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Franchising Properties

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DISADVANTAGES AND ADVANTAGES OF FRANCHISING
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Corporate visionOur vision is to be the best retailer of convenience for emerging markets.Core PurposeTo make daily life easier by providing modern convenience.Oath of 7-Eleven EmployeesI want to treat everyone honestly and promise to try my best to serve our customers in order to create a better future for the company, my family, and myself.The 5 7-Eleven fundamentals are quality, speed, selection, and value in a safe and pleasant environment.Core Values Customer focused Teamwork Integrity Reliability Results orientedThe first seven years OnOctober 26, 1982, Philippine Seven Corp. (PSC) acquired the license agreement to use the 7-Eleven Convenience Store system in the entirePhilippinesfrom Southland Corporation ofDallas,Texas. After a month, PSC was registered with SEC on29 November 1982. The incorporators were Jose T. Pardo, Vicente T. Paterno and Francisco R. Sibal. The companys chief mission was to introduce an entirely new retailing concept to the Filipino consumers, i.e. operating a chain of 24-hours convenience stores. The first corporate office was located at the ninth floor of theCenturyTowerbuilding inSalcedoVillage,MakatiCity. In order to apply Southland technology in all phases of managing a 7-Eleven convenience store, PSC sent five of its employees to various Southland installations in theUS. The so-called Five-Man Team was consisted by Francisco R. Sibal, Executive Vice President; Ramon de Jesus, General Manager; Jose Blanch, Merchandising Manager; Wilfredo Villanueva, Accounting Manager; and Teodoro Wenceslao, Store Operations Manager. They left onFebruary 15, 1983to undergo a five-week in-depth training in their respective fields. Upon their return to the country, the Five-Man Team immediately set out to practice what they've learned from the functional training: site selection, design and construction of the first 7-Eleven store, negotiation with suppliers, ordering of equipments, recruitment and training of first batch of employees. The assassination of Ninoy Aquino at theManilaInternationalAirportonAugust 21, 1983triggered the steady deterioration of the economic and political situation in the country. In spite of the bleak state of the market, PSC decided to proceed with the 7-Eleven project. On this account, the company needed fresh capital to build its first two stores. The Board of Directors increased their respective equity contributions in PSC and invited two outstanding businessmen, Mr. Jorge L. Araneta and Mr. Ernesto B. Rufino Jr., to become new shareholders and directors of PSC. Despite the aggravating political and economic adversities, PSC gamely opened its first 7-Eleven convenience store, located at the corner of EDSA and Kamias Streets in Kamuning,Quezon City, onFebruary 29, 1984. This store proved to be a tough one as it weathered all types of calamities, the EDSA revolution, and coup'd'etats. The second 7-Eleven convenience store was opened atPresident Ave., BF Homes, Paraaque, which was adjacent to the entrance of a posh subdivision, in April 1984. Having been able to open two stores within the same year, PSC was able to make necessary comparisons in the operations of its stores. It has learned that the primary customers of 7-Eleven stores came from the middle class: the salaried, busy employee who preferred a quick fix, while on his/her way home or to the office. Because PSC steadily lost money during the years of 1984 to 1985, and due to the outrageous impossibility of securing bank loans, Francis R. Sibal was compelled to sell his share in the company and relinquish his responsibilities as executive vice president and managing director. His duties as Managing director was assumed by Mr. Vicente Paterno, while his responsibility for external affairs was taken over by Mr. Jose T. Pardo. To infuse additional capital into the company, PSC sought the assistance of a friendly large Philippine organization who later offered a substantial semi equity term loan. Because of this, the company had adequate funds to open its third 7-Eleven convenience store at the corner of Harrison and Libertad Streets inPasayCityin October 1985, and patterned it to the characteristics of the Kamias branch. Management also came up with a clever leasing scheme wherein the lender participates in store profit when an individual store achieves higher than target sales volume. This was an effective way to source out funds for the construction of more stores. The first 7-Eleven Convenience Store built through this scheme was the branch located in Nagtahan Rotonda, at Santa Mesa,Manila. On May 19, 1988, PSC's sister company, Philippine Seven Properties Corporation (PSPC) was registered with SEC, and its incorporators were Manuel Agustines, Jorge Araneta, Jose Pardo, Vicente Paterno, and Alfredo Ramos. PSPC undermined the difficulties posed by the Constitution, and made it easier for PSC to raise money through acceptance of foreign and corporate investments. PSPC was able to successfully generate additional funds which were used by PSC in the construction of six stores in 1988, and five stores in 1989. Indeed, a tremendous blast of enthusiastic action from PSC Management. Though still inexperienced in the field of the convenience store industry, PSC showed remarkable results. In fact, according to Southland's