Seven-Eleven Japan: A Case Study in Supply Chain Management

This case study examines the supply chain management practices of Seven-Eleven Japan, a leading convenience store chain. It explores the company's history, growth, and strategies for success, including its response to globalization, e-commerce, outsourcing, and supply chain relationships. The study analyzes the challenges faced by Seven-Eleven and provides recommendations for improvement.

Supply Chain Management
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Table of Contents
Introduction......................................................................................................................................3
Company Overview.........................................................................................................................3
Globalisation....................................................................................................................................4
E-Commerce and Information Systems...........................................................................................5
Outsourcing......................................................................................................................................7
Supply chain relationships.............................................................................................................10
Supply chain improvement............................................................................................................11
Recommendations on the various identified issues.......................................................................14
Reflective Report...........................................................................................................................15
Reference List................................................................................................................................19
Appendix........................................................................................................................................21
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Introduction
Supply chain management, as the term is defined as a chain of processes followed in
organizations, especially in manufacturing firms. The product before it is served to the customers
passes through a chain. The process entails from the supplier to manufacturer, wholesaler,
retailer and then finally to the customers. Supply chain management helps in increasing the
productivity. It also helps in attaining efficiency in time management by following the Just-in-
Time approach, lean and agility procedures. This assignment briefs about the supply chain
management principle followed in Japan by Seven-Eleven company. The company has owned its
fame with the help of strong information centre and distribution of the products. This assignment
briefs about the efforts Mr. Masatoshi took to expand his business globally and in Japan. The
company has made use of advanced information technology to manage its operations. Through
innovation, the company organized POS system and ranked among the first. The company
increased its revenue with the growing years.
Company Overview
Seven-Eleven company was founded by Mr. Masatoshi Ito. In Japan, the convenience stores
provide a variety of products to the customers, which are carried by the general retailers and the
food retailers. He approached Southland with the project of Seven-Eleven but got rejected. In the
year 1973, Southland agreed to make a licensing agreement with him. Ito offered 0.6% f the total
sales to Southland. As an exchange to this sale, Ito got the exclusive right to widen his empire
throughout Japan (Chopra, 2017). In May 1974, the first company of Seven-Eleven stores was
introduced in Tokyo. With the introduction of this store, Japan saw a phenomenal growth. By the
year of 1979, this company has expanded in numbers to 519 in Japan. By the end of 1990's, the
numbers has increased to 5500 stores. In the last ten years, the company has grown in revenue on
average by 12.6% in an annual year (Endo, 2014). The net income has also increased by 20.9%
annually. The Return on Sales has also improved with the years, from 11.7% to 25% by 1992.
Due t economic recession, though the company has faced a decrease in the Return on Sales by
23.8%. Seven-Eleven Company is considered as the third largest retailer in Japan. When
measured by ordinary profits, this company has acquired the position of being the largest retailer
in Japan. In numeric’s, this company has expanded by 5,523 stores and is known to be the largest
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convenience store chain in Japan (Larke, 2014). The rate of customers visiting the store in Japan
is totalled to 1.8 billion, on an average 15 times per year. The Return of Equity has been over an
average of 20% in the last ten years.
Globalisation
Globalization, in relation to business indicates where the company takes a move from being
located in a single country to multiple countries (Delene et al., 2015). The economic, cultural
and social activities are operated in relation to international boundaries through a process.
Globalization has helped many companies to expand its stores not only in national but also
international locations. It has increased the opportunity for competition among companies
developing from single to multiple companies. Competition can be in respect to the provision
and quality of goods, price, and technological adaptation. Through globalization, a company can
increase its market shares with reduction in the cost of production (Villarreal et al., 2015,).
Globalization is integration of one's own company with other company economically. An
interchange of ideas and products takes place in relation to culture. Macro-social forces play a
vital part in globalization. Through globalizations, products have the access to be transported
across the world in an integrated manner. Approximately, in the last fifteen years, globalization
has changed the trend of the companies having a vision to expand globally. Organizations are
moving forward from national boundaries to external world to develop business opportunities.
MNCs are looking for employees, who can adapt to various cultures and social practices.
Globalization has brought with it an innovative style of developing flexible working pattern
(Toda, 2016).
