit basis rather than a fixed amount. Additional variable

expenses such as labor costs and variable overhead account for a large portion of the firm’s overall expenditures as well. Fixed costs are mainly dispersed among advertising expenses,

which has exceeded $800,000,000 since 2012, salary expenses paid to high-level executives ($14,000,000+ per year), rent, and insurance (SalaryList, 2016). This cost assessment seems appropriate for Dick’s Sporting Goods because it does not manufacture its own products and it

must pay vendors for all of its goods to be sold to consumers. Since Dick’s manages a large inventory of all of its products, products costs are understandably its largest expense.

Additionally, variable overhead costs are incurred at each store location. These costs may only be fractions of total sales at each location, but accumulate to a significant total expenses for the firm when combined across all stores.

Based on the processes, facilities, and locations, Dick’s Sporting Goods operates on an activity-

based costing system. While analyzing the firm’s annual report, it was evident that Dick’s categorizes its percentages of annual sales into four general areas: hardlines, apparel, footwear, and other (Dick’s Sporting Goods Annual Report, 2016). This information is useful in

determining what product areas are the most profitable and which ones can be adjusted to reduce costs. This method helps Dick’s Sporting Goods’ management team provide value-added

services to existing products on an actual cost incurred basis. Activity-based costing allows allocation of resources to the company’s most profitable items, which contributes to operational efficiencies and future strategic decision making. This is more accurate than a general costing

system that implements one activity driver to estimate various costs for an organization. Because its costs come from many different product types and cannot accurately be measured using a

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single activity driver, activity-based costing is the most rational method for assigning costs to each of its operating activities.

b. Dick’s Sporting Goods Strategy Map

Figure 21. Strategy Map for Dick’s Sporting Goods

c.

Financial

Customer

Increase

Income &

Improvement

Grow

Customer Base

Improve

Customer

Experience

Internal Business Processes

Excellent

Operational

Efficiency

Expand E-

Commerce

Learning and Growth

Hhh

Build Core

Workforce

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The strategy map illustrates the primary strategic goals and objectives of an organization and how they are interrelated through cause and effect relationships. As the map depicts for Dick’s

Sporting Goods, some causes such as transitioning its e-commerce business and efficiently managing operations have direct effects on increasing profitability and improvement overall.

Other causes such as developing a core workforce can affect improving customer experience, which increases profits. This strategy map demonstrates the interconnected relationship between cause and effect and the correlation to the organization’s strategic objectives to help make

decisions on where to allocate resources. Dick’s Sporting Goods can use this information to improve its supply chain. Dick’s supply chain consists of over 1,600 vendors and 50 suppliers.

Although the manufacturing is entirely controlled by its providers, the profitability of its suppliers is partially a result of the efficiency in Dick’s management of quick transportation and distribution. This is where Dick’s power in the supply chain comes into play. If suppliers do not

meet transportation requirements, there are serious financial consequences because its products do not get released which gives Dick’s power in setting product costs. All the interworking of

this strategy map contributes to Dick’s Sporting Goods primary goal and mission of becoming the number one omni-channel sporting goods retailer that is committed to continuous improvement.

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c. Dick’s Sporting Goods Balanced Scorecard

Figure 22. Balanced Scorecard for Dick’s Sporting Goods.

Build Core Workforce

Excellent Operational Efficiency Expand E-Commerce

Grow Customer Base Improve Customer Experience

Generate Profit

Fin

an

cial

Lea

rnin

g &

Gro

wth

Inte

rn

al

Bu

sin

ess

Pro

cess

es

Cu

stom

er

Profit

Increase 21%

Sales Revenue

Increase 3.7%

Market Share

Increase 2%

Same Store Sales

Increase 3.5%

Acquire new

Stores

140 locations

Award

Programs

Implement 3+

Customer

satisfaction

Achieve 3-star

rating

Customer

complaints

30% decrease

Order Tracking

≤48 hrs. to

begin tracking

Shipping

≤6 business

days

Process Timing

≤2 business

days

Number of online sales

> $1 billion

15%-25% of total revenue

Ship from Store

75% within a

15mi radius

Employee Revenue

>195,000

Employee Satisfaction

Achieve 50 CSR

Employee Rating

Employee Benefits

>$11.50 competitive

hourly rate

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Both a balanced scorecard and strategy map provide a useful framework for strategic planning and management. By incorporating a balance of financial, customer, internal business processes,

and learning and growth categories, an organization can identify areas of improvement and weaknesses. A balanced scorecard for Dick’s Sporting Goods exemplified the need for

improvements in customer and employee relations, and to continue enhancing operational efficiency and learning and growth opportunities.

