MPU3242

INNOVATION MANAGEMENT

GROUP ASSIGNMENT:
BUSINESS PLAN (7-ELEVEN)

PREPARED BY (GROUP 9):

No. Name ID

1. A’DLIN AMIRA BINTI MUNAWAR 62213219048

2. AIN HAMIZATUL AMIRAH BINTI JAMALUDIN 62213219228

3. AZYAN FITRI BINTI MAZLAN 62213219073

4. FAZRIN NADJWA BINTI KHAIRUL ANWAR 62213219056

5. NURUL IZZATI BINTI ZAINUDDIN 62213219044

6. WAN SHARIFAH ARNIDA BINTI WAN ABD RAHMAN 62213219045

PREPARED FOR:
PROF. DR. SULAIMAN SAJILAN

GROUP:
AC 10

SEMESTER:
JANUARY 2020

1
 GROUP PROJECT: Generico Inc. BUSINESS PLAN FORMAT

Item In Business Plant Of Generico Incomplete Not Complete

Inc Available
SECTION 1 Executive summary X
SECTION 2 Business description
A General description of business X
B Industry background X
C Goals and potential of the business and X
milestone
D Uniqueness of product or services X
SECTION 3 Marketing
A Research and analysis
1 Target market (customers) identified X
2 Market size and trends X
3 Competition X
4 Estimate market share X
SECTION 3 Marketing
B Marketing plan
1 Marketing strategy- sales and x
distribution
2 Pricing x
3 Advertising and promotion x
SECTION 4 Operation
A Identify location X
1 Advantages X
2 Zoning X
3 Taxes X
B Approximately to suppliers X
C Access to transportation X
SECTION 5 Management
A Management team- key personnel X
B Legal structure – stock and employment X
agreement and ownership
C Board of director, advisor and X
consultant
SECTION 6 Financial
A Financial forecast
1 Profit and loss X
2 Cash flow X
3 Breakeven analysis X
4 Cost control X
5 Budgeting plans X
SECTION 7 Critical risk
A Potential problems X
B Obstacles and risk X
C Alternative course of action X
SECTION 8 Harvest strategy
A Transfer of asset X

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 TABLE OF CONTENT

SECTION CONTENT PAGE

1 Executive summary 1

2 Business description 2

3 Marketing 6

4 Operation 13

5 Management 18

6 Financial 24

7 Critical risk 35

8 Harvest strategy 38

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SECTION 1: EXECUTIVE SUMMARY

7-Eleven Malaysia Holdings Bhd is a Malaysian-based company primarily

engaged in convenience store business under the brand name 7-Eleven. 7-Eleven
Malaysia Sdn. Bhd, the fully owned subsidiary of the company, owns and operates 7-
Eleven stores all over Malaysia. It offers ready-to-eat hot food, packaged fresh food,
bakery, soft drinks, frozen drinks, coffee, and other products. It also provides a variety
of services, including billing services, sales of mobile phone reloading cards,
photocopying and faxing. In addition to running self-owned stores, the company also
franchises local companies through its franchise program.

Vision and Mission

Vision: To be the best retailer of convenience
Mission: To consistently serve the changing needs of customers for their convenience

Values
• Understand: We seek to understand the needs of stakeholders & the company to
make the best (balanced) decisions
• Simplify: We work towards making things convenient for people to increase the
effectiveness of our solutions
• Solve: We find ways to resolve issues that prevents us from delivering value to
those we serve
• Connect: We communicate to manage people’s expectations in the most effective
manner

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SECTION 2: BUSINESS DESCRIPTION

A. Industry background:

7-Eleven was founded by J. C. Thompson as the Southland Ice Company in

Dallas, Texas, in 1927. Started as an ice vendor, the business eventually started
selling milk, bread and eggs on Sundays and evenings when grocery stores were
closed. This new business plan created satisfied customers and high profitability,
becoming a precursor to the current convenience retail concept.

The company's first convenience stores were known as Tote'm stores since
customers had "toted" their purchases, and some of them even had genuine Alaskan
totem poles in front of them. In 1946, Tote'm became 7-Eleven to reflect the new,
longer hours of the stores – 7 a.m. seven days a week, till 11 p.m. In 1999, the
company's corporate name changed from The Southland Corporation to 7-Eleven, Inc.

Tote’m store before became 7-Eeleven

The first 7-Eeleven store

2
B. General description of business:

7-Eleven Malaysia Holdings Berhad through its subsidiary 7-Eleven Malaysia

Sdn. Bhd. is the owner and manager of the 7-Eleven stores in Malaysia. 7-Eleven
Malaysia, founded on 4 June 1984, has made its mark on the retail scene and has
been an influential brand for more than 30 years. It is the leader and biggest 24-hour
stand-alone convenience store retailer in Malaysia with 2,287 outlets nationwide and
serving nearly a million customers every day.

