Adaptation of Convenience Stores to New Market Environments - Case Study Example

7 Eleven Company in Taiwan Name Institution: Date: Introduction The global market has experienced increased growth of the convenience store industry. Although traditionally regarded as an alternative for the formal shopping organizations, these organizations have in the recent past outgrown that classification to create a niche of their own in the global market. However, the evolution, development, organization and challenges in this industry remain unknown to many. This review addresses the industry in Taiwan with a case study on the 7 Eleven Company, originally American Company, which has developed into a multinational convenience store Company. Question 1: Taiwan Convenience Store Industry Economic and Business Characteristics The convenience industry in the Taiwanese market is characterizes by two key economic characteristics emanating from the growing and evolving consumer buying behavior. On one hand, the industry has a large consumer base. Internationally, Taiwan I acknowledged as the second largest density populated areas across the globe, only second to Bangladesh. As such, the increased population base increased the market for convenience store products in the industry. In addition, the market unlike other economies in the Asian market received a liberal approach where the government allowed for free competition. As such, international and multinational organizations in the market experienced free and fair market competition allowing for increased investment in the market. Such fair competition allowed for the growth of the Taiwanese convenience store industry to its eventual global status. On the other hand, the industry is characterized by the Taiwanese population need for Immediacy. As evidence by their trend in traffic and the existence and thriving of roadside food sellers, the population seeks to obtain services and products with ease and immediacy. Therefore, this allowed the development and growth of convenient stores that availed required convenience products as and when required. Further, a major economic trait in the Taiwanese convenience stores industry is the existence of a vertical zoning structure. This is a trait unlike the horizontal zoning structures present in the US and Canada. With the vertical zoning structure, it implies that building and structures in the Taiwanese market houses diverse services and business organizations. For instances a building’s first floor would be a supermarket, the second a bank, and the other upper floors residential houses. Through such a structure, convenience store located in such areas had a continuous flow of consumers’ regardless of the season or daytime. The combination of these economic and business characteristics in the Taiwan industry facilitated its convenience store growth and expansion. Question 2: Taiwan Convenience Store Industry driving forces The driving forces in the Taiwanese convenience store industry can be cited in the political, technological and social changes in the industry. The combination of these factors has facilitated the experienced increased industry growth. On one hand, the existing political climate in the Taiwanese market has facilitated the development of legal regulations favoring the industry development. This can be cited in the governments’ liberalization process of the food industry despite its criticality in the nation. Instead of controlling the industry, the government conducts monthly oversight role to ensure price sanity is retained. As such, this has offered organizations an opportunity to compete effective through their competitive advantage approaches. On the other hand, a major industry driving factor emerges as the changing societal and cultural structures in the market. The Taiwanese market experiences double incomes in families implying that the majority of the parents work. As such, they have minimal times to shop in the main stores and supermarkets. Therefore, they consider the deliveries and the accessibility of the convenience stores beneficial in their quest for saving shopping time. The convenience stores are perceived supplements for the traditional shopping stores such as the supermarkets. However, the increased need for product diversity and variety in order to save on shopping time increased their popularity. Currently, convenience stores in the Taiwan market stocks wide range of goods making its variety a major driving and success factor for customer attraction. Finally, technology development have enabled convenience stores partnering with other industry players for variety provision, its main success and market attraction factor in the industry. Question 3: Taiwan convenience store industry businesses success factors Among the business success factors in the Taiwanese convenience stores, industry include the presence of a convenience shopping culture, strong supply networks, customer loyalty and market low cost structures among others. On one hand, the market has had a tradition of purchasing their convenient products such as foodstuffs by the roadside in the informal family business setups rather than form the formal stores and business enterprises in the market. As such, businesses venturing in the convenience stores industry enjoy a culture head start where the existing market culture supports the development of such ventures. Therefore, minimal marketing and advertising of such ventures are required consequently reducing on the overall operating costs. Moreover, business in the market has a critical success factor in the existence of a strong supply network in the market. Government market liberalization allowed for the establishment of strong business ventures across the supply chain. Therefore, organizations in the convenience stores industry have a wide pool of market support systems, partners and stakeholders who facilitate the development and retention of consumer markets. In addition, ventures in the Taiwanese convenience stores industry are the presence of a customer loyalty. The Taiwanese market is comprised with a loyalty culture in which customers retain brand and business interactions with the enterprise or brand upon satisfaction. Therefore, business in the industry has an opportunity to increase their influence and expand their consumer base through consumer satisfaction. Through this approach, organizations can reduce on the costs of acquiring new consumers, as well as costs associated with loosing existing consumers. Finally, a major business success factor in the industry is a low cost structure. Consumers in the market are increasingly interested in the product quality and standards rather than the convenience stores aesthetics and layout. This is a market condition in contrast with the American and Canadian markets, that focus on both products and stores aesthetics. Therefore, organizations operating in the Taiwanese market have the opportunity to reduce on their operational costs through reduced investments in stores aesthetics consequently enabling products low pricing a stimulant for increased demand in the market. Question 4: 7-Eleven’s international strategy The organization relies on the franchising expansion and new market entry strategy as its international strategy. A franchise approach incorporates the development of international ventures through separate business models. Through the adoption of a franchising approach as an internationalization and market expansion trend, organizations benefit in a range of factors including reduced investment costs as well as increased speedily