7-11: An Overview

Strengths

• Affordable products
• Using franchising to increase sales
• Wide array of products
• Assets and inventories increased
• Sufficient funds
• Availability of technology
• one of the fastest-growing convenience store brands worldwide
• dependability

Weaknesses

• Higher expenses and finance costs
• Some bad merchandise
• Brand name not too strong
• Poor service due to lack of employees

Opportunities

• strong shareholder support
• Big demand for the products
• Favorable government policies
• Possibilities of good profits
• fast growing category

Threats

• Rapid expansion resulted in a decline in average of sales
• Competition among retailers
• Increasing costs of production
• increasing rents and wages

Plans for 2005

• PSC will protect its lead in the C - store business by opening profitable stores in strategic locations
• Management will continue its success on franchising and will reorganize itself to support this thrust. It fully understands that the two franchise packages it offers are the key to profitable and scaleable expansion, but also recognizes that such a business model demands increased levels of excellence on much of the organization.
• The philosophy of identifying only the most important initiatives and focusing on them relentlessly will be built on and extended to other areas of operation throughout the year
• Management will contain other operating costs for its corporate stores, and reduce some controllable expenses such as inventory variation and bad merchandise
• The company will have POS machines (point of sale) in every store before year end, and is preparing the organization to make use of the information that will be generated to improve the quality of its business decisions
• Management will arrest the decline in services brought about by trends in the prepaid market by rolling out a new product. Bills payment which is highly successful in other countries is targeted to be fully operational across all stores in 2005.

Plans for 2006

• The company will work towards the optimization of the earnings of the store base by opening new stores in strategic locations and closing underperforming stores
• The company's new store development efforts will focus on the existing markets to take advantage of population density and leverage their current distribution capabilities
• The company will continue to assess new store location by evaluating demographics, traffic volume, visibility, population density, ease of access and economic activity in the area
• The company intends to continue to upgrade the more mature stores with more than P50 million of capital spending related to remodeling, maintenance and replacement of store equipment
• The company will continue to embrace franchising. The company will continue to build on the success of their franchising initiatives by strengthening their franchise selection, development and retention process and doing their best to ensure success of the franchisees. This will be completed by their HQ - level plans and programs aimed at supporting corporate and franchise store.
• Management shall improve on its advertising and promotion initiatives. More programs are lined up to boost sales; margin and customer count in partnership with the suppliers.
• Continue to control costs to sustain profitability amidst volatile oil and utility prices
• Create more value for shareholders, business partners and employees

Alternative Courses of Action

1. Maximize sustainable rather than peak profits by:
   • Using leading market share strategically
   • Reduce fixed costs to maintain profitability at lower sales levels
   • hedge or offset input costs (energy etc)
2. Introducing of new products and disposing of stocks that are not moving
3. Restrain capital investments
4. Lower Variable costs
   • See if the company can find a cheaper supplier but sells quality products, control the inventory, schedule staff more effectively or consider more efficient technology
5. Control fixed expenses
   • Examine to see if any budget cutbacks can be made
6. Consider wide marketing strategies at a lower cost
7. Encourage quantitative performance driver management adapted to each business operation for every organizational hierarchy / function and business
8. Improve profitability, financial standing and cash flow using such tools as result management, performance evaluation and risk anticipation
9. Strengthen business promotion structure ( establishing facilities, m & a, business alliances)
10. Bolstering business combativeness through integration of technology /development abilities and staff work
    • Comprehensive cost improvements through integration of technology/development abilities and staff work
    • Strengthen cost improvements focused on each store
    • Better cooperation between business divisions and corporate staff

Recommendation

The group's recommendation is to maintain the company's plans for 2005 and 2006 because this has been the company's formula to success. The common concept should be maintained but it should leave room for creativity and sensitivity to local market needs. The company can also reduce fixed costs and dispose of stocks that are not moving. Related to this issue, the company can also continue to introduce new products in partnership with other companies and encourage quantitative performance driver management adapted to each business operation for every organizational hierarchy/ function and business. Another thing is to consider wide marketing strategies at a lower cost. In the long-run, fewer products, and better management will return the company to consistent profitability. This will allow the company to reduce its break-even point while the market for 7- eleven continues to grow.