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7-Eleven in Taïwan - Marketing Analysis

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MGT301 国际企业管理

台湾7- ELEVEN:便利商店因应新市场环境的调整

7-ELEVEN IN TAIWAN : ADAPTATION OF CONVENIENCE STORES TO NEW MARKET ENVIRONEMENTS

Brief introduction

In Taiwan, 7-Eleven stores are more common than Starbucks in Seattle.  In the capital city of Taipei, there are more than 4000 locations in a city of 23 million, with many city blocks capable of sustaining more than one location.  Aside from purchasing local food and Slurpees, customers can pay credit card and utility bills, book travel arrangements, and buy small electronics like iPods. It’s also not unusual for people to have packages delivered to their closest 7-Eleven instead of their home, because it’s more convenient to pick it up late at night instead of trying to coordinate with a deliveryman.  The government has even given into the popularity of the shops by allowing people to pay traffic tickets and property taxes there, and using them as a hub for special programs like health screenings.

Problem Statement:

How the famous American retailer has adjusted its fundamental operational procedures to suit the  Taiwanese Market ?

Case presentation

The case illustrates the expansion of 7-Eleven in Taiwan and adaptation format stores its local franchisee under the new market conditions. The main issue here is the balance between standardization and localization in business format franchising across national borders. Leaving only the logo and the convenience store concept is well known in the United States, the local 7-Eleven franchise in Taiwan reformatted almost all aspects of a chain of stores, including its positioning, location, product offerings, etc.

For about three decades, it has grown from zero to nearly 5,000 stores in Taiwan with more than 50 percent of the market, while expanding its influence in Asia.

I- 7-Eleven overall presentation

What is the business?

7-Eleven purchases a wide variety of goods and services on the local, regional and national level. They are not a manufacturer, so every item they sell in their stores and all goods and services they use in day-to-day business operations must be supplied by vendors.

They aim is to facilitate the shopping-oriented to meet customer needs, for which they will be consistent at a reasonable price, fast transactions and a friendly shopping environment for the majority of customers with fresh, high-quality products and services. Their annual growth is 62 billion dollars.

Company history

7-Eleven, Inc. was founded in Dallas, Texas in 1927 and has since been the leader in franchising and licensing in the convenience store industry for 46 years. In 1927 the world's first store opened in the United States, initially only sell ice. The shops would be closed on Sundays and started selling milk, bread and eggs in the shop on Sunday. In 1946 officially named 7-Eleven, its meaning represents the convenience store opening hours.

1962 due to a contingency, they created a new 24-hour business model throughout the day.

The company entered franchising in 1964, signed its first United States area licensing

 agreement in 1968, an international licensing agreement with Mexico in 1971.

a– International development

First international store was in Canada in 1969. They then expanded every two or three years into a new country, and achieved great success in almost every country. Today, it operates, franchises, and licenses some 56,600 stores in 18 countries as Australia, Japan, Taiwan, Mal

aysia, Philippines, Singapore,South Korea, Thailand, China, Hong Kong, Macau, Scandinavia, United States,Canada and Mexico.

The opening of the first 7-Eleven in Japan in 1974 also represented the beginning of its expansion in Asia.

b– Convenience stores and 7-Eleven in China and Taiwan

[pic 1][pic 2]In Taiwan, 7-Eleven is the largest convenience store chain and is owned by  President Chain Store Corporation under Uni-President Enterprises Corporation. The first store opened in 1979 in Taipei and the 5,000th store was opened in July 2014. The figure in the chart are from 2013.

Convenience stores in Taiwan : As of 2014, Taiwan has about 10131 convenience stores (of which 7-Eleven accounted for more than half). There is a convenience store every six minutes and a convenience store can serve a community of nearly 2,500 people.

[pic 3][pic 4]Taiwan characteristics: The number of population per square kilometer is 616 people, population density ranked second in the world. In Taipei, this figure is even as high as 9737 people. Chinese and Taiwanese people are keen on the concept of fast consumption, and don’t like to wait, which leads to the rapid development of the convenience store industry.

i-Opportunity factors for 7-Eleven

Demographic and economic: Total population projected growth by 2030, is expected to reach 23.6 million. Domestic consumption and investment contributed 1,50%  and 1,19% to the GPD growth respectively. Inflation rate -0,66% in 2015. Projected 2,46% in 2020.

Socio-cultural : Food and beverages is the second highest contributor. 93% of Taiwanese have the habit of eating out.

Technology: Internet penetration rate reached 80% in 2014, and E-commerce sector enjoys an estimated annual growth rate of 10% to 20%.

ii-5 Forces from the 7 Eleven exportation in Taiwan

 Threat of new entrants : High entry barriers through domineering presence (occupies half of the market pie), strong brand loyalty, saturation of retail food and convenience store market

Bargaining power of suppliers : Able to leverage internal network to meet needs of stores

Strong brand reputation ensured strong consistent sales for suppliers.

 Bargaining power of buyers : Low product switching costs for consumers. Buyers will still purchase from whichever store that is more convenient

Threat of product substitutes : Similar products sold across the industry and Rapid copy of innovations within the industry

Intensity of Rivalry : Highest density of convenience stores in the world. However, due to first move advantage and strong branding, 7-Eleven is still the industry leader.

...

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