7-Eleven is Malaysia's biggest 24-hour convenience store operator. 7-Eleven

Malaysia opened its doors to local entrepreneurs through its unique franchise program
in 2009 when it achieved its 1,000 mark in the stores network. 7-Eleven is the first
franchisor in the local market to offer existing profit-making shops to franchisees.

7-Eleven outlets can be found across bustling business districts to serene

suburban housing complexes across Malaysia, from gas stations and LRT stations to
shopping malls and medical institutions. 7-Eleven is Always There For You.

7 Things that you didn't know about 7-Eleven Malaysia:

i. The first 7-Eleven store opened in Malaysia on 9 October 1984 in Jalan Bukit
Bintang, Kuala Lumpur, and is still in operation today.
ii. The new "clear cup" for Slurpee was introduced on 21 January 2008 so that
customers can make their own concoction of frozen Slurpee beverages.
iii. The first 8 oz. Slurpee Mini Cup was launched for a limited period only on 10
November 2008.
iv. 7-Eleven stores use recyclable plastic bags to protect the environment.
v. 7-Eleven Malaysia celebrated its 25th anniversary on 6 April 2009 and also
marked the achievement opening of the 1,000th store in Bandar Sunway.
vi. In Malaysia, 7-Eleven Day is celebrated on 7 November (7/11) instead of 11
July, which is the official birthday of the 7-Eleven convenience store
vii. On 18 June 2014, 7-Eleven Malaysia launched its 1600th store in Publika
Solaris with a fresh new look and feel concept.

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C. Goals and potential of the business and milestone:

2018

● Partnered with MOL AccessPortal Sdn Bhd to be the first retailer to launch
One2pay Mobile Wallet Acceptance in 7-Eleven stores nationwide on 10 January
2018.
● Malaysian Golden Globe Tiger Awards 2018: Malaysia's Best Brands.

2017

● Partnered with Tenaga Nasional Berhad (TNB) to roll-out electric bill payment in 7-
Eleven stores nationwide on 14 September 2017
● PMAA Dragons of Asia Awards 2017: Dragons of Malaysia Awards 2017 (Gold
and Silver for Best Brand Loyalty Campaign; and 3 Bronzes for Best Social Media
or Word of Mouth Campaign; Best Brand Building and/or Awareness Campaign;
and Best Cause, Charity Marketing or Public Sector)
● Partnered with Lazada Malaysia to launch Lazada Over-the-Counter Payment
Service in 7-Eleven stores nationwide on 11 May 2017
● Partnered with Alipay to be the first Malaysian retailer for Alipay Mobile Wallet
Acceptance in 7-Eleven stores nationwide on 22 May 2017
● CSR Malaysia Awards 2017: Company of the Year Award (Retail Category) For
Pioneering Corporate Social Responsibility Initiatives

2016

● Created a new menu for Fresh to Go products with Brahims SATS Food Services
● Partnered with BOXit to launch BOXit Parcel Locker Service to selected 7-Eleven
stores on 19 May 2016
● Opened its 2000th store at Scott Garden on 20 July 2016
● Putra Brand Awards 2016: The People’s Choice (Bronze in Retail Category)
● Launched its 7-Select House Brand Product: Artissue Collection
● PMAA Dragons of Asia Awards 2016: Dragons of Malaysia Awards 2016 (Gold &
Silver for Best Brand Loyalty Campaign)
● Successful bid to run retail spaces at MRT stations

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D. Uniqueness of product or services:

Every 7-Eleven store carries over 2,200 SKUs, including its exclusive brands
such as Slurpee frozen drinks and Big Gulp soft drinks. The variety of facilities offered
at 7-Eleven includes payment service, selling of cell phone reload cards, IDD / STD,
Touch N Go reload, internet gaming starter packs, reloads via MOL Point top-up, ink
cartridge refill, photocopying, faxing, automated teller machine ( ATM) and bulletin
board for local community notices.

In 2009, 7-Eleven launched fresh brewed coffee and other hot drinks along with
frozen fresh food and bakery products for the convenience of consumers looking for
ready-to-eat fast meals. All food products sold in 7-Eleven are HALAL approved and
undergo strict quality control to ensure quality and freshness.

Examples of products and services provided by 7-Eleven:

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SECTION 3: MARKETING

SECTION 3A: RESEARCH AND ANALYSIS

1. Target market and market size trends.

Target market is one market segmentation that includes a marketing strategy that
involves dividing the single market into smaller segments. The reason for dividing the
market into smaller segments is to make it easier as they are divided to small groups
of customers based on the criteria such as gender and age, or other distinctions, like
income or location and try to produce different products according to their needs.

