Professional Documents
Culture Documents
Description of Organization
• 7-Eleven offers a multitude of products through its convenience stores. One of these,
the V-com product, enables consumers to complete a number of financial transactions
and purchase financial products through technology-powered kiosks.
• Fifty-five percent of the stores are franchise owned and another 45 percent are owned
by the company.1
• There are approximately 6,000 7-Eleven locations in North America.
• Most stores are located in urban areas because it is important that they are near the
distribution centers (known as CDCs).
Historic Context and Driver for Growth/Scale
• The company started in the convenience store industry 75 years ago when the
founders sold ice and other goods, in the Dallas area.
• 7-Eleven found its niche in the convenience store market selling food on Sundays
when other stores were not open.
• In the mid-1960s, 7-Elevens began to stay open 24 hours a day and expansion
accelerated in the 1980s.
• 7-Eleven stores were the first retailers to have off-premises ATMs.
• In the early to mid 1990s, 7-Eleven began to offer money orders and tested various
strategies to provide financial services to their customers. These services have been
aggregated in the Vcom technology kiosks.
Growth/Scale-Up of the Organization over Time
• 7-Eleven’s systems (which include marketing, store deployment and structure, and
experienced store management) provide the marketing, location and labor to make
the services accessible to a population with limited relationships with banks.
• Funding is provided through 7-Eleven’s resources as well as negotiated financing
from banks.
• Expenses are offset by placement fees paid by Vcom financial technology partners in
exchange for exclusivity. These partners provide specialized expertise in the
financial services and financial delivery systems.
• The partners include: Western Union (which provides money transmission including
orders), Certegy (check cashing), Cyphermint (e-commerce), Verizon
(telecommunications/phone cards), American Express (ATM), and Microsoft and
NCR (information technology infrastructure).
• From 7-Eleven’s perspective, the key development issue in relation to the
infrastructure is the ergonomics of the machines.
• 7-Eleven is in the midst of rolling out the Vcom product. Having been introduced to
nearly 100 stores during the market trial stage, it is now in 350 stores, and 7-Eleven
intends to expand the product to 3500 new stores over the next few years.
1
Franchisees retain 48 percent of the profits. Capital required to acquire a franchise is minimal. Whether the store is
company or franchise depends on the region – some areas have tended to be more franchise and others more
company owned stores.
2
• Once fully rolled out, 7-Eleven estimates that the total capitalization will be $200
million.
Lessons for Profitability, Sustainability and Successful Scale-Up
• The Vcom product is convenient to the target customer – they already go to 7-Eleven.
• 7-Eleven’s partners are responsible for the payment system and hardware of the
Vcom kiosks. Originally, 7-Eleven looked to bank partners for instant credibility in
financial services but later moved from that approach to the current set of partners.
• 7-Eleven was willing – and able -- to make a significant investment to grow the
business.
• The Vcom product and market trials phase involved testing not only the customer
acceptance and potential profitability of the model, but also the efficiency of the
service being offered. Through the testing period, the product was tested to ensure
that the systems worked smoothly and that the kiosks were user friendly.
• The consumer financial service model works only when a number of products can be
provided in one place. A single product is not attractive to the busy consumer.
Combining financial services with nonfinancial services adds to the convenience
benefit to the consumer.
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centers, develop a credit grid (a first step toward credit scoring), and open new
lending offices.
Lessons for Profitability, Sustainability and Successful Scale-Up
• ACCION's emphasis on commercial viability and institutional growth — known as
the financial systems approach — has helped their affiliates and partner microfinance
institutions reach scale and financial self-sufficiency.
• ACCION provides extensive technical assistance and infrastructure support for
network affiliates to improve operations and efficiency. It also provides loan
guarantees and investment funds to help organizations in the network access
commercial capital.
• Where/when appropriate, ACCION has assisted or facilitated the transition of an
affiliate from NGO to commercial bank status.
• ACCION USA is one of the few community development finance organizations in
the U.S. that has engaged in a deliberate and comprehensive initiative to increase
scale and improve efficiency. Much of the success ACCION USA has had with this
expansion initiative can be credited to its network structure.
• ACCION USA also engaged a market research firm to go beyond the typical SBA
and HUD data in order generate a better estimate of demand for microloan products
in their markets.
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• The bank has continually brought in skills and integrated new management into the
Banknorth community and philosophy.
• Acquisitions were not only a means of buying assets but also acquiring management
talent. For instance, the insurance agencies are still run by the same team that had
managed them when they were acquired and a bank regulator was brought in to
manage credit risk.
• Banknorth presents an example of how a community bank can maintain a community
focus despite experiencing phenomenal asset growth and expansion of the scope and
breadth of its financial products, geographic reach, and number of customers.
• The growth and mission focus was achieved as a result of a carefully followed
strategic plan, a strong management, and recognition of the opportunities that
consolidation of the financial services industry presented.
