Abstract
Strategy is part of the core of a business. A well-formulated and executed strategy distinguishes high performing from mediocre organizations. The intricate nature and diversity of customers organizations deal with mean each region and country has different demographic makeup, thereby calling for different strategies for different regions and demography. 7-Eleven, an American-Japanese convenience store, has perhaps mastered the art of strategy. It uses different strategies in different regions; for instance, the different strategies it uses in the U.S and China. While the strategies in China have been successful so far, the store needs to do more innovation in strategy to remain at the top of the competitive retail market.
Strategy in any business competitive environment dictates the success or failure of a business. Organizations continually use strategies to not only get their businesses off the ground, but also gain a competitive advantage and market share. However, with different social, cultural, and economic backgrounds, as well as demography, not all strategies work for particular populations. The intricate nature and diversity of customers organizations deal with mean each region and country has different demographic makeup, thereby calling for different strategies for different regions and demography (Jensen and Zajac 507). From this knowledge, 7-Eleven has pursued different strategies for its operations across the world. While based in the U.S and Japan, the convenience store employs different strategies for different markets. One such market is China, where 7-Eleven has found marked success. Using a different strategic approach in China than in the U.S has enabled 7-Eleven to not only gain a footing in China, but also cement its positions as one of the largest convenience stores in China and the world.
7-Eleven stands as one of the most efficacious convenience stores in the world after transforming from an insignificant Dallas storefront that sold groceries and basic items to become the multinational corporation and franchise that it currently is. Headquartered in Irving, Texas, the store opened its doors for business in 1927 (7-Eleven n.p.). At the start, the store had the name Southland Corporation, later changing it to 7-Eleven in 1946 reflecting its protracted hours of business between 7:00 am and 11:00 pm. Prolonging its hours of service assisted in the growth of the company as a convenience chain (7-Eleven n.p.).
Southland Corporation, however, filed for Chapter 11 bankruptcy in 1990, as it was deep in debt and was running bankrupt. Purposely, the company filed for bankruptcy in its bid to transfer 70 percent of the company to Ito-Yokado Co. for $430 million (Silverstein n.p.). From the arrangement, the convenience store transformed into a fully-owned subsidiary of Seven & i Holding, a Japanese conglomerate. Over the years, the convenience store has grown to operate, franchise, and license stores across the world. By 2017, the store came first in the Entrepreneur’s Magazine Franchise 500, having reached more than 40,000 operational stores across the world (Entrepreneur). Today, apart from its remarkable operations and customer service, 7-Eleven is among the largest convenience stores in the world.
From its establishment to date, 7-Eleven has more than 90 years of operational experience in the U.S. The store had exceptioanally good performance since its establishment, especially with the stiff competition present in the U.S for convenience stores. Part of the reason for its marked success has been the strategy the company uses for its daily operations. One of the strategies used by the company in the U.S is franchising its stores, in addition to company-operated stores. By 2005, 7-Eleven had 3,508 franchised stores and 2,321 company-operated stores that helped bolster its market presence in the country (Sato 46). Through both franchising and opening its own stores, 7-Eleven has since expanded its operations, having more than 10,000 operational stores in North America (the U.S and Canada).
7-Eleven’s entry strategy usually targets urban markets, tailoring its services to the taste of the locals. Additionally, the stores are also conveniently located around office and home areas, especially in the U.S and Canada, targeting customers on the go, who want to pick products on their way home quickly. This is why the company has intensified its store-opening aiming at area dominance in large urban areas such as Los Angeles and New York. Such a strategy has ensured that the company has high visibility and high customer traffic. In furthering and increasing its customer traffic, 7-Eleven has also made its stores pick up points for online deliveries, where customers pick their Amazon deliveries from the store in the U.S and Canada (Huber, Diers, and Gulisanon.p.).
In addition to competitive prices, 7-Eleven uses convenience as part of its strategy in the U.S and Canada. Convenience gives the store the leeway to not only create and provide high quality, but also a wider range of products. Most of 7-Eleven stores have more than 3,000 SKU products ranging from beer to beef jerky, cigarettes, and cereals. Moreover, “About 70 percent of these are recommended by the head office and the remaining 30 percent are picked by local store managers to cater to specific local needs” (Broad, Kihn and Schneider 7). The 30 percent leeway on stock for the manager allows flexibility among managers, who can then stock the store with local-centric product. Moreover, managers operating the stores have the power to withdraw slow-moving products and introduce new products.
The wide range of products sold at the store also includes private label products, which help in differentiation and boosting the store’s margins. Introduced in 1965, Slurpee remains 7-Eleven’s most famous product, a flavored, crushed-ice beverage (Broad, Kihn and Schneider 8). Slurpee sales have been on the increase, in 2004, the company was selling 11.6 million Slurpees monthly, as well as other flavors introduced every year (Broad, Kihn, and Schneider 8). 7-Eleven has more than 2,000 product labels, marking 10-15 percent of its merchandise mix. Moreover, “If a product is not available in a conveniently sized package or is unknown in another country, 7-Eleven’s category managers will work with suppliers to create a new product” (Broad, Kihn, and Schneider 8). Such a strategy was evident in the store’s launching of its branded low-carb category that comprised of nutritional bars and snacks, in addition to the introduction of mentholated gum in the U.S. in view of the gum’s success in Japan (Broad, Kihn, and Schneider 8).
