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Saturday, May 8, 2010

Management of Change: The Case of 7-Eleven

by Joan Idanan

Management of Change: The Case of 7-Eleven

 

Introduction

Change is the only permanent in life. Change can be a lot of things, but no matter how the benefits are spelled out, it's often a scary proposition. A business cannot simply rely on past successes to withstand the internal and external forces that may threaten its profitability. So in order to retain a company's viability, its leadership must maintain a forward-thinking vision, be vigilant in recognizing the need for change and have the skill and leadership style to guide the organization through the process of change (, 1991). Today's successful companies must change daily to keep up with their customers' changing needs and the competition.

Organizational change can be defined as "Anything that affects people, processes and chains of accountability is organizational change" (, 2003). Regardless of the size of an organization or the industry in which an organization resides, preparing for change is the same.

The need for change is driven by market forces, a need to improve performance internally, competitive situations, and rapid changes in technology. Managers see a clear and positive impact to the financial bottom line or a boost in the performance and morale of employees. But improvements to technology and business processes also bring about human changes, which, if not managed effectively, can be the demise of any implementation. Monitoring and managing the human changes that result from changes to business processes and technology is what change management is all about.

According to  (2005), consistent change management is critical to a new system implementation's success. Managing the implementation of these major changes is a must if you are to survive in today's highly competitive environment. Attempting to implement major changes without a well thought out plan will result in wasted efforts, lost time, missed sales and lower profits. Major changes within organizations are required for long-term survival. Getting these changes implemented as smoothly as possible with a minimum of disruption is a difficult, but manageable task.

"Change management involves the process of effectively restructuring an organization to make it more responsive to its marketplace. It is the process consists of identifying destabilizing forces, determining the present situation, selecting the methods for the implementation of change, developing an effective strategy and applying these strategies accurately" (, 1997). It is also important to determine the external and internal sources of the need to implement changes.

Changes are continually happening in the workplace, and it would be futile for both supervisors and employees to resist it. Employees in general resist change because they are comfortable with the status quo (, 2002). Downsizing, buy-outs and mergers are occurring at dizzying speeds it seems. And "planned" change, the introduction of a new way of doing things, can arouse resistance.

This paper attempts to analyze external and internal factors that affect to the choice of 7-Eleven to decide on organizational changes. Any company has undergone challenges in their business operations and 7-Eleven is one of the companies that have experienced these difficulties. For a company to sustain its competitiveness, it must be sensitive to the necessary changes in the organization. Usually in implementing changes, there are a number of persons on the organization that resist to these changes. However, change is good for the company when properly planned.

 

Company Background

7-Eleven is an international company operating as a convenience store in eighteen countries which includes Canada, United States, Mexico and Puerto Rico in the Americas; Norway, Sweden and Denmark in Europe; Taiwan (Republic of China), People's Republic of China (China), Hong Kong, South Korea and Japan in East Asia; the Philippines, Thailand, Malaysia and Singapore in Southeast Asia; and also Turkey and Australia.

 

 

 

 

History

7-Eleven was founded in 1927 in Oak Cliff, Texas, USA in which started using the name 7-Eleven in 1946. In 1964, 7-Eleven enter the business of franchising when the company purchased a chain store named "Speedee-Mart."

It was in 1991, Ito-Yokado a supermarket chain, which operates 7-Eleven stores in Japan, purchased the majority interest of The Southland Corporation. In 1999, The Southland Corporation changed its name to 7-Eleven, Inc.

Initially, these stores were open from 7 am to 11 pm, which was unprecedented at the time, hence the name; however, most 7-Eleven stores are now open twenty-four hours per day, seven days per week.

In November 2005, 7-Eleven has turned to a publicly traded Japanese conglomerate when Seven and I Holdings Co. has completed its purchased of the company.

 

Vision

7-Eleven's vision is to be recognized as a leader in providing time-conscious consumers with a full-range of products and services that meet their ever-changing daily needs.

 

 

 

Mission Statement

7-Eleven's mission is to offer time-conscious customers a full range of products and services that meet their ever-changing daily needs through quality, speed, selection and value in a safe, friendly and pleasant environment.