Financial

Dick’s Sporting Goods faced a strenuous financial year in 2015. With profits dipping 17%,

shares in the company falling 7.5%, and missing its sales projections, Dick’s primary financial strategic objective is to generate profits (Market Watch). This can be measured by growth in

profit, sales revenue, and market share. Dick’s has strategically invested $55 million in enhancing the shopping experience in stores, building brand equity through partnerships, and transitioning its ecommerce business. With the addition of these strategic investments, Dick’s

hopes to see financial rewards of profit margin increases of 21% and same store sales growth of 4% (Barrons, 2016).

Customer

Monitoring the customer perspective has been a pressing and unresolved issue for Dick’s in the

past. With customer satisfaction levels at a consistent low, and complaints continuously increasing from both customers and employees, it is paramount that Dick’s focus on increasing

the customer experience and reducing complaints. By raising its customer satisfaction rating from one start to three stars and reducing customer complaints by 30%, Dick’s has a good chance of significantly growing its customer base. This will not be an easy process and will

require great efforts from executive management to implement a customer first culture. To start at the most basic level, Dick’s can offer new rewards programs and acquire new stores to reach

more customers. The most recent reward program involves a relaunch of its Rewards of Sport Credit Card program, which offers new benefits such as 6% money back on purchases and 1% back wherever MasterCard can be used (Market Watch, 2016). This new revival is offered in all

Dick’s Sporting Goods, Field and Stream, and Golf Galaxy locations.

Internal Business Processes

The balanced scorecard also demonstrates a focus on exceling in efficiency of operations to

perfect its shipping process. This could be accomplished through managing reliable relationships with its primary suppliers such as Nike, Adidas, Under Armour, and the other 50 suppliers. Dick’s can prioritize inventory management by making sure necessary merchandise gets to its

distribution centers and is shipped to individual stores on time. Dick’s has a goal of 6 business days being the maximum wait for standard orders and an ability of tracking an order after two

days (Retail Information Systems News). With the shipping process running smoothly and customers receiving orders in a timely manner, Dick’s set forth new goals of opening more stores

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which would allow its ship from store system to increase sales. Expectations for further improvement is evident through the expansion of its E-Commerce business. Dick’s projects e-

commerce sales to reach $1 billion dollars and make up 15-25% of total revenue (Retail Information Systems News).

Learning & Growth

Dick’s Sporting Goods can invest more in its most valuable asset; its associates, by providing

specific training and additional benefits for its employees. Dick’s currently offers discounts, health benefits, and vacation time. However, to match competitors such as Cabela’s, Dick’s can

offer special savings plans, employee stock purchase plans, wellness programs, or college saving plans. By increasing employee benefits, Dick’s will see happier employees, which translates into better customer experiences and higher employee satisfaction. All of these aspects directly

correlate to high customer satisfaction and establish a strong foundation for the company. This will be essential in encouraging Dick’s Sporting Goods to achieve excellence in operational

efficiency and furthering long-term relationships with customers. Inherently, the better a customer feels interacting with an associate, the more likely they are to revisit the store and become loyal customers. This facilitates a recognizable reputation in customer experience,

which Dick’s previous performance has demonstrated to be consistently lacking. With the recent bankruptcy of Sports Authority, Dick’s has major opportunities for growth and is looking at

expanding to 150 or more new store locations where devoted employees will be indispensable (Fox Business, 2016).