technical representatives, PSC's 7-Eleven stores compared favorably with other 7-Eleven stores anywhere in the world. The stores were clean, comfortable, and the ambience was very inviting and pleasant. Surely, the company has learned its lessons well.Corporate history Philippine Seven Corporation (PSC)was registered with the Securities and Exchange Commission (SEC) on November 1982.It acquired from Southland Corporation (nowSeven Eleven, Inc.) ofDallas,Texasthe license to operate 7-Eleven stores in thePhilippinesinDecember 13, 1982. Operations commenced with the opening of its first store inFebruary 29, 1984at the corner ofKamias Roadand EDSA Quezon City, Metro Manila. Considering the countrys economic condition at that time, the Company grew slowly in its first few years of existence. In July 1988, PSC transferred the Philippine area license to operate 7-Eleven stores to its affiliate, Phil-Seven Properties Corporation (PSPC), together with some of its store properties. In exchange thereof, PSC received 47% of PSPC stock as payment. Concurrent with the transfer, PSC entered into a sublicensing agreement with PSPC to operate 7-Eleven stores in Metro Manila and suburbs. As part of PSPCs main business, it acquired or leased commercial properties and constructed retail storebuildings, leasing the buildings to PSC on long term basis together with most of the capital equipment used for store operations. In effect, PSC concentrated on managing its stores and effectively took the role of a pure retailer. In May 1996, the stockholders of both PSC and PSPC approved the merger of the two companies to advance PSC groups expansion. InOctober 30, 1996, SEC approved the merger and PSPC was then absorbed by PSC as the surviving entity.With the consolidation of the respective lines of business of PSC and PSPC, PSCs retailing strengths were complemented by PSPCs property and franchise holdings.Their management as a single entity enhanced operational efficiency and strengthened ability to raise capital for growth. PSC listed it shares (SEVN) in the Philippine Stock Exchange and had its initial public offering inFebruary 04, 1998. The shares were offered at the price of P4.40 per share from its par value of P1.00 per share. InSeptember 17, 1998, PSC established Convenience Distribution Inc. (CDI), a wholly owned subsidiary, to provide a centralized warehouse and distribution system to service its 7-Eleven stores. With the effectivity of the Retail Trade Liberalization Act (R.A. 8762) onMarch 25, 2000, foreign entities were allowed to invest in an existing retail company subject to the requirements of the law. President Chain Store Corporation of Taiwan (PCSC), which is also the 7-Eleven licensee inTaiwanoperating about 2,700 stores, purchased 119,575,008 common shares of PSC or 50.4% of PSCs outstanding capital stock at the price of P8.30 per share. The purchase was made under a tender offer during October 9 toNovember 7, 2000by President Chain Store (Labuan) Holdings, Ltd., a Malaysian investment holding company, wholly-owned by PCSC. The acquisition is meant to forge a strategic alliance which aims to provide PSC with technical support from PCSC in strengthening its organizational structure and operating systems. This shall enable PSC to pursue store expansion plans on sound and profitable basis.A new affiliate, Store Sites Holdings Inc., was also established onNovember 9, 2000, as the entity to own land properties of the Company.These land properties are leased to PSC by SSHI.The Corporations area license to operate 7-Eleven Stores in thePhilippineswas renewed in August 2007 for another term of 20 years, renewable every 10 years.The Renewal Area License Agreement has been approved by andregistered with the Intellectual Property Office as ofSeptember 25, 2007. The Corporation initiated the establishment of PhilSeven Foundation Inc. (PFI) in October 2007 to support its corporate social responsibility programs. PFI was granted certificate of registration by DSWD last August 6, 2010. The company had a manpower complement of1,921 personnel, 655 of whom are regular employees, 301 contractual/probationary and 965 cooperativemembers to augment temporary needs during peak hours or season in the stores and the support services units. There is no existing labor union in the company and collective bargaining agreement. There is an Employees Council which communicates to management the employee concerns. There has been no strike or threat to strike from the employees for the past three years. At year end, PSC is operating 551 stores, 211 of which are franchise stores, 130 stores are operated under a service agreement, and the remaining 210 are company-owned stores.The store franchise and service agreements have a minimum term of 5 years each, renewable for a similar term. The stores under franchise and service agreement are indicated in the store list provided in the discussion of Leases herein. Currently, PSC considers three major competitors in maintaining its leadership in the Convenience Store (C-Store) Industry.There are a number of other small players including gas marts, but their store count and sales volume as a group by itself is not significant to be considered.PSC concluded in August 2009 a non-exclusive tie-up with Chevron Philippines Inc. and opened 25 7-Eleven Stores in certain identified Caltex gasoline stations. The Company continues to sustain its leadership by putting stores in strategic locations, carrying product assortment fit for such market.