Differences in population and demography in the U.S. and China have, however, necessitated the change in strategy in 7-Eleven’s operations in China. Having set up shops in China in 2004, 7-Eleven has had to customize its strategy to run its operations in the Chinese market (Sato 46). While it used franchises to increase its presence in the U.S., 7-Eleven has built its Chinese subsidiary largely by itself (Sato 46). Known as managing-alone strategy, 7-Eleven’s strategy has meant that the company has stronger probability in the establishment of efficient and transparent business model in comparison with partnership formation as is the case of other convenience stores in China (Sato 46).
Despite its recent economic fortunes and rise as one of the world’s largest economy, the bulk of the Chinese population, whether peasants or the growing middle-class, is highly price sensitive. Therefore, while convenience was one of its key strategies in the U.S., price is a large concern. 7-Eleven has responded to this concern by maintaining a low cost through the sale of its self-branded products. With most of the world’s manufacturing done in China, 7-Eleven has collaborated with more than 180 factories within China as part of its supply chain. The collaboration gives it the flexibility of developing its own products at low prices. Through this avenue, the store not only stocks its shelves with 60% of its branded products in China, but also does so at a low cost, allowing it to sell its products at relatively low prices.
While the need to appeal to the more price-sensitive Chinese customers has remained the hallmark of 7-Eleven’s strategy in China, the company yet moved to another strategy aimed at attracting a diverse customer base. Young urban professionals have essentially been the target in the new strategy that introduced and promoted some of the most popular proprietary products such as Slurpy (Chang and Chen 7). The strategy worked for the company in Taiwan, which naturally led to its extension to mainland China. Through the new strategy, 7-Eleven not only targeted young professionals, but also included local delicacies. Specifically, “the success of marketing local food led to the decision to extend the concept of customer convenience in two ways: moving beyond selling packaged foods to selling fresh food and selling products that could be consumed immediately rather than held for stock” (Chang and Chen 7).
Similar to its strategy of providing convenience in the U.S. is the store’s extension of similar services in China. In Hong Kong, for instance, customers pay their phone bills at the stores. The proliferation of online shopping has also been a boon to the store in China, which has collaborated with one of the largest online and on-demand delivery platforms. According to Xiao, adopting digitization of its services through a cooperation with Meituan has given 7-Eleven an edge over its competitors. Customers can order the store’s labeled food from Meituan app and have the food delivered in utmost 30 minutes through Meituan delivery services ( n.p.). The cooperation is advantageous to 7-Eleven as it allows the store to integrate customers’ orders into its database and IT systems for subsequent SKU selection and supply chain management. The strategy and integration of the system is especially important as China increases it mobile phone penetration and online shopping.
Formulating and executing a working business strategy requires patience and study of the market within which an organization operates. 7-Eleven’s strategies have so far been successful in launching and sustaining its operations in China. Using different approaches apart from those it used in the U.S have proven especially successful in propelling the store to its current prestigious status in not only China but the world as well. Staying ahead of competition means that 7-Eleven has to continue reinventing itself using different strategies not available to competitors, while keeping up with demographic and consumer trends.
Therefore, with increased mobile penetration and online shopping in China, it is high time 7-Eleven develops its own mobile app instead of relying on third-party apps. A loyalty program integrated into the app redeemable with products can also go a long way in cementing its presence in China and branching into the online platform. Additionally, the company should increase its presence especially in high-density areas as a way of increasing its brand visibility and accessibility.
Works Cited
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Chang, Aihwa and Chen, Shih-Fen. 7-Eleven in Taiwan: Adaptation of Convenience Stores to New Market Environments. National Chengchi University, 2012.
Huber, Margot, Diers, Deike and Gulisano, Andrea. “Hangout Haven.” Business Today, 2013, https://www.businesstoday.in/magazine/lbs-case-study/london-business-school-case-study-on-7-eleven/story/194769.html,
Jensen, Michael and Zajac, Edward, J. “Structural Position Shape the Scope of the Firm.” Strategic Management Journal, vol. 25, pp. 507-524, https://pdfs.semanticscholar.org/457b/40d677222518e203b1ca63cd6b093b2e3973.pdf.
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Silverstein, Stuart. “7-Eleven Parent Files ‘Prepackaged’ Bankruptcy : Retailing: Southland Corp. hopes to expedite the sale of the convenience store chain to its longtime affiliate in Japan.” Los Angeles Times, 1990, http://articles.latimes.com/1990-10-25/business/fi-4478_1_prepackaged-bankruptcy.
Xiao, Philip. “7-Eleven in China: How Should Chinese’ Choice of Convenience Store Respond to Digitization?” Harvard Business School, 2017, https://rctom.hbs.org/submission/7-eleven-in-china-how-should-chinese-choice-of-convenience-store-respond-to-digitalization/.