711 Case Study

- Examines the business model of a company based upon a large network of

neighborhood retail stores with a very small footprint, and their supporting distribution
and logistics operations.

Competitive advantage
- Information-based strategies, selling high quality products through an industry-wide
supply chain network
- Policy of outsourcing most IT capabilities to partners and pursuing advanced IT
initiatives
- Strategic IT, human & and information assets such as store councilors, item-by-item
real-time control, industry-wide IT network, sophisticated analysis system
- Identifies customer orientation, providing various products and comfort to its customers
- Convenience
- POS system that forecasts future trends and creates a “hypothesis” of potential hot-
selling products based on the analysis of various information.
- “team merchandising” development tie-ins with major raw material and packaging
manufacturers to provide original products.
- Differentiation of products cannot be found in anywhere else
- Strategies include company’s principles, merchandising, store network expansion
strategy, franchise strategy, outsourcing policy
- needed to establish the system that enables store owners and the ordering clerks to
create their hypotheses and share them among part-time workers at the store
- a streamlined distribution system to efficiently integrate product supplies.
- High quality and fresh products, convenience

Company’s principles
- Customer satisfaction: constant item control, well organized delivery system, use of IT
- Mission: provide solutions for all the problems of everyday life
- Key principles to define a quality convenience store:
o Reduction of lost opportunity: development of operational processes
o Effective Item Control and Well-Planned Product Supply Management: supplying
products in high demand with a rapid turnover rate and eliminating dead or
slow-moving products through item-by-item analysis (product supply efficiency).
o Commitment to Customer Satisfaction with Original Product Development and
Friendly Service: provide original products at reasonable prices, well trained
store clerks

Merchandising
- Items selected for target customers -> focus more on specific items and fashionable
ones according to sales data and market trend
- Product quality & turnover is high
 - POS system: collect sales data to improve merchandising and the item-by-item control
process
- “team merchandising” development tie-ins with major raw material and packaging
manufacturers to provide original products.
o SEJ executives repeatedly sample original fastfoods everyday so that the quality
of these products can be improved before they are sold.
o Differentiation of products cannot be found in anywhere else
o Improve quality of food & efficiency of production
- original product development can reduce the costs of marketing and advertisement as
compared to other general products -> selling commodities at competitive prices and
increasing sales

Franchise Strategy
- OFC (consulting): motivates franchisees but also supports company-wide brand image
and promotional strategies.
- Franchisee goes through on-the-job training at the corporate center
- Provide Merchandise Information
- Provide Information and Delivery System
- Cover Promotion Cost
- Install Sales Equipment
- Provide Accounting Service
- Cover 80% of Utility Cost
- Guarantees a minimum gross profit for poor performing stores in order to support
owners.

Outsourcing policy
- Cooperate exclusively with SEJ in return for high quality of operations and service levels
- Good information systems, quick & precise sales data, everything from raw
procurement to product deliveries: manufacturers understood customer needs
- SEJ & business partners shared information systems and know-how about operations
management as well as quality control in the food manufacturers’ factories and delivery
centers.

Information Systems Strategy

- Sales transactions are sent to the information systems center where sales data is
collected, integrated and analyzed with hypothesis, order and validation.
- developing a systems vision that fits with the business strategy, while the rest of the
information systems management is outsourced
o links needs from stores with top management and proposes innovative system
plans (vertical integration)
- Integrated Service Digital Network
o allowed data to be exchanged at 30 times faster speeds and thus enabled SEJ
headquarters to collect and analyze daily POS data on every single item in each
store for use the next morning
 o improved the ability to order the right items, thus maintaining shelves of
o hot-selling products which may be out of stock in competitors’ stores.
- Weather forecasting system to forecast orders

Operation Infrastructure

1. Total information systems

a. High efficiency, maintainability and reliability of the total network system
i. Faster system and better cost performance
ii. Terminals are constantly monitored and software and configuration can
be updated remotely.
iii. Shared by 10k stores, HQ, suppliers -> crisis management planning & high
service levels
b. The store information system which encourages all store staff to participate in
ordering:
i. Multimedia system: helps employees forecast consumer demand by
providing POS, products, weather and regional information with
sophisticated interfaces and graphics.
ii. Leads to appropriate orders, optimizes employees’ capabilities and
maintains their motivation
c. The system platform shared with business partners:
i. Depends on the partner’s business
ii. Facilitates collaboration among SEJ allies by improving the efficiency of
delivery through the sharing of order, sales and inventory information
d. Sophisticated analysis system which eliminates intuitive decision-making
i. provides a highly integrated analysis system which collects enormous
quantities of data and creates value-added information for original
product development and store support services.

2. Electronic Commerce Business

a. Financial Services
i. Payment acceptance service: customers can pay bills 24/7
ii. IY bank’s settlement services
b. Internet shopping site
i. by utilizing SEJ’s existing operating infrastructure in its EC activities.
ii. ties into other internet sites and provides payment acceptance and pick-
up service at the retail stores or sent to homes for convenience.
c. Public, civil and regional services
i. Prepared meals and cooking ingredients through ordering in the internet.
d. In-store intelligent copy machines
3. Temperature-separated combined distribution system
a. Combined Delivery System: same kinds of products from different suppliers are
centralized to be loaded on the same trucks for delivery
Identify two specific ways that 7-11 Japan’s information systems differentiate it from its
competitors and contribute to its competitive advantage.

711 uses tech, such as the Integrated Service Digital Network (ISDN), to stay ahead of its
competition. This particular system enables data to be exchanged among all parties at 30 times
faster speeds and allows headquarters to examine daily Point of Sale (POS) system which
collects sales data. Analysis of every single item will then be ready for the stores the next
morning. Not only does this enhance the capability for stores to stock the right popular items,
but it also saves limited shelf space. Other than that, it allows the company to stay ahead of its
competition by selling those products that are sold out in its competitors’ stores. Product
turnover is then high because the right items, such as fresh foods, are targeted at the
customers to ensure product quality, one of its competitive advantages. This guarantees
centralized product deliveries from different suppliers, resulting in efficiency of delivery,
decreasing costs, and quality control. The company is able to streamline and rationalize its
operations to encourage a transparent vertical integration. This is because all parties involved
from suppliers to employees are then allowed to participate in forecasting customer demand
and bringing high quality products to its customers through analysis of data and multimedia
information. This management and information systems are what differentiate 711 to its
competitors.

Another way that 711’s information system differentiates from its competitors is the
development of its electronic commerce business, which contributes to the company’s
competitive advantage – convenience. Its financial services, such as payment acceptance and IY
Bank’s settlement services, allow ease of paying bills wherever and whenever. Other than that,
its internet shopping site integrates a seamless omnichannel experience to its customer by
combining its online and offline channels. Products can then be picked up at the retail stores or
sent to homes to customers. The company also offers in-store intelligent copy machines to
allow easy printing for customers. All of these services promote convenience for the customers,
encourage a synergy between online and offline users, turning the online ones to offline ones,
and vice versa. The company excels in following the market trends, increasing the use of online
platforms to its customers, and also urging them to visit its offline platforms at a very low cost.