109-2 marketing midterm

Video of case study

Topic: Why 7-Eleven failed in Indonesia

Members:
Professor: Ying-Kai Liao, Ph.D.

April 16, 2021

Table of Contents
I. Video introduction.................................................................................................................3

A. 7-Eleven’s development in Indonesia..........................................................................3

B. Reasons why 7-Eleven failed.......................................................................................3

II. Overview of 7-Eleven..........................................................................................................4

A. History.........................................................................................................................4

B. Mission Statement.......................................................................................................5

C. Worldwide Business....................................................................................................5

III. Analysis of 7-Eleven...........................................................................................................6

A. The market segmentation.............................................................................................6

B. The Market Targeting..................................................................................................7

C. Product/ Market Grid...................................................................................................8

D. The BCG Matrix..........................................................................................................9

IV. Marketing research of 7-Eleven........................................................................................11

A. Define the problem and research objectives...............................................................11

B. Develop the research plan for collecting information................................................11

C. Implement the research plan – collect & analyze the data.........................................13

D. Interpret and report the findings.................................................................................13

References..............................................................................................................................13

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 I. Video introduction
A. 7-Eleven’s development in Indonesia
The 7-Eleven chain first landed on Indonesian shores in 2009. Traditionally,
it was a place to buy cigarettes, snacks, and slushies. While the Indonesian 7-
Eleven provided all of that, it became a social hub all of its own. Popular with
18-25 year-olds, it was a one-stop-shop for free Wi-Fi, socializing and cheap
alcohol. This lead to the rapid growth of 7-Eleven in Jakarta and surrounding
cities. It opened 21 stores in 2010, 100 stores in 2012, and reached 190 stores in
2014. Sales peaked this year, with $78.2 million revenue.
However, there was one problem. Competition in the sector was huge. In
2007, 3 years before 7-Eleven entered Indonesia, there were already 12,000 retail
stores across the archipelago. By 2016, there were 40,000. Mini markets were the
fastest growing segment in the sector. By 2017, Alphamart had 10,000 Stores
(38% market share), Indomaret had 15,000 Stores (47% Market Share), and 7-
Eleven had only 190 Stores (0.7% Market Share). The downfall of 7-Eleven in
Indonesia can be pinpointed in 2015, with the government banning the sale of
alcohol in mini-marts. This exercise was taken in order to “protect Indonesia’s
youth” – the exact target market 7-Eleven’s growth relied on. Just 2 years after
the ban, 7-Eleven closed all its stores. Despite the fact, 7-Eleven is now finding
new partners and trying to enter the Indonesian market again.
B. Reasons why 7-Eleven failed
The main reason Indonesia’s 7-11 failure can be attributed to the lack of sales.
The followings are the reasons for decreasing in revenue.
a. Customer behavior and habit
Local people don’t spend money in 7-Eleven. They usually buy one drink
and sit for three hours.
b. Competitors in Indonesia’s convenience store
As mentioned above, there were 40,000 convenience stores in Indonesia by
2016. Mini markets were the fastest growing segment in the sector. By
2017, Alphamart had 10,000 Stores (38% market share), Indomaret had
15,000 Stores (47% Market Share), and 7-Eleven had only 190 Stores
(0.7% Market Share).
c. Government policy
In 2015, Indonesia government imposed in alcoholic ban in convenience
stores, which led to a 24% drop in 7-Eleven’s sales. On the contrary,

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 Alphamart and Indomaret had an increase in net sales as they offer wider
range of products and services.
d. Geographic reach
7-Eleven convenience store chain didn’t expand beyond Jarkarta and
surrounding cities because of the restriction for foreign franchise on
convenience stores. Alphamart and Indomaret are local brands, so they have
less restriction and come off expansion to other citizen regions.
e. Economic slowdown
The economic slowdown that occurred in Indonesia also affected the
business performance of 7-Eleven outlets along 2014.