The balanced scorecard also demonstrates a focus on exceling in efficiency of operations to perfect its shipping process. This could be accomplished through managing reliable relationships

with its primary suppliers such as Nike, Adidas, Under Armour, and its other 50 suppliers. Dick’s can prioritize inventory management by making sure necessary merchandise gets to its

distribution centers and is shipped to individual stores on time. They have a goal of 6 business days being the maximum wait for standard orders and an ability of tracking an order after two days (Retail Information Systems News). With the shipping process running smoothly and

customers receiving its orders in a timely manner, Dick’s also set a goal of opening new stores, which would allow it to ship from store systems to increase sales.

With all of these pieces falling into place, this balanced scorecard illuminates areas of

improvement and further development for Dick’s Sporting Goods. Dick’s can plan to see an

increase in income after investing in its employees, catering to its customers, enhancing the

capabilities of operations, and exploring growth opportunities.

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D. SWOT Analysis, Summary, and Recommendations

A SWOT analysis is an analytical framework that enables a company to plan strategically and

make decisions by identifying its strengths, weaknesses, opportunities, and threats. For Dick’s Sporting Goods, a SWOT analysis can be used as a valuable tool to utilize in addressing what

kinds of decisions the company faces, such as expanding its physical store base, bringing 100% of its e-commerce platform in-house, potentially divesting its golf department, and expanding new product lines. Dick’s strengths and weaknesses are internal elements that can play a major

impact on its distinctive competitive advantage, core competencies, and operational structure by either allowing or prohibiting these certain goals to be achieved.

Dick’s most notable strength is its dominant position in the market. Its sheer number of stores,

competitive prices, and product availability coupled with a deep assortment of merchandise give the company a leading and extensive presence in the market. With an operating 644 sporting goods stores in 47 states; 73 Golf Galaxy Stores in 29 states; 19 Field & Stream stores in nine

states; and five True Runner stores in three states (Dick’s Sporting Goods, Inc. Annual Report Fiscal Year 2015, Form 10-K), Dick’s currently operates a total of 741 stores as of January 30,

2016. In comparison to a competitor such as Cabela’s who operates 51 stores, it is easy to see how Dick’s maintains a dominant position in the market just from the number of stores they operate alone. The price positioning and product availability are also contributors to this

strength. By offering competitive prices, and lowest price guarantee matching, Dick’s is reducing reasons for customers to go to competitors. An additional strength for Dick’s Sporting Goods is

its ability to adapt and respond to changes in the market. This is evident through its development of private labels, store-within-a-store shops, and new store formats. To follow the recent shift in demand, the company is aggressively increasing its offering of private labeled products, with

plans to grow private brand sales from $730 million in 2013 to $1 billion by 2017 (Yohn, 2016). Like other retailers, it has found that exclusive product offerings draw people into stores and

allows for more pricing flexibility. Dick’s Sporting Goods created store-within-a-store shops to satisfy new consumer trends including the Nike Field House and Under Armour’s All American. These have proven to be destinations that increase store traffic and offset operating costs as a

result of the brands they partner with. These exhibitions have proven to be so successful that Dick’s plans to test Nike Air Jordan and Polo Ralph Lauren store shops. Finally, the

reconstruction of its store format demonstrates Dick’s impressive ability to adapt to change. To address rising real estate costs and declining appeal of big box store environments, Dick’s is experimenting with smaller, specialty stores. It has opened 20 Field & Stream stores focused on

hunting and fishing gear that are located next to existing Dick’s locations. These strategies are leading Dick’s to project a $50 to $55 million-dollar increase in earnings and full-year comp

store sales of flat up 2% in 2016 (Yohn, 2016).

The weaknesses of a retailer like Dick’s inhibit the achievement of forecasted goals and negatively affect overall profitability. Without question, Dick’s Sporting Goods most concerning weakness is its lack of investment in its employees which has enduring consequences for the

company. Dick’s does not have a culture of rewarding employees, offering good benefits, or competitive pay which gives little incentive to work hard and relish in the firm’s success. Dick’s

employee satisfaction rating is a 45 out of 100 (CSR Hub, 2016). In comparison to Cabela’s

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score of 65, it is clear that Dick’s does not consider its employees an investment and is evident through the lack of their presence in stores, and how it can occasionally take up to ten minutes to

find a single employee. This is a major concerning weakness if Dick’s intends to expand and open new stores, since a critical part of its success is dependent on its employees’ interactions

with customers. Another weakness of Dick’s Sporting Goods is its reliance on international manufacturers and outsourcing service providers. As previously noted in Section C: III, Dick’s Sporting Goods purchases all of its products, which makes the company heavily dependent on its

suppliers.

