Chapter 5.

4.1 Summary and Conclusion

The researchers analyzed the internal environment of Philippine Seven Corporation through its political,
economic, social, technological, environmental, and legal environment, the industry and finally the
competing firms. Thus, with the use of Internal Factor Evaluation Matrix, findings for this paper will be
summarized and will properly reflect the performance of Philippine Seven Corporation in terms of strengths
and weaknesses.

Key Internal Factors Weight Rating Weighted

Score

STRENGTHS
1 Convenient Locations 0.0800 4.00 0.32
2 Overall Brand Equity 0.0900 4.00 0.36
3 Increase in Franchise Outlets 0.0700 4.00 0.28
4 Low Barriers of Market Entry 0.0500 4.00 0.20
5 Individually Branded Products 0.0500 4.00 0.20
6 7-Eleven's Loyalty Program 0.0500 4.00 0.20
7 Good Customer Service 0.0400 3.00 0.12
8 Highly Visible Websites 0.0200 3.00 0.06
9 Increase advertising for Private Brands 0.0300 3.00 0.09
10 Technology Used by 7-Eleven 0.0300 4.00 0.12

WEAKNESSES
1 High Rental Costs 0.0700 2.00 0.14
2 Untrained Employee Issues 0.0600 1.00 0.06
3 Pricing 0.0800 1.00 0.08
4 High Staff Costs 0.0600 2.00 0.12
5 High Capital Expenditure 0.0600 2.00 0.12
6 Competitive Market 0.0600 2.00 0.12
7 Large Team of Franchisees 0.0500 2.00 0.10
8 CLiQQ App Issues 0.0500 2.00 0.10

TOTAL 1.00 2.79

As reflected by the IFE table, Philippine Seven Corporation is capable of maximizing the
aforementioned Strengths. In addition, PSC also has the capability to overcome those
threats in the industry with a weighted score of 2.79. The following entries explain the
rationale behind the data mentioned above.

STRENGTHS
Convenient locations
7-Eleven has over 50,000 outlets throughout the world, which gives them a significant
location and convenience advantage. Obviously, being a convenience store, their primary
benefit to consumers is that commonly purchased products are located at nearby stores.
Therefore, greater market coverage through a greater number of outlets will provide
increase convenience to more consumers.

Overall brand equity

7-Eleven is generally perceived as the market leader by consumers in the convenience
store sector. This brand equity translates into customer loyalty and reduced price sensitivity
and, therefore, continued stability of revenue streams across its outlets. PSC is also engage
on different Corporate Social Responsibility initiatives like Project A-Game program,
Operation Chill program, Support for our military families and Developing Women
through NEW (Network of Executive Women).

Increase in franchise outlets

Many of the 7-Eleven stores throughout the world are franchised. This provides to strengths
for the organization – the first being that they can continue to grow the number of outlets
throughout the world without having significant capital requirements, as the franchisee is
typically responsible for the setup costs of the outlet – and the second advantage being that
the stores are run by motivated individuals who have a profit incentive for the store to
perform well.

Low Barriers of Market Entry

IN addition to market access, the ease of doing business in a jurisdiction is also a decisive
factor for investors. According to the Global Competitiveness Index 2015-2016, the
Philippines ranked 47th out of 140 countries, while in the World Bank Doing Business
Report 2016, it ranked 103rd out of 189.This ranking demonstrates that the Philippine
business environment, despite positive developments in recent years, still remains
challenging. This not only serves as a barrier to entry but also encourages entrepreneurs
and start-up investors to stay “underground.” Creating a competitive business environment
will not just benefit foreign investors, it will also support increased efficiency and productivity
for all, create a transparent business environment and a level playing field that will benefit
every Filipino, from exporters, to micro, small and medium enterprises, to consumers.
 Individually branded products
In addition to having a strong overall brand, 7-Eleven also has several branded product
offerings. The most famous of this are probably the Slurpee and the Big Gulp. Through
this kind of products, Philippine Seven Corporation can incorporate a higher profit margins
rather than those inventories that was retailed for instance. In some countries they also
have other branded offerings such as Movie Quik in the United States. These individual
product brands provide a further strength to 7-Eleven, as consumers may choose to seek
out these particular products/brands as their preferred choice. Hence, this may increase
customers since these products are exclusively available only in PSC stores.

7-Eleven's loyalty program

CLiQQ Rewards is 7-Eleven's loyalty program (formerly Every Day!Rewards). You can
already earn points every time you shop at 7-Eleven using your Every Day! Rewards Card
even before activation. However, you will need to activate your card before you can redeem
or inquire your balance. Activation links your card to your mobile phone number so that you
can sign in to your account to update your profile, link your Facebook account.

