7 Eleven’s strategy in Taiwan
Across the globe, businesses are expanding to new regions and this brings about many challenges of suiting that business to the new market. 7-Eleven, a US based company in 1927 has successfully expanded to almost all the continents and has experienced massive growth in Asia. Since its introduction into Taiwan, the company has successfully established more than 4, 700 stores and a huge customer base. The successful integration of a multinational company into a foreign region is pegged on the successful customization of goods and services, operations and management and even business model to the prevailing culture, practices and expectations of that new market.
7-Eleven stores in Taiwan are located, managed and operate differently from those in the US. In US, the stores are usually separated by long distances due to the expansive geography of the US. Taiwan is a very small country compared to the US and the 7-Eleven stores are located close to each other where the populations are high (Chang, 3). The US head office provided the guidelines for putting up new structures and the floor plans had to be similar for all franchisees. Since Taiwan had a scarcity of freestanding sites where stores could be built, the 7-Eleven stores did not conform to the standard size, format and floor plans used it the US. The standard floor area in the US was between 2, 400 and 3000 square meters while most stores in Taiwan measured 700 square meters! (Chang, 5) This compelled the Taiwanese franchisees to use floor plans that were different from those used in the US. In the US, the stores are located where people congregate such as street corners and at gas stations. In Taiwan the stores were located within residential areas and cities.
The stores in the US are also commonly found in the rural areas where the population density is low. Stores have large parking areas and have similar floor plans. The US stores are commonly constructed on free-standing space. This contrasts the Taiwanese 7-Eleven stores which were zoned vertically. The stores were found in high-rise buildings which also accommodated other facilities such as apartments, offices, service centers, workshops and other facilities.
The localization of 7-Eleven stores in Taiwan has strengthened the concept of convenience stores. It brought about flexibility and better business in terms of ownership, location, goods and services that were customized for the Taiwanese population. The President Chain Store Corp (PCSC) which managed the 7-Eleven stores in Taiwan stopped the costly buying of premises to set up stores and instead resorted to renting which was cheaper and more convenient. The PCSC also started franchising to suit the demands of Taiwanese businessmen. This meant less capital outflow, less managerial time could now be spent on monitoring operations, more rapid growth and greater flexibility in the choice of locating stores (Chang, 6). This meant greater accommodation of the Taiwanese people and more business for 7-Eleven. For instance, franchisees opened stores in high-density locations such as railway stations away from the price-sensitive housewives in the residential areas. As such they appealed to urban professionals and young people who spend heavily. Merchandising allowed the Taiwanese stores to offer more products that were demanded by the local population such as hot dogs, tea egg, baozi, fantuan and other local delicacies that are popular among the Taiwanese (Chang, 7). As such, localization benefited al the stakeholders; the company proprietors, businessmen and franchisees, companies such as PCSC and local population. This proves that indeed the
The differentiation offered by 7-Eleven in Taiwan delivered competitive advantages to the store chain. First, the Taiwanese stores offered Taiwanese people local delicacies such as biandang, fantuan, luwei and baozi in addition to say the hotdogs commonly found in the American market. This product differentiation endeared them to the local population and thereby acquiring competitive advantage over other entrants and local stores. The company adopted the use of technology through i-Bon to improve its services to its customers. i-Bon enabled all stores to offer digitized services such as reservation of tickets for travelling and movies, download documents and pay bills among other related services (Chang, 8). These saved customer time and brought about convenience that made them more loyal to 7-Eleven stores. The introduction of pre-ordering services suited the local very much especially for seasonal shopping for occasions such as Mother’s Day. Customers found the ability to order goods over the phone and pick them at a store of their choice very convenient thereby earning the company significant competitive advantage. The introduction of e-commerce services where customers could use i-Bon to order goods such as books trough Amazon also gave the customers a lot of convenience, brought about massive business to 7-Eleven and was therefore competitive advantage. Other services such as the introduction of prepaid phone cards also enabled customers to shop conveniently at 7-Eleven stores. This introduction of 7-mobile also enabled 7-Eleven to compete favorably with bigger companies such as the state-owned Chunghwa Telecom in the provision of cellular services. As such the differentiation offered by 7-Eleven has delivered massive competitive advantages to the chain store.
The operational format of 7-Eleven in Taiwan can be expanded to other countries. This is so because it has proved to be a success in Taiwan and several other countries that product differentiation and customization have been applied. Customers now demand products and services that have been tailored to suit their specific needs and uniqueness. (Aliber & Reid, 23) warns that it is impossible for a business to succeed if it does not uphold the cultural aspects such as food, clothing, religion among others. 7-Eleven had successfully offered Taiwanese businessmen and consumers a lot of what they need and that matches their needs. As such, this can be successfully replicated in other countries. Technology-based services in Taiwan can be applied across many other countries since many countries are fast-adopting technology in business. However, it would be important for the stakeholders to match its services with the level if technology in a given country in order to make it relevant to the end users.
Quelch and Hoff state that successful marketers only need come up with a great product and a convincing marketing strategy to be successful. In regard to this case, 7-Eleven has implemented some product differentiation and customization for the Taiwanese market and this has enabled the company to thrive. Quelch and Hoff state that it “ global marketing” is too extreme to be practical and this can be attested by the introduction of the 7-Eleven stores in Taiwan. In the first ten years (from 1980 to 1990) when the PCSC operated stores in a similar manner as was being done in the US, there was minimal growth and that period had numerous “ mistakes”. However after the “ customization of global marketing” which was marked by increased franchising and aligning products with the Taiwanese culture, the company recorded impressive growth. As such, multinational companies should customize their products and services to the local market in order to overcome competition and gain significant market shares in diverse territories.
The successful introduction of 7-Eleven into the Taiwanese market can be attributed to localization. The stores in Taiwan were smaller (700 sq. meters) as opposed to the standard 2400 sq meters of US stores and they also had to be located in densely populated areas. The stores also offered local delicacies such as biandang, fantuan and luwei in addition to hotdogs and other conventional products. The differentiation was also extended to allow franchisees instead of the original PCSC-centered control of the region. The operational format of 7-Eleven in Taiwan can be expanded to other countries. This is so because it has proved to be a success in Taiwan and several other countries that product differentiation and customization have been applied. Use of technology can be customized for different regions to increase customer loyalty and together with other similar strategies give the company some competitive advantage. Quelch and Hoff attest that customization of products, services and operations is the ultimate may for successful marketing. Indeed, the successful integration of a multinational company into a foreign region is pegged on the successful customization of goods and services, operations and management and even business model to the prevailing culture, practices and expectations of that new market.
Chang, Aihwa. 7-Eleven in Taiwan: Adaptation of Convenience stores to new market environments. College of Commerce, National Chengchi University and the Richard Ivey School of Business Foundation. Ver 2012-03-16.
Aliber, Robert Z, and Reid W. Click. Readings in International Business: A Decision Approach. Cambridge, Mass: MIT Press, 1993. Print.