The Success of 7-Eleven Japan

145 Pages·2002·2.8 MB·English

by  Akira Ishikawa

Published by
World Scientific Publishing Co. Pte. Ltd.
5 Toh Tuck Link, Singapore 596224
USA office: Suite 202, 1060 Main Street, River Edge, NJ 07661
UK office: 57 Shelton Street, London WC2H 9HE
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library.
THE SUCCESS OF 7-ELEVEN JAPAN (English translation)
Originally published in Japanese as
SEBEN-IREBUN DAKEGA NAZETSUYOI
in 1998 by The Sanno Institute of Management.
Copyright © 1998 Akira Ishikawa and Tai Nejo
All rights reserved.
We would like to thank Seven-Eleven Japan Co., Ltd. for permission granted to use their
corporate logo on the book cover.
ISBN 981-238-014-0
ISBN 981-238-030-2 (pbk)
Printed in Singapore.
Preface
“The era of dynamic change is now upon us.” In this new age,
consumer tastes have become ever more whimsical, demanding
and diverse. Only the companies that can positively incorporate
“change” as a major business and strategic ally will have the
capabilities to survive the ruthlessness of this new high competition
era. In practice, however, performing this feat is much easier said
than done. How can “change” itself be made the key ingredient in
the recipe of success? The core objective of this book is to find
possible answers to this question through the exploration of the
knowledge and insights generated by our detailed case-study analysis
of 7-Eleven Japan.
As a standard bearer of revolution in logistics systems, 7-Eleven
Japan has consistently been confronted with various business
upheavals and uncertainties since its foundation in 1973. Indeed
many upheavals have required 7-Eleven Japan to conduct some
challenging reformations of its operations. Yet through these
experiences, 7-Eleven Japan has clearly been able to establish a
unique management concept. It has developed new management
techniques and has created unique management systems that have
enabled it to cope with the tumultuous changes of the time.
Illustrations of these abilities are quite numerous.
It is said that the highly evaluated “item-by-item management system”
as developed by 7-Eleven Japan was in fact the principal reason why
v
Preface.p65 5 08/26/2002, 2:46 PM
vi 7-ELEVEN JAPAN
gigantic retail groups such as Wal-Mart in the US and Metro in
Europe made the decision to tie up with the Ito-Yokado group. It
is also cited as the motivating factor as to why the usually reticent
Chinese government openly granted the Ito-Yokado group a full
retail license to operate in the Chinese market.
Apart from this particular management skill, 7-Eleven Japan has
also been developing new epoch-making methods, to be discussed
later, such as “joint distribution” and “co-development” well ahead of its
competitors. Also the existence of the “integrated information systems”
must not be overlooked when talking about 7-Eleven Japan’s
innovative and advanced management style. Integrated information
systems play a key role not only in forming its corporate strategy
but also in developing its functional strategies for logistic support,
merchandising and store operations.
In this book, although we will spend many pages analyzing the
integrated information systems of 7-Eleven Japan, it would be a
little one-sided to claim that the source of the company’s strong
competitive power lies exclusively in the hardware used. It is very
obviously the human elements who utilize the “integrated
information system” and who actually run the organization helping
it adapt to change. Therefore, we will focus on the importance of
the management concepts of Hirofumi Suzuki, the charismatic
owner of 7-Eleven Japan and pursue the reasons why 7-Eleven Japan
has established itself as such a successful and particularly robust
organization.
As there are so many valuable things to be learned from the
management systems employed at 7-Eleven Japan, there already
exists an absolute plethora of books praising and illustrating the
company as the perfect enterprise. This is certainly not the purpose
of this book. By using the business structural analysis model
developed by Michael Porter, we are aiming for a very objective
analysis and in addition to the excellence of the company, we will
also look at some of the current problems and difficulties facing
7-Eleven Japan.
Preface.p65 6 08/26/2002, 2:46 PM
Preface vii
It is not only the inclinations of customers that have been rapidly
changing in this industry. Several major external environmental
factor transformations have occurred, such as industry deregulation
and the emergence of a cashless society. These are central issues
that could potentially dominate the future of 7-Eleven Japan. How
can 7-Eleven Japan cope with these changes? In November 1997,
7-Eleven Japan adopted what is termed the “fifth integrated information
system” for its stores as a measure to deal with the demands of this
new era. We will clearly explain the features of this system that has
allowed for such further progress and success.
So when you have finished reading this book, you will be aware
of the reasons why in spite of the tough economic conditions, only
7-Eleven Japan has:
1. Achieved profits levels of over 111,000,000,000 yen — the
first time such enormous profits have been achieved among
retailers.
2. Exceeded its parent company in turnover and ordinary profits.
3. Managed to consistently surpass competitors for nearly 20
years since its foundation.
Moreover, you will get a clear idea on how the convenience
store industry will continue to change and evolve in the 21st century.
If this book could provide readers with a law for success in this
“time of dynamic change”, it would be a source of boundless joy for
the author.
Finally, I would like to express my most sincere gratitude to Mr.
Yoshio Nemoto, the publisher of Sanno University Press, who has
been a constant source of valuable ideas and suggestions during
the entire writing process of this book.
Preface.p65 7 08/26/2002, 2:46 PM