II. Overview of 7-Eleven

A. History
7-Eleven. Inc. is an international chain of convenience stores, headquartered in
Dallas, Texas, United States. The chain was founded in 1927 as an ice house
storefront in Dallas. It was named Tote’m Stores between 1928 and 1946. The
company’s first outlets were in Dallas, named “Tote’m Stores” because customers
“ toted” away their purchases. Some stores featured genuine “native” totem poles
in front of the store. In 1946, the chain’s name was changed from “Tote’m” to “7-
Eleven” to reflect the company’s new, extended hours, 7:00 am to 11:00 pm,
seven days per week.
In 1963, Open 24 hours : A 7-Eleven locations near a university in Austin stays
open all night to satisfy customer demand. The 24/7 idea is a hit and soon catches
on in other location. Later on, 24- hours stores were established in all global all
over the world.
In 1964, Franchising Business: With the purchase 126 Speedee Mart franchised
in California, 7-Eleven company entered the franchise business.
In 1965, THE DRINK REVOLUTION:7-Eleven in the United States sells
Slurpee drinks, a partially frozen soft drink introduced in 1965 and the world’s
first coffee to go.
In 1969, open oversea store: 7-Eleven goes international and opens locations in
Canada, bumping up the number of stores to 3,500.
In 1980, Global Operations: 7-Eleven continues opening new international
locations, including stores in Australia, Sweden, Taiwan, Hong Kong, Singapore,
Guam, Malaysia and the Philippines.
Late 1980 to 1990: Various assets, such as the Chief Auto Parts chain, the ice
division, and hundreds of store locations, were sold between 1987 and 1990 to
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 relieve debt incurred during the buyout.
In 1990, Southland Corp. filed a bankruptcy in order to transfer control of 70%
of the company to Japanese affiliate Ito-Yokado.These two Japanese entities, Ito-
Yokado and Seven-Eleven Japan, now controlled 70% of the company, with the
founding Thompson family retaining 5 percent.Ito-Yokado formed Seven & I
Holdings Co. and 7-Eleven became its subsidiary in 2005. In 2007, Seven & I
Holdings announced that it would be expanding its U.S. operations, with an
additional 1,000 7-Eleven stores in the U.S.
B. Mission Statement
7-Eleven is the world’s largest convenience store because the mission, vision
and focus are all about serving the customer and have been since our founding in
1927.
“Give the customers what they want, when and where they want it.” the mission
statement said by Joe C. Thompson Jr., 7-Eleven Founder. The 7-Eleven brand is
known and loved around the world, and their iconic products are a big part of the
American culture. Although 7-Eleven grown significantly over the years, it
focuses on making life easier for customers. Below are the core values:
a. Fast & Friendly Service
b. Extended Hours of Operation
c. Close & Convenient
d. High-Quality Differentiated Fresh Foods & Private Brands
e. Consumer-Focused Product Assortment
f. Good Value
C. Worldwide Business
As of January 2020, there were over 70,200 7-Eleven convenience stores in
operation around the world. 20,988 of these stores were located in Japan, making
it the country with the most 7-Eleven stores globally. 7-Eleven expands its stores
in a fast pace. There are more than 2,100 net new stores opened in 2020. 6 new
stores open daily. Every 4 hours a new store opens.
7-Eleven franchises in the U.S., Canada and other 17 countries. International
franchising store country includes Australia, China (Beijing, Guangdong
Province), Denmark, Hong Kong, Japan, Malaysia, Norway, Philippines,
Singapore, South Korea, Sweden, Taiwan and Thailand.