7-Eleven uses demographic segmentation strategy with gender and age as the
parameter. The main target segments are youth and adult. They also target mainly the
family and working people whom have no time to go to supermarket to buy groceries.
They take children into consideration because they are more attract to the freebies
and candies. The kind of busy people also prefer 7-Eleven because it is convenient to
get anything and also it is easy to find. The youth choose convenient store to withdraw
money or get their prepaid reload.

7-Eleven is busy shopped at an everyday store. It has tailored its products and
services like speedy transaction to meet the needs of the customers. The company’s
other target markets are coffee lovers. That’s why it has put much attention into making
some of the finest fresh-brewed coffee, sloppy and big gulp beverages which it is well
known for around the world.

The company also offers to go meals and smart snacks to better target busy people
in fast paced cities or countries. Its customers mostly are male which is in 60-70% of
age 18 to 44 years old. In addition, the company targets students and low income
workers as their secondary market.

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 2. Competition

99 Speedmart KK Mart
7-Eleven

Number of 2,240 Outlets 1,646 Outlets 300 Outlets

outlets nationwide nationwide nationwide
nationwide

Operating 24 Hours 10 a.m. - 10 p.m. 24 Hours

hours

Products Groceries, Groceries & Groceries, fresh

available fresh foods, freshmart foods, ATM and
ATM and photocopying
photocopying services
services

Benefits to Points by Trolley provided None

customer business
partners

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 From the table, we can compare the best of each of the convenient store. 7-Eleven
is considered as the strongest and best convenient store company in the market. 7-
Eleven has the most outlets nationwide which makes it is the easiest to find by the
customers wherever they are. Besides 7-Eleven operates 24 hours which is if the
customer is in case of emergency it can be very useful to customers to get what they
need in whenever that happen. Furthermore, 7-Eleven provide the services and even
sells products which make it has lot of variety to customers.

3. Estimated market share

7-Eleven is among the world’s largest and most widely recognized and iconic
retailers, both inside and outside the convenience store channel. 7-Eleven has been
working towards an overhaul of its store operations to mitigate the high operating
expenses and is expected to improve profitability in financial year 2019.

At 82% market share, 7-Eleven is commanding the convenience chain store

market with store expansions. 7-Eleven has targeted to open at least 150 new stores
per year over the next two years, translating into an organic growth of 7%, lower than
Bison Consolidated Bhd’s organic growth of 24%. However, we believe this is
compensated by 7-Eleven’s higher base which commands 82% of the convenience
store market.

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 SECTION 3B: MARKETING PLAN

7-Eleven need to let people know about their product or service repeatedly to get
effective marketing. To achieve this, the marketing mix variables of the 4P be applied,
which are commonly known as product, place, price and promotion. First 4P’s is
product. Product is the goods or services, or both that a company offers and make
available to its customer. 7-Eleven sell goods such as local products which are mostly
purchased from local or consumer customers. The second 4Ps is place. 7-Eleven
franchises are a convenience store that can easily be found in many locations. The
third 4Ps is Price. 7-Eleven sell high quality products but at an affordable price for
consumers. The fourth 4P’s is Promotion. 7-Eleven has do some promotion to make
customer notice their product and stores.

1) Marketing Strategy – Sales And Distribution

There a few sales and distribution strategy that perform by 7-Eleven. Firstly, 7-
Eleven introduce their website and mobile apps. The 7-Eleven company has
developed a 7-Eleven mobile app to better serve its customers, which meets the needs
of internet-friendly customer generation. 7-Eleven can sell their product online through
their website. Customer can easily but their product without have to go to their store.
The 7-Eleven stores can better serve customers through this app by delivering food,
paying online bills, or giving reward points to customers.

Second, 7-Eleven also open 24 hours. This will make their customer easy to
purchase anytime they need. For exam their customer has emergency and need
something ad midnight, they can go buy 7-Eleven because this store open for 24
hours.

Next, 7-Eleven selling ready to eat product to increase their daily incomes and
compete with Family Mart and myNEWS. To increase the sales volume, they must
promote their new product in various ways. They bring fresh items for sale. They sell
fresh food like sandwiches, salads, cakes, fruits, and pastries. It'll make easier for
customer to eat. Fresh food at 7-Eleven is easy for customers to get.

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 After that, 7-Eleven sell product that have high demand from customer. 7-Eleven
sell items such as local products which are often bought by community or individual
customers. They have a variety of products and most of them are basic to modern
living, such as fast food, frozen food, instant noodles, soft drinks, instant drinks,
newspapers, magazines and a variety of snacks that most children and adults like to
eat. 7-Eleven also Selling basic necessities for personal grooming such as toothpaste,
face wash and travel bath soaps because sometimes customers seem to forget this
simple items. It will make customers easy to buy this basic need in 7- Eleven store.
Customers do not need to go to supermarket to buy this basic need product.
Customers just can easily get from 7-Eleven. 7-Eleven sell slurpy that many customers
like. Slurpy is one of customer’s favourite beverage. Customers just only can get slurpy
exclusively from 7-Eleven store because others store not sell slurpy. This is because
slurpy is 7-Eleven products. This will make customer will go to 7-eleven just to buy
slurpy.