Core Values

7-Eleven is a customer-preferred convenience store which value customer expectations through quality, speed, selection and value safe and pleasant environment. The company treats employees with dignity and respect the company also recognizes franchisees and suppliers as business partners. In addition, the company strives to be a good corporate citizen.

 

External Analysis

There are factors that can stimulate changes. One of these sources is external to the organization. This includes society, political or legal environment and technological developments.

Society

These changes are affected by the beliefs, values, attitudes, opinions, and lifestyles shift in society. In the case of 7-Eleven, with the increasing changes in consumers' preferences, changes in the management of the human resources is significantly important especially with the nature of the business of 7-Eleven to have the quality service to its customers. In business, consumers dictate the success of the company. The society today is more demanding and is demanding for quality products and services and the value to their money.

Political/legal environment

Another source of change is the government's policies. 7-Eleven is operating in different parts of the globe which would probably face these challenges of different government policies. With these, the company would likely to change how they work in each country that would be according to the policies of the government in the country they operate. Political decisions or events in a country will affect the business climate in such a way that investors will lose money or not make as much money as they expected when the investment was made. 

Political factors that may affect the 7-Eleven may include government laws and regulations. Restrictions on repatriation of capital, profit, and management fees can affect the operations of the retail store. In addition, regulation on the price controls for rooms and other charges in some of its products.  Moreover, implementation of high corporation tax on products can affect the 7-Eleven.

Technological developments

With the rapid change in the technology especially in the communications and transportation, organizational change would likely to occur. In a global organization, communication and transportation are of great importance.

With the presence of Internet retailing, 7-Eleven faces extensive competition. The company must understand that with these competitors, changes would likely to be a significant development to the company especially with their services. Services can be delivered effectively to the customers when there would be significant changes in the human resource management.

 

Competitive Analysis

7-Eleven is currently having various competitions which include superstores, hypermarkets, convenience stores and even traditional markets. However, the biggest competitors of 7-Eleven today are Circle K convenience stores, ParknShop and Wellcome. Currently, in Hong Kong there are already more than 600 supermarkets and convenience stores.

 

ParknShop is associated with three other supermarkets by the name of Great, Taste, and Gourmet. These high-end supermarkets are after the more affluent clientele. They are ideal outlets for innovative, quality and priced international food products. These stores also carry a wide selection of organic products. Great adopts a stylish international food hall concept and its flagship store offers over 46,000 gourmet items.

 

In addition Wellcome also is a competitor of 7-Eleven which is also is owned of Dairy Farm. Wellcome, will also be opening an upscale supermarket in Hong Kong's central commercial area catering to the more affluent clientele. It will be Hong Kong's largest retail outlet for organic and natural products. About 6,000 items or 70 percent of the items in the store will be organic or natural products. The store will include an organic sector for baby products. "Health" and "natural" are the key concepts of this store.

 

 

Name of Retailer

 

Ownership

 

Food Sales

US$

 

No. of Outlets

 

Location

 

Type of Purchasing agent

 

Wellcome

 

Hong Kong

 

over $1 billion

 

261, 27 of which are superstores

 

Hong Kong

 

Importers/Agents

Exporters Consolidators

 

ParknShop

 

Hong Kong

 

over $1 billion

 

215, 45 of which are superstores*

 

Hong Kong

 

Importers/Agents

Exporters Consolidators

Source:  (2006)

 

ParknShop and Wellcome account for almost 80 percent of the supermarket turnover. Both supermarkets are able to work closely with real estate developers to open stores in strategic locations, thus maintaining their significant market share.  Because of their significant market share, they are able to make suppliers offer goods to them at very competitive prices, so that they are able to set retail prices lower than their competitors. Consequently, it is difficult for small competitors to survive and new players to enter into the market.

Moreover, a new development in 2003 is that ParknShop expanded into 24-hour convenience store operations.  The supermarket giant has opened a number of stores under the name ParknShop Express on a trial scheme and may expand the network across Hong Kong if the experiment succeeds.  Currently, there are about ten Express stores.  ParknShop has intrinsic competitive advantages over its rivals because it can use the leverage of the group's existing infrastructure to offer products at low prices.  The stores carry the products as other convenience stores such as cooked food, drinks, newspapers and magazines.  In a bid to lure customers, the 1,000 products offered by ParknShop Express are priced at the same level as those being sold at ParknShop.  This is in contrast to other convenience store operators charging at a premium of up to 15 per cent from those selling at supermarkets. 