BOARD OF DIRECTORS*

Vicente T. PaternoChairman of the Board & DirectorLien-Tang HsiehDirector

Nan-Bey LaiVice-Chairman & DirectorDiana P. AguilarDirector

Jose Victor P. PaternoPresident & DirectorJorge L. AranetaDirector

Jui-Tang ChenDirectorAntonio Jose U. Periquet, Jr.Independent Director

Mao-Chia ChungDirectorMichael B. ZalameaIndependent Director

Wen-Chi WuDirector

*As of 18July2013, PSCAnnual Stockholder'sMeeting.

CORPORATE OFFICERS*

Chin-Yen KaoHonorary ChairmanJose Victor P. PaternoPresident & CEO

Vicente T. PaternoChairman of the BoardPing-Hung ChenTreasurer & CFO

Nan-Bey LaiVice ChairmanAtty. Evelyn S. EnriquezCorporate Secretary

*As of 18July2013, PSCBoard Meeting.

Copyright 2004, Philippine Seven Corporation. All rights reserved.

Legal Disclaimer

Management TeamJose Victor P. PaternoPresident and CEOJose C. Ang Jr.General Merchandise Division ManagerJason Jan G. NgoManagement Information Systems Division Manager

Ping-Hung ChenTreasurer and CFOArmi A. CagasanStrategic Merchandise Division ManagerChao-Shun TsengCorporate Planning Head

Ying-Jung LeeOperationsDirectorand Concurrent Marketing DirectorLawrence M. de LeonFinance and Accounting Services Division ManagerEduardo P. BataclanProcurement Resources Division Manager

Liwayway T. FernandezOperations Division ManagerAtty. Evelyn S. EnriquezCompliance Officer and Corporate SecretaryLegal & Corporate Services Division, Division ManagerMaria Celina D. De GuzmanInternal Audit Division Manager

Francis S. MedinaBusinessDevelopment Division ManagerVioleta B. ApolinarioHuman Resourceand Administration Division Manager

Community affairs

7-Eleven is truly committed in being thefriendly neighborhood convenience store. It is always one with the community in uplifting the lives of the Filipinos as it continuously supports the communitys various social programs and services. To site some are the Computer Donation Project, our participation in environmental welfare programs sponsored by local NGOs, and assistance extended to several charitable institutions. 7-Eleven is in partnership with thePhilippine National Red Cross (PNRC), a voluntary humanitarian organization that serves as the governments auxiliary arm in providing relief, health, and welfare to the most vulnerable people in need including victims of disaster and other emergencies. And 7-Eleven takes pride in supporting theirCoin Can Projectwhich is seen in our stores cash register counters. Our way of saying, 7-Eleven cares for our less fortunate Filipinos.