Lastly, 7-Eleven provide other service like ATM service to their customer. This
service can attract more customer buy in their stores. It is because customer can buy
something when they withdraw their money. It will make their customer easy to
withdraw their money when they need.

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2) Pricing
7-Eleven stores keep the price of the goods as competitive as compared
to other stores. The standard items include product that is sold at any
convenient store such as coffee, chips, bread, eggs and so on are sold at
normal and affordable prices. The price is same likes other convenience store.

But, for the 7-eleven brand product, the price is little bit high. The price
is a little higher for its privately branded goods like Slurpees and Big Gulp. The
reason for high pricing for their private label products is simply because their
customers like their products and they are only exclusively only available in 7-
Eleven stores.

Furthermore, when the store provides a one-stop shopping option for all
consumer demands and the 24-hour time during which the supermarket runs,
the consumer is able to pay certain high costs for the 7-eleven retail service. 7-
eleven can sell product with a little high price from other shops because 7-
eleven store is open for 24 hours. Their customer available to buy in 7-eleven
store anytime they need.

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3) Advertising And Promotion
A few advertising and promotion have been perform by 7- eleven. Firstly,
every month, 7 – Eleven Malaysia do promotion such as contests to promote
certain products. 7-eleven also pick certain products to reduce their price to
encourage customers to buy their product for a period of 1 month or 2 months.
7-Eleven Malaysia retail has won number of awards from YB Dato Tan Lian
Hoe, Deputy Minister of Domestic Trade Cooperative and Consumerism, to a
National Franchisee of the Year of Best Outlets sales growth categories.

Then, for promoting 7-eleven among public, they do activities such as

Monthly highlights food and non-food parties. 7-Eleven also give prize
certificates to their customers as an ideal gift and this gift are valid for all 7-
Eleven Malaysia. 7-Eleven Malaysia also visiting some handicapped people to
contribute some food and some other non-food.

Next, every month, 7-Eleven retail sites like own 7-Eleven websites, and
Facebook have been promoted. 7-Once retail stores announce through
newsletters such as The Star, New Straits Times, See Hua Daily, Oriental Daily,
Kosmo and The Sun.

Besides that, 7-Eleven stores follow the Omni-channel approach for their
promotional strategy, from digital promotion to physical store promotion events.
The 7-Eleven company is committed to improving its sales through a 'shoulder'
campaign for its Slurpee product, which cited the product 's benefits beyond
just refreshment. The company has begin to celebrate the 7-Eleven Day as a
promotion strategy to attract more customers to its shops. For example, 7-
Eleven stores offer Slurpee free of charge from any of their stores. Also the
company started offering small Slurpee on fuel purchase to get new customers.

Lastly, The company is also offering gift cards, 7-Eleven Universal Fleet
Card, Prepaid Cards to give its customers special offers. 7-Eleven has also
engaged in various activities such as the Shelter Makeover Project, Unisel
Voice for Refugee, Slurpee Taste Check to attract the community and create
awareness about brands.

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SECTION 4: OPERATION

Identify Location

7-Eleven Malaysia Holdings Berhad through their subsidiary 7-Eleven Malaysia

Sdn Bhd which is the owner and operator of 7-Eleven stores in Malaysia. Incorporated
on 4 June 1984, 7-Eleven Malaysia has made its mark in the retailing scene and
remained a prominent icon for over 35 years. It is the pioneer and largest 24-hours
standalone convenience store operator in Malaysia with 2,411 outlets nationwide and
serves close to a million customers daily.

There are many 7-Eleven’s stores that can be found across busy commercial
districts to serene residential suburban compounds across Malaysia, from petrol
stations and LRT stations to shopping malls and medical institutions. In addition, it is
along with their slogan that “7-Eleven is Always There For You”.

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Advantages

The advantages from the location that 7-Eleven operates, we see that 7-Eleven
operate their business across the busy commercial districts such as shopping malls,
LRT and petrol stations and even at the residential area. From those locations, 7-
Eleven will get more customers because of its strategic location and easy location that
people can access.

Other than that, 7-Eleven is a convenience store with a strategic location. We

know that 7-Eleven was selling value-priced retail items, snacks, soft drinks and others
that customers are looking to meet their needs. There are stores with great demand
across cities and neighborhoods.

Next, 7-Eleven has more than 50,000 stores throughout the world, which give
them more location to interact with customers. For customers, they can access 7-
Eleven everywhere they are having and get primary benefit to purchase commonly
products that are located at nearby stores. Therefore, with this greater market
coverage through many stores will provide increased convenience to more customers.

