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Convenience Store Industry (Corporate Strategy)

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Management Development Institute of Singapore Convenience Store Industry (Corporate Strategy) UNIVERSITY OF WALES MASTER OF BUSINESS ASMINISTRATION MBWD5 0306A SONG YANG G0262693X 12/Aug/04 TABLE OF CONTENTS Page Introduction --------------------------------------------------------------------3 Background---------------------------------------------------------------------4 Porter's five forces------------------------------------------------------------5 PESTEL Analysis----------------------------------------------------------------------7 Industry Life Cycle--------------------------------------------------------------------10 Structural Drivers of Change----------------------------------------------12 Scenarios from Configurations of Factors-------------------------------13 Conclusion-------------------------------------------------------------------16 Bibliography ----------------------------------------------------------------17 Introduction Strategy is the direction and scope of an organisation over the long term, which achieves advantage for the organisation through its configuration of resources within a changing environment and to fulfil stakeholder expectations (G. Johnson & K.Scholes 2002). According to a recent poll released by Yankelovich Partners Inc., the availability of 24-hour convenience stores was one of the highest-ranked items that Americans want to see continue into the new millennium. By providing immediate access to food products, beverages, cash, petroleum, and any necessary item, convenience stores have become the gas station, quick service restaurant, bank, and water-cooler of a mobile, time-hungry society. This assignment will use Porter's '5 Forces', PESTEL analysis, Structural drivers and Life cycle model to map and analyze the strategies of convenience retailing industry. Then scenarios analysis will be given in order to identify the long term futures of industry. Background A convenience store is a retail business with primary emphasis placed on providing the public a convenient location to quickly purchase from a wide variety of consumable products (predominantly food or food and gasoline) and services (NACS of US). The Southland Ice Company is credited with the birth of the convenience store in 1927 in Dallas, selling items such as milk, bread, and eggs at one of its neighborhood stores 16 hours a day-long after the local grocery stores were closed for the day. ...read more.


It also helps to create a 'service business' such as payment acceptance of bills, mail order, catalogue shopping and so on. An effective distribution system with vendors is also hook up via its information system. Convenience store industry was previously simply a 'place to sell merchandise' but now it becomes a 'place to offer services' as well. A 'manpower shortage' became a serious problem after 1980s, convenience store have to hire many part-time workers. Therefore, its immediate task is to make them into productive employees despite their lack of experience. Industry should design its information system base on the concept that 'anybody can use it'. Environmental It is quite natural that people concerned with environmental issues could worry about the convenience industry. As it operates 24 hours and required high frequency deliveries, it inevitably include in the strong criticism because high frequency delivery is said to cause traffic jams and increase exhaust gas pollution. Even the 24-hour operation mode is criticized by many quarters in light of environmental problems, and even social problems like the increase of crime. To deal with these problems, convenience store takes up with reducing the numbers of deliveries through their effort. It also invests on electricity-saving equipment to be installed at all of its chain stores to save the electricity of electric lights and also the electricity of air-conditioners simultaneously. Industry Life Cycle The nature of corporate strategy will change as industries move along the life cycle. Introduction Phase In 1927, the Southland Ice Company is founded in Oak Cliff, Texas Tote'm stores introduced. At the same time, other types of stores were emerging such as "midget" stores and "motorterias" or mobile convenience stores. Sometimes supermarkets had small outlets in rural areas for people. ...read more.


The building up of a large-scale distribution system together with vendors cannot be realized in a day. Therefore, only after years of experience can it be possible to obtain the operational know how on the management of convenience chains. Competition with rival convenience stores will be intensifying. With the development of more than 70 years, the total number of convenience stores exceeded a large amount and this means less available of population of each stores. The number of stores started to increase in the 1990s but the annual sales of the industry has grown slowly (Konbini 1997, Spring issue). A coined phrase of a 'convenience street' was created for the many areas crowded with convenience stores. Even 7-Eleven cannot avoid this intensification of competition with rival firms. Due to stagnation and the intensification of competition, industry requests vendors to keep up quality, while also pressuring them to produce at lower costs. Major manufacturers now develop new products based on the information on customers and the market information is provided by the convenience industry. For this reason the sales network of the convenience industry are very attractive for producers. Therefore, the cost of merchandise will be stable in a long term. At the same time, the life cycle of products is getting shorter and the burden of investment in the facilities for the production of new products gets bigger. It makes productivity and innovation become more different and takes longer time. But with the rapid development of information system, the higher productivity and innovation can be achieved. Conclusion Business in the grocery trade had grown steadily in the world. This has enabled a number of stores, particularly supermarkets and convenience stores. It is not surprising that convenience stores will present the most successful performance and also make impressive gains in value added and profitability . ...read more.

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