.

Summary and Conclusion

The researchers analyzed the external environment of Philippine Seven Corporation

through its political, economic, social, technological, environmental, and legal
environment, the industry and finally the competing firms. Thus, with the use of External
Factor Evaluation Matrix, findings for this paper will be summarized and will properly
reflect the performance of PSC in terms of opportunities and threats.

i. External Factor Evaluation Matrix

As reflected by the EFE table, Philippine Seven Corporation is capable of maximizing

the aforementioned opportunities. In addition, PSC also has the capability to shield
against threats in the industry with a weighted score of 3.09. The following entries
explain the rationale behind the data mentioned above.

OPPORTUNITIES
Increase advertising for Private Brands
This is an opportunity for to add allure to your store’s brand. When these private brands
get marketed well, it can mean not only an increase in your bottom line, but an increase
in the number of PSC’s loyal customers. PSC for instance, uses social media platforms
to spread information regarding their private brands like Slurpees and Big Bites. Thus
with high visibility of their websites, they were viewed by the researchers as a superior
response to this opportunity.
More receptive Markets in Visayas and Mindanao
In the Philippines, PSC views that provinces across other island groups (Visayas and
Mindanao) to be a good market. After opening 318 new stores in 2017, Philippine
Seven Corp. (PSC), the exclusive local licensor of global convenience store (C-store)
chain 7-Eleven, steps up its momentum with more strategic franchising initiatives as
part of its aggressive expansion plan. As it embarks for long-term profitability and strong
leadership this 2018, PSC, with a C-store fleet now pegged at 2,285, is targeting to
open 375 new stores in various strategic locations this fiscal year. Areas up for
expansion include Region 2 (namely, Isabela, Tuguegarao, Nueva Vizcaya and also
Mindoro). For the Visayas, PSC will be starting expansion in Leyte, Tacloban and the
rest of Eastern Visayas. In Mindanao the company is planning to open stores in
Surigao del Sur and Norte and Sultan Kudarat. (Business Mirror 2018).bPSC’s move to
be more aggressive in the provincial markets is perceived to be a great response to the
more receptive markets present in these areas. A rating of 4.0 was given for this
opportunity.
Environmental recognition given by DENR

Philippine agencies like DENR recognizes 11 'ECO-FRIENDLY' BUSINESSES,

INDIVIDUALS. The Department of Environment and Natural Resources (DENR) has
recognized nine business establishments and two individuals for their exemplary
performance under the agency's Philippine Chiller Energy Efficiency Project (PCEEP)
and the Philippine Environment Partnership Program (PEPP). With awards like this,
PSC can further create a good reputation in the market which can be beneficial to the
business.

Loyal Coin

Aside from reward points that the consumer can get from loyalty programs like
CLiQQ Rewards, their members get exclusive access to some services like wifi for
instance. We’ve seen a tremendous growth in mobile smart phone and the use of
technology not just in the Philippines, but also globally, Comparing to the biggest loyalty
rewards in the country, Loyalcoin has the full advantage being the first mover in this
industry. It is the first block chain-based digital loyalty rewards you can use not just
in the Philippines but globally as well. It has a wider scope of usage, more rewarding
customer experience, and an incentive for customers to stay loyal with the brands. PSC
may benefit with the use of this block chain. However, its adoption was not yet officially
executed. It can be used at various stores in the Philippines and global stores as well.
As of this writing, this already served about 2 million customers, in the following
Philippine companies such as Petron, Bench, and FamilyMart and others brands.

Increasing per Capita Gross National Income (GNI)

With the increasing trend of per capita GNI, households have higher disposable income.
Their income remaining after deduction of taxes and other mandatory charges are more
available to be spent on products and services. For this opportunity, PSC was given a
score of 3.0. With the passing of the TRAIN Law, the company will increase the prices
of most commodities. Aside from that, 7/11 is known to have a pricing strategy viewed
to be high by consumers. PSC may implement this in consideration of the current
purchasing power of its market. However, the increase in prices may somehow sacrifice
potential income.