14
Taxes

7-Eleven franchises have been taxed on their income taxes, which is on current
and deferred taxes. This current tax is the expected amount of income taxes payable
in respect of the taxable profit for the year. It is also measured by the tax rates. In
addition, this current asset is recognized in profit or loss except to the extent with tax
related to items recognized outside profit or loss.

Next, for the deferred tax is provided for and using the liability method. At the
principle, deferred tax liabilities are recognized for all taxable temporary differences
and deferred tax assets are recognized for all deductible temporary differences,
unused tax losses and unused tax credits. Besides, deferred tax is not recognized if
there is a difference between goodwill and initial recognition of asset and liability in a
transaction. Other than that, deferred tax that relates with items recognized out profit
or loss is recognized outside profit or loss and the deferred tax items are recognized
in correlation to the underlying transaction either in other comprehensive income or
directly in equity.

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Approximately to suppliers

7 Eleven has implemented an effective inventory system, rigorous inspection

of suppliers and cross-docking delivery system. Other than that, 7 Eleven also
performs healthy competition with other suppliers, manufacturers, distributors,
wholesalers and service agents who are part of the value chain. They are also having
priority in supporting local products as part of contribution to the growth of the local
economy and minimum environmental footprint.

In addition, they are using Handbook on Procurement Policies and Procedures

and their Purchasing Guideline to guide the supplier selection process. It is to reduce
potential procurement risks and they are also doing pre assessment to the potential
suppliers and the criteria that include the financial position, product quality, regulatory
compliance, halal certification and labelling the requirement before signing agreement
with supplier.

16
Access to transportation

7 Eleven used The Cross Dock Delivery System as their logistic practice since
2017 in the transportation process. This system not only increases their inventory
efficiency but also can reduce the transportation costs, time of delivery and minimize
our environmental footprint. For example, they use huge trucks which are the size of
40 footer trucks in these systems to transport their goods from CDC (Bukit Raja, Klang)
to the Cross Dock Hubs that are located at East Coast, Northern and Southern part of
Peninsular Malaysia.

Besides, that was their strategy to increase the number of Cross Dock hub
networks in Ipoh and Melaka. This is to expedite shipments to their customers and by
doing so it will enhance their competitive edge.

17
SECTION 5: MANAGEMENT

Generico Inc.

18
 A. Management team- Key personnel

Colin George Harvey

On 13 August 2018 Mr Collin George Harvey was appointed Non-Independent

Executive Director and Chief Executive Officer of 7-Eleven Malaysia to our Board.
He began his retail career in South Africa where he worked for the largest retailer
in Africa, Shoprite, holding various commercial and operational roles for 13 years
before joining Dairy Farm in Malaysia in 2004, where he managed the largest Dairy
Farm hypermarket in Johor Bahru for one year, followed by 3 years as Head of
Dairy Farms Food Trade Team in Kuala Lumpur.

From 2008 to 2011 he was Commercial Director for Pt Hero Supermarket, covering
Indonesian Affiliate Dairy Farm’s commercial operation, covering 5 retail formats in
Indonesia. He managed Dairy Farm’s- Guardian Indonesia business in 2011,
restructuring the business, building the support office, supply chain, and restoring
profitability to the business till he decided to leave in 2017.

He held the position of independent director of Pharmacity JSC, a retail Pharmacy

leader in Ho Chi Minh City, Vietnam before being appointed CEO of 7-Eleven
Malaysia. He has extensive retail experience in South East Asia, where he has
been in various senior roles for the last 16 years. Mr. Colin holds a Bachelor of
Commerce from the University of South Africa, and an MBA from the University of
Stirling, UK.

Tan U-Ming

On 21 August 2013 Mr Tan U-Ming was appointed Executive Director to our Board.
He studied at Irvine Valley College, California, USA. He attended North Africa
franchisee and in-store training with 7-Eleven USA, and completed Phase 1 of Field
Consultant Certification Training in Dallas, Texas, USA. HE WAS APPOINTED AS

19
Director of 7-Eleven Malaysia Sdn Bhd in 2008. Where he was responsible for
supervising the functions of merchandising, logistics and distribution as well as
procurement and advertising and promotions of 7-Eleven Malaysia Sdn Bhd in
January 2011.

He is currently the Executive Director of Toto Malaysia Sdn Bhd and MOL Global
Pte. Ltd. Director. He also holds management roles in many other private
companies. He is the son of the Company’s major shareholder, Tan Sri Dato’s Seri
Vincent Tan Chee Yioun.

