Seven & i Group (Model) Business Strategy Evaluation

Brief Introduction to Seven & i Group

Seven & i Holdings Co., Ltd. is a Japanese multinational retail group highly reputed in business diversification, starting from convenience store chains and supermarkets up to department stores. It was founded in 1920 as Ito-Yokado Co., Ltd. and later renamed Seven & i Holdings in 2005, mirroring wider business operations. It is best known for owning the convenience store chain 7-Eleven, which has grown into one of the world's largest and most successful convenience store franchises, especially in Japan and abroad.

Other than 7-Eleven, Seven & i Group has been into businesses such as food retailing, financial services, and even real estate development. It has a portfolio of brands that includes Ito-Yokado, a supermarket chain; Sogo & Seibu, department stores; and Seven Bank, among others. It has been known for paying special attention to customer convenience and innovating retail technologies, evolving with the changing needs of the people.

Seven & i Holdings is committed to corporate social responsibility, through the reduction of environmental impacts, energy efficiency, and helping in the communities. With a strong global presence, the company has remained one of the leaders that continue to influence the face of retailing and convenience store retailing and related industries.

Corporate Overview:

• Founded: 1920 (originally as Ito-Yokado, a general merchandise store)
• Headquarters: Tokyo, Japan
• Primary Industry: Retail, convenience stores, supermarkets, and financial services.
• Listed on: Tokyo Stock Exchange
• Revenue (2023): Approximately ï¿¥17,789.9 billion

Overview

Nowadays, with the market growth and increasing industry expectations, most organizations expect changes in their management. This provides organizations with the opportunity to recharge and upgrade in line with the advancing world. Therefore, most organizations proceed to create strategic corporate plans by utilizing internal or external agents to collaborate with management on specific changes. These changes are crucial for enhancing organizational effectiveness, improvement, and development. This is where the corporate strategy is evaluated.

According to Seven & i Holdings' corporate profile, the company is committed to both solving social issues and improving corporate value. The group is implementing its Medium-Term Management Plan via the Management Philosophy, as well as its corporate strategy and policies, while actively utilizing intangible assets and other management resources. Its corporate strategy is branching out, customized for each business, which is operating on an individual scale, to formulate and execute its ideal, using its management resources effectively according to the business conditions in each segment and department, while also incorporating corporate strategy, policies, etc. as a whole.

However, both the corporate strategy ie.: group business strategy and individual business operation strategy are implemented through the company’s division of seven segments. Each segment has its unique operational system, depending on location and nature.

The main businesses of the Seven & i Group are as follows:

1. Domestic Convenience Store Operations: This segment primarily refers to 7-Eleven Japan, the company’s core convenience store business within Japan. It focuses on the operation, expansion, and optimization of convenience stores across the country.
2. Overseas Convenience Store Operations: This segment covers the international operations of 7-Eleven, including regions such as North America, Southeast Asia, and other global markets. It emphasizes the expansion of the 7-Eleven brand outside Japan, adapting to local market needs.
3. Superstore Operations: This segment includes businesses like Ito-Yokado and York-Benimaru, which operate large-scale supermarkets and hypermarkets in Japan. It focuses on offering groceries, household items, and other daily essentials.
4. Financial Services: This segment includes Seven Bank, insurance services, and other financial products provided through both physical and digital channels. It focuses on offering banking and financial solutions to customers across its retail operations.
5. Other Operations: This "catch-all" category includes various other business operations that don't fit neatly into the above categories. It could encompass real estate, logistics services, and other ventures or investments not directly tied to core retail activities.

These businesses have opened up many opportunities for the company. Considering the diverse customer base, the company must pay close attention to customer loyalty. As a result, the company has decided to align its operations with the Sustainable Development Goals (SDGs).

(Seven & i Group, 2024)

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In today's world, with the growth of people's needs and wants, customer demands and expectations in the retail industry are reaching new heights. Customer convenience has become a major focus in the industry. Seven & i Group has been introducing innovative concepts in recent years to increase customer satisfaction. The company has established various businesses through collaboration, creating an interconnected network that offers numerous benefits to its customers.