As there is an increase in the demand for the product with the entry of the new threats,
competition develops to a certain level for the companies. Competition has driven to cut down
the prices in various companies. It is becoming a tough challenge for many companies to face the
issues arising from globalization. Financial instability has led Seven-Eleven faced major issues
in developing its stores in Japan. The decline of the lifetime employment has caused Seven-
Eleven to face a challenge. In the 1990's, the economic growth was stagnant in Japan and
markets have fallen down. The affect of globalization in Seven-Eleven was that it has several
small retailers and multiple layers of wholesaler. The distribution structure affected the Seven-
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Eleven company in expanding its markets. Since globalization is the interchanging of ideas and
expansion of boundaries, Seven-Eleven faced issues in the beginning of 1950s. As the
wholesalers were fearful of the fact that due to the emergence of new cultures, their markets will
be driven out. Globalization also brought with it the concept of mass production system and sales
system. This resulted in the decrease in the number of distributors. Supermarkets were actually
merchandising stores traditionally. Seven-Eleven faced the issue at the initial stages with the
concept of localization in business and standardisation. Poor logistics has created a barrier for
Seven-Eleven to expand its retail empire beyond Japan. Due to over stock of products, chances
of waste dumping increases as the products remained untouched due to less demand.
It is recommended for Seven-Eleven company to expand its business and improve customer
satisfaction by enhancing the distribution system. With the help of logistics, items from the
stores could be delivered to the customers. This concept would enable to have efficiency in time-
management system. Distribution will be possible to be developed with an increase in the
logistics mix. Applying logistics mix technology, the company can expand its business globally
and not only in Japan. Application of Just-in-Time management will help Seven-Eleven to
purchase products only when there is a requirement and will help in eliminating waste due to
over stock of products. With an increase in the demand of the products, Seven-Eleven can bring
the items to the store. As shopping in convenience store is not popular worldwide, Seven-Eleven
through its promotion can build a trust with the customers globally. Online delivery of products
will help the company to make the products available to the customers at a faster rate and will
help in an increase in the market share. Through online promotion, the company can increase its
brand value not limited to Japan but globally.
E-Commerce and Information Systems
An e-commerce business actually deals with the micro and macro environment by offering
products and services to consumers. An innovation in the technological field requires innovation
for developing supply chain management (Huang and Liu, 2017). E-commerce helps to interact
with customers developing marketing analysis to target customers. E-commerce is used in
business a one of the strategy to earn revenue through B2C and B2B online transactions. E-
commerce includes cooperation among B2B, B2C, C2C, B2A and C2A. E-commerce helps to
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have transaction through online thereby increasing customer satisfaction. With the introduction
of the concept of digitalization, e-commerce has increased the productivity. E-commerce helps to
have business activities performed through online transaction. This advanced digital technology
has been efficient in making time management possible with many industries. Estimation has
been made by the e-marketers that e-commerce will contribute an increase in the revenue with
the years. E-commerce has proved to be the success key for online business. E-commerce
provides with complete web store features and helps in accounting. It is considered as the
superior marketing tool in the digital markets. Business and customers are becoming closer to the
digital world with the use of e-commerce. In the retail sales operation, e-commerce has
developed the trend of online shopping among customers.
Attracting the targeted customers becomes difficult with e-commerce in business activities.
Customers are more concern with the reviews of the product shared in the online portal of the
company. A change has taken place in the style of communicating online. Although e-commerce
helps in utilizing time-management but also distracts the customers with technology and social
media. Online shopping increases the risk in the customers about the quality of the product. Even
the mode of payment through online transaction has not been able to generate trust among the
customers. Customers are more reliable in mode of payment through cheque or in cash till date.
Attracting new customers is more costly than retaining the existing customers. Security and
privacy is another challenging aspect of e-commerce. As Internet being an open technology,
chances of hacking data from the system is easier through various latest technologies. Customers
while providing personal data like bank details for transaction feels insecure. The growing
threats of spammers are reducing the confidence of the customers in online business. Data
transaction like crediting and debiting of amounts of one customer takes time. A customer
transacting amounts (debiting and crediting) through online mode requires servers to operate
quickly but it lacks in this area.
