No. 35: Secrets of Seven-Eleven’s growth (September 30, 2013)

Management:

Seven-Eleven creates excitements incessantly.

Since the first convenience store was opened in the early 1970s, convenience stores added new services and functions to satisfy social demand. Added services include installing an ATM inside the store and selling movie and concert tickets. As the number of added services increases, convenience stores have become a vital infrastructure in daily life. The Great East Japan Earthquake that occurred on March 11, 2011 made people renewed this recognition.  

The market leader Seven-Eleven worked out a new strategy for further growth. The company focuses on the senior generation and working women. It will open 1,600 stores in 2014 with an investment of 90 billion yen. Seven-Eleven has 15,800 stores in 42 prefectures at present and 37% share in terms of sales in 2012. With the 1,600 new stores, it plans to increase the share to 40% in 2014. To develop the market for the senior generation, it designates each store as the base of door-to-door delivery service. It introduced Toyota’s COMS to increase the efficiency of the door-to-door delivery service. It delivers such daily necessities as detergent and packed lunch to the households of the aged.

Women account for more than 40% of shoppers at Seven-Eleven stores, and Seven-Eleven successfully doubled the share of shoppers older than 60 years old to about 20% in five years. Making the best use of its delivery system, it started to deliver packed lunches to public junior high schools in Kanagawa Prefecture. Seven-Eleven has daily average sales of 668,000 yen per store, while the followers have average daily sales of a little more than 500,000 per store. Surprisingly enough, only 1% of all Seven-Eleven stores have daily sales of less than 400,000 yen, which barely prevents a store from being closed. The strength of Seven-Eleven lies in the ability to create original products unavailable from suppliers. Seven-Eleven places more importance on value than on price and launches high quality products that are little bit higher in price.

Japan has 50,000 convenience stores as of the fall of 2012, and some industrial sources say that the market is saturated. However, it is noteworthy that Seven-Eleven increased sales on a year-on-year basis for 13 months consecutively up to August 2013.

As Seven-Eleven shows, it is not too much to emphasize the importance of segmentalizing your market and focus on the promising markets with investment. The world is changing fast, and every business has to adapt itself to the change. As long as you develop new markets and scrap obsolete markets, the word “saturation” will not irritate you.  

Seven-Eleven regards a store as the base

of the door-to-door delivery service.

Shoppers get excited with Seven-Eleven's coffee.

No. 34: Developing business in the global market in the Unicharm way (September 21, 2013)

Management:

Unicharm is outstanding in the paper diaper business. It is expected to record sales of 580 billion yen this year. Because low birthrate and longevity dwindles the domestic market, the company has been energetic in developing foreign markets. Actually, its sales from foreign markets exceeded those from the Japanese domestic market for the first time in 2012. It is dominant in Indonesia with a share of more than 80% in the western part of Java. It will start to operate its third plant in Surabaya this year to make the Indonesian market even more solid. The new plant is part of its strategy to increase the share of diaper and sanitary goods from the current 20% to 30% in Asia. 

 Unicharm's products are selling fast in Asia.

Allying with local companies is vital for global competition.

Focusing on newly developed countries is a must for every Japanese manufacturer. Because economies of scale matters a lot to compete in the global market, it is critical even for Unicharm to compete with Proctor and Gamble (P&G) of the U.S. successfully. As a matter of fact, Unicharm projects to increase total sales three times over the current level to 1,600 billion yen in 2020. However, P&G has total sales of 8,000 billion yen, of which 1,600 billion yen come only from the divisions with which Unicharm has direct competition. To cultivate undeveloped markets in Asia, Unicharm merged companies in Vietnam and Myanmar. The M&A strategy allowed the company to have more than 50% share in Myanmar.

Diversify your market, not your business.

The Japanese adult diaper market grew to 140 billion yen in 2012, exceeding the baby diaper market. Unicharm has more than 50% in the adult diaper market. Since establishing a laboratory for the adult diaper market, the company has been developing the adult diaper market in coordination with medical and nursing-care facilities. These hardworking efforts made Unicharm successful in the adult diaper market from which P&G withdrew in 2007 and in which Kao is still struggling. This fact indicates the importance of diversifying your market by developing and sophisticating your products, instead of diversifying your business.

Establish and share the management objectives with employees around the world.

Unicharm has 20,000 employees around the world, of whom 80% are local people in foreign markets. For further growth in the global market, the company has to establish common recognition of the management objectives among all employees. For this purpose, the company introduced the management of resonance that ask every employee to think and work to creates results that exceed the simple addition of all employees. The SAPS management model was created for this purpose. S stands for schedule, A means action, P indicates performance, and the SAP returns to S (schedule). That is, the second S asks every employee to schedule next jobs and actions based on the past SAP. Ultimately, the SAPS model asks every employee to think by himself and act to develop the company. The keywords of the Unicharm management model can be summarized as follows:

Keywords to symbolize the Unicharm management model
Management of resonance	Every employee is asked to work in concert with others to exhibit unlimited power as if he creates resonance.
SAPS management model	Every employee is asked to observe the SAPS management model.
Enhancing communication through a social gathering	Every department holds a social gathering once a month at company expense to activate communication inside the department.
Unicharm way	Every employee is asked to carry a booklet in which Unicharm’s value and action guidelines are described.

The above Unicharm case illustrates the strategy that a company has to take into consideration for business expansion in the global market. 

Is everything going well, little princess?