Seven & i Group has introduced seven Material issues to support the achievement of the Sustainable Development Goals (abstracted directly):

• Create a livable society with local communities through various customer touchpoints
• Provide safe, reliable, and healthier merchandise and services
• Realize decarbonization, circular economy, and society in harmony with nature, through environmental efforts
• Achieve a society in which diverse people can actively participate
• Improve work engagement and environment for people working in Group businesses
• Create an ethical society through dialogue and collaboration with customers
• Achieve a sustainable society through partnerships

(Seven & i Group, 2024)

By focusing on these five concepts, the company can enhance its value while working toward the goal of achieving 99% customer convenience and business development.

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Seven & i Holdings Co. Ltd Group Business Strategy

The organization has valued corporate strategy and focuses on an overall business and operational strategy, especially merchandising, digitalism, store-opening policy, distribution systems, and global focus. The corporate strategic system is segmented according to the nature of its under-businesses. Therefore, the operational strategy is a systematic strategic process governed by corporate management and carried out by general employees. The organization’s corporate and business operational strategies are interconnected to meet the requirements needed to accomplish daily tasks and goals. Here, below mentioned are the merchandising and global strategies.

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Research Evaluation

To evaluate Seven & i Holdings Co. Ltd.'s operational strategy, the following tools have been used:

• Porter's Generic Strategy
• Ansoff's Matrix
• Bowman's strategy clock
• The Force Field Analysis
• Kurt Lewin's change model

These tools are applied in the context of Seven & i Holdings' corporate profile as outlined in their 2024 Management report and 2020 business strategy report, which highlights the company's market position, growth strategies, competitive dynamics, and ongoing transformation initiatives. The profiles provide insights into the company's operational framework, strategic objectives, and key challenges, serving as a foundation for analyzing its approach to sustaining long-term profitability and adapting to changes in the retail and logistics sectors.

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Porter's Generic Strategy

*Selection: Cost leadership

When evaluating the organization’s Corporate Strategy, Business Strategy, and Operational Strategy as outlined in the Seven & i Management Report, June 26, 2019, it is clear that the organization operates in a broad market where businesses compete, focusing on cost as the source of competitive advantage to maintain low prices and ensure easy accessibility, often utilizing discounts and promotional campaigns. Overall, the organization’s strategy is Cost Leadership, supported by a skilled labor force for mass production, along with minimum wage employee positions. Although following two generic strategies could lead to below-average profitability and strategic mediocrity, as Porter suggests, expansion into various demographic and geographic locations will require maintaining a presence in newfound markets and including effective differentiation strategies to offer the most desirable offerings. It must be evaluated through micro-analysis beforehand to identify the resilience within.

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Ansoff's Matrix

*Selection: Product Development and Market Development

Seven & i Holdings is a corporate organization that has established many local and international businesses. When considering the organization’s Group Strategy, it outlines the industry, market, and products of its businesses to evaluate the current status of the organization using the Ansoff Matrix. According to the analyzed data, the organization has already introduced key products to the competitive market. Therefore, it must pursue a product development strategy by making changes and introducing new products to the existing market.

At the same time, the organization should enter new markets with its existing products to expand market reach.

Matrix 1.0 indicates that the organization is positioned in a Cost Leadership position. To compete with current industry rivals, the organization must offer its existing products at a lower price while delivering the best value. Seven & I Holdings targets average customers in both the local and international markets with some degree of differentiation. Hence, the current position is ideal for the organization to grow through this strategy in order to accomplish its missions and vision.

Cost Leadership

A cost leadership strategy focuses on achieving success through low costs and prices. The hallmark of this strategy is a high-volume, low-margin approach. (Peng, 2009)

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Bowman's strategy clock

*Selection: Hybrid, very slightly leaning toward differentiation

The organization’s position evaluation through Bowman’s Strategy Clock indicates that Seven & I Holdings competes in the market by offering highly perceived product/service benefits at a low price, using Cost Leadership strategies. Therefore, its positioned strategy is #3 – Hybrid Strategy. This is an effective positioning strategy that ensures consistent growth through added value.