7-Eleven believes that protecting the environment is one of the best ways to invest in the countrys future. Thus, we took part in ABS-CBN FoundationsLa MesaWatershed Project.Said program aims to reforest some 1,200 hectares of open areas to ensure the sustainability of Metro Manilas water source.

During 7-Elevens celebration of the 204thGrand Store Opening Celebration, 7-Eleven donated monobloc chairs to the Barangay Satellite of Highway Hills inMandaluyongCity.Barangay Captain Severo Servillongleefully accepted them.http://www.7-eleven.com.ph/index.php

Do you have suggestions or complaints about 7-Eleven? Do you want to buy from or sell to us? Are you interested in a 7-Eleven franchise? Contact us now.7-Eleven StoresProvide feedback on your shopping experience at a 7-Eleven store. Click here forcomplaints,inquiries and suggestions.For a complete list of our stores, please go toStore Locator

Franchising7-Elevenfranchise inquiry sectionor call the Franchise Hotline: +63 (2) 726-9968, +63 (917) 871-1475

Vendor RequestsIntroduce yourproduct or serviceto 7-Eleven. Accreditation forms are also availablehere.

Investor RelationsClick here forinquiries.

For comments, suggestions, complaints&franchise inquiries, etc...

Customer Hotline : 724-10-31 (Open 9am to 5pm) Mondays to FridaysMobile Hotline : 0917-750-2757 (Open 24 hours)

7-Eleven Corporate Office7th & 11th FloorsColumbia TowerOrtigas AvenueMandaluyong City 1550Trunkline: 705-5200

The Pros and Cons of Franchising Your Business15/07/2013 10:34 amshare this article twitter facebook delicious digg stumble reddit

Entrepreneurs with a successful business often wonder if they should franchiseas a way to expand their operations. Like any business model, franchising has its benefits and drawbacks. It is impossible to know whether franchising is right for your company until you evaluate the pros and cons in the context of your operations. That usually requires the help of a franchise lawyer or consultant, but before you start talking to the experts, you should get a sense of the key advantages and disadvantages.Franchising offers three major benefits to business owners seeking to expand operations:Access to better talent.Franchising is a great way to find talented people to manage your outlets and give them an incentive to work hard. The most qualified and hardest working people generally prefer to invest in running a business in return for profits rather than taking a salary as an employee. So by franchising, you are going to get better talent that will work harder to build the business than you would by hiring someone to work for you.Easy expansion capital.Franchising is a good way to obtain expansion capital. Because your franchisees pay to buy outlets in your chain, you can grow the number of locations without tapping much of your own capital or needing to request financing from banks or investors.Minimized growth risk.Franchising can generate high financial returns for relatively little risk. Unlike adding company-owned outlets, when you franchise, you put relatively little money into adding each location. If you have a good business model, you can earn high royalties from sales at those outlets. The percentage returns you earn can be many times what you would have earned if you opened and ran the outlets yourself.Offsetting these positives are three major disadvantages of the franchising business model:Less control over managers.You cant tell franchisees what to do the way you can with employees. Franchisees are independent business owners. Moreover, they have different goals from yours, which can easily conflict and even lead to legal trouble. Consider the classic example: Franchisors make money by collecting a percentage of sales as a royalty for letting the franchisee use their brand name and operating system. Franchisees make money from the outlets profits. Anything that boosts sales, but not profits will create conflict between you and the franchisee. If you want to offer customers promotional coupons, franchisees may likely object. Coupons boost sales, but not always profits, benefitting the franchisor, but not necessarily the franchisee.A weaker core community.Its more difficult to get franchisees as opposed to hired store managers to work together. Franchisees have an incentive to profit from each others efforts to generate business. For instance, your franchisees might try to get out of paying for the advertising needed to attract customers, figuring they will get the customers anyway if other franchisees buy the advertising. Of course, if all of them do the same thing, you end up with no customers because youve got no advertising. There are ways of minimizing franchisee free riding, of course, but those cost money and require enforcing your franchisee contracts in court.Innovation challenges.Its a lot harder to innovate with franchising than if you own your own outlets. With franchising, if you come up with a new idea, you have to negotiate with your franchisees to get them to accept the new product or whatever innovation you want to introduce, instead of just putting the new idea in place on your own.Before you talk to the experts about franchising your business, consider these pros and cons. Franchising isnt a silver bullet for business expansion. But when the advantages outweigh the disadvantages, it can be a great way to grow your business and well worth further research..http://www.theedgewirral.co.uk/content/the-pros-and-cons-of-franchising-your-business/

