In football parlance, Dollar General (NYSE:DG) is in a tough spot -- third and long. The discount retailer issued a press release today signaling two new plays it plans to run in an attempt to bolster shareholder value. If they fail, management might be forced to punt, which could put the ball into the hands of private-equity investors. Did management make the right call here?

The field of play
 Sales at Dollar General have consistently risen, thanks to rapid store expansion. Over the past several years, gross margins have held up, while operating margins have slid, causing shareholders' return on equity to fall. Since peaking in 1999, Dollar General has doubled its sales and store count, only to watch its stock decline from $24 to less than $16. To make matters worse, Dollar General's stock has fared worse than those of competitors Family Dollar Stores (NYSE:FDO), Dollar Tree Stores (NASDAQ:DLTR), and Wal-Mart (NYSE:WMT).

Such sluggish performance and suboptimal operating performance make perfect fodder for a rumored private-equity buyout. If that rumor becomes a reality, current management might be called off the field, letting Dollar General's backups strut their stuff on the next set of downs. So what plays will management call to create shareholder value?

First call: Buy back stock
 The board of directors authorized a $500 million share-buyback plan, in hopes that investors will recognize that the stock is undervalued. It won't hurt that any actual repurchases will leverage bottom-line earnings growth.

Second call: Turn it around
 This play is more complex, including a reformatting of new stores, the closure of 400 underperforming locations, and increased operational efficiencies through better inventory management. The initiative is designed to show that current management is as capable as any private equity investor in wringing better operating performance out of the company.

Held in reserve
 Thus far, Dollar General has kept one play in reserve: raising the company's dividend. Consider Home Depot (NYSE:HD), which has also suffered poor stock performance over the past several years. Robert Nardelli, CEO of Home Depot, has raised the company's dividend 50% since Q2 2006 and 125% since Q3 2005, directly and immediately increasing shares' value to stockholders.

I think Dollar General's management is calling the right plays. Operations honestly don't look bad enough for a Hail Mary or a punt. At an enterprise-to-revenue multiple of 0.63, it trades in line with competitors Family Dollar, which trades at 0.66, and Wal-Mart, which trades at 0.68. These valuations don't look cheap enough for private equity to get involved, even given its ongoing bubble. Still, Dollar General's management can't afford to rest on its laurels: It needs to stay focused on creating value whenever possible.

Further general-interest Foolishness:

Family Dollar is aMotley Fool Stock Advisorselection, while Dollar Tree, Wal-Mart, and Home Depot areMotley Fool Inside Valuerecommendations. Try any of our Foolish newsletters free for 30 days.

Fool contributor Matthew Crews welcomes your feedback -- really! He has a financial position in Dollar Tree, but in none of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.