Seven-Eleven company before shipping any products needs to verify it for ensuring customers
trust with the company. It is recommendable for the company to make the customers aware of
the issues of shipping beforehand. Along with the issues of shipping, the customer needs to be
educated about their rights. This will certainly help the customers to understand that they are
valuable for the company. The customers of Seven-Eleven opting for online business activities
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must be informed an approximate timing for the delivery of their products. A customer through
personal texts can be informed of the stages of the shipping of their products. Even discounts and
offers to the products will encourage retaining their existing customers and acquiring their
lifetime membership with the company. Seven-Eleven company to gain the customer experience
can also offer free shipping to the customers. Seven-Eleven should work with a schedule of
providing customer support 24/7 to aid the customers. Online delivery of products does not
assure the quality of the product. Seven-Eleven should offer minimum time for the customers to
exchange the product if it does not match their requirements. Online transaction of amounts
though has an increased rate of risks; it is recommended that Seven-Eleven provides an online
receipt of the transaction sand the lists of products purchased by the customers. An online
support has to be there to answer the queries of the clients and the customers.
Outsourcing
Human Resource Outsourcing
Human resource outsourcing is the business process where the company instructs an external
company to take responsibilities to perform an assigned area of tasks. The time consuming tasks
or actions that the company cannot perform alone are given to the external company to exercise
effectively (Berber and Slavić, 2016). When Seven Eleven gets its human resources from a
different company then it is human resource outsourcing. This process is also known as BPO,
where an external company supplies the human resource activities.
Issues
Loss of control
As the human resources are given by an external company, the Seven Eleven do not have any
authority to claim for any dispute to any employee that has been outsourced from the external
company. This makes loss of controlling the human resources which might affect the company’s
performance negatively.
Threats of Poaching
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The workers, those are recruited by the outsourced company might leave the job when the Seven
Eleven is running through losses. This can create more losses to the Seven Eleven. The
outsourced employees might pass some important information to the outsiders which can become
a threat to the company (Paz-Aparicio et al., 2017).
Legal or regulatory requirements
There might be conflict among the laws of the outsourcing company and the Seven Eleven and
this can create a problem to the workers working for the company. This can create a trouble for
the Seven Eleven as it will be affecting the performance of the company.
Industrial relation issues
Formal education about the company is very much essential for the workers working in a
company. As the human resources are completely unaware of the rules and regulation of the
company for whom they have recruited, the workers may not perform accordingly.
Recommendation
As the company deals with the supermarket business process, there are a list of activities that can
be recommended to exercise a better human resource management, they are as follows:
 Knowing the employees more closely
 Installing computerised monitoring systems
 Controlling of cash receipts
 Tracking the business checks
Process outsource
Process outsourcing is the process in a business where a specific part of process is done by an
external company and only the authoritative other activities is made by the mother company so
that the company can focus on the important areas of the business process (Perdikaki et al.,
2015). When Seven Eleven get its process operated by an external company then it can be said
that the company have outsourced its process.
Issues
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Loss of talents
The workers present within the company can be more talented that the workers working in the
process outsourcing company. This can affect the productivity of the company (Lacity and
Willcocks, 2015).
Lack of customer focus
When a company like Seven Eleven outsources its process from an external company, the
process might not be the way the company wanted. Seven Eleven might need to focus on
customers which the process outsourcing company might not understand. This can create a
trouble to the company as it may lose its potential customers.
Loss of control
As the business process gets outsourced from an external company, Seven Eleven cannot make
any direct contact to the process designers which creates a gap and that affects the performance
of the company. This makes loss of control over the process development that limits the
company to meet its planned goals.
Dependency
As Seven Eleven is outsourcing its process, the company get totally depended on the external
company for the process to achieve its objectives and goals (). If the outsourcing company fails
to make proper process making then the mother company fails in meeting the objectives and this
will definitely affects the company’s performance adversely.
Recommendation
While the company is outsourcing its process from an external company, it can face many issues
which can be treated with the given recommendations:
 Clear communication with the outsourced company
 By identifying the area of work that needs to get outsourced
 Proper briefing of the work that is outsourced
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Supply chain relationships
Supply chain relationship is a set of activities that includes the tie up with the transporters and
suppliers and also to the other individuals that connects the company’s products to the customers
(Christopher, 2016). The supply chain relationship also involves the relationship with the
vendors and also to the retailers or even with the warehouses for storage. The relationship
includes few rules and they are:
 The togetherness of manual goodwill
 Compromising from both the parties while solving disputes
 Continuous communication process from both sides
 Field of commonness between the suppliers, vendors or transporter with the company
Issues by supply chain relationship
Monitoring issues
Supply chain is a lengthy process that involves every single step from the point of raw material
manufacturing till the point of finished product if delivered to the customers. This lengthy
process needs through monitoring because if the company fails ay any one stage, the left over
stages fails automatically (Venkatesh et al., 2015). This can affect the whole supply chain. A
proper monitoring at every stage is necessary or else the company fails to perform the tasks
completely.