FINDING A BUSINESS: FRANCHISING VS. THE INDEPENDENT BUSINESSAs a buyer, you have the option of purchasing an existing independent business or a franchise. Each has its strengths and weaknesses. To understand which type of business is best for you, you need to understand both the differences between these two business types, and your own strengths and weaknesses.FranchisingFranchises come with a set of rules that you must follow. The franchisor has taken the time to develop a business template, which is then rolled out from location to location. If you are looking to use your managerial skills, and won't feel cramped if you can't put your own ideas into play, this may be the ideal form of business for you.Franchising offers many advantages. With a good franchise, the formula has been proven, and the kinks should have been worked out the system. Potential customers will probably be familiar with the name or brand of the franchise. For example, consider a popular coffee shop franchise. You may not have been to an individual franchise before, but you will likely feel confident that the quality of the product will be consistent with other shops. This consistency of product, store design and operations is the key advantage that a franchise offers. As a result a franchise may takes less time to establish a customer base than an independent business, which may in turn lead to bigger profits earlier.It's like a ready made business and all you have to do is play by the rules. You have all the experience and support of the franchiser, says Richard Wise a Chartered Business Valuator in Montreal, QC.Buying a franchise is quite different from buying an independent business, and is beyond the scope of this article. When you buy a franchise, many terms are non-negotiable. In So You Want to Buy a Franchise authors Douglas Gray and Norman Friend explain that while there is no standard franchise agreement, the agreements for each franchise can generally be considered non-negotiable, with the exception of items like location, exclusive territory, and opening date. If you are considering buying a franchise, So You Want to Buy a Franchise would be an excellent starting reference to pick up.Independent businessesBuying an independent business gives you the freedom of setting your own rules. You set the vision of the company, control human resources, and get to choose which supplier you're going to buy from. In an independent business the decisions and the success of the business rest on your shoulders. There is room for creativity and innovation, but at the same time, your choices may destabilize the business. Unless you are buying a business with a strong, existing brand, you may not have the same recognition that you would get with a franchise. On the flip side, you won't have to pay franchise fees and royalties.Some buyers look for failing businesses, which may be up for sale because they have hit upon hard times and their owners can't afford to keep them. These businesses can be a good buy, but you'll want to take a long and hard look at why the business is failing and whether or not you can fix these problems. Wise feels that many businesses can be turned around and in some cases a simple change in management will solve the problems.

Independent Business or Franchise? How to DecideBYCURTIS KROEKERIt's a question every business buyer faces. Here are five major differences between buying an independent business versus a franchise.132SHARES |SHARE THIS ARTICLE

