CHAPTER 4.

C EFE MATRIX

4.1 Summary and Conclusion

The researchers analyzed the external 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 External Factor Evaluation Matrix, findings for this paper will be
summarized and will properly reflect the performance of Philippine Seven Corporation in terms of
opportunities and threats.

Key External Factors Weight Rating Weighted

Score

OPPORTUNITIES
1 Increase advertising for Private Brands 0.0900 4.00 0.36
2 More receptive Markets in Visayas and Mindanao 0.1000 3.00 0.30
3 Environmental recognition given by DENR 0.0700 3.00 0.21
4 Loyal Coin 0.0800 1.00 0.08
5 Increasing per capita GNI 0.0700 3.00 0.21
6 Lower poverty incidence 0.0700 3.00 0.21

THREATS
1 Increasing Retail Segment Competition 0.0900 4.00 0.36
2 Supermarkets moving to 24/7 hours 0.0600 4.00 0.24
3 Security 0.0900 3.00 0.27
4 High Rental Costs 3.00
4 TRAIN Law 0.0800 4.00 0.24
5 Competitive Market 0.1200 2.00 0.24

TOTAL 1.00 3.09

As reflected by the EFE table, Philippine Seven Corporation is capable of maximizing the aforementioned
opportunities. In addition, PSC also has the capability to shield against threats in the industry with a
weighted score of 3.09. The following entries explain the rationale behind the data mentioned above.

OPPORTUNITIES

Increase advertising for Private Brands

This is an opportunity for to add allure to your store’s brand. When these private brands get marketed well,
it can mean not only an increase in your bottom line, but an increase in the number of PSC’s loyal
customers. PSC for instance, uses social media platforms to spread information regarding their private
brands like Slurpees and Big Bites. Thus with high visibility of their websites, they were viewed by the
researchers as a superior response to this opportunity.

More receptive Markets in Visayas and Mindanao

In the Philippines, PSC views that provinces across other island groups (Visayas and Mindanao) to be a
good market. After opening 318 new stores in 2017, Philippine Seven Corp. (PSC), the exclusive local
licensor of global convenience store (C-store) chain 7-Eleven, steps up its momentum with more strategic
franchising initiatives as part of its aggressive expansion plan. As it embarks for long-term profitability and
strong leadership this 2018, PSC, with a C-store fleet now pegged at 2,285, is targeting to open 375 new
stores in various strategic locations this fiscal year. Areas up for expansion include Region 2 (namely,
Isabela, Tuguegarao, Nueva Vizcaya and also Mindoro). For the Visayas, PSC will be starting expansion in
Leyte, Tacloban and the rest of Eastern Visayas. In Mindanao the company is planning to open stores in
Surigao del Sur and Norte and Sultan Kudarat. (Business Mirror 2018).

PSC’s move to be more aggressive in the provincial markets is perceived to be a great response to the
more receptive markets present in these areas. A rating of 4.0 was given for this opportunity.
 Environmental recognition given by DENR

Philippine agencies like DENR recognizes 11 'ECO-FRIENDLY' BUSINESSES, INDIVIDUALS. The

Department of Environment and Natural Resources (DENR) has recognized nine business establishments
and two individuals for their exemplary performance under the agency's Philippine Chiller Energy Efficiency
Project (PCEEP) and the Philippine Environment Partnership Program (PEPP).

With awards like this, PSC can further create a good reputation in the market which can be beneficial to the
business.

Loyal Coin
Aside from reward points that the consumer can get from loyalty programs like CLiQQ Rewards, their
members get exclusive access to some services like wifi for instance.
We’ve seen a tremendous growth in mobile smart phone and the use of technology not just in the
Philippines, but also globally, Comparing to the biggest loyalty rewards in the country, Loyalcoin has the full
advantage being the first mover in this industry. Loyalcoin is the first blockchain-based digital loyalty
rewards you can use not just in the Philippines but globally as well. Loyalcoin, has a wider scope of usage,
more rewarding customer experience, and an incentive for customers to stay loyal with the brands. PSC
may benefit with the use of this blockchain. However, its adoption was not yet officially executed

It can be used at various stores in the Philippines and global stores as well. As of this writing, this already
served about 2 million customers, in the following Philippine companies such as Petron, Bench, and
FamilyMart and others brands.

