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7-Eleven Indonesia: Innovating In Emerging Markets Case Solution & Answer

7-Eleven Indonesia: Innovating In Emerging Markets Case Solution

Introduction

7-Eleven – one of the leading and valuable global convenience store entered Indonesia in 2009 with domestic player PT Modern International as the master franchisor. The CEO of the company combined the idea of convenience store and restaurant in his new 7-Eleven outlets in order to cater to emerging market customers and differentiate stores from convenience store. The company provided a convenient and affordable location for young generation to have quick bite to eat and hang out. The case sets out to investigate the innovative elements that tend to explain the success of 7-Eleven in Indonesia, reflecting its sustainability and scalability.

PESTLE Analysis

Political factors:

The labor laws are sticker posit by governor of Jakarta. The government ordered to rise the employee’s salary by 12.5 percent which in turn would lead to increased cost to the company. Additionally, the government imposed ban on selling alcoholic beverages in the convenience stores due to which the company would face difficulty as the business thrived on selling beers.

Economic factors:

The strong economic growth of Indonesia is backed by the increased GDP of 888.5 billion dollars. Similarly, the income level of the people in Indonesia were increasing which in turn would increase the customer’s purchasing power and surges the sales of the company.

Social factors:

The company was eagerly interested to target the young age group due to their willingness to dine out, have fun and experience eating in soothing environment which in turn resulted in the idea of cafes along with the convenience store. In initial period of time, the people were not restricted to consume alcoholic products due to which the company became able to earn more from alcoholic beverages.

Technological factors:

Due to the evolution of the digital transformation, the company became able to offer the digital services to its customers with the use of the digital kiosk called Sevelin to provide ease and convenience to customers. The people could call taxis from the cafes of 7-Eleven with the use of the application installed by Bluebird Group.

Legal factors:

The government does not regulating the mini-markets that resulted in tough challenges at the franchise. Thus, the instable political environment and government regulations could hinder the ability of firm to generate sales.

Environmental factors:

Due to the intense traffic problems on rise in Jakarta, the company was unable to deliver the fresh food in the day time due to which the company delivered food in the night. As the customers prefer green companies, the company need to make the operations sustainable and invest in green initiatives to sustain immediate environment and surroundings.

Porter five forces model

Bargaining power of buyers:

The bargaining power of buyer is of high force because of the reason that the industry is dominated by number of valuable and leading players. Additionally, due to the presence of many players, the buyer could easily switch from one company to another. Furthermore, the competitors are in race of stealing the market share of other by providing high-quality products to customers.

Bargaining power of suppliers:

The bargaining power of suppliers is of high force in the market due to the presence of high profile and valuable suppliers in the market, thus 7-Eleven has different option to select from.The dependency of 7-Eleven on its suppliers is high due to which the suppliers could demand high prices. There is abundance of rice producers in Indonesia, therefore, the company could order rice for their rice dishes from any of them. 7-Eleven could negotiate the prices of the raw material as per their budget.

Threat of new entrant:

The threat of new entrant is low force due to the high startup cost, brand loyalty, high capital requirement, switching cost, access to suppliers, economies of scale and strict government policy. The government of Jakarta does not assist and support the convenience store and is currently planning to impose restrictions on selling alcoholic products in the convenience store. Moreover, the company has the facility of own central kitchen with refrigerated trucks as well as improved delivery service, but the new entrant would not have these facilities due to which they would not be able to provide the exceptional customer experience.

Threat of substitutes:

The threat of substitute is of high force because the products offered by the convenience store are easily available and accessible at the lower prices in small stalls which are situated near the residence of people in Indonesia. Thus, the people prefer to purchase everyday items from small stall located in nearby area. Another alternative to traditional shopping is the online shopping and people prefer to make purchases online because of price comparison and convenience……………….

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