Contents
Preface v
Chapter 1 The “Information Industry” Converting the
“Change” into a “Chance”
Dealing with changing times, and 1
7-Eleven Japan’s continuing
self-reformations
Establishment of a business creed to meet 4
social change
Converting “problems” into “opportunities” 6
7-Eleven Japan becomes an “information 7
industry”
Using the improvement of information 8
technology to perform self-reformations
A subsidiary company whose business 9
performance has exceeded its two
parent companies
Definition of a convenience store 11
Chapter 2 The Birth of “Item-by-Item Management”
and the Integrated Information System
The “item-by-item management” system of 13
7-Eleven Japan
Synergistic effects generated by the 14
information system
ix
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x 7-ELEVEN JAPAN
Rationalization efforts made before the 16
introduction of the integrated
information system
Introduction of “Terminal Seven” 17
First integrated information system 20
enables the expansion of multiple stores
Transforming “disadvantageous changes” 21
into advantages
The second integrated information system 23
available for marketing purposes
Responding to the “individualization of 27
consumption” with graphic information
analysis
Differentiation of product quality to cope 28
with “intensification of intra-industry
competition”
Two big features of the third integrated 30
information system
Inter-company innovation utilizing 34
“technological progress”
Cultivation of new customer bases by the 35
information system
The fourth integrated information system 36
connected by ISDN line
Chapter 3 Secrets of 7-Eleven Japan’s Excellent Ability
in New Product Development
Quick recognition of the arrival of more 41
“value-oriented times”
The lunch box, 7-Eleven Japan’s vital 42
strategic product
Co-development with manufacturers with 43
7-Eleven Japan taking the leadership role
Offering a new service and expanding business 44
POS playing a central role in 7-Eleven Japan’s 45
strategy
Content.p65 10 08/29/2002, 4:34 PM
Contents xi
Grasping trends of “deregulation” and “new 46
product development”
Selling summer products in the winter season 47
A new strategic weapon of the convenience 48
store, the multimedia station (MMS)
Chapter 4 The Innovative Distribution System of
7-Eleven Japan
Distribution cost savings by using the 51
“dominant system”
The distribution revolution begins with the 53
intensified use of wholesale agents
Maintaining the taste and freshness 56
of foodstuff
Information system supporting logistic 57
strategy
Unifying the delivery of liquor and 58
processed food
Establishment of a distribution base in Taiwan 58
to unify the overseas distribution system
Chapter 5 Analyzing the Robustness of 7-Eleven Japan
According to Personality and Organization
The management philosophy of 61
Hirofumi Suzuki, the virtual founder of
7-Eleven Japan
Another information route — direct 64
communications
Basic concept of independent order 66
placement
Idea of “co-existence and co-prosperity” 67
brings about robustness
Outsourcing prevents organizational stiffness 68
Source of strength hidden in the 69
organization chart
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xii 7-ELEVEN JAPAN
Chapter 6 Any Blind Spots in 7-Eleven Japan’s Strategy?
Why are sales of existing stores growing 73
slowly?
Industry structure analysis using the Porter 75
Business Model
Development of an oligopoly by three major 79
companies
Opposition from existing wholesalers against 80
the establishment of an exclusive
wholesale operation company
Opposition from manufacturers of 82
“fresh baked bread”
Business results of 7-Eleven Japan 83
Vendor of rice products suffer from low 85
margins
Task of “securing a successor” 86
Is there any limit in the growth of the 88
convenience industry?
Is the information system of 7-Eleven Japan 91
perfect?
Environmental problems surrounding the 92
convenience store industry
Chapter 7 The Fifth Integrated Information System
Connecting Chain Stores Utilizing
Satellite Communications
The general concept of the fifth integrated 95
information system
Utilizing “animations”, “still pictures” and 97
“sound” for the construction of an
attractive store with heavy-selling
items and services
Using this new system for smooth 98
communication with employees
Content.p65 12 08/29/2002, 4:34 PM
Contents xiii
Utilization of multimedia information 99
for sales promotion
An elaborate marketing plan using a 99
“data warehouse”
Chapter 8 The Convenience Store Industry Changing with
the Times
Stamp and rice are now on sale at the 101
convenience store
High expectations for deregulation of medical 102
supplies
Making an all-out effort to obtain a liquor 104
license
New trends in the relationship between 105
gas-filling stations and convenience stores
Itochu Corp. becomes the largest 106
shareholder in Family Mart
Expanding services by introducing home- 108
delivery operations
New entrants from different categories of business 109
Chapter 9 Progress in the Unification of the Retail and
Banking Sectors
Unifying cashing and shopping 111
Banking industry and convenience store 112
co-operation with ATM installations?
Buying and selling dollars at the 112
convenience store?
Unification of retail and banking sectors 113
in England
Unification of retail and banking sectors 114
progresses in Japan
Electronic money and the convenience 117
industry
Surival of convenience stores in the age of 119
electronic money
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