 

In the convenience store, Circle K is the competitor of 7-Eleven. Circle K is continuing to expand.

 

Retailer Name

Ownership

No. of Outlets

Location

Purchasing Agents

Year Established

Client's Age

Circle K

Hong Kong

180

HK

Importers

Agents

1985

15-35

Source:  (2006)

 

 

 

 

 

 

 

Internal Analysis

 

SWOT Analysis

 

Strengths

Majority of the goods that 7-Eleven Store are low prices sue to low cost of operations. Also, 7-Eleven is more convenient to customers. Consumers could avoid the long checkout lines, crowded parking lots, and traffic. There are many choices of shopping methods; browsing the aisles, using product search, and choosing from a shopping list customized from frequently bought products. They could shop 24/7 since the store is open for 24 hours in 7 days. The store also offers variety of selection from fresh to processed food and whatever shoppers would need.

Weaknesses

Increase in competition is a great threat to 7 Eleven. Also, with the increasing high levels of educated people, consumers are now more skeptics and are more demanding. In addition, the traditional markets in which people can purchase fresh fruits and vegetables are still in its popularity in Hong Kong. Moreover, 7-Eleven has high employee turnover which is a sign of bad management.

 

Opportunities

7-Eleven has also some opportunities. With the problem of information dissemination, an opportunity to acquire new technology for more efficient operations can now be possible. Also, 7 Eleven has been already known by the people as a store open in 24 hours they have the advantage over it. In addition, the company also got the most strategic locations of their stores. Moreover, the company can still expand their business and open some more stores especially in China which got the opportunities of expansion with its large market.

 

Threats

However, despite the strengths, the store has also its weaknesses. One of which is inventory inefficiency in which they would experience stock outs. Moreover, with the presence of superstores, their current marketing strategies have been overshadowed. In addition, low performance of workers also has negative effect on the efficiency of the store.

 

Identification of Problem/Issues

 

7-Eleven faces an intense competition. With the continuous globalization, it is important for 7 Eleven to maintain its leadership in the convenience store industry. Superstores are already emerging which are mostly are also beginning to open 24 hours.

 

From the SWOT analysis, the company faces various problems that are needed to have a solution. It is recommended to concentrate on some areas. One of the areas that have a major impact on offering goods and service is the efficiency and effectiveness of the people doing the work.

 

One of the major objectives that the company should concentrate is the improvement of their workers. A strategic human resource development must be implemented within the company.

 

Human resource development (HRD) plays a vital function by maximizing employee expertise to achieve the main objectives of an organization. Human resource development (HRD) has served the needs of organizations to provide employees with up-to-date expertise. According to  and  (1994) Advances in HRD models and processes have kept pace with the increasingly sophisticated information and production technologies that continue to diffuse throughout our nation's most vital industries. During this period of rapid technological development, the HRD function could be relied upon to support a broad range of business initiatives that required a competent workforce.

 

Critical business issues, from new marketing strategies to innovations in production technology, were based on, among other factors, the performance capabilities of those expected to use these new work systems. As a factor integral to business success, employee expertise itself has been expanded through effective programs of employee development. According to  (1994), expertise is defined as the optimal level at which a person is able and/or expected to perform within a specialized realm of human activity.

 

However, according to  and  (1994), today's business environment requires that HRD not only support the business strategies of organizations, but that it assumes a pivotal role in the shaping of business strategy. Business success increasingly hinges on an organization's ability to use employee expertise as a factor in the shaping of business strategy. 

 

The rationale for using HRD interventions to support business objectives is to enhance employee expertise through HRD increases the likelihood that business objectives will be achieved ( and , 1995; , 1994).

 

Training and other initiatives associated with total quality management have been critical in transforming marginal manufacturing plants into successful facilities (, 1994). HRD continues to be a primary vehicle for assuring mandated levels of employee competence and public safety in highly regulated sectors like the nuclear power industry (, 1994).