After thoroughly evaluating the company’s strategies using various strategic tools, the following strategic options have been identified:

1. Seek partnership agreements with other organizations, like governments and NGOs.
2. Continue with market research, R&D, and benchmarking to innovate new products.
3. Make cutting-edge improvements to existing products within the current market.
4. Attract new customers from competitors by offering new products at a reasonable price.
5. Expand into new local and international markets by introducing new concepts and business segments.
6. Reduce production costs to the lowest possible rate.
7. Determine the lowest possible market price while maintaining high-quality products.
8. Offer consistently positive price variations through added value to increase product demand.
9. Provide promotional giveaways and free products to build a loyal customer base.
10. Organize lottery programs and prize draws to engage existing customers and enhance the organization’s reputation.

The above strategic options reflect the best possible outcomes to fill gaps in the organization’s market, though they may emulate competitors. The chart below evaluates the Critical Success Factors for these strategic options.

The best recommended strategic option for the organization is to “Make cutting-edge changes to existing products in the current market.” This falls under the Product Development category.

Product development increases the value of a product as it reaches its declining stage. More often, product development should be based on the nature of the market and customer expectations. When a product introduces updated features compared to its previous version, it allows customers to perceive it as an advancement with greater value. These developments can be achieved through branding, packaging, upgrades, and additional offerings, all of which help the organization achieve its goals and fill gaps in the market.

Some examples to find an idea:

• Sell instant noodles with a free instant Kool-Aid packet.
• Change the packaging of slow-moving products and replace them with attractive packaging themes with inexpensive ornaments, etc.
• Sell chilled sushi or sandwich with a small portion of fresh fruit dessert for the same price.

Some strategies for product development to find an idea:

• Prevent product decline and preserve the existing product to minimize the costs of introducing new products.
• Compete with substitute goods in the market by offering the same product at the existing price, but with additional features.
• Use product development ideas alongside brand awareness while filling the marketing gap to achieve customer recognition.

Every company must undergo changes at some point to achieve the best outcomes and fill market gaps. Internal or external change agents should assess organizational effectiveness, improvement, and development to determine if the organization is aligned with its identified change factors. Seven & I Holdings has identified five key areas for organizational change. The Force Field Analysis is used for further evaluation.

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The Force Field Analysis

Organizations can determine the critical elements that can help or impede a strategic shift by using Force Field Analysis, a tool for evaluating the forces that will either support or oppose a change. The analysis will weigh the arguments for and against Seven & i Holdings' suggested strategy, which is to "make cutting-edge improvements to existing products within the current market" (Product Development), based on the strategic options and recommendations that have been offered for the company.

Change Factors Analysis (followed by the above model)

When considering the above evaluation using the Force Field Analysis, the organization needs to prepare a structure for implementing the plan by informing the 'Change Agent' about the immediate changes. Leadership and Change Agent Skills: Interpersonal skills, Communication skills, IT knowledge, Awareness of the current economic system, Evaluation report writing skills, Idea generation skills, Awareness of the current technological system, Market research skills, Industry research skills, Benchmarking, Categorizing skills, Organizational skills, Management skills, Awareness of current business and employment laws, Public speaking skills.

CHANGE FACTOR #01

Seek customer opinions, feedback, and insights:

• Market research and customer input must be regularly gathered by Seven & i Holdings in order to make sure that product improvements are well received by consumers. By doing this, the business will be able to comprehend the unique requirements and preferences of its clients, guaranteeing that any new features or product changes will meet customer needs.
• Change Agent: Marketing and Product Development Teams
• Department: Research and Development (R&D) and Customer Insights Department
• Implementation: Product and supplier research => Budgeting => Purchase and install

CHANGE FACTOR #02

Create a flexible and scalable Research and Development (R&D) process:

• Seven & I Holdings must create a flexible and efficient R&D system that can effectively add small enhancements to current items without needing large financial outlays for every modification. Developing a scalable innovation pipeline helps speed up time to market and lower innovation costs.