Wong Wai Keong

On 12 March 2018, Mr Wong Wai Keong was appointed as Chief Financial Officer
of the Group. He is an accomplished financial professional with over 23 years of
experience in multinational corporations (MNCs) and local environment in the
region covering finance, accounting, information technology/ enterprise resource
planning (ERP) and business management. He has operated in numerous sectors
including education, multi-level marketing, business technology services,
engineering, agriculture and the fast-moving consumer goods industry (FMCG). He
is a member of Malaysian Institute of Accountant (MIA), Charted Institute of
Management Accountant (CIMA) and Charted Global Management Accountants
(CGMA). Prior to entering 7-Eleven Malaysia Holdings Berhad, he was the Group
Finance Director of SyAqua Group Inc. overseeing the Asian markets and Florida,
USA where he was active in organizational expansion and was instrumental in
turning the company into an integrated functional corporation. He previously held
executive roles in Avon Cosmetics, KFCH Marketing, Ayamas Food Corp, Abbott
Laboratories, and Wyeth. He was also JD Edwards Lead Application Consultant.

20
 B. Legal Structure –stock and employment agreements and
ownership

Substantial Shareholders Direct %

Tan Sri Dato’ Seri Vincent 295,170,000 25.66

Tan Chee Yioun

Classic Union Group Ltd 210,396,226 18.29

True Ascend Sdn Bhd 121,132,160 10.53

Tan Sri Kong Hon Kong 61,454,716 5.34

Tsai, Tzung-Han - -

Tsai, Hong-Tu - -

Substantial Shareholders Indirect %

Tan Sri Dato’ Seri Vincent 248,771,740 21.63

Tan Chee Yioun

Classic Union Group Ltd

True Ascend Sdn Bhd

Tan Sri Kong Hon Kong

Tsai, Tzung-Han 210,396,226 18.29

21
Tsai, Hong-Tu 210,396,226 18.29

22
 C. Board of director, advisors and consultant

Board of Director

Tan Sri Dato Seri Abdull Hamid Bin Embong

On 20 July 2016, Tan Sri was appointed as Independent Non-Executive Chairman

to our Board. At Malay College Kuala Kangsar, Perak, Tan Sri completed
secondary schooling. He was admitted as an Utter Barrister in 1976 and obtained
a Barrister at the Lincolns Inn, London at Law Degree.

Tan Sri served in the Judicial and Legal Service and was appointed as Magistrate,
Deputy Public Prosecutor, Legal Advisor and Senior Federal Counsel to the
customs and Excise Department, Department of Economic Planning (PM), Ministry
of Land and Regional Development, Treasury, Ministry of Home Affairs and Legal
Advisor to Negeri Sembilan and Pahang States.

He was appointed Commissar of the Judiciary in 1994 and Judge of the High Court
in 1996. He was elevated to the Court of Appeal in 2006 and to the Malaysian
Federal Court in 2009. In February 2016 he retired from bench. Tan Sri also serves
as independent non-executive director on the board of Ancom Berhad and as
chairman of Zetro Service Sdn Bhd. On 1 March 2017 Tan Sri was also appointed
Judge of the Syariah Court of Appeal, Perak.

Colin George Harvey

On 13 August 2018 Mr Collin George Harvey was appointed Non-Independent

Executive Director and Chief Executive Officer of 7-Eleven Malaysia to our Board.
He began his retail career in South Africa where he worked for the largest retailer
in Africa, Shoprite, holding various commercial and operational roles for 13 years
before joining Dairy Farm in Malaysia in 2004, where he managed the largest Dairy
23
Farm hypermarket in Johor Bahru for one year, followed by 3 years as Head of
Dairy Farms Food Trade Team in Kuala Lumpur.
SECTION 6: FINANCIAL

Generica Inc.

A. Financial Forecast

1. Profit or Loss

Statement of Profit or Loss

Actual Forecast

RM'000 RM'000

Revenue 2,361,058 2,217,040

Cost of sales (1,620,671) (1,518,435)

Gross Profit 740,387 698,605

Other operating income 143,059 122,665

Selling and distribution expenses (645,850) (642,802)

Administrative and other operating expenses (117,333) (95,705)

Profit from operations 120,263 72,763

Finance costs (43,610) (9,230)

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Profit before tax 76,653 63,533

Income tax (expenses)/credit (22,569) (22,510)

Profit after tax 54,084 41,023

Other comprehensive income not to be

reclassified to profit or loss in subsequent

year

Revaluation on land and buildings 1,010 2,120

Taxation (193) (1,807)

Total other comprehensive income (net of

taxation) 817 313

Total other comprehensive income for the

financial year 54,901 41,336

Profit after tax attributable to:

Equity holders of the Company 54,058 41,001

Non-controlling interest 26 22

25
 54,084 41,023

Total comprehensive income attributable to:

Equity holders of the Company 54,875 41,314

Non-controlling interest 26 22

54,901 41,336

Basic/diluted earnings per share (sen) 4.74 4.57

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 2. Cash Flow

Statement of Cash Flows

Actual Budgeted

RM'000 RM'000

Cash flows from operating activities

Cash receipts from customers and other

receivables 2,528,621 2,390,400

Cash paid to suppliers and employees (2,186,318) (2,270,900)