Increasing per Capita Gross National Income (GNI)

With the increasing trend of per capita GNI, households have higher disposable income. Their income
remaining after deduction of taxes and other mandatory charges are more available to be spent on
products and services. For this opportunity, PSC was given a score of 3.0. With the passing of the TRAIN
Law, the company will increase the prices of most commodities. Aside from that, 7/11 is known to have a
pricing strategy viewed to be high by consumers. PSC may implement this in consideration of the current
purchasing power of its market. However, the increase in prices may somehow sacrifice potential income.

Lower Poverty Incidence

This is in relation to the previous opportunity due to the rationale that with higher disposable income, their
purchasing power increase consequently. For this opportunity, PSC was given a score of 3.0. With the
passing of the TRAIN Law, the company will increase the prices of most commodities. Aside from that, 7/11
is known to have a pricing strategy viewed to be high by consumers. PSC may implement this in
consideration of the current purchasing power of its market. However, the increase in prices may somehow
sacrifice potential income.

THREATS

Increasing retail segment competition

In the past years, the Japanese giant LAWSON plans market entry into the Philippines c-sector. Today
there were several LAWSON outlets in the Philippines. The researchers foresee this as a threat to PSC
due to its possible expansions in the near future. In addition, recent searches stated that Circle K opening
last year and FamilyMart and Robinsons Retailed-owned domestic chain Ministop also intending to
increase their presence. In addition, ‘Mini-marts’ are in as retail giants fight for bigger slice of market. 7-
Eleven will face unprecedented levels of competition in the coming years.

Tax Reform for Acceleration and Inclusion (TRAIN) Law

TRAIN is the first package of the comprehensive tax reform program (CTRP) envisioned by President
Duterte's administration, which seeks to correct a number of deficiencies in the tax system to make it
simpler, fairer, and more efficient. This is one of the Threats of PSC due to the reason that some prices of
commodities will increase their price. This may negatively affect consumer behavior. For instance, this may
increase the potential switchers.

Security
With the nature of business of Philippine Seven Corporation, it is always likely to be a target for theft and
armed hold-up. Obviously the chain has put in various security measures in different parts of the world,
including video cameras, safes, and window barriers and so on.
Generally speaking, there is a significant demand for safety and security products in the Philippines.
Security upgrades are needed in various airports and other facilities around the Philippines. Demand is
increasing for electronic surveillance for crime prevention and apprehension purposes.

Shoplifting is another important point to consider when it comes to security issues. According to Manila
Bulletin, a Philippine newspaper, theft cases in the Philippines is rising. Like most retail stores, 7-Eleven
will have the continued threat of minor shoplifting and stealing. In some locations, these stores operate on a
lean budget and only have minimal staff, which presents the opportunity for some consumers to
occasionally shoplift. Like with the security threat above, video cameras may assist in this regard.

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.

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.

Supermarkets moving to 24/7 hours

Coming from the successful round-the-clock shopping started by SM Hypermarket Mall of Asia in
December 2016, 21 SM Markets stores were opened 24 hours in 2017 to accommodate anyone in a
Christmas shopping mood anytime. SM Markets’ move aims to cater to those staying late hours at work or
taking night shifts and will accommodate those shopping for Noche Buena essentials at their most
convenient time. No more rushing after work, no more enduring cravings in the middle of the night, and
most importantly, be able to get the ingredients fresh when you need them. This is a potential threat to PSC
stores due to the possibility of SM Markets to execute a whole 24 hrs operation. This erodes 7-Eleven’s
natural competitive advantage of having extended shopping hours. This is a significant threat to 7-Eleven
over time, as they would not have the low cost structure required to compete effectively on a price basis
with a major retail chain, such as SM Markets for example.