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 Graph 1. Number of 7-Eleven stores worldwide

III. Analysis of 7-Eleven

A. The market segmentation
The case study, “Why 7-Eleven Failed in Indonesia”, demonstrated that 7-
Eleven was first landed on Indonesian shores in 2009, then rapidly increase the
numbers of stores in Jakarta and surrounding cities between 2014 and 2016. In
this view, we may suggest that 7-Eleven might initially use both geographic
characteristics and demographic characteristics as variables of segmentation.
a. Geographical segmentation
In geographical segmentation, the market is divided according to place. The
theory in this strategy is that people who live in the same area have similar
needs and desires, and that the needs and desires are different from the
people who live in other areas. Take Indonesia for instance, it consists of
more than seventeen thousand islands, and is regarded as the world's fourth-
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 most populous country. However, Indonesia has several levels of
subdivisions, including provinces, regencies, cities, districts, and villages.
Provinces such as Aceh, Jakarta, Yogyakarta, Papua, and West Papua have
greater legislative privileges and a higher degree of autonomy from the
central government due to the highest level of subdivisions; especially,
Jakarta is the only city granted a provincial government due to its position as
the capital of Indonesia.
In terms of the case, Jakarta was chosen to be the major city for 7-Eleven to
begin the business might result from geographical advantage. Jakarta, the
center of the economy, culture, and politics of Indonesia, provide lots of job
opportunities for men and women to migrant for work. Therefore, Jakarta
became the world's second-most populous urban area, after Tokyo. Also, the
business opportunities, and its ability to offer a potentially higher standard of
living than other parts of the country, have attracted migrants from across the
Indonesian archipelago, making it a melting pot of numerous cultures. Above
all, Jakarta not only have the largest population among all part of Indonesia,
but also can bring huge commercial possibilities for 7-Eleven.
b. Demographic segmentation
Another variable for 7-eleven to do market segmentation might be
demographic characteristic. According to the demographic studies of Jakarta,
39% were under 20 years of age, 42% were between 20 and 35 years old,
15% were between 35 and 50, and only 4% were over 50. The reason that
nearly half of Jakarta's population were between 20 and 35 were probably
because the city offered many job opportunities and the people in that 20-35
age bracket were usually the most likely to be looking for work. To conclude,
most of people in Jakarta were younger generation, whom might be the target
audience for 7-Eleven.
B. The Market Targeting
After identifying segmentation, few segments are selected to reach target
customers. Hence, market target helps to evaluate the market segmentations. Base
on the analysis from geographical segmentation and demographic segmentation,
geo-advantage and younger customers might be the reasons that Jakarta was
chosen as the major place for 7-Eleven to expand market. Above all, teenagers
from 20 to 35 years old in Jakarta were the target audience of 7-Eleven in
Indonesia.
7-Eleven studied the culture, habits and tastes of the Indonesian population and
realized Indonesia lacked places where young people could hang out, eat, drink,

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 and follow their new passion: being online. It adopted a unique business model in
the country: it blended a small supermarket with inexpensive readymade food and
seating to cater to Jakarta customers looking for outdoor recreation space in a city
where traffic jams often restrict mobility.
In order to meet the needs of customers, 7-Eleven in Indonesia included
everything from both local markets and street vendors. The store was open 24
hours, had free parking, offered leisure activities such as concerts, was air-
conditioned, and most importantly, had wireless connectivity. 7-Eleven also
featured local artists or live bands to further attract crowds at its stores.
Consequently, 7-Eleven was popular with people that around 18 to 25 age range
from the case study.
Different from other retail store in Indonesia, 7-Eleven offered a place for
customers to “hang-out”. 7-Eleven's success in Indonesia was attribute to its
marketing strategy which aligned to the growing demographic opportunity in the
Indonesian market, where young people constituted a high proportion of
population. Capturing this important market with the right positioning - a cool,
trendy place to hang out with affordable meals, drinks, and free Wi-Fi - have been
the key success factors. In this way, stores of 7-Eleven surged from 2010 to 2014
in Indonesia.
C. Product/ Market Grid
The Product/Market expansion grid was specified by the Ansoff’s matrix. The
product market expansion grid is used for planning by a company when the
company is looking to increase the sale of its products either by expanding
product range or entering new markets. The product market expansion grid
considers two main factors: product and market. The product can either be a
current product or a new product, while the market can either be a current market
or a new market. Therefore, the grid is separate as four strategies.
a. Market penetration
Market penetration strategy is decided when the product is a current product in
an existing market.
b. Market development
The market development strategy is used when the product is an existing
product but the market is new.
c. Product development
Product development is used when there is a new product which has to be
introduced in an existing market.
d. Diversification

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 Diversification strategy is used when a company enters new markets with new
products.