High costs
As supply chain involves a lengthy procedure, the cost at every stage increases which can
increase the price of the product that are about to be delivered to the customers. A proper
relationship with the executive of every stage heads can help the company to deliver the goods at
a cheaper rate (Fernie, 2014).
Delivery
Delivery can be a great issue while the company is having a supply chain. Timely delivery is
something that every organization must have in order to make better impact to the customers.
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The company must track the order periodically so that there are no issues during the time of
delivery. Timely delivery should be made in order to meet the customer needs at the right time.
Recommendation
To avoid the supply chain relationship issues, the chosen company can make strategies according
to the recommendation which are discussed below:
 Better communication with the executives of every department that are there in the
supply chain.
 The company should a proper track of the products which got dispatched and that are
about to be dispatch and for this a proper communication with the person developing and
maintain the tracker.
 The company can reduce the issues related to the supply chain by making clear and sound
contracts with the parties involved in this process. This will help the company to make
question in case if there is any dispute during the transportation or processing of the
produced goods (Thomas et al., 2014).
 The company has to make sure that they are always in synchronization with their
partner’s performance, which is considered to be one of the most important key success
factors in the field of a successful supply chain management relationship (Venkatesh et
al., 2015).
 The organization concerned with the measurement of their partner’s performance has to
make sure that all of their resources used for processing the most relevant technology are
completely up to date.
Supply chain improvement
Contemporary chain models implementation
The supply chain of the seven-eleven is distributed into six models (Fahimnia et al., 2017).
These are mentioned below:
Facilities
The facility model is broken down into two levels namely, DCs and Stores.
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DCs
The infrastructure of DCs is comparatively less in number. The structure does not include any
inventory. The main function of this structure is to serve only within its cluster. The importance
of having DCs is to increase the efficiency while decreasing the responsiveness.
Stores
The structure usually contains large number of levels than compared to The DCs. The structure
keeps inventory only on the shelf. The presence of this level is in great abundance and it usually
dominates the market. The stores generally are efficient but it greatly contributes towards
responsiveness.
Inventory
The inventory of the supermarket seven-eleven consist of DCs that are highly efficient and
poorly responsive. The stores in the inventory keep daily stocks. They are also efficient but lack
responsiveness.
Transportation
The features of this model acts as vendor delivery and the seven-eleven delivery usually includes
transportation of raw materials and finished goods from DC to the stores. The network design
allows each truck to be stocked at DC. Then only one truck will deliver5 supplies to more than
one stores. The mode of transportation is usually by roads. The level adds to high frequency thus
contributing to high responsiveness with less efficiency.
Information
The information model usually checks the graphic order terminal, scanner terminal, and store
computers that are linked to seven-eleven network (Turban et al., 2018). With the help of this
model, there is a proper tracking of inventory level and proper order maintenance. It also consists
of POS register that deals with the storage of data after the customers purchases. Then finally, it
transmits those data to the headquarters of the seven-eleven.
Sourcing
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The aim of this level is to ensure the rapid and reliable delivery with the help of outsourced
transportation to Transfleet Ltd, set up by Mitsui and Co.
Pricing
The model ensures reasonable priced product so that it maintains the market dominance with
stable demand from the customers.
Issues caused by the shift in paradigm
The major issue is the management of inventory since it requires balancing within its levels. The
management of suppliers is also a concerned issue since each step requires thought and process
suiting the business. The globalization of supply chain is dependent upon the safety and quality
of the products (Brindley, 2017). There can be damage in the reputation of the company if there
are recalls in the safety issues such as cash flow.
The supply chain managers must mitigate the risks so that damage in any of the models shall not
bring any damage to the other levels. The company sometimes increase the prices of its products
to incur with the losses in the market; this sometimes causes a negative effect on the purchasing
aspect of the customers. There are also issues during the delivery of the goods either it be the raw
materials or the finished goods.