Subway's Fred DeLuca at the counter. He built the first one by himself.Buying a small business is a major career step. One of the first decisions you'll need to make relates to the type of business you hope to acquire. Specifically, you will need to decide whether to buy an independent business or a franchise.AtBizBuySell.com, we know buyers can and do succeed with both independent businesses and with franchises. However, there are key differences that need to be considered when determining which type of business is the best fit for your personal and business goals.Should you buy an independent small business or a franchise?Some buyers thrive as independent business owners, while others are more likely to prosper as franchise owners. In reality, there are no easy answers to the independent business versus franchise dilemma. Instead, you will need to carefully evaluate the factors that differentiate the two approaches, talk with your family and other trusted advisers, and decide which one is right for you.1.Ownership ModelFrom an ownership perspective, a franchise is very different than a typical small business. Unlike independent business owners, franchise owners don't have the freedom to change their products or services based on their personal desires or changing market conditions. To a large degree, the franchisor (i.e., the parent company) makes the decisions about product lines and other variables.But on the other hand, independent business owners don't have the security of knowing that product lines, service offerings and other ownership decisions have already been tested and optimized for the marketplace. In other words, although franchise owners sacrifice independence in decision-making, they enjoy the security and stability that comes from belonging to a much larger organization with a proven track record.2.CostIndependent business owners are likely to have higher investment costs to buy and operate their business, but they also have more control over the investment decisions and timing thereof. For example, if cash is tight, independent business owners can delay remodeling or expansion plans. They can also choose to downsize the scope of the projects they pursue.Franchise business buyers typically have lower total investment costs (especially upfront), but need to fulfill the obligations set by franchisors. For example, in addition to an upfront franchise fee, franchise buyers are required to pay royalties on an ongoing basis. When it comes to renovations and other investments, the franchisor often has the right to dictate the timing and scope of the remodel to franchisees.3.Brand RecognitionIn most cases, franchise buyers have an advantage over independent business owners when it comes to brand recognition. Unless the independent business seller has proactively cultivated the brand, it's unlikely that the business will enjoy the brand recognition that comes with standard franchise business opportunities.But buyers also need to recognize that brand recognition can have a dark side. If the franchisor or another franchisee does something that results in negative publicity, all of the brand's franchisees suffer--a risk that independent business buyers don't have to worry about.4.Operational ResourcesFranchise businesses tend to be popular with buyers who lack extensive business or industry experience. Certainly, experienced business owners also buy franchises, but franchisors make it easier for first-time business owners to succeed by providing access to a business system, corporate support, a supplier network and other services.Independent business owners, on the other hand, typically have to go it alone. In return, however, they get complete control. Although independent business owners retain total control over their companies, they don't have access to the support franchisors provide their franchisees in marketing, operations, supply chain management, human resources and other departments.5.Success RateVariances in the success rates of franchises and independent small businesses are debatable. There is no conclusive evidence that either approach improves or reduces your likelihood of success.As a business buyer, you need to evaluate each potential acquisition on its own merits. Both franchises and independent businesses fail every day, and, at the same time, people clearly have success with both models. The key takeaway is that, whether you buy a franchise or an independent business, it's important to do your homework and thoroughly research the business before you invest.Ultimately, the decision to buy a franchise or an independent small business may boil down to your personality as a business owner. If you can't see yourself relinquishing control over operational decision-making and other activities, then a franchise likely isn't the right business model for you. However, if you prefer the security, stability, and benefits of participating in a larger organization, then the acquisition of an existing franchise or opening a new franchise location may make more sense than the purchase of an independent small business.http://www.inc.com/curtis-kroeker/independent-business-or-franchise-how-to-decide.html

Hangout HavenThis case study of 7-Eleven illustrates how a brand needs to and can benefit from adapting to a local market.Margot Huber, Deike Diers and Andrea GulisanoEdition:May 26, 2013TAGS:7-eleven|London school of business|LBS case studySTORY TOOLS Change font size Print this story E-Mail this story CommentRELATED How Kraft Foods made Oreo a global brand

Executive Summary:7-Eleven is known in the United States as a convenience store chain where customers can grab snacks, drinks and other everyday products on the go. In most parts of the world, it is a no-frills store with little emphasis on decor. But in Indonesia,7-Eleven has been positioned as a trendy spot where young people spend time, surf the Internet and meet friends. Thiscase study of 7-Eleven illustrateshow a brand needs to and can benefit from adapting to a local market.

It's one of the hippest places to hang out in Jakarta. And it isn't some trendy new French restaurant in a Dutch-era heritage building. Instead, thousands of people in the Indonesian capital spend their evenings sipping coffee or beer on pavement tables at their neighbourhood 7-Eleven, the international convenience store synonymous with anytime, on-the-go shopping in most parts of the world.

