The Gunners suffered nine defeats as they trailed home behind Chelsea and Manchester United in the Barclays Premier League this season - their worst record since they finished fourth in 2006.
And with the top two, as well as Tottenham and Manchester City, planning to spend big in the summer, former defender Dixon is glad Wenger has finally decided to strengthen his squad.
Up in arms: Lee Dixon believes it's high time Arsene Wenger brought in new talent
'There's been a huge amount of negatives this season: not competing at the top - getting back into the title race twice but dropping out - the lack of consistency and not being good enough when not in possession,' reflected the Arsenal legend.
'Arsene has given the youngsters a period of time but I've heard signs from him that it hasn't worked. So he's going to do things differently this summer.
'Wenger has moved forward in his attitudes towards his team. You can't turn a bunch of kids into champions and he realises that now.
'Any Arsenal fan should be happy with that - he's finally accepted what's wrong with the team and has plans to change it.'
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Dixon made 619 appearances for Arsenal after moving from Stoke in 1988 and won the Double on two occasions - 1998 and 2002.
And he believes the Gunners must buy at least four players this summer to bring silverware to the Emirates after five barren years.
He said: 'In terms of depth of squad Arsenal can't compete and he certainly needs to bring in four players - four that can come in and play.
'A forward, a keeper, a centre-back and midfielder are the obvious targets. Mikael Silvestre is, putting it mildly, past his best and is Johann Djourou the player you want to hold the back together? I'm not so sure.
'Nicklas Bendtner has been thrust in to the forefront of Arsenal's season but I don't think he's good enough to play as the focal point just yet.
'I think he can develop into a good player but the big mistake was not buying someone in January when Wenger knew Robin Van Persie would miss the rest of the season.'
The former England international will be in South Africa this summer with the BBC and has also teamed up with Freesat who will be beaming the games back home in HD for the first time.
Dixon has tipped Tottenham centre-backs Ledley King and Michael Dawson to play a big role at the finals after the pair were named in Fabio Capello's 30-man provisional squad.
Good times: Dixon enjoyed league and cup success with the Gunners - something the club are missing right now
'I'm glad Capello hasn't surprised us with untried players like Theo Walcott as Sven Goran Eriksson did in 2006.
'And I certainly think the pairing of King and Dawson have played themselves in this second half of the season.
'Dawson is playing better than any of the other centre-backs in contention. John Terry hasn't been in great form and Rio Ferdinand's continuing injuries are a worry.'
Read more of Lee's World Cup analysis and see comprehensive match planners and brilliant football facts at www.freesat.co.uk/worldcup