expansion. This was the case with the 7-eleven organization. As evidenced in its expansion approach both in Canada and Taiwan, the corporation relied on the franchise approach to expand in these new yet promising markets. Through its strategic approach, the organization relied on the established partnerships and alliances business models success. However, it ensured that it retained a temperament similarity and homogeneity in its franchise organizations. For instance, the organization required all its franchise ventures to stock a given range of products. As such, the industry acquired an increased opportunity to retain products homogeneity in the market. On one hand, the approach sought to develop appropriate standard structures for its ventures. In this regard, the store standard measures and design were established a-on a standard basis. Moreover, the organization requires its franchise organizations to retain its brand name, label and logo. The retention of these symbols enhances the development of international brand and organizational reputation for the 7-eleven organization. Moreover, brand reputation and logo adoption enhances increased organizational multinational status and products standardization. Further, besides the development of a similar stores location and layout structures, the organization has ensured the supply o similar products. Through its chief operations officer, who conducts regular inspection visits on the respective stores to guarantee on the products supply variety, the organization established the product maintenance agreement (PMA). Through this agreement, franchisee organizations are required and guided to local suppliers who avail specific products as per the PMA agreement terms. Therefore, a review on the organizational international franchise strategy establishes that through standardization and franchisee control, the organization has relatively succeeded in venturing into the international markets such as Canada, Taiwan and Japan. Question 5: PCSC financial condition An organizational, financial review and analysis is based on the presence and availability of its financial statements. These statements, statistically offer organizational, historical, present and future forecasted performance in the industry. In the case of evaluating the 7-Eleven organization performance in the Chinese market; this analysis reviews the organizations financial income and balance sheet statements for a ten year period between 2001 and 2011. On one hand, the organizational income analysis establishes that the organization has registered increased gross and net incomes over the years. In this regard, the organization has increased its total earnings form NT$ 1,786 in 2001 to NT$ 6,081 in 2011. This is statistical evidence that the organizational earnings in the Taiwan industry have grown and thus expected to project the growth into the future. Further, an asset analysis on the organization evidences a similar increase from NT$ 17,968 in2001 to NT$ 69,826 IN 2011. This is a clear indication of an increasing organizational capital and asset base. The presence and continued growth of an organization's capital and asset basis an indicator of financial and economic stability. Statistically, this is interpreted to imply that the organization has increased capacity to invest in the industry and a similar ability and potential to mitigate market changes accordingly. A critical review on the organizational asset base reveals that it has been on the rise since 2001 and thus the trend is projected to traverse into the future. Further, income analysis reveals that the organizational net income has been on the rise apart from the 2011 accounts, where income was significantly reduced. However, due to its strong financial capital base, this analysis concludes that the organization is financially stable with the ability to expand its financial base into the future. Question 6: problems or issues facing 7-Eleven in Taiwan Based on a critical analysis on the 7 Eleven Company in the Taiwan market, it is apparent that despite its highlighted success ratios, the organization has over the years faced a range of challenges, some of which it is yet to overcome. Upon its venture in the Taiwan market, the organization faced a consumer market challenge. Initially, the organization targeted the housewives through locating its convenient stores near the residential areas. However, this consumer segment, though large failed to yield substantial returns. This is because the organization supplied high quality high end products, which the consumer base was unable to acquire due to their low economic status. However, the organization has in the recent past shifted its focus from the housewives to the working class through establishing ventures in the town centers to capture this group. Nevertheless, the organization is yet fully to relocate into this market and subsequently has experienced losses, as a result, of abandoning stores initially erected in the residence areas. In addition, the organization faces the challenge of increasing market prices in the Taiwan economy. The increased global oil prices have implicated on production costs in Taiwan resulting to increased market prices. As a result, this exposes the organization to the risk of losing its market competitiveness pegged on the presence of low operation costs as well as low pricing of its products against market competitors. Further, the organization faces a marketing challenge in technology expansion. The organization has in the recent past expanded its product base to incorporate services provision to its consumer base. Such availed services include the I cash and the electronic ordering system that not only enhances electronic ordering, but also links each cashier with the head office. The development of this technology requires the development of appropriate online security measures to regulate and hedge it against online hacking and theft. Therefore, the organization faces the challenge of investing in its IT section with the reduced revenues margins available. Question 7: Recommendations A Taiwan convenience industry and the 7 Eleven Company individual analysis I recommend that the organization should seek to develop an increased diversification approach in its products supply. A diversification strategy allows an organization to the stock and supply a wide range of products and series into the market. Evidently, the organizational diversification strategy has earned it an increased market influence and control. In this regard, I recommend increased investment in services provision. Currently, the majority of convenience stores in the Taiwan and global markets provide goods as their core products. Therefore, if the organization rolls out a large based service provision approach, it would differentiate itself from competitors in the market. Moreover, the service provision approach would serve as its strategic competitive edge in the long run. In developing a service provision platform, this analysis recommends that the organization should seek to recruit qualified services providers to offer supplementary services through programs such as consumer membership through which the members can enjoy services such as fitness classes among others at reduced prices. A membership program as Camarero and Ma (2011) argued would increase the organizational consumer loyalty rates. Reference Camarero, C., & Ma, J. G. (2011). Incentives, organizational identification, and relationship quality among members of fine arts museums. Journal of Service Management, 22(2), 266-287. Read More