Chart 1. Product/Market Grid

When 7-Eleven expanded their market in Indonesia in 2009, it represented the
example of market development strategies. 7-Eleven, Inc. an international chain
of convenience stores that was found in Dallas, 1927. Today, the chain has grown
to about 49,500 stores in 16 countries, more than 10,000 in North America itself,
but its core customer remains the same: people on the go who need a one-stop
shop to quickly buy everyday products.
In 2008, 7-Eleven entered the Indonesian market. Similar as the expansion in
other countries, the placement strategy of 7-Eleven Indonesia was also located in
commercial and office areas. But unlike the US, the archipelago of around 17,000
islands does not have a 7-Eleven literally at every corner; instead, it focuses on
big hubs in Indonesia. Above all, 7-Eleven might implement market development
strategy to enter into a new market
D. The BCG Matrix
The BCG Matrix, also referred as the product portfolio matrix, is a business
planning tool which was created by the Boston Consulting Group in the 1970’s.
This business method helps to evaluate the strategic position of a company’s brand
portfolio by means of a two-by-two matrix of a company’s product or services. In
BCG matrix, each quadrant is classified as low or high performance, depending on
the relative market share and market growth rate. Thus, the matrix is divided as

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four parts.
a. Stars
The star shows a scenario where there is the optimum situation of high growth
and high share, this method requires an increased investment due to the
continuous growth.
b. Cash Cows
The Cash Cow cycle deals with low growth and high share. This scenario
requires a low investment, but the growth is very slow.
c. Dogs
The Dogs demonstrates the situation where the growth is low and the market
share is low, this is one of the worst situations. In this situation if the products
are not delivering the cash then it is best to liquidate.
d. Question Marks
The Question mark which is high market growth but low shares. In this
situation there is a high demand but low returns. It is best to try and increase
market share or get it to deliver cash.

Chart 2. The BCG matrix

In terms of the case of 7-Eleven in Indonesia market, 7-Eleven started their
business and flourished with traditional items, local food, and cigarette in 2009.
Alcohol was especially in great demand and led 7-Eleven become a social hub in
Indonesia. Although alcohol was the most favored product among all items, it
seems to be classified as product in Question Marks stage. Popular with 18 to 25
year-old teenagers, high demand of cheap-alcohol made the rapid growth of 7-
Eleven. However, the item was just in low relative market share due to expansion
in new Indonesian market. Therefore, alcohol might be the product that 7-Eleven
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 need to increase investment, and tried to turn Question Marks into Stars.
Unfortunately, Indonesian government sharply restricted the right to sale all kinds
of alcohol drinks in 2015. The ban seriously made negative impact on 7-Eleven,
and caused loss on sales.

IV. Marketing research of 7-Eleven

When conducting marketing research, there are four steps to follow: define the
problem and research objectives, develop the research plan for collecting information,
implement the research plan – collect and analyze data, and interpret and report the
findings.
A. Define the problem and research objectives
As mentioned in the first section, the reasons for Indonesia’s 7-Eleven
failure can be summarized as consumer behavior, intense competition,
government regulation, geographic reach, and economic slowdown. Therefore,
based on the first cause of failure (consumer behavior), we want to extend the
research problem to the question “Why do Indonesian consumers tend to spend
less but stay at 7-Eleven for a long time?” It is a type of exploratory research,
which based on the collected data, explores the facts and truth of the problem in
order to develop new suggestions. Through research, we expect it to achieve the
following research objectives:
a. Identify the different age groups of potential consumers
b. Understand which products or services consumers prefer to buy
c. Learn why locals stay at 7-Eleven instead of just going
B. Develop the research plan for collecting information
A research plan outlines the sources of existing data, and spells out the
specific research approaches, contact methods, sampling plans, and instruments
that researchers will use to gather new data.
a. Data source
While implementing marketing research, we could access the primary data
through different research approaches. Internal database — the point of sale,
can also be an important primary data, which can be analyzed and combined
into the final research. Besides, secondary data such as local government
publications, business statistics guides, periodicals, books, business
investigation report, infographics, videos, white papers, and 7-Eleven
internal database, especially accounting and statistics will be integrated in
order to demonstrate a sound and complete research.