Recommendations
Proper supply chain is required for any organization dealing with retail business. The company
must have an improved supply chain in order to make proper performance. As for the chosen
company, Seven Eleven few recommendations can be made to make an effective supply chain,
they are discussed below:
 Replacement of labour with technology can increase the productivity level of the
company by making accurate performance in the proper place and this can also help the
company by lowering the costs. This can be used for better supply chain development.
 Monitoring production can help the chosen company by both inventory space utilization
and also by saving financial resources. This can help the company by proper utilization of
resources. As there will be less production, the company can focus more on a particular
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product while its production. This will increase the quality of the product which will be
delivered to the customers.
 By practicing, lean management of non essential human movement. It can help the
company to monitor the supply chain flow which can stand beneficial to the company by
reducing the cost. As the company will be reducing involvement of unnecessary labour
force, the chosen company can increase its financial strength which can be used for
different purposes to meet other deficits.
 Again, by practicing lean management in transportation. This can help the chosen
company by keeping proper eye on every stages of transportation. This can improve the
quality of transportation, resulting in enhancement of the flow of good from the
manufacturers to the customers.
Recommendations on the various identified issues
The company should bring stability in the financial cost cutting upon iys products so that the
company is not possessed by any future threats related to finance.
The company should maintain access for the national interest so that the company maintains its
position in the market. The company should also maintain access with better monitoring and
better benchmarking.
The main reason of using e-commerce and information systems in the business of supermarket is
to increase the sale. Therefore, new and upgraded e-commerce and IT services should be adopted
to increase the overall sales in comparison to its competitors.
The company should check on the regulation of the excessive pricing of tyhe products so that
they can increase their customer audience in the market.
The company should also deal with the inventory, delivery, the relations with its suppliers,
quality of the products and mitigation of the risks so that the overall affects of these issues
reduces, contributing to higher chances of promotion of the company in the market.
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Reflective Report
For preparing the report we were divided into groups wherein we were asked to evaluate the
possible risks that are faced by the buying organizations when they interact with their suppliers. I
was chosen as the team leader of the group by my other team mates as according to them I
possess good leadership and management skills. The organization chosen for the project was
Seven-Eleven, Japan. The initial task that we required doing was to research about the company
in order to understand the background of the company. Secondly, we needed to identify the
issues that affected the company such as, globalization, information systems and E-commerce,
outsourcing and supply change relationships and improvements. In order to conduct a thorough
research, I distributed the above-mentioned sub-topics among the group members. For the first
week, my team and I dedicated our entire time in researching upon the topic. Our basic source of
gathering information was different books, journals and internet sources. All the information that
was gathered from the mentioned sources was then analysed and the information and data that
were required and obligatory for the report was taken and the rest were discarded. However,
during the entire process there was a number of issues that occurred, for instance, there was
miscommunication and misinterpretation between the team members. This occurred due to the
fact that the different team members had different opinions and perspectives regarding the topic.
In addition, there was communication gap between the other team members, which created a lot
of misunderstanding between the team members. This also delayed the entire process of
preparing the report assignment. Besides, the some of the team members were also not contented
with the task allocation as according to them they could perform better in some other task in
comparison to the one allocated to them.
In order to overcome the above-mentioned issues, I took a number of initiatives such as; I
arranged a get together so that my team members could interact with each other, thus reducing
the risk of miscommunication. In addition, I also tried to communicate with the all team
members in order to identify and analyse their skills and potency and accordingly allocate tasks
to them so that they give extra efforts in obtaining the objectives of the assignment. During the
entire process of preparing the report we continuously interacted with each other with the help of
e-mails and other communication mediums. Furthermore, we conducted a team meeting every
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week in order to keep up with the progress of the assignment. We also helped each other by
providing information concerning their topic. Once the researching and analyses of the
information and data was done, our next step was to prepare the report. We sat together and
decided upon which points and sections of the gathered information was necessary for the
assignment. Once the report was completed, I divided the report and distributed it among the
team members for proofreading it. Once this process was over, certain changes were required to
be made. For that, we further researched upon the topic and made the necessary changes in the
report.