Cash generated from/ (used in)

operations 342,303 119,500

Interest paid (7,629) 9,918

Tax paid (25,955) (19,457)

Tax refund 1,198

Net cash generated from/ (used in)

operating activities 309,917 90,125

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Cash flows from investing activities

Purchase of property, plant and

equipment (93,774) (34,450)

Proceeds from disposal of property, plant

and equipment 146 350

Purchase of quoted shares (27,177)

Dividend income received 124 115

Interest received 861 852

Net cash (used in)/ generated from

investing activities (119,820) (33,133)

Cash flows from financing activities

Dividends paid on ordinary shares (27,093) (29,870)

Proceeds from banker's acceptance

acceptances 205,000 280,115

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Repayment of banker's acceptances (211,145) (301,111)

Proceeds from term loan 18,000

Proceed from revolving credit 20,000

Repayment of term loans (16,071) (11,700)

Repayment of revolving credit (20,000)

Payment of principal portion of lease

liabilities (117,032)

Repayment of hire purchase and finance

lease liabilities (97) (85)

Net cash used in financing activities (166,438) (44,651)

Net increase/(decrease) in cash and

cash equivalents 23,659 12,341

Cash and cash equivalents at 1 January 72,548 45,078

Cash and cash equivalents at 31

December 96,207 57,419

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 3. Break Even Analysis

Sales(40,000 units) : RM 2,361,058 (RM 59/unit)

Less: Variable costs : RM 1,772,000 (RM44/unit)

Contribution Margin = 589,058

Less: Fixed cost =534,974

Net Income = 54,084

BEP=RM 534,974/ (RM 59-RM 44) = 35,665

4. Cost Control

Actual Budget

Cost estimation 5,905 5,497

Budget 4,904 4,780

Cost Monitoring 12,790 12,850

Financial 4,807 4,341

Evaluation

Cost Estimation: is used in the initiation phase. In this phase, the users are
responsible for evaluating a particular project’s financial viability

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Budgeting: is applied during the planning phase. The users plan the work during this
phase by considering the overall cost estimates and converting the same into a
budget.

Cost Monitoring: is used during the phase of execution. In this phase, users monitor
their costs to check that there is no overspending or unnecessary expenditure to
keep expenditure in line with budgets

Financial Evaluation: is used in the termination phase. In this phase, users assess
whether or not a given project has met the predetermined financial goals.

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 5. Budgeting plans

Over/

(Under
Summary Actual Budget Budget)

Total Income 2,361,058 2,217,040

Total Expenses 1,620,671 1,518,435

740,387 698,605 41,782

INCOME DETAILS

Sales 2,123,672 1,997,056

Interest earned 6,725 7,913

Fees 9,868 18,995

Commissions 56,862 45,036

Rent 11,521 12,522

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Royalties 9,351 12,853

Other 143,059 122,665

Total income: 2,361,058 2,217,040

EXPENSES DETAILS

Selling

Salaries and wages 1,148,019 1,021,459

Commissions 46,528 36,899

Advertising 220,465 216,112

Delivery 45,960 55,639

Shipping 17,661 36,255

Travel 12,008 13,890

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Salaries and wages-admin 100,876 113,474

Employee Benefit 12,697 12,476

Other 16,457 12,231

Total Expenses 1,620,671 1,518,435

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SECTION 7: CRITICAL RISK

A. Potential Problems

Even though 7-Eleven Malaysia Holdings Bhd is currently the dominant leader in
convenience store industry as it occupies 80% of the market, there is a growing
competition as two other main companies are competing against 7-Eleven Malaysia
Holdings Bhd. They are MyNews.com owned by Bison Consolidated and Family Mart
which is Japanese-owned convenience store.

Beside these two prominent competitors, 7-Eleven Malaysia Holdings Bhd also
faced another challenge from other convenience store companies. It can be noticed
that whenever 7-Eleven open its stores, there will be another local or international rival
convenience store either beside or situated at the same shop lot as 7-Eleven store.
So not all customers will go to 7-Eleven store as they have more than 1 convenience
stores to choose for shopping.

Furthermore, with the implementation of GST, it increases the product prices

therefore indirectly turns few customers away from coming to 7-Eleven stores since
they find the products expensive. GST also contributes to the rise in expenses such
as rent and utility.

Lastly, the announcement of minimum wage requirement also lead to increases in

selling and distribution expenses. The company should be cautious and take
necessary steps to minimize costs and increase sales revenue.

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 B. Obstacles And Risk

Even 7-Eleven convenience stores have been operating in Malaysia for 25 years
and have successfully built a strong reputation, it faces the inherent risk of entry of
new player to the convenience change industry in Malaysia, especially established
foreign convenience store giants like Family Mart which are direct competitors of 7-
Eleven. So, from that, 7-Eleven has implemented the market concentration business
concept which is to protect its business by expanding market share and creating a
dominant market position to discourage other players from entering the market.