Therefore, Dick’s is exposed to the risks associated with operating in foreign countries. Political and economic forces can affect operations if its partners cannot supply the merchandise at the

desired quality and time. The company also relies on single third-party provider eBay Enterprise to operate and host certain aspects of its e-commerce website, www.DICKS.com (Market Line, 2016). While the outsourced provider is performing impeccably, the weakness for Dick’s

Sporting Goods is its complete reliance on that party’s operational, privacy, security procedures and controls to operate and host its Dicks.com online business. The third-party source also offers

related fulfillment and customer services to the customers purchasing merchandise through this website. Failure of the partner to efficiently service these aspects of the company’s Dicks.com e-commerce business could result in a prolonged disruption which, in turn, affects website’s

functionality. This could also result in loss of customers and as a result, Dick’s profits would be affected.

Figure 23. A visual SWOT Analysis for Dick’s Sporting Goods.

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Opportunities are presented by the environment within which the organization operates. These arise when an organization can take benefit of conditions in its environment to plan and execute

strategies that enable it to become more profitable. It is important to explore opportunities because a company like Dick’s Sporting Goods can gain competitive advantage by making use

of opportunities. For instance, Dick’s can find major opportunities in growing its e-commerce business. With daily advancements in technology, online retail shopping is becoming more of a norm. According to the US Department of Commerce, e-commerce sales in the United States

increased 14.4% in 2015 (Market Line, 2016). For Dick’s Sporting Goods, e-commerce accounted for 8.5% of sales compared to 7% in the previous quarter. CEO Ed Stack said the

rationale for controlling its e-commerce platform is to improve profits, differentiate itself online, better leverage customer data, improve agility and control development (Dignan, 2015). The opportunity in furthering its e-commerce platform needs to be pursued. Opportunities also arise

with expanding brick and mortar stores. With the recent bankruptcy of a top competitor, Sports Authority, and the resulting closing of 140 stores, Dick’s Sporting Goods has its sights set on

recovering some of the displaced market share. A week after Sports Authority filed for bankruptcy, Dick’s Sporting Goods announced plans to open 36 new stores (Yohn 2016). Before this, Dick’s announced a store expansion plan that includes opening 135-150 locations by 2018

with hopes of accelerating growth and building brand equity (Torres, 2015). The CEO of Dick’s explained, “We continue to be excited about the profitable long-term growth opportunities of our

business. We are operating in an attractive space in which we continue to gain market share and believe there is significant runway ahead” (Dick’s Press Release, 2015).

Potential threats are the final component of a SWOT analysis. Threats arise when conditions in the external environment jeopardize the reliability and profitability of the organization’s

business. Threats facing Dick’s Sporting Goods include changes in customer spending due to the rise of e-tail, tighter regulations on gun laws, direct to consumer business by suppliers,

showrooming, and poor customer service performance. The recent explosion in online shopping in which sales worldwide reached $1.7 trillion in 2015, puts brick and mortar retailers such as Dick’s in a position where they can lose a large portion of customers who will go online for

convenience and price (Divante, 2015). To fight this threat, Dick’s needs to enhance the retail experience of going to one of its stores. Another threat for Dick’s is the possible regulation of

gun laws and weaponry. Making it more difficult for customers to purchase weapons would decrease its already low end sales. Direct to consumer business by suppliers such as Nike and Under Armour is another threat facing Dick’s Sporting Goods. As previously mentioned in

Section C: II, these suppliers are increasing its direct to consumer business penetration of the market, which lessens the need for retailers such as Dick’s. Dick’s Sporting Goods is also

threatened by showrooming where customers use brick and mortar stores as a mechanism to see and use products but then purchase elsewhere or online. As noted earlier, the final major threat facing Dick’s Sporting Goods stems from its biggest weakness; lack of investment in employees

which translates to poor customer service performance. No matter its strengths, Dick’s will continue to be held back by this weakness and threat if there is no improvement.