Indonesia's 7-Elevens are, clearly, a long way from the original concept behind the world's largest convenience store chain. "At 7-Eleven, our purpose and mission is to make life a little easier for our guests by being where they need us, whenever they need us," says the company's website. And that's what it has been doing all over the world since the first convenience store was born after a Southland Ice Co employee in Dallas started selling milk, eggs and bread from an ice dock in 1927.The 7-Eleven chain has about 49,500 stores in 16 countries across the world, over 10,000 of them in North AmericaToday, the chain has grown to about 49,500 stores in 16 countries, more than 10,000 in North America itself, but its core customer remains the same: people on the go who need a one-stop shop to quickly buy everyday products. Typically, most 7-Eleven stores all over the world are conveniently located in office areas and are open around the clock.

Initially, 7-Eleven spread its wings slowly. In its early years, it grew strategically in suburbs in the United States and areas too small for a supermarket: by 1963, it had 1,000 stores across the country. But it began to grow at breakneck pace after it adopted a franchisee model the following year. In 1969, 7-Eleven began expanding beyond US borders and set up shop in Canada. In the 1970s and early 1980s, it expanded to Mexico, Japan and Asian markets such as Taiwan, Singapore and the Philippines. With the increasing importance of emerging Asian markets such as Thailand, the Philippines and Malaysia, 7-Eleven Corporation moved its corporate headquarters to Japan in 2001.

Traditionally, 7-Eleven's entry strategy is to target urban markets and tailor stores to local tastes. For example, customers in Hong Kong can pay their phone and utility bills at a local 7-Eleven; in Taiwan, they can service their bicycles or photocopy at the convenience store; and in the US they can pick-up their online Amazon shopping there. By offering these services - often exclusively - customer traffic can be increased significantly. To achieve this customer orientation and competitive advantage, almost all stores arfe operated by franchisees, who understand the local environment.

7-Eleven in Indonesia has everything local markets offer, and more. It also has live entertainment and wireless connectivitySo, when 7-Eleven entered the Indonesian market in 2008, the question was: what was the Indonesian customer looking for and where should the retailer position itself? The Southeast Asian country was an ideal market for a retailer. It was among the world's largest growing economies with a population of 240 million and a growing class of consumers.

But Indonesia had some typical traits not found in other markets. For one, just hanging out and doing nothing is so deeply embedded in Indonesian culture, the local language has a special word for it: nongkrong.

People traditionally gather at street markets and share stories, eat in local markets and roadside food stalls called warungs or Western fastfood chains such as McDonalds, Dunking Donuts or coffee shops such as Starbucks which entered Southeast Asia a whi le ago.

Moreover, Indonesia is highly plugged-in: the country had an estimated 20 to 30 million Internet users in 2009, a big chunk of them between the ages of 15 and 19. 7-Eleven studied the culture, habits and tastes of the Indonesian population and realised Indonesia lacked places where young people could hang out, eat, drink and follow their new passion: being online. It adopted a unique business model in the country: it blended a small supermarket with inexpensive readymade food and seating to cater to Jakarta customers looking for outdoor recreation space in a city where traffic jams often restrict mobility.

7-Eleven in Indonesia included everything local markets and street vendors offered - and more. The store is open 24 hours, has hasslefree parking, offers leisure activities such as concerts, is air-conditioned and, most importantly, has wireless connectivity. Sixty-five per cent of the Indonesian franchise's customers are less than 30 years old and love social networking. 7-Eleven also featured local artists or live bands to further attract the nongkrong-ing crowds at its stores.

The target customers7-Eleven in Indonesia is more focused on the experience of hanging out rather than the convenience store concept itself. Its valued customer there is between 18 and 35, works in a large commercial area and is happy to pay a premium for food and drinks if he has an enjoyable place to spend some time. He/she is not bound by time and stops by throughout the day and night, which makes it worthwhile to stay open 24/7. In addition, the social network connectivity of visitors to 7-Eleven stores, who tweet and post about their experience, attracts new customers. It is "hip" to hang-out at the local 7-Eleven store.

When it came to pricing strategy, the local franchise followed the company's traditional model. It leveraged the fact that its stores are open 24/7, even when other food retail competitors are closed, and priced products at the upper end.