• Change Agent: R&D Team and Innovation Strategy Specialists.
• Department: Research and Development (R&D) and Operations Management
• Implementation: Innovation Pipeline Development => Resource Optimization and Budgeting => Rapid Prototyping and Testing => Automation and Scalability

CHANGE FACTOR #03

Boost cross-functional cooperation:

• To make sure that new product ideas are viable, in line with brand goals, and able to be successfully introduced to the market, the organization should encourage cooperation amongst several departments (such as marketing, product development, and operations). Cooperation with outside partners or suppliers may also be investigated to introduce new materials or technologies that can spur innovation.

• Department: Delivery Department
• Change Agent: Delivery Operations Director
• Implementation: Vehicles and suppliers research => Budgeting => Purchase and upgrade

CHANGE FACTOR #04

Efficiency in operations and cost-effectiveness:

• The business must concentrate on creating cost-effective product enhancements in order to prevent reaching over budget. This can entail making the most of already-existing resources and cutting manufacturing costs without sacrificing quality. So to guarantee that any more product modifications do not adversely affect the company's capacity to sustain profitability, operational efficiency has to be the focus.
• Department: Operations Management Team and Cost Analysts
• Change Agent: Operations and Finance
• Implementation: Resource Optimization => Cost-Effective Manufacturing => Profitability Assessment => Operational Efficiency Programs

CHANGE FACTOR #05

Strategies for Flexible Marketing and Promotion:

• Seven & I Holdings should use agile marketing techniques that concentrate on swiftly and efficiently raising awareness while introducing new and inventive items. Freebies or bundled products are examples of promotional offerings that might entice customers to sample new features without taking a big risk. Additionally, marketing strategies must concentrate on the new products' unique selling points (USPs), highlighting the value that the novel features offer and how they benefit the consumer.
• Department: Marketing Team and Brand Managers
• Change Agent: Marketing and Sales
• Implementation: Fast Campaign Design => Promotional Offers => Highlight Unique Selling Points (USPs) => Multi-Channel Marketing => Customer-Centric Messaging

To successfully implement the above structure, the following Resource Implementation Plan will be created using Lewin’s Change Model, along with a justified timeline for execution. All the change factors will be discussed below, along with appropriate solutions.

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Kurt Lewin's change model

#01

Seek customer opinions, feedback, and insights.

Unfreeze Stage

Goal: Raise awareness of the value of consumer input and how it contributes to the enhancement of goods and services by also focusing on hyper-personalization.

Actions:

• Hold training sessions and workshops to inform teams about the value of consumer insights.
• Explain the advantages of consumer feedback, such as increased customer satisfaction and product quality while educating them to gather as much as data possible.

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Change Stage

Goal: Put in place systems for gathering and evaluating consumer feedback.

Actions:

• Create and incorporate a mechanism for gathering feedback (such as surveys, feedback forms, and user evaluations).
• Use software solutions to automate data collecting and analysis, like as CRMs and customer insight platforms. Call frequent review sessions to go over comments and decide on the next steps.

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Refreeze Stage

Goal: Make using consumer feedback an official procedure.

Actions:

• Standard operating procedures (SOPs) should be developed for gathering and reacting to input.
• Update stakeholders on customer insights and improvement initiatives regularly.
• Encourage a culture of active listening by providing regular training and praising team members who do a great job incorporating input into their work.

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Timeline: Initial setup and process embedding take three to four months, after which iterations continue.

#02

Create a flexible and scalable Research and Development (R&D) process.

Unfreeze Stage

Goal: Increase understanding of the necessity of a scalable and adaptable R&D process in order to meet shifting market demands.

Actions:

• To explain the advantages of flexible R&D (such as a shorter time to market and greater agility), hold internal meetings and workshops.
• Determine inefficiencies in current R&D procedures by conducting a current state evaluation.

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Change Stage

Goal: Use fast R&D techniques, such as Scrum and Kanban.

Actions:

• Create cross-functional teams to promote cooperation and dialogue.
• Educate employees on fast methods and resources (e.g.: Jira, Trello).
• Create iterative development cycles, especially of a mathematical or computational process, to guarantee continuous product assessment and improvement.
• Use loops for client input to direct R&D efforts.

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Refreeze Stage

Goal: Make sure the new R&D procedure is well-established and regularly adhered to.

