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7-Eleven in Taiwan: Adaptation of convenience stores to new

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Deborah Koh

on 21 September 2015

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Transcript of 7-Eleven in Taiwan: Adaptation of convenience stores to new

7-Eleven in Taiwan:
Adaptation of convenience stores to new market environments

Objectives
How a US-based MNE retailer
maintains its fundamental operational procedures
while simultaneously remodeling itself,
attaining a break through into the
Asian market.
1. Problem Statement
2. Summary of the case
3. Case Analysis
3a. General Environment (PESTLE)
3b. Industry Environment (Porter's Five Forces)
3c. SWOT Analysis
4. Main Issues/Problems
4a. Past issues and its implications
4b. Present issues
5. Recommendations
6. Transferability of good practices
7. Conclusion
8. References

CAse ANalysis
TEchnology
Internet Technology and Global E-commerce:

Internet penetration rate reached 80% in 2014.

E-commerce sector enjoys an estimated annual growth rate of 10% to 20%
Demographic
Population Size:

Total population projected growth by 2030, is expected to reach 23.6 million, (Euromonitor 2015).

Geographic Distribution:

Population density is the highest in Taipei, 7,871,900 in population size.
Economic
Direction of the economy:

Rising levels of domestic demand being offset by Taiwan’s trade deficit.

Domestic consumption and investment contributed 1.50% and 1.19% (yoy) to the GDP growth respectively (British office, 2015)

Inflation Rates:

Inflation rate -0.66 percent in 2015

Projected at 2.46 percent in 2020 (Trading economics 2015).

Political / Legal
Competition and anti-monopoly laws:

The Fair Trade Act (FTA), dictates Taiwan’s competition law provision (Taiwan.gov.tw)
Socio-cultural
Consumption:

Average household expenditure US$24,931 in 2013.

Food and beverages is the 2nd highest contributor, (Taiwan today 2014).

93% of Taiwanese have the habit of eating out

Workforce:

Employed persons in Taiwan increase to 11,200 thousands in July 2015 (Trading economics, 2015).
taiwan's
General Environment
Summary of the Case
Industry Environment
(Porter's five forces)
SWOT ANalysis
Strengths
Opportunities
Weaknesses
threats
Past Issues
Present Issues
1. Location
First positioned as high-end convenience stores.
Opened mainly in the residential communities
Did not appeal to its price-sensitive target consumers - housewives

2. Merchandise
Retained U.S. Model
Lacked in local taste

3. Ownership
PCSC bought premises instead of renting space
Greater capital outflow, more managerial time spent in monitoring operations
Slow growth
Main Issues
Porter's
Five Forces
Threat of New Entrants
(low)
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
(LOW)
Able to leverage internal network (of UPEC) to meet needs of stores

Strong brand reputation ensured strong consistent sales for suppliers
Bargaining power of buyers
(Med-High)
Low product switching costs for consumers

Buyers will still purchase from whichever store that is more convenient
Threat of Product Substitutes
(High)
Similar products sold across the industry

Rapid copy of innovations within the industry

E.g. When 7-Eleven Taiwan announced sale customized flat-screen TVs
Intensity of rivalry
(high)
Highest density of convenience stores in the world

However, 7-Eleven is still the industry leader to date

Due to first move advantage, and strong branding
recommendations
Transferability of good practices
in other Asian countries

Vietnam
china
7 Good
practices
in taiwan

1.
Saturation
of the convenience store market

2. Constant need to introduce new innovations in order to compete > increases the
complexity of its operations

3. Tedious workload > High employer turnover rate >
Rising training costs

United States

Founded in 1972 in Dallas, Texas

World’s largest operator, franchisor and licensor

Pioneered concept of convenience stores

8,604 stores to date
Taiwan

President Enterprises Corp (UPEC) established President Chain Store Corp (PCSC) in 1978

First 7-Eleven store launched in Taipei, February 1980 by PCSC

Growth in Taiwan made up of 3 stages: Imitation, Localization and Innovation

Mid-1995, PCSC opened its 1000th store
Established brand image

Excellent in-house infrastructure

Localization of food to suit Taiwanese taste buds

Technology and service innovations

Foresight in future developments
Past:

Conformity with U.S. model

Present:

Saturation of convenience store market

Complex operations

High employee turnover rate
Implementation of drive through 7-eleven

Introduce more innovations in i-Bon service kiosk

Foreign currency exchange services other than Chinese yuan (RMB)

Fedex/DHL collaboration

7-Eleven App on iTunes store
Past:

Lack of localization

Present:

Mergers and acquisition

Intense competition from both international and domestic markets

Rising manpower costs

Rising R&D costs

How can 7-Eleven compete in the future and sustain their competitive advantage?

Technology and R&D:

Continuous service innovation

Sociocultural:

Constantly keep up with current trends
In terms of promotions, marketing and product offerings

Human Resources:

(i ) Employee level:
Constant upgrade of employee training
Provision of good welfare

(ii) Management level:
Strong corporate governance

1. Sale of fresh and hot food

2. i-Bon E-commerce kiosk

3. Pre-ordering of unconventional items

4. Taxi-services

5. Seating areas

6. Strong in-house infrastructure of HQ (UPEC)

7. Strong branding with 7-Eleven’s Taiwan Mascot, Open-Chan

Yes

Yes

Maybe


Yes

Yes

No


Yes

Yes

Yes

Maybe


Maybe

Yes

No


Yes

conclusion

Every Asian country has its own unique environment, culture, varying lifestyles and consumer tastes.

MNEs have to take careful considerations of these factors in order to employ appropriate (standardization or localization) strategies specific to the market

Therefore, business models and strategies must be reevaluated in order to achieve a breakthrough in new market environments within Asia.
Conclusion
References
Done by:
Michelle Janthi (43303320)
and
Deborah Koh (43659544)


Differences between Taiwan and u.s.
&
Implications of standardization vs Localization
Contributing
Factors
Differences
Taiwan
United States
Geographic
Locality
Consumer Tastes and Preferences
Culture
35,980 sq km
Vertical Zoning
9,826,675 sq km
3rd largest country in the world
Horizontal zoning
Convenience converged at one destination, aligned with their hectic lifestyle
Daily necessities which they have ran out of
Fast food, frozen/package food etc.
Asian culture
Collectivistic
Mostly housewives that does purchasing of daily necessities for the entire household
Western culture
Individualistic
Gender equality
Full transcript