Second is competition amongst existing retailers. Consumers now enjoy a wide

choice from spectrum of retail outlets ranging from small private retailers, mini
markets, shopping centers to hypermarkets. The entry of foreign retail player into the
market has undoubtedly intensified all areas of competition including price, quality,
variety and convenience. In terms of operations, 7-Eleven convenience stores have a
distinct competitive advantage compared to other retailers because it open 24 hours
a day while most of the other retailers do not operate on a 24 hours basis. 7-Eleven
convenience stores have an advantage over petrol kiosk based convenience stores.

Next is security risk. As the 7-Eleven convenience stores operate on a 24 hours

basis it is inevitably affected by pilferage, shoplifting theft and robbery. This is a real
risk faced by all 24 hours convenience stores. To reduce the risk, all 7-Eleven
convenience stores are filled with closed circuit television and time delayed safes. In
additional, 7-Eleven has taken insurance coverage for theft and robbery.

Lastly, risk faced by this company is low margins recorded. However the risk
arising from the low margins recorded by the 7-Eleven are can be reduced by cash
flow management and usage of trade lines from financial institution to fund its
operations. In future, the revenue of the 7-Eleven retail is expected to grow further with
the full implementation of it’s from chaise program. The franchise programs which also
aim to provide a sense of ownership to the franchisees, is expected to generate
revenue and profit of the 7-Eleven retail.

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 C. Alternative Courses Of Action

7-Eleven’s mission is successful in serving the changing needs of customers for

their convenience when the expansion of product lines, the introduction of mobile and
touch n go top-up services and the upgrading of stores with modern looks have
retained existing customers and attract new customers therefore boosting the
revenues over the years. For example, as the demand for mobile top-ups and touch-
n-go top-ups are increasing due to limited places offering these products,
telecommunication companies and PLUS companies made a partnership deal with 7-
Eleven to provide top-up services to consumers. This will convenience the customers
who can travel to 7-Eleven stores to top-up their Touch N Go cards instead of going
to PLUS offices.

To cut down costs, 7-Eleven Malaysia Holdings are focus on opening its stores in
residential areas at the rural area where the rental or land fees are low and set up its
own distribution center like Bison Consolidated. Store expansion can be done at
residential areas with high population density where there is no other convenience
store. If 7-Eleven Malaysia Holdings Bhd continues to expand product line, maintain
the quality of its products such as Slurpee and open its stores at convenience-store-
deprived areas, it will sustain its position as No. 1 in convenience store industry for a
long time.

Furthermore, 7-Eleven Malaysia Holdings Bhd is one of the first convenience store
companies to offer franchising business to local entrepreneurs who intend to set up
their first businesses which is the company is offering business opportunity to business
customers. 7-Eleven has been continuously ranked as a top five global franchisor. The
franchising business is based on profit-sharing therefore when the franchise business
is successful, both the franchisor and franchisee will reap the rewards of profits as a
win-win situation.

Lastly, 7-Eleven Holdings Bhd also offers the opportunity to vendors who are
interested to sell their products at 7-Eleven stores. This business strategy works well
for 7-Eleven Malaysia Holdings Bhd as there is an 7-Eleven Malaysia Holdings Bhd.
Approximately about 70% of the products sold in 7-Eleven stores come from external
vendors or suppliers.

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SECTION 8: HARVEST STRATEGY

To provide the highest quality franchise business plans, firstly, the need of
training which is all 7‑Eleven franchisees, must attend an intensive three-day launch
class that introduces the 7‑Eleven brand at the Support Center in Dallas, Texas. The
introductory training is followed by six to eight weeks of local College of Operations
Leadership (C.O.O.L.) training. The training takes place in an actual store and teaches
franchisees about running a business while also providing practical experience.

Next plans is initial investment. The initial investment for opening a 7-Eleven
Store depending on the location and size of a store. Unlike most franchise systems
that require franchisees to develop their stores, 7‑Eleven provides fully stocked. The
average start-up period of a 7-Eleven store is only 60 days. The initial expenses
generally include the franchise fee, inventory down payment, cash register fund, and
costs for supplies, licensing, permits, and bonds.

Lastly, the business expenses. 7‑Eleven obtains and bears the cost of the land,
building, and store equipment such as bakery cases, Slurpee’s barrel dispensers, and
ATMs. 7-Eleven also covers the expenses of utilities, rent, and real estate taxes. In
addition, 7‑Eleven provides financing for all store-operating expenses, bookkeeping,
bill paying, and payroll services for store operations as well as business consulting
services. Unlike most of franchisors that charge a percentage of revenue, 7-Eleven
shares the store’s gross profit with the franchisee in order to further encourage the
store’s profitability. With a renowned brand name and the support of an existing
business model, as a franchisee you will get a quick and guaranteed return on
investment.

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