Actions:

• Through ongoing instruction and reinforcement, integrate agile practices into the corporate culture.
• To evaluate the efficacy, track key performance indicators (KPIs) such as cycle time and product quality.
• Establish a feedback loop so that team members can offer ideas for enhancing the agile procedure.

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Timeline: Complete implementation will take six months, with a quarterly process review.

#03

Boost cross-functional cooperation.

Unfreeze Stage

Goal: Acknowledge the need for cross-functional cooperation in accomplishing strategic goals.

Actions:

• Explain the necessity of better departmental collaboration.
• Determine which teams are segregated and what obstacles they have while working together.

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Change Stage

Goal: Create new procedures and frameworks for collaboration.

Actions:

• Form collaborative task teams for important projects that include representatives from all relevant departments.
• Use communication technologies, like Slack, Microsoft Teams, or Asana, to promote improved engagement.
• Plan team-building exercises that involve several departments, to strengthen interpersonal links.

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Refreeze Stage

Goal: Establish cross-functional collaboration as a cornerstone of the company culture.

Actions

• Create standard operating procedures for managing cross-functional projects.
• Teams that successfully collaborate should be acknowledged and rewarded with public recognition or performance bonuses.
• Establish explicit guidelines and accountability for departmental collaboration.

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Timeline: three to six months to completely include collaborative approaches, with ongoing evaluation and modification.

#04

Efficiency in operations and cost-effectiveness.

Unfreeze Stage

Goal: Draw attention to inefficient regions and the possible savings from cost-cutting strategies.

Actions

• Examine current operations to find inefficiencies and duplicate procedures.
• Provide information about the possible effects of streamlined operations on business profitability.

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Change Stage

Goal: Put plans into action to increase cost control and process efficiency.

Actions:

• Present process automation options, such as AI-based solutions and robotic process automation (RPA).
• Workflows should be optimized to cut out pointless processes and bottlenecks.
• To reduce waste, encourage departments to implement lean concepts.

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Refreeze Stage

Goal: Ascertain that operational modifications become the new standard.

Actions:

• Create a mechanism for monitoring performance that gauges how well new procedures are working.
• Regular training and upgrades are necessary to ensure that efficient workflows are followed.
• Establish a procedure for ongoing development that lets groups recommend improvements.

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Timeline: Initial implementation will take four to five months, followed by continuous improvement and a biannual evaluation.

#05

Strategies for Flexible Marketing and Promotion.

Unfreeze Stage

Goal: Describe why flexible marketing tactics are essential in today's corporate environment.

Actions

• Provide case studies of effective adaptable marketing initiatives.
• Examine current marketing tactics to determine which ones require greater flexibility.

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Change Stage

Goal: Modify and broaden promotional and marketing tactics.

Actions

• Use multi-channel marketing strategies to connect with different clientele groups.
• Use data analytics to tailor advertising campaigns and make adjustments in response to customer behavior.
• Make use of agile marketing strategies like A/B testing and quick campaign iterations.

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Refreeze Stage

Goal: Make flexible marketing a fundamental strategic approach.

Actions:

• Update marketing team procedures and document best practices.
• Teach the marketing staff how to efficiently use new resources and techniques.
• To make the required changes, periodically review the metrics from your marketing campaigns.

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Timeline: Three months to establish adaptable plans and begin implementing them, with quarterly adjustments to be made.

To implement the above plan, the company requires the following resources:

• Physical Resources: Company assets, including raw materials (e.g., vehicles, machines, stored stocks).
• Financial Resources: Cash liquidity, bank deposits, fixed deposits, certificates of deposit (CDs).
• Human Resources: Skilled and highly skilled labor (e.g., operators, engineers).
• Intellectual Resources: Copyrights, partnerships, brand value, concepts.

Conclusion

The organization’s current strategic evaluation introduces opportunities to address market gaps, upgrade with advanced technology and product development, and adapt the organization’s position to the current situation in order to form a new strategic plan with business objectives. However, it will be essential to thoroughly study and monitor these change factors before making any immediate adjustments to the company’s systems, policies, and regulations. Overall, the proposed changes are expected to lead to positive advancement for the organization.

*Note: Given the current circumstances, micro-analytical research is necessary to create specific strategies aligned with the department's orientation.

written by Omalka Arachi

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