Seven Eleven

CASE: GS-18 DATE: 5/23/2006 (REV’D. 7/30/10)