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b. Research approaches
Among the three research approaches of observational research, survey
research, and experimental research, we have chosen the survey research
method because it obtains data by asking people questions about their
knowledge, attitudes, preferences, and buying behavior, which we could
have a better and detailed understanding of the reasons why Indonesian
consumers spend less money and stay at 7-Eleven for a long time. In
addition, we adopted interview survey instead of questionnaire survey to
measure experiences, emotions, opinions, and other qualitative data.
Interview survey may be divided into online focus group interviews and
expert interviews. Through online focus group interviews, samples can be
collected faster and distance barriers may be eliminated. On the other hand,
expert interviews can provide professional personal perspectives as well as
insights into future events (such as consumer trends) for research.
Observational research
Survey research interview Groups: Online focus group
interviews
Individual: Expert
interviews
questionnaire
Experimental research
c. Contact methods
For the online focus group interviews, we will invite group interviews via
email and social media, and conduct interviews on online platforms. As for
the expert interviews, we will visit in person.
d. Sampling plan
For online focus group interviews, we will adopt the stratified random
sample sampling procedure. The population will be divided into six
mutually exclusive age groups (20↓, 20-30, 30-40, 40-50,50-60, 60↑), and
random samples will be drawn from each group. The unit will be residents
in Jakarta as it was the main place 7-11 expanded its branches in Indonesia.
The size would be 42 respondents (6 rounds according to age groups,
7ppl/round) in total. For the expert interviews, judgement sample will be
used for sampling procedure. Based on our judgement, we will select
population members who are likely to obtain accurate information. 1 to 3
experts will be invited among professionals who are familiar with marketing
in Indonesia.

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 e. Research instruments
Both online focus group interviews and expert interviews should be
prepared with interview guide and recorder. Online platforms (e.g. B2B
international) and a moderator are additional preparations for online focus
group interviews.
C. Implement the research plan – collect & analyze the data
D. Interpret and report the findings

References
WowShack. (2018). Why 7-Eleven Totally Failed In Indonesia? Retrieved from:
https://www.wowshack.com/why-7-eleven-totally-failed-in-indonesia/
Armstrong, G., Kotler, P., & Opresnik, M. O. (2019). Marketing: An Introduction,
Global Edition (14th ed.). Pearson.
Wikipedia. 7-Eleven Retrieved from: https://en.wikipedia.org/wiki/7-Eleven
Wikipedia. Jakarta. Retrieved from: https://en.wikipedia.org/wiki/Jakarta
Tan Heng Hong (2017). Why 7-Eleven failed in Indonesia? Retrieved from:
https://www.minimeinsights.com/2017/06/27/why-7-eleven-failed-in-indonesia/
The Megacity of Jakarta. Population characteristic Retrieved from:
https://jakartabeltrami.weebly.com/population-characteristic.html
Evan Tarver (2021) Market Segmentation Retrieved from:
https://www.investopedia.com/terms/m/marketsegmentation.asp
Corporate Finance Institute. What is the Boston Consulting Group (BCG) Matrix?
Retrieved from: https://corporatefinanceinstitute.com/resources/knowledge/strategy/
boston-consulting-group-bcg-matrix/
Bridgehead (2020). What is a market product grid and why should you use one?
Retrieved from: https://bridgeheadagency.com/what-is-a-market-product-grid-and-
why-should-you-use-one/

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