The placement strategy of 7-Eleven Indonesia was also the same as the US. The stores are located in commercial and office areas, but not public transport stations because they are not seen as premium locations.

But unlike the US, the archipelago of around 17,000 islands does not have a 7-Eleven literally at every corner; instead it focuses on big hubs in Indonesia.

7-Eleven Indonesia's unique customer experience extends to popular local artists and social media websites. Local artists perform in 7-Eleven stores because their fans like to hang out in these areas and 7-Eleven provides the location at low or no costs. Although 7-Eleven has a first mover advantage and has already built up a strong brand name and large customer base, new competitors will come into this market and existing ones are likely to reposition themselves. 7-Eleven should continue to innovate its product range and offer additional services that meet local traditions and customer needs to stay ahead of the competition.Retail is one area, especially mass merchandise retail, where global success stories are few and far between: Prof Nirmalya KumarHow much to adapt is a classic dilemma for global brands

As global brands from Western countries adapt to emerging markets, they face the challenge of different demographics and income patterns. How much to adapt while retaining the brand DNA is a classic dilemma. Adaptation needs to be limited for luxury brands as their target market tends to be the top of the pyramid, where consumption patterns are global.

Similarly, for technological products, like software or smartphones, the adaptation needed is relatively small. Retail is one area, especially mass merchandise retail, where global success stories are few and far between. Even the most successful global retailers - Carrefour, Metro and Wal-Mart - have had their share of failures.

Why is global mass retailing so challenging? The products/brands sold by mass retailers are not unique - and are already widely available in the country. As a later entrant, a global retailer is unlikely to find the best locations available and it is unlikely to have a lower cost of operations than local mom-and-pop stores. To succeed, the global retailer has to offer better customer experience while hoping that savings from state-of-the-art global systems will more than compensate for the higher real estate and operating cost disadvantages.

The 7-Eleven case in Indonesia is an outstanding example of a global retailer having found a unique proposition with its customer experience that taps directly into the demographic differences of the country. For global firms, after China and India, Indonesia has perhaps the greatest potential. Kudos to 7-Eleven for unlocking this.

Prof Nirmalya Kumar, Professor of Marketing and Director of the Aditya Birla India Centre at London Business School

It shifted its core brand proposition from a convenience store in the US to a place where convenience store meets Internet cafe: Lassi Lastiani7-Eleven Stands Out For Its Marketing Strategy

7-Eleven's success in Indonesia is an ideal case to study how a brand redefines its marketing strategy to enter a new market. While other brands are struggling to find their place in the market, 7-Eleven stands out for its marketing strategy. The new local strategy is aligned to the growing demographic opportunity in the Indonesian market, where young people below 30 account for almost 40 per cent of the population. Capturing this important market with the right positioning - a cool, trendy place to hang out with affordable meals, drinks and fast Internet - have been the key success factors. It shifted its core brand proposition from a convenience store in the US to a place where convenience store meets Internet cafe for young people in Indonesia.

Moving forward, keeping pace with changing customer needs, a fast-moving economy and a competitive environment in Indonesia are the challenges for 7-Eleven. While the entry strategy perfectly captured a strategic position, competitors are adapting their strategy to win back market share. The local 7-Eleven concept is not that hard to copy after all, especially when some competitors have been established in the country for a longer period of time. The size and design of 7-Eleven stores needed to implement its strategy also deters expansion in every corner of the country. It has to carefully chose the right corner to be spacious enough for both the store and Internet cafe, and strategically located to be viable as a 24/7 concept.

Lassi Lastiani, Finance Director, Consolidated Services International, Jakarta

*An earlier version of the case study misspelt the first author's name.

(This case study is from the Aditya Birla India Centre of London Business School.)

What can we learn from 7-Eleven's experiences in Indonesia? Write to [email protected] or post your comments at www. businesstoday.in/casestudy-7-Eleven. Your views will be published in our online edition. The best response will win a copy of India Inside by Nirmalya Kumar and Phanish Puranam. Previous case studies are at www.businesstoday.in/casestudy

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