Eleven (7-11, or 7-Eleven) is part of an international chain of convenience stores owned and operated by Seven & I Holdings of Japan. The company operates largely as a franchise, and is the global leader in franchising and licensing convenience stores, with almost 40,000 outlets -- surpassing McDonalds. The U.S. subsidiary is headquartered in Dallas, Texas. 7-Eleven operates stores in 16 countries, the largest markets being Japan, the United States, Canada, the Philippines, Hong Kong, Taiwan, Malaysia and Thailand. The estimated total earnings in 2009 were $16.9 billion, with over 45,000 total employees (7-Eleven World's, 2007). The world over, 7-Eleven is famous for the Big Gulp fountain drink, branded in a cup and an entire 32 U.S. fl oz. (.95 liter). Now they have Super Big Gulp (44 oz.); the Double Gulp (64 oz.), and the Team Gulp (128 oz.) that, while causing some consternation to nutritionists, have made the company stand out for affordable soft drinks on the go, and, as some say, one of the most telling products of the 21st century (Butterworth, 2010).
Innovator of convenience industry leader for several decades
Has become mired in layers of managers and bureaucracy, no longer lean and mean and able to take quick action
Keep business unit structure but allow individual units to operate more independently
Even greater and more intense competition.
Strong cash flow, market presence, logo identification
Erosion of market share may decrease share price and ROI
Consider expansion of services, not decrease; offer more incentives
Low consumer confidence or perception of market. Limited assortment.
Strong brands with ability to capture an audience
ATM hacking; public perception of pricing and security.
Contract with Edaleen Dairy; pursue other contracts with industry miso-leaders
Regulatory issues. High turnover of staff.
New strategies and focus on protecting and increasing market share are top of 2011-12 plans
Competitive pressures -- others are doing what 7-Eleven did and sometimes doing it better.
The developing world; as internet access becomes more and more available, e-commerce between countries should follow; also, partner with mobile device manufacturers, etc.
Lumbering giant may not have the steering ability to move fast enough to recapture the dollars necessary to lead the market. Not a first destination for shoppers.
Franchise system has proven extremely successful for the company. Real estate availability, convenience, high margins.
Growing demand for fresh, healthy products
City/State employee issues often on bad side of town, perception of danger. Perception of high margins and pricing.
Situation Analysis -- External Factor and Internal Factor Evaluations- Because of their longevity in the industry, as well as their proactive stance on numerous regulatory issues over the past few decades, the 7-Eleven companies are well-poised for 21st century needs. One of the keys will be tied to the changing forces of real estate, particularly in large urban areas. While their reputation is stunning, there are various micro and macro forces that shape their strategic planning process:
Changes in psychographic needs of employees and clients.
Globalism and increased interdependence on foreign markets.
Aging baby boomers
Public perceptions of the industry.
Employee needs and desires change -- more personalized programs. Not seeing career opportunities nor liking night hours
U.S. economic lull.
Individual economies of scale and competitive environment
Demographic changes and fluid evolution of such.
Internet and electronic shopping, comparing, and communicating (also macro). Home grocery delivery
Five Forces Modeling - Using Michael Porter's Five Forces Model, we find that 7-Eleven is poised quite aggressively in all five segments. It is certainly more than their tenacity that causes continual growth, and their ability to spend millions of dollars on new products and individualized services during a down-economy. Indeed, the outline of the Porter instrument helps us understand why the strategic direction of 7-Eleven is moving more towards individualized plans and systems (Porter's Five Forces and SWOT).
Existing Companies -- By maintaining market share and solvency, tend to discourage too much encroachment. Marketing strategy will need, however to keep up with Amazon.com type deliveries, as well as all-night grocers.
Potential New Companies -- Smaller niche companies that import certain very specific items might compete for a very small percentage of dollars, but it is unlikely that any will arise with the same reputation and buying power. 7-Eleven must keep pace with the times, offering some healthier fare.
Substitutes for Products Offered -- Clearly, there is a market for the convenience factor, plus certain products one can only get at 7-Eleven. Keeping this top of mind with consumers is vital.
