7-Eleven Case Study

CASE ANALYSIS FOR 7-ELEVEN

I. PROBLEMS

A. MACRO

1. 7-Eleven faced increasing competition in its niche.

2. Even more damaging to the company was the growing belief among consumers that 7-Eleven's prices were too high and that its food products were perceived as stale.

3. Stagnant growth and gradual eroding of market share in some regions during the early 1990s.

B. MICRO

1. The quality of the offerings varied significantly from store to store.

2. Inventory management and control also varied sharply from store to store.

3. To a large extent, the computerized ordering system's implementation was complicated and it also saddled the company with a massive complex ordering and inventory control system that defied easy product classification across numerous geographical sales regions.

II. CAUSES

1. In the Late 1980s, a number of competitors had entered its niche---Stop and Go, Circle K, Handimart---and many gas stations had also begun retailing food. By the early 1990s, the larger grocery chains (Albertson's, Safeway, Kroger) began offering 24-hour service in some key metropolitan areas, while aggressively promoting different products each week with significant discounts. Moreover, new competitors were entering the food retailing business, such as the Wal-Mart and K-Mart, who began to offer a broad range of grocery offerings at enormous discounts.

2. To earn a profit in the face of its higher costs, it must charge higher prices (10 percent to 15 percent on average).

3. They are open 24 hours and with some products and food staples languishing on the shelves for sometimes weeks at a time.

4. The combination of these factors, plus the growing capabilities of large grocery store chains to match 7-Eleven's initial strengths

5. 7-Eleven often sells widely different products in different stores, depending on regional preferences.

III. SYSTEMS AFFECTED

1. STRUCTURAL

1.1. To secure major cost savings in its supply and distribution systems, 7-Eleven is starting to consolidate a number of its delivery operations for regional markets into combined mega-distribution centers, where vendors ship their goods to a centralized site rather than to each store. Southland would then deliver everything a store needs on one shipment each day.

2. PSYCHOLOGICAL

2.1. It also helps relationships with suppliers (e.g., Coke, Pepsi, Frito-Lay, Interstate Bakeries). The information downloaded from 7-Eleven's computers will enable both the company and its suppliers to better forecast demand for their own products.

2.2. Even