Lower Poverty Incidence

This is in relation to the previous opportunity due to the rationale that with higher
disposable income, their purchasing power increase consequently. For this opportunity,
PSC was given a score of 3.0. With the passing of the TRAIN Law, the company will
increase the prices of most commodities. Aside from that, 7/11 is known to have a
pricing strategy viewed to be high by consumers. PSC may implement this in
consideration of the current purchasing power of its market. However, the increase in
prices may somehow sacrifice potential income.

THREATS

Increasing retail segment competition

In the past years, the Japanese giant LAWSON plans market entry into the Philippines
c-sector. Today there were several LAWSON outlets in the Philippines. The researchers
foresee this as a threat to PSC due to its possible expansions in the near future. In
addition, recent searches stated that Circle K opening last year and FamilyMart and
Robinsons Retailed-owned domestic chain Ministop also intending to increase their
presence. In addition, ‘Mini-marts’ are in as retail giants fight for bigger slice of market.
7-Eleven will face unprecedented levels of competition in the coming years.

Tax Reform for Acceleration and Inclusion (TRAIN) Law

TRAIN is the first package of the comprehensive tax reform program (CTRP)
envisioned by President Duterte's administration, which seeks to correct a number of
deficiencies in the tax system to make it simpler, fairer, and more efficient. This is one
of the Threats of PSC due to the reason that some prices of commodities will increase
their price. This may negatively affect consumer behavior. For instance, this may
increase the potential switchers.

Security
With the nature of business of Philippine Seven Corporation, it is always likely to be a
target for theft and armed hold-up. Obviously the chain has put in various security
measures in different parts of the world, including video cameras, safes, and window
barriers and so on. Generally speaking, there is a significant demand for safety and
security products in the Philippines. Security upgrades are needed in various airports
and other facilities around the Philippines. Demand is increasing for electronic
surveillance for crime prevention and apprehension purposes. Shoplifting is another
important point to consider when it comes to security issues. According to Manila
Bulletin, a Philippine newspaper, theft cases in the Philippines is rising. Like most retail
stores, 7-Eleven will have the continued threat of minor shoplifting and stealing. In some
locations, these stores operate on a lean budget and only have minimal staff, which
presents the opportunity for some consumers to occasionally shoplift. Like with the
security threat above, video cameras may assist in this regard.
 High rental costs
Due to the need to locate the 7-Eleven outlets in very convenient locations, they are
likely to incur higher rental costs as a result. This higher operating cost structure will
mean that they will need to adopt a price premium approach. There are some
consumers who are happy to pay a little bit more for convenience and speed of
purchase, however other budget-conscious consumers a more price sensitive.

Competitive Market
In addition to market access, the ease of doing business in a jurisdiction is also a
decisive factor for investors. According to the Global Competitiveness Index 2015-
2016, the Philippines ranked 47th out of 140 countries, while in the World Bank—
Doing Business Report 2016, it ranked 103rd out of 189. This ranking demonstrates
that the Philippine business environment, despite positive developments in recent
years, still remains challenging. This serves as a barrier to entry.

Supermarkets moving to 24/7 hours

Coming from the successful round-the-clock shopping started by SM Hypermarket Mall
of Asia in December 2016, 21 SM Markets stores were opened 24 hours in 2017 to
accommodate anyone in a Christmas shopping mood anytime. SM Markets’ move aims
to cater to those staying late hours at work or taking night shifts and will accommodate
those shopping for Noche Buena essentials at their most convenient time. No more
rushing after work, no more enduring cravings in the middle of the night, and most
importantly, be able to get the ingredients fresh when you need them. This is a potential
threat to PSC stores due to the possibility of SM Markets to execute a whole 24 hrs
operation. This erodes 7-Eleven’s natural competitive advantage of having extended
shopping hours. This is a significant threat to 7-Eleven over time, as they would not
have the low cost structure required to compete effectively on a price basis with a major
retail chain, such as SM Markets for example.

5 Summary and Conclusion

The researchers analyzed the internal environment of Philippine Seven Corporation
through its political, economic, social, technological, environmental, and legal
environment, the industry and finally the competing firms. Thus, with the use of Internal
Factor Evaluation Matrix, findings for this paper will be summarized and will properly
reflect the performance of Philippine Seven Corporation in terms of strengths and
weaknesses.

a. Internal Factor Evaluation Matrix

As reflected by the IFE table, Philippine Seven Corporation is capable of maximizing the
aforementioned Strengths. In addition, PSC also has the capability to overcome those
threats in the industry with a weighted score of 2.79. The following entries explain the
rationale behind the data mentioned below.

STRENGTHS

24/7 Operation
This is one of the major strengths of 7/11 stores. Operating 24/7 is not an easy task
which poses a great competitive advantage in the market. With this nature of business,
PSC is able to bring convenience to their market any time of the day compared to other
retail stores in the Philippines.

Convenient locations
7-Eleven has over 50,000 outlets throughout the world, which gives them a significant
location and convenience advantage. Obviously, being a convenience store, their
primary benefit to consumers is that commonly purchased products are located at
nearby stores. Therefore, greater market coverage through a greater number of outlets
will provide increase convenience to more consumers.

Overall brand equity

7-Eleven is generally perceived as the market leader by consumers in the convenience
store sector. This brand equity translates into customer loyalty and reduced price
sensitivity and, therefore, continued stability of revenue streams across its outlets. PSC
is also engage on different Corporate Social Responsibility initiatives like Project A-
Game program, Operation Chill program, Support for our military families and
Developing Women through NEW (Network of Executive Women).

Increase in franchise outlets

Many of the 7-Eleven stores throughout the world are franchised. This provides
strengths for the organization – the first being that they can continue to grow the
number of outlets throughout the world without having significant capital requirements,
as the franchisee is typically responsible for the setup costs of the outlet – and the
second advantage being that the stores are run by motivated individuals who have a
profit incentive for the store to perform well.

In the Philippines, the affordable PSC franchising package was viewed as the main
factor of the increasing number of PSC franchise outlets. The country’s leading
convenience store operator Philippine Seven Corp. (PSC) has rolled out its simplest
and most affordable franchising package to date – one that requires only P300,000 in
cash outlay from franchisees willing to run these stores on a full-time basis. With this
new scheme, PSC seeks to farm out mature corporate-owned stores to franchisees, in
turn freeing up more resources to open more stores and cement its market-leading
position in the local convenience store business.
After opening 318 new stores in 2017, Philippine Seven Corp. (PSC), the exclusive local
licensor of global convenience store (C-store) chain 7-Eleven, steps up its momentum
with more strategic franchising initiatives as part of its aggressive expansion
plan(Business Mirror, 2016, paragraph 1).

As it embarks for long-term profitability and strong leadership this 2018, PSC, with a C-
store fleet now pegged at 2,285, is targeting to open 375 new stores in various strategic
locations this fiscal year (Business Mirror, 2016, paragraph 2). Areas up for expansion
include Region 2 (namely, Isabela, Tuguegarao, Nueva Vizcaya and also Mindoro). For
the Visayas, PSC will be starting expansion in Leyte, Tacloban and the rest of Eastern
Visayas. In Mindanao the company is planning to open stores in Surigao del Sur and
Norte and Sultan Kudarat (Business Mirror, 2016, paragraph 3).

“This year’s plan for the Visayas and Mindanao is to open 75-percent franchise stores.
Also, we have formulated a new franchise offer, the FC3, which is a lower investment
compared to our existing franchise package. From P3.5 [million] to P5- million
investment, we came up with the new franchise package, which is around less than half
a million,” revealed Francis Medina, Business Development Unit head. (Business Mirror,
2016, paragraph 4). Via the FC3 package, the company is targeting to have “a franchise
ratio from 54 percent to 60 percent.” (Business Mirror, 2016ph)

Low Barriers of Market Entry

IN addition to market access, the ease of doing business in a jurisdiction is also a
decisive factor for investors. According to the Global Competitiveness Index 2015-2016,
the Philippines ranked 47th out of 140 countries, while in the World Bank Doing
Business Report 2016, it ranked 103rd out of 189.This ranking demonstrates that the
Philippine business environment, despite positive developments in recent years, still
remains challenging. This not only serves as a barrier to entry but also encourages
entrepreneurs and start-up investors to stay “underground.” Creating a competitive
business environment will not just benefit foreign investors, it will also support increased
efficiency and productivity for all, create a transparent business environment and a level
playing field that will benefit every Filipino, from exporters, to micro, small and medium
enterprises, to consumers.

Individually branded products

In addition to having a strong overall brand, 7-Eleven also has several branded product
offerings. The most famous of this are probably the Slurpee and the Big Gulp.
Through this kind of products, Philippine Seven Corporation can incorporate a higher
profit margins rather than those inventories that was retailed for instance. In some
countries they also have other branded offerings such as Movie Quik in the United
States. These individual product brands provide a further strength to 7-Eleven, as
consumers may choose to seek out these particular products/brands as their preferred
choice. Hence, this may increase customers since these products are exclusively
available only in PSC stores.

7-Eleven's loyalty program

CLiQQ Rewards is 7-Eleven's loyalty program (formerly Every Day!Rewards). You can
already earn points every time you shop at 7-Eleven using your Every Day! Rewards
Card even before activation. However, you will need to activate your card before you
can redeem or inquire your balance. Activation links your card to your mobile phone
number so that you can sign in to your account to update your profile, link your
Facebook account. “We are building momentum for our business by continually
innovating our products, especially our proprietary brands and services to give greater
value to our patrons and shareholders. As of now, we are looking into venturing and
expanding our e-commerce usage to provide products and services to customers in the
most convenient way possible. They can already use CLiQQ App as their wallet to buy
7-Eleven products,” Francis Medina, Business Development Unit head said.
Good Customer Service
According to research, the customer service of PSC is of great service. To those who
experienced working here, they’ve mentioned that it has a productive and good
environment. In addition, it was very responsive on issues stated by customers not only
through their hotline but also regarding the issues that were commented trough social
platforms like Facebook. A verbatim reply from the official page of 7/11 is presented
below:
“Hi, Kristi! Thank you for bringing this to our attention and sorry you experienced this.
Rest assured that we will be investigating this concern. Please send us the full details of
the incident. Kindly include your name and contact info so we can keep you posted.
Thanks again!” In addition, 7-Eleven in the Philippines boosts customer service using
the QuickScan QW2100 Linear Imager from Datalogic to Scan Mobile Phones.

Highly Visible Website

According to observation, 7/11 is visible in common social media platforms like
Twitter with 10,800 followers, Facebook with 1,500,000 followers and Instagam with
32,000 followers. This is a strength of this company because with such visibility it
creates a more opportunity for profit. Leads are everywhere in social media platforms
like these. With a simple marketing online, a lot of people can be reached due to its
visibility and due to the number of followers their account has.

Increase advertising for private brands

An important evolution in the retailing industry is the growing success of store
brands. This can increase intrinsic loyalty of their customer base, and the conquesting
power to attract potential switchers. For instance, advertisements on social media
related to Slurpees.

Technology used by PSC

7-Eleven has been using Dbvisit Standby in a production environment since 2011.
Dbvisit Standby replicates production data from the primary database to the secondary
(backup) database at a frequency of between five and fifteen minutes, 24 hours a day,
seven days a week. When one of the database tables within the warehouse
management system became corrupt, 7-Eleven was able to switch (failover) to the
standby database instance almost immediately. Once in failover mode the activated
standby database supported the production system while 7-Eleven’s IT team prepared
the replacement primary database server. Once this was ready, they used Standby to
recreate the database on the replacement server by replicating from the standby
database. Once this process was complete, the application was reconfigured to use the
replacement database server.

7-eleven has hired Big Data For Humans, an automated customer insight firm, to
automate some of its customer data decisions, as part of a strategy to upgrade its
customer marketing (McEleny 2017 paragraph 1). Jose Victor Paterno, president at
Philippine Seven Corporation (7-eleven), said: ‘We want to generate more customer
insights from our data-stream and use these effectively to improve our marketing, and
we were impressed by the potential of Big Data for Humans’ Customer Graph to help us
achieve this. Their cost effective and insightful approach to customer marketing made
them the right partner for our customer marketing strategy.’(McEleny 2017 paragraph
6).

In addition, the warehouse management system includes physical Windows-based

application servers and Linux-based database servers. The database servers are
running Oracle 10g Standard Edition and store around 900GB of data, with a weekly
growth rate of approximately 3GB. The system maintains a daily volume of around
14GB of transactional data, and archive logs of approximately 100GB, all of which need
to be replicated to the standby database. This is a large volume of data to be kept
replicated across multiple servers without impacting performance.

WEAKNESSES

Untrained Employee Issues and CLiQQ App Issues

There were a issues based on customer experience that were posted and commented
mostly on the official page of 7/11 Philippines in social media. This was identified as a
minor weakness by the researchers based on the relative extent of the issues. For
CLiQQ, PSC created a tab in their website entitled: “FAQ” or Frequently Asked
Questions in order to help and assist those who may have encounter difficulties or
issues in the application.
 Pricing
Consumers view the prices of 7/11 to be of a high price. According to a research, this
may be caused by such factors/expenses by Philippine Seven Corporation: marketing
costs, maintenance of machines, rental costs, 24/7 staffs and cost for convenience.
High staff costs
Similar to the high rental costs above, because the store operates on a 24/7 basis in
some locations, this type of retailing operation is likely to have a higher ongoing
operating cost structure. As a consequence of these higher costs, 7-Eleven will be
required to have higher price offerings in order to protect their margins.

All their stores require overnight staff, unlike supermarkets, where majority of their
outlets are not open 24/7. This means that 7-Eleven has to hire a few hundred staff to
cover the night shift, which wages, logically, should be higher than day shift staff. This
contributes to cost for the company, more so when there are rarely any customers
making purchases in the wee hours of the night.

Higher Capital Expenditure

PSC expanded its existing distribution centers and opened new warehouses in 2015,
ending the year with nine warehouse facilities compared to only four as of mid-2014.
PSC has increased its capital expenditures budget to P3.5 billion to support its
accelerated store expansion strategy on 2016. Hence, this may lead to lower revenues.

Large team of franchisees

Although the overall franchised model is a strength as indicated above, running a large
team of franchisees is also a weakness. This is because it removes some element of
direct control of the day-to-day operation of each outlet and passes it to the franchisee.
In addition, a management team is required to recruit, train and monitor the various
franchisees, which also adds to the overall cost structure on an operational basis.
Hence according to Economic Article 4, “Franchisees control 55 percent of all stores
while the remaining 45 percent are corporate-owned.” – The Philippine Star
RECOMMENDED STRATEGY
As clearly shown in the above figure, Philippine Seven has been steadily
pursuing an aggressive strategy towards expansion and franchising its stores and must
adopt the same to aggressively grow the business more raising the stakes for all
competitors. The company wants to utilize its market positioning advantage and it rightly
does so with this strategy.

6.3. Internal-External Matrix

The Internal-External (IE) Matrix uses the total weighted score from the IFE and EFE
matrices for the x and y axis to ascertain the appropriate strategy theme for the
company. The total weighted score for the IFE serves as the X axis coordinate while the
total weighted score for the EFE serves as the Y axis coordinate.

After plotting the IFE and EFE total weighted scores the results showed that PSC falls
on Cell I which pertains to the High Grow & Build region. The results suggest that the
company must concentrate its efforts on intensive and aggressive strategies like market
penetration, market development, and product development. The results were furthered
proved through PSC’s current strategies. For instance, this year’s plan for the Visayas
and Mindanao expansion. PSC plans to open 75-percent franchise stores in these area
for the year 2018. In addition, PSC can also consider strategies such as: forward,
backward, or horizontal integration.