Suppliers/Supply Chain -- This is one particular area in which 7-Eleven excels. Because of their longevity, they have developed relationships over time with some of the top people in the global food industry. This allows some negotiating of contracts and new tactics to ensure greater profitability.
Customers -- 7-Eleven was built on convenience and location; and likely retains its edge on the same. While the customer has psychographically changed; less loyal, more willing to return an item, the steadfast support of the NOW generation gives it a marketing edge (Peck and Payne, 1999).
Strategic Marketing Map- For the past decade, 7-Eleven has shifted much of its marketing strategy to emphasize competitive pricing with grocery stores, not just convenience shopping by brand or last minute needs. They realized that many grocery stores were staying open later, many even 24/7, and needed to vie for that consumer's dollar on such everyday items as mile and bread. This strategic direction was also put in place to remove the stigma that 7-Eleven stores are much higher priced than many other locations (7-Eleven Shifts Marketing, 2002). More recently, they tested a GMR Marketing campaign in which users can get free drinks using UPC bar codes on their mobile phones. For instance a consumer sends the word "Fast or Rapido" to a number and gets a free beverage. This is designed to build marketing and customer loyalty, to give clients a reason to come into the stores, and to promote certain drink items (slurpees, flavored drinks, etc.). The bilingual (English/Spanish) test and design was purposeful and reflects the organization's view of the changing demographics of the United States, particularly focusing on the Latino group in which form a core portion of their business within certain geographic areas.
Customer Purchasing Behavior
Located in neighborhoods in almost every suburb and major city; usually on an easy egress for traffic. Open 24 hours, resulting in last minute or impulse purchases.
Sampling of a number of grocery and medical (OTC) items, pastries, coffee, soft drinks, etc.
Convenience factor, Slurpee products, cigarettes and beer; Red Box videos, new promotions.
Perception of crime, ATM hacking, unsavory characters.
Competitive in some areas, higher in others; staples (milk, bread, etc.) are leveling out.
Few unique or specialty items.
Perception of high price and low quality.
Strong point; many franchises in many neighborhoods.
Sometimes only grocer in poor neighborhoods after 5pm.
Exclusivity retains image.
Items often focused on sugary, high-carb items that are relatively inexpensive for certain demographic.
Television ads, some radio spots. Does not promote too much.
Testing cross marketing ideas, cell phone and certain demographic promotional ideas.
Has an opportunity to clean up- change image.
Cannot always force franchise owners to modernize or clean.
Competitive Analysis -- As we know, 7-Eleven stores are found in a number of suburbs and towns with a niche quality that is different from the local supermarket. 7-Eleven is actually an example of a small business (Franchised) that has many of the attributes of larger corporations: customer, employees, stakeholders, inventory, etc. In the United States alone, there are more than 8,200 owned, operated and franchised 7-Elevens. Once complete saturating the market, in May 1998, however, 113 7-Eleven stores in the Midwest and Southeastern region would be sold and converted to the Kum & Go Stores; and the Minnesota stores to Super America. This was likely due to market saturation, unprofitable stores, and rubrics of performance. The company splits franchise profits 50/50 with owners, with the initial term of 15 years. The fees are non-transferable, yet the company was ranked Number 11 in the Top 75 North American Food Retailers by SupermarketNews, who also noted that it was the 24th largest retailer in the United States (Schulz, 2011).
There are six key strategic competitive factors that define the customer benefit relationship of 7-Eleven to the neighborhood culture and other competitors:
Location -- Offering lower travel costs, east of parking, known quantity
Hours of Operation -- Open when needed, 24/7, 365 days per year, even on Holidays
Customer Service -- Generally rated good; pleasant and able to give good advice and knowledgeable about stock
Range of goods sold -- Plenty of impulse and must have items
Store Presentation -- Makes shopping easy, speedy, stores try to be clean and hygienic
Price -- occasional perception of price gouging, but for many consumables, lots of consumer savings (Kenny, 2001).