 

 and  (1995) posit the argument that "Organizations in the new economy have come to realize that employee expertise is a vital and dynamic living treasure. The desire for employee expertise is meaningless unless an organization can develop it in ways that respond to the business needs."

 

However, some Organizations have rushed to embrace information technology as a way to improve overall efficiency and reduce costs. Yet, it is not the information technology itself, but the way information technology is thoroughly integrated into major business processes, that represent the greatest opportunity for the successful transformation of outdated business processes (, 1993). However, those who have successfully used information technology to improve business performance will quickly point out that these advantages will not materialize without highly competent people to both implement and utilize these innovative work systems.

 

The human capacity must exist to use information technology to maximize performance (., 2003). Employee expertise is critical to an organization's ability to capitalize on the vast opportunities afforded by information technology. HRD is then in a strategic position to assure that the required expertise is available and effectively utilized.

 

Organizations in market leadership positions realize sooner or later that human resources are ultimately the only business resource with the creativity and adaptive power to sustain and renew an organization's success despite changing market conditions (, 1993). The development of employee expertise provides a potentially inexhaustible source of ideas for further innovation and increased productivity because the most basic output of the highly competent employee knowledge is not used up in the process of producing it (, 1989). Developing employee expertise at all levels of the organization and using knowledge as a catalyst for growth and competitive advantage represents a major frontier in organizational performance that is only now beginning to be fully appreciated (, , , , and , 1994; , , and , 1995).

 

 

Resistance to Change

No matter how much analyzing, planning and employee participation you do, some of your employees will resist the changes. The majority of human beings naturally resist change (, 2002). Change takes employees (and some presidents) out of their comfort zone and places them in an unknown situation. This results in resistance to the needed changes.

According to  (2002) resistance comes in two forms; overt and passive. Overt resistance is the easiest to overcome. It comes from the employees who openly oppose the changes. Allow these employees to speak their mind and then work with them to overcome their concerns.

Passive resistance is much tougher to overcome. If you don't know it exists you cannot overcome it. The most passive resistance comes from employees who have n opinion when asked about the proposed changes. Everyone has an opinion; be very careful and watchful of those who do not express it when asked. After passive resistance is detected take immediate action to eliminate it.

 

No Change Scenario

If 7-Eleven would not change its human resource management, there would be an increasing number of staff turnovers because mainly staff are not motivated and are unsatisfied with their work. In addition, because of lack of expertise of most of its staff, more problems will prevail.

 

Change Scenario

When the company would adopt changes on its human resource management, the staff would likely to be motivated and empower with their proper training and with their development and expertise with their job.

 

 

Conclusion

More than anything, human resource is important to any company. And its development would likely improve the performance of any company. HRD serves a broad range of interests and outcomes in organizations. The primary purposes to be served by HRD can range from programs intended to meet the personal development needs of individuals such as identifying individual learning styles or personal financial planning to HRD programs necessary for everyone in the organization such as programs addressing a new performance appraisal method or role changes secondary to structural reorganization. HRD is a crucial antecedent to successful business strategy. In these situations, HRD actively shapes strategy.

 

Some companies jump into deciding on application of technology however, it is important first to reorganize the organization as a whole. Changes in the management of human resources should be the first at hand with the company of 7-Eleven.



4 comments:

  1. Thank you for this wealth of information. I am currently working on an Integrated Marketing Communications plan for 7-Eleven and am curious if you found any information focusing on the US competitors of 7-Eleven. If so, would you mind directing me to them? I would greatly appreciate your direction. Thank you.

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  2. Hi

    I like this post:

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    Peter

    ReplyDelete
  3. Dear Brittany, no not at this point in time do I have any info of 7Eleven's US competitors. If I do, it will be posted in this blog, so watch this space, so to speak. Thank you for visiting this blog.

    Dear anhasing, thank you for the link to Performance Appraisal Methods blog. Good one. Your very own blog is good too. Thank you for your input and encouraging words.

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    Replies
    1. I am surprised to read this post. Every line in this post is informative. Really I would like to say thanks from my heart.


      Business Management

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