The entire process of doing the assignment has taught me a number of things, which will help me
developing my personal as well as professional skills and abilities. As I was selected as the
leader of the team, I was able to identify my potency and limitations concerning my management
and leadership abilities. Furthermore, with the help of self-evaluation, I was able to identify a
number of factors such as; I have good communication and motivation skills. I was able to
comprehend that when I could successfully manage the miscommunication issue between the
team members. Besides, as per the feedbacks and reviews of my team members I have good
motivation and incentive skills, as I was able to influence my team members to work effectively
towards the success of the project. The teamwork also helped me in improving my
communication skills as being the team leader I had to communicate and interact with my team
continuously. However, at times I used to get impulsive and had anger issues while managing the
team issues. This was a drawback for me as well as my team members. Therefore, I need to work
on my anger issues in order to work more efficiently in the future assignments. The report
project has also helped me in improving my knowledge due to the thorough research that I had to
undergo while preparing the report. The project also helped me in improving my problem
solving skills, as I had to cater to a number of issues that took place while performing the task. In
addition, my time management skill was also developed and enhanced. I was able to distribute
the time accordingly among the different tasks and was finally able to finish the entire project
report on time. However, while proofreading the entire report project several issues were
identified, which required improvements. This took some extra time, although it did not exceed
the scheduled time frame. In addition, working in a team helped me to learn a number of new
things. For instance, I was not well accustomed with the information technology systems;
however, one of my team members was well knowledgeable concerning the mentioned subject.
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Therefore, it was easier for me to learn the mentioned skill from him, which further helped me in
improving my research and finding skills. Besides, as per my team members they were able to
learn good leadership and management skills from me. Teamwork has also facilitated me in
improving my creativity and resourcefulness. My conflict resolution skills were also enhanced
by working together in the team. It has further enhanced my confidence and self-reliance, thus
encouraging my healthy risk taking abilities.
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Conclusion
With the advantage of the information system, Seven-Eleven stores were able to meet the supply
with an increased rate of demand. The company though initially got rejected but took a strong
turn in the year of 1960 (Lin, 2016). The company developed an extensive franchise network,
which helped in the operations of this network. The company to increase its efficiency adapted
the market dominance strategy. Striving towards globalization, the company adapted te changes
and influenced in Japan's stock exchange market. The quality of the product is never comprised
in this company. It has developed new strategies like regulating the temperature, packaging of
the food items increased customer satisfaction with the quality.
For the mode of payment, Seven-Eleven has provided the customers with a utility bill payment
service. On behalf of credit companies, this company has adapted the system of accepting
instalments payments. To maintain the efficiency in operations of franchise, distribution centres
and suppliers, this company has developed and adapted an unrivalled integrated information
system network. E-commerce though has many risks but still have the ability to manage time and
increase customer satisfaction. Globalization has helped Seven-Eleven to expand it stores not
only in Japan but across the world attracting wide range of customers through e-commerce. With
the advanced information centre, the company has made a rapid growth in distribution.
Supply chain management of this company has been tightly linked to make the logistics mix
operate smoothly in Japan. With globalization, the company has adapted many changes in
technology. The company utilized digital technology to collect data and information and send
information. With the help of globalization, the company has expanded its retail stores to Hong
Kong, Indonesia, Malaysia, China, Macau and Philippines. Thus to conclude, the company has
shown immense growth in the field of supermarkets and retail stores. The company has a brand
value in providing beverages, drinks to the customers without compromising the quality.
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Appendix
Seven-Eleven has served the customers with innovative strategies. The company has currently
5500 stores in Japan and Hawaii. The company covers almost an average area of 100 square
meters in Japan with it individual stores. Depending on the customer’s choice, the company has
stores with about 3,000 SKUs on average. 90% of the stores of Seven-Eleven operated 24 hours
basis to assist customers in their product query. By 1994, the company owned stores about
29.2%.IYG acquired almost 70% of Southland's common stock carrying a total price of about
$430 million. The company had seen rapid growth in revenue and stores in Japan by the end of
1990. The company though has a contribution of about 7% in the group revenue yet it has 47%
of the groups operating income.
Figure 1: Global Growth of Supermarket Industry
(Source: http://www.coriolisresearch.com/pdfs/coriolis_retail_supermarket_globalization.pdf )
Industry Overview (Provide Snapshot)
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