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1. Final Recommendation

After gathering many pieces of information encompassing the people, decision-making process,

and business strategies that make up the entity Dick’s Sporting Goods, Inc., there is something to be said about where the company is projected to go and whether its stock should be bought, held or sold. Since every good argument begins with a counterargument, it is important to establish a

few headwind drawbacks before addressing the final recommendation. Despite the fact how Dick’s continues to expand its omni-channel platform into more e-tailing functions, the company

has transitioned a bit slower than expected. This slow transition to online sales can be backed up with a few numbers. Total online sales as a percentage of revenue for the 3rd quarter of this past year in 2015 was only 8% compared with 7.3% the same time last year in 2014 (Rossolillo).

Dick’s main focus continues to be growing its physical brick-and-mortar footprint along with more specialty stores. As more online-oriented retailers continue to essentially grab ahold of

more market share via e-commerce, perhaps Dick’s obtuse angle in the market share pie chart will become more and more acute over time. One last potential drawback is how Dick’s may be missing out on exclusive deals and merchandise from its suppliers. Competitors like Foot Locker

have been snagging deals with suppliers like Nike and Adidas and directing more traffic to its stores when offering either exclusive or discounted gear. All of this to say that Dick’s Sporting

Goods may just be leading the way to a new era in sporting goods. Given the company’s dedication to serving and helping teams and athletes in need of help, sponsorship of Team USA in the Summer Olympic games in Brazil, diversified merchandise mix, consistent earnings

record, modest annual paid dividend of 50 cents per share, and reasonably strong balance sheet, Dick’s does not look too shady whatsoever. It is riding right along where it needs to be as the

current fitness boom or “athleisure” trend is affecting more and more people today than it ever has before. Dick’s strong expansion in opening new stores also segways into re-vamping the old-fashioned, in-store customer experience. Its same-store sales have increased for the first 3

quarters of this year so far, while it has also been able to re-allocate capital to its shareholders, buy back approximately 10 million shares since 2013, and still invest in more stores. Dick’s will

need to keep the pace up as it rides along the ever-expanding e-commerce world that is coupling beautifully with the fitness boom, as well as seek ways to stay on top, increase associate satisfaction ratings, offer more unique and versatile deals, and ultimately keep its customers

coming back through its large, magnificent stone storefront. For these reasons, Dick’s Sporting Goods, Inc.’s stock will be a recommended buy among potential investors.

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Sources for Visuals and Diagrams

Figure 1. http://investors.dicks.com/~/media/Files/D/Dicks-Sports-

IR/Annual%20Reports/2015/2015-analyst-meeting.pdf

Figure 2. http://www.physicalactivitycouncil.com/pdfs/current.pdf.

Figure 3. http://quote.morningstar.com/stock-filing/Annual-Report/2016/1/30/t.aspx?t=:DKS&ft=10-K&d=046c39f997f5989b10b670369355af9f.

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Figure 5. http://www.statista.com/statistics/200773/sporting-goods-consumer-purchases- in-the-

us-since-2004/.

Figure 6. http://www.statista.com/statistics/185459/us-online-shops-and-mail-order-houses-sales-figures- for-sporting-goods/.

Figure 7. http://www.jdpower.com/press-releases/2013-sporting-goods-retailer-satisfaction-

report.

Figure 8. http://www.smartinsights.com/wp-content/uploads/2013/10/The-Growth-Share-matrix.png.

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Figure 10. http://www.aspenprojectplay.org/the-facts.

Figure 11. http://www.dickssportinggoods.com/shop/index.jsp?categoryId=20675246.

Figure 12. http://tradingeconomics.com.

Figure 16. http://www.chainstoreage.com/sites/chainstoreage.com/files/field_main_image/2014-

09/Dicks_app_0.jpg.

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sch&sa=X&ved=0ahUKEwiX1O68t43MAhWD1CYKHTwwCksQ_AUIBygC#imgrc=w3VsF2ABZHiqGM%3A.

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