Case 2 - 7-11 Japan

7-11, which is a globalized company which operating convenience stores. It expand its business by franchising. It is the world biggest licencor of convenience stores. 7-11 has developed more than 50000 physical world all over the world and its headquarter located in Japan.

At the beginning of the business, it's act as a store selling simple foods bread and egg. At 1946, the business its name to 7-11 with serving customer 7 a.m. to 11 p.m.. 7-11 changed their service hour to 24 hours in 1963 and keep developing quickly and now become a well-known brand all over the world. Now, 7-11 is not only selling simple beverage but also other necessities such as shampoo, tissue. It also sells magazine, computer games and related products.

There existing distribution system has generated large customer value. Also, 7dream.com is the online purchase service provide by 7-11 Japan. Customer can purchase variety of product rather than typical product that you can found in convenience store. Their service characteristics has brought  actual convenience to their customers.

1. Compare the service and product in 7-11 Japan and Hong Kong

	7-11 Japan	7-11 Hong Kong
Type of Service and Product	Products are not usually be found in physical convenience stores Mainly in 8 content: Travel, Music, Photographs, Gifts, Mobile phones, Tickets, Books, Car-related items 7-dream.com: Purchase product through the internet, paid at store and pick up later Internet enabled computer service Providing products with famous brand Example: NEC  Corporation, Nomura Research Institute, Ltd, Sony Corporation, Mitsui & Co.,Ltd, Japan Travel Bureau and Kinotrope Inc.	Tangible goods  Easy-handle commodities and consumables: food, drinks, daily necessities, medicine and cigarette Fast moving informative items: newspaper, magazines Majority of the product is not expensive, customer will purchase those product without a long consideration.
Targeted Market	Youngsters who always browse the Internet	All citizens
Price Range of products	Relatively expensive	Relatively cheaper
Payment Method	Credit card through internet Cash payment in physical store	Cash payment Octopus card
Where to make purchase?	7dream.com: Personal computer, wireless devices and internet enabled kiosks in 7-11 Physical store	Physical store only
How to get the product?	Customer decide where to pick up: home address,specific address or any 7-11 stores (using their existing logistics system)	Pick and purchase immediately in existing store

Website of 7dream.com:

1) Food

                                                     2) Product for celebration: flower   

2. Identify the major obstacles to e-commerce in Japan.

1. Connection Charge

The combined telecommunication and Internet service fee in Japan is the highest over the world. It is because the market was dominated by a monopoly government-owned corporation.

2. Government Policies

The government regulated companies heavily in the e-commerce sector before 1999

3. Demographic Factor

Many household are having tiny house, it is not possible for them to accommodate a personal computer

Convenience store have a great coverage, customers can easily make purchase in convenience store no matter where they are

4. Local Culture

Japanese is a cash-base society which means they are paying cash to make purchase as a routine. It is common salary paid by bank note. Over 90% mail-order sales paid with cash-on delivery or bank transfer.

Japanese believe that when they are making purchase in physical store, they can see and touch the product, also obtain discount.

The privacy issue was a critical consideration. Japanese are fear about their credit card information will leak out to the hacker when they are using their credit card to make purchase through the internet. They afraid that they may need to bear the loss.

Problem of end-fulfillment of online order also exist, most customer were not at home during the day to receive the delivery of their products. There also some uncertainty such as mailing error or non-fulfillment on he part of the stores also bring uncomfortable to the customer.

3. Government Role in Japan for e-commerce development

1. Encourage Trade through internet
For the sake of international competitiveness, the government has deregulated the stock commissions to encourage consumer to start trading in the internet.

2. Increase competitiveness

Government break down NIPPON Telephone and Telegraph into three sub company( the original one is the monopoly government-owned corporation). It can enhance the competition in the market. As a result, the service fee of connecting to the internet will be lower, consumer can enjoy online shopping at a relatively low cost.

Supermarket is forced to close at 8 pm. Consumer can only make purchase online or in convenience store.

3. e-Japan Strategy in 2001

Government built ultra-speed internet network, also established rules on electronic commerce. The consumer will have more confidence in security while making online service.

Establish ECOM

Promote law that protect copy right

Discount of some specific products is not allowed, company will put their product to the online store which can reduce the cost of rent or expense in physical store

4. Identify the critical success factors of the business plan of 7dream.com.

1. Benefits from using existing delivery system
7-11 Japan use their existing delivery system to provide services. A critical benefits is that they can obtain the goods directly from the warehouse of its supplier. Therefore, 7-11 doesn't need to hold inventory and the inventory related cost is lower.

Also, the existing delivery system of 7-11 Japan can minimize the additional cost of delivering orders of 7dream.com to 7-11 stores.
                                                        Distribution of 7-11 in Japan

7-11 self-owned truck

2. Deal with cultural Issue (cash base society)

Japan is a cash base society which mean citizens usually refuse to use credit card to pay the bill or shopping online. It is because they think that they may obtain discount to afraid of the leaking of personal information. However, 7-11 use joint-venture to promote their business. For example, they cooperate with world class brand in order to build confidence to the customers to shop in the online store. Media is also an important role for 7-11 to promote the 7dream service

3. Government Support

The rise of e-business in Japan, the government plays an important role. Firstly, the deregulation and e-commerce in the middle of 1990s open the market to the public, business through internet or wireless devices become more easy. Also, the government split the telecom giant NTT into three companies in order to increase the competition which can lower the price and improve the service quality of the internet service. As a result, e-business can be promoted more easily and more customer have the chance to purchase through the internet.

Company structure of NTT today

4. Information Kiosks in physical store

In Japan, majority of the families are living in a tiny house. Therefore, it is not common for them to owning a personal computer in home. However, 7dream.com solve this problem by providing internet-enable multi-kiosks. It is an computer with internet service placed at the physical stores while customers can purchase the product from 7dream. Also, 7dream.com also provide alternative connection method, wireless devices such as mobiles. Customer can use their cell phone to purchase products from 7dream. Therefore, the requirement of a personal computer with internet service has been removed.

5. Phobia of credit card usage through the internet
Japan is a cash based society, citizens refuse to use credit card to pay online. However, 7dream provide an alternative for the customer, it is payment in convenience store.

6. Problem about receiving parcels

7dream use 7-11 existing distribution system including physical store and transportation to provide excellent delivery service. Customer can select one of the physical store to pick up their product. Nevertheless, they can choose the address  for the delivery. The flexibility provide a larger customer value to their customer. 

5. Conclusion

Besides the creative business idea for 7dream.com which is providing products that are not necessities to their customers. We can also see that how 7-11 can fully utilize their strength in order to expand their business. The wide distribution system can bring convenience to their customer. The word "convenience" become critical to their business because it can reduce customer consideration. Many customer purchase decision may change under consideration. Therefore, 7-11 Japan has made a great success in this case.

Finally, how 7-11 promote their business by eliminating the problem is also important. For example, the culture of Japan and the low penetration rate of personal computer. These two factors show that Japan is not a suitable places to promote e-business because it is not easy for this service become widely use. However, 7-11 can deal with the problem critically. If customer don't have a computer, they can come to our store or purchase by wireless devices. If customer don't want to pay by credit card through internet, they can pay at physical store. We can see that the decision makers in 7dream got the right direction in adopting e-business in Japan.



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