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Seven Eleven Case

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Seven-Eleven Japan Co.

Established in 1973, Seven-Eleven Japan set up its first store in Koto-ku, Tokyo, in May 1974. The company was first listed on the Tokyo Stock Exchange in October 1979. In 2004 it was owned by the Ito-Yokado group, which also managed a chain of supermarkets in Japan and owned a majority share in Southland, the company managing Seven-Eleven in the United States.
Seven-Eleven Japan realized a phenomenal growth between the years of 1985 and 2003. During that period, the number of stores increased from 2,299 to 10,303, annual sales increased from 386 billion to 2,343 billion yen, and net income increased from 9 billion to 91.5 billion yen.

The Seven-Eleven Japan Franchise System
Seven-Eleven Japan developed an extensive franchise network and performs a key role in the daily operations of this network. The Seven-Eleven Japan network includes both company-owned stores and third-party-owned franchises. In 2004 franchise commissions accounted for over 68 percent of revenue from operations. To ensure efficiency, Seven-Eleven Japan based its fundamental network expansion policy on a market-dominance strategy. Entry into any new market was built around a cluster of 50 to 60 stores supported by a distribution centre. Such clustering gave Seven-Eleven Japan a high density market presence and allowed it to operate an efficient distribution system. Seven-Eleven Japan, in its 1994 annual report, listed the following six advantages of the market-dominance strategy:
1. Boosted distribution efficiency
2. Improved brand awareness
3. Increased system efficiency
4. Enhanced the efficiency of franchise support services
5. Improved advertising effectiveness
6. Prevented competitors’ entrance into the dominant area

In 1994, forty-five percent of total gross profits at a store went to Seven-Eleven Japan, and the rest went to the store owner. The...

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