Good Customer Service

According to research, the customer service of PSC is of great service. To those who
experienced working here, they’ve mentioned that it has a productive and good
environment. In addition, it was very responsive on issues stated by customers not only
through their hotline but also regarding the issues that were commented trough social
platforms like Facebook. A verbatim reply from the official page of 7/11 is presented below:

“Hi, Kristi! Thank you for bringing this to our attention and sorry you experienced this. Rest
assured that we will be investigating this concern. Please send us the full details of the
incident. Kindly include your name and contact info so we can keep you posted. Thanks
again!”

In addition, 7-Eleven in the Philippines Boosts Customer Service Using the QuickScan
QW2100 Linear Imager from Datalogic to Scan Mobile Phones.

Highly Visible Website

According to observation, 7/11 is visible in common social media platforms like
Twitter with 10,800 followers, Facebook with 1,500,000 followers and Instagam with 32,000
followers. This is a strength of this company because with such visibility it creates a more
opportunity for profit. Leads are everywhere in social media platforms like these. With a
simple marketing online, a lot of people can be reached due to its visibility and due to the
number of followers their account has.
 Increase advertising for private brands
An important evolution in the retailing industry is the growing success of store brands. This
can increase intrinsic loyalty of their customer base, and the conquesting power to attract
potential switchers. For instance, advertisements on social media related to slurpees.

Technology used by PSC

7-Eleven has been using Standby in a production environment since 2011. Standby
replicates production data from the primary database to the secondary (backup) database at
a frequency of between five and fifteen minutes, 24 hours a day, seven days a week. When
one of the database tables within the warehouse management system became corrupt, 7-
Eleven was able to switch (failover) to the standby database instance almost immediately.
Once in failover mode the activated standby database supported the production system
while 7-Eleven’s IT team prepared the replacement primary database server. Once this was
ready, they used Standby to recreate the database on the replacement server by replicating
from the standby database. Once this process was complete, the application was
reconfigured to use the replacement database server.

In addition, the warehouse management system includes physical Windows-based

application servers and Linux-based database servers. The database servers are running
Oracle 10g Standard Edition and store around 900GB of data, with a weekly growth rate of
approximately 3GB. The system maintains a daily volume of around 14GB of transactional
data, and archive logs of approximately 100GB, all of which need to be replicated to the
standby database. This is a large volume of data to be kept replicated across multiple
servers without impacting performance.

WEAKNESSES

High rental costs

Due to the need to locate the 7-Eleven outlets in very convenient locations, they are likely to
incur higher rental costs as a result. This higher operating cost structure will mean that they
will need to adopt a price premium approach. There are some consumers who are happy to
pay a little bit more for convenience and speed of purchase, however other budget-
conscious consumers a more price sensitive.

Untrained Crews and CLiQQ App Problems

There were a issues based on customer experience that were posted and commented
mostly on the official page of 7/11 Philippines in social media. In addition, this was
identified as a major weakness by the researchers due to its capability to decrease the
potential revenue of Philippine Seven Corporation.
 Pricing
Consumers view the prices of 7/11 to be of a high price. According to a research, this may
be caused by such factors/expenses by Philippine Seven Corporation: marketing costs,
maintenance of machines, rental costs, 24/7 staffs and cost for convenience.

High staff costs

Similar to the high rental costs above, because the store operates on a 24/7 basis in some
locations, this type of retailing operation is likely to have a higher ongoing operating cost
structure. As a consequence of these higher costs, 7-Eleven will be required to have higher
price offerings in order to protect their margins.

All their stores require overnight staff, unlike supermarkets, where majority of their outlets
are not open 24/7. This means that 7-Eleven has to hire a few hundred staff to cover the
night shift, which wages, logically, should be higher than day shift staff. This contributes to
cost for the company, more so when there are rarely any customers making purchases in
the wee hours of the night.
Higher Capital Expenditure
PSC expanded its existing distribution centers and opened new warehouses in 2015,
ending the year with nine warehouse facilities compared to only four as of mid-2014.
PSC has increased its capital expenditures budget to P3.5 billion to support its accelerated
store expansion strategy on 2016. Hence, this may lead to lower revenues.

Competitive Market
IN addition to market access, the ease of doing business in a jurisdiction is also a decisive
factor for investors. According to the Global Competitiveness Index 2015-2016, the
Philippines ranked 47th out of 140 countries, while in the World Bank Doing Business
Report 2016, it ranked 103rd out of 189. This ranking demonstrates that the Philippine
business environment, despite positive developments in recent years, still remains
challenging. This serves as a barrier to entry.

Large team of franchisees

Although the overall franchised model is a strength as indicated above, running a large
team of franchisees is also a weakness. This is because it removes some element of direct
control of the day-to-day operation of each outlet and passes it to the franchisee. In
addition, a management team is required to recruit, train and monitor the various
franchisees, which also adds to the overall cost structure on an operational basis. Hence
according to Economic Article 4, “Franchisees control 55 percent of all stores while the
remaining 45 percent are corporate-owned.” – The Philippine Star