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countries until the country in question was determined to be “ready” for the direct
model. This readiness depended on several factors:
1. The size of the current and potential market
2. The availability of resources (i.e., sales force and management at a local level)
3. Local acceptance of the direct model
4. Suppliers ability to meet quick turn around requests
5. Final arrangements with carriers to ensure timely delivery of products
6. Understanding and containment of operating costs
• In 1996 Dell offered e-purchasing of computers via the Web. The direct model was
adapted to the Internet and by 1999 Dell had Web pages for 44 countries in 21
different languages.
• Using the Web, Dell offered their customers 24 hour customer service on-line as well
as a second medium through which purchases could be made.
• Dell also has kiosks, most of which are in Japan, with product samples from which
customers can experience Dell.
Lessons for Profitability, Sustainability and Successful Scale-Up
• As Dell states, they do not adapt their products to the culture of an area but customize
according to the needs of each individual.
• With direct model production, there is much less research needed into the desires and
needs of the customer. Customers customize their purchases according to their needs.
• Instead of going after corporations with more resources and potentially more needs,
Dell went after quantity in number of potential customers.
• This strategy allowed them to enter the market but prohibited huge growth.
• The rate and speed at which they grew would be very difficult to replicate because
they capitalized on a market need of customers who were willing to invest in products
that would automate and improve their businesses.
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• By offering services that support the growth of its members, Unified helps to increase
its members’ capacity to buy more products.
• Unified has also invested in the development of an internal training program to
increase staff capability.
Lessons for Profitability, Sustainability and Successful Scale-Up
• Unified has been willing to exit unprofitable investments and return to its core
business before these investments become a serious drain. For example, during the
nineties, Unified purchased a small division of retail stores. When these stores turned
out to be bad investments, Unified terminated these businesses and returned to
focusing on its original work as a wholesaler and service provider.
• Unified has built an automated, 635,000 square foot distribution facility as well as
several facilities to house their products.
• More than 95 percent of revenues come from Unified’s core business as a wholesaler
and distributor with the other five percent coming from support services.
• Unified has worked hard to balance its prices so they serve both its members and the
organization, keeping the organization self-sustaining and profitable while continuing
to offer its members the benefits of bulk rate purchasing.
• Unified has incorporated financial services and insurance services into its product
mix, to support the growth of its member businesses.
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APPENDIX A
Lesson or Theme Ace Cash Express Unified Western Grocers Dell Computer Self-Help
1. Product Growth strategy focused on Growth of this cooperative Use “standards-based technology” Brings traditional financial
Development acquisition of existing businesses organization is achieved through that relied on standard industry services to low- and moderate-
and internal growth through increased membership of components to design computer income communities. Acts as a
and/or product development. independent grocers. Existing systems and deliver in streamlined laboratory on how to provide
Acquisitions members determine relevant fashion. Dell uses the best of what financial services to those
product development for the already exists, providing greater communities effectively.
cooperative to explore and deliver. customer choice.
2. Demand/Market Growing number of unbanked The prevalence of supermarkets Targeted small- to medium-sized Lack of financial services in
Opportunity and under banked people who and the economies of scale they businesses as well as individuals, a low- and moderate-income
need financial services. achieve were crowding out large and growing market often areas. Products ranging from
independent grocers. A cooperative ignored because viewed as business, depository, advisory,
was needed to compete. UWG resource-constrained compared to housing and development. Lack
serves as a wholesaler and large corporations. of a secondary market for
provides a range of services to community development loans.
3700 independent grocers.
3. Geography Increasing geographic coverage Unified Western Grocers was Geographic expansion using Core business stays in North
is critical to scaling up created in 1999 as a result of the regional headquarters to support Carolina, but certain programs
operations. merger of Certified Grocers of direct sales philosophy. allowed for effective geographic
California and United Grocers Simultaneous with construction of expansion. For example, Self-
based in Oregon. Two regional manufacturing and Help has provided mortgage
organizations had similar histories assembly facilities. Staged entry loans in 47 states through their
but different geographic footprints. into new markets country by Community Advantage Program
country. Initially used distributors to develop a secondary market
until region determined “ready” for for non-conforming home loans.
preferred direct sales model.
4. Infrastructure Custom built point of sale The cooperative is structured to Internet allowed Dell to expand Self-Help and their partners
computer systems facilitated focus on the core business: reach while maintaining low (foundations, government
management of customer purchase, wholesale and inventory levels and avoiding the agencies, financial institutions,
relationship, transactions and distribution of food and dry goods costs associated with retail outlets. etc.) ensured that an appropriate
interactions. for members. Member support Customer education was critical infrastructure was in place prior
Two core systems: human departments include sales and aspect of sales success and growth. to the national roll-out of the
resources and technology. servicing, the Grocers Capital Dell helped customers understand Community Advantage Program.
Company; store development; software and only purchase what This included rigorous research
graphic services for advertising; was needed and relevant. Dell and testing of models for the
the international division; customer offered customized training and structure and delivery of the
service; and retail technology. lending product.
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Lesson or Theme Ace Cash Express Unified Western Grocers Dell Computer Self-Help
customer support which built brand
loyalty.
5. Technology Success based on high-touch The cooperative developed Dell replicated its direct sale model Technology is an important part
human based transactions w/ proprietary technology to process over the internet offering 24 hour of the Community Advantage
technology supported delivery. orders and get products to grocers. customer service on line as well as Program due to the necessary
Also see below. another medium for product scrutiny of data on
purchases. Within a year of nonconforming loans.
announcing dell.com, daily sales
over the internet totaled more than
$3 million.
6. Partnership Selected partners to add value by Selected partners to add services Success driven by relationships Self-Help’s Community
augmenting suite of product for cooperative members. (partnerships) with other Advantage Program was made
offerings. technology organizations that possible through partnerships
allowed Dell to develop a with HUD, the MacArthur
standards-based product mix. Foundation, the Ford Foundation
Direct relationship with suppliers and Fannie Mae. The actual
was critical – kept inventory costs lending network for this program
low, sped delivery of new includes partnerships with Bank
technologies to customers, and One, Bank of America, JP
avoided unnecessary cost of Morgan Chase and Wells Fargo,
transitioning from one technology among other banks
to another.
7. Capital Sources Sourced through equity Equity from patron-owners Not raised in case study. Internal earnings in the early
and financings. through purchase of two classes of stage. $3.5 million in grants and
stock, debt from bank loans and loans from philanthropic sources
Requirements lines of credit The cooperative for portfolio development and
simultaneously earns enough to analytical models. $50 million
pay dividends to the owners, from the Ford foundation for
improve margins by reducing costs credit enhancement and $1.8
and provide management and million for operating expenses.
financing services to the members. Fannie Mae and banks
A source of funds for financing committed almost $2 billion in
subsidiary: sale of loans to participation in the lending
National Coop Bank network.
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Lesson or Theme Ace Cash Express Unified Western Grocers Dell Computer Self-Help
8. Organizational Retail store with regional VPs Unified created and seeded two Selling directly to customers Because access to credit was a
Structure and district managers for every subsidiary companies: a finance provided best avenue to significant barrier to expanding
100 stores. company and an insurance understanding and meeting ownership, Self-Help created
company. customer computer needs. two financing affiliates: Self-
Direct sales model allows company Help Credit Union (a state
to build every computer system to chartered, federally insured
order at competitive prices. credit union) and Self-Help
Ventures Fund (a non-profit
community development loan
fund)
9. Regulation/Public Regulation by state-level SEC compliant and USDA Government purchasing helped Fannie Mae had an incentive to
Policy consumer laws; must register as guidelines on food preparation for them grow through large contracts. participate in the Community
a financial service provider in having warehouses and Advantage Program given the
some states; some state caps on refrigerated facilities helped them levels of activity in low- and
fees for specific products grow. moderate-income geographies as
required by Congress. Financial
institutions have an equal
incentive through the
Community Reinvestment Act.
10. Management Decentralized divisional The CEO of the cooperative Readiness for expansion Discussed and considered
structure. reports to the board of directors determined by: size of current and management succession policies
who are selected by and include potential market; availability of since inception so that they
owners / patrons. Staff of nearly critical resources, especially could continue to grow.
1000, with broad range of skills management capacity and sales
required. Continuing training force; local acceptance of direct
program at headquarters used to model; and containment of
build necessary skill sets. operating costs.
Single point of contact and
accountability for customers in the
event of problems or questions.
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Lesson or Theme Ace Cash Express Unified Western Grocers Dell Computer Self-Help
11. Adaptive Ability Add products based on changing Between 1990 and 2001, Expanded product line, i.e., Self-Help has pioneered a series
customer demand . conventional supermarket revenues printers and went global. of new products and services,
in Southern California went from moving from primary to
69% to 2% of total revenues, while secondary market products as it
Hispanic market went from single- saw more powerful opportunities
digit to 74% of revenues. UWG for financial intermediation.
developed products and services
appropriate to needs of grocers
serving the Hispanic market.
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Appendix B
An Organization/Network Model (ACCION) Retooling, organizational restructuring
and 3rd stage growth
?
15 ACCION
affiliate
organizations
are now
financial
institutions
Driver:
Demand for
Consumer Credit
1959
1958 Evaluation:
Partner ID • Customer and
Idea: Obstacle Removal Roll-Out:
Bank of merchant acceptance
Bank of America Standardization In San
America • Error Rates
issued Build infrastructure Francisco and
BankAmericard Pilot • Speed of processing LA
(e.g. getting critical mass of
customers and merchants, creating
bank-merchant links)
Experimentation (innovation/research)
1960’s 1966
Evaluation: Re-Tooling: Evaluation:
Early Driver:
Customers & • Dropped Success!
merchants liked it, but Profitability and Replication: Industry Leader
delinquent
Volume 200 banks offer Standardization:
a financial disaster accounts
credit card
• Target high The Bank
programs; few Americard
profile
successes product
merchants
(B of A negotiated licensing
agreements with a number of
reputable banks)
1968 1970
Evaluation: Industry Infrastructure On-going Roll “Scale”
Bank of America Restructuring Development out and • Profitability
licensee • Creation of Evaluation • Increased reach
system a mess (e.g. nationwide computer • Increased market
new industry system to handle transactions)
organization share
and governance • Growth of
structure. “brand”
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