Chapter 5.

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 24/7 Operation
2 Convenient Locations 0.0800 4.00 0.32
3 Overall Brand Equity 0.0900 4.00 0.36
4 Increasing Franchise Outlets 0.0700 4.00 0.28
5 Low Barriers of Market Entry 0.0500 4.00 0.20
6 Individually Branded Products 0.0500 4.00 0.20
7 7-Eleven's Loyalty Program 0.0500 4.00 0.20
8 Good Customer Service 0.0400 3.00 0.12
9 Highly Visible Websites 0.0200 3.00 0.06
10 Increase advertising for Private Brands 0.0300 3.00 0.09
11 Technology Used by 7-Eleven 0.0300 4.00 0.12

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

24/7 Operation
This is one of the major strengths of 7/11 stores. Operating 24/7 is not an easy task which poses a great
competitive advantage in the market. With this nature of business, PSC is able to bring convenience to their
market any time of the day compared to other retail stores in the Philippines.

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 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.

In the Philippines, the affordable PSC franchising package was viewed as the main factor of the increasing
number of PSC franchise outlets. The country’s leading convenience store operator Philippine Seven Corp.
(PSC) has rolled out its simplest and most affordable franchising package to date – one that requires only
P300,000 in cash outlay from franchisees willing to run these stores on a full-time basis. With this new
scheme, PSC seeks to farm out mature corporate-owned stores to franchisees, in turn freeing up more
resources to open more stores and cement its market-leading position in the local convenience store
business.

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 (Business Mirror, 2016, paragraph 1).

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 (Business
Mirror, 2016, paragraph 2).

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, 2016, paragraph 3).

“This year’s plan for the Visayas and Mindanao is to open 75-percent franchise stores. Also, we have
formulated a new franchise offer, the FC3, which is a lower investment compared to our existing franchise
package. From P3.5 [million] to P5- million investment, we came up with the new franchise package, which
is around less than half a million,” revealed Francis Medina, Business Development Unit head. (Business
Mirror, 2016, paragraph 4). Via the FC3 package, the company is targeting to have “a franchise ratio from
54 percent to 60 percent.” (Business Mirror, 2016ph)

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.
“We are building momentum for our business by continually innovating our products, especially our
proprietary brands and services to give greater value to our patrons and shareholders. As of now, we are
looking into venturing and expanding our e-commerce usage to provide products and services to customers
in the most convenient way possible. They can already use CLiQQ App as their wallet to buy 7-Eleven
products,” Francis Medina, Business Development Unit head said.

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 Dbvisit Standby in a production environment since 2011. Dbvisit 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.

7-eleven has hired Big Data For Humans, an automated customer insight firm, to automate some of its
customer data decisions, as part of a strategy to upgrade its customer marketing (McEleny 2017 paragraph
1). Jose Victor Paterno, president at Philippine Seven Corporation (7-eleven), said: ‘We want to generate
more customer insights from our data-stream and use these effectively to improve our marketing, and we
were impressed by the potential of Big Data for Humans’ Customer Graph to help us achieve this. Their
cost effective and insightful approach to customer marketing made them the right partner for our customer
marketing strategy.’ (McEleny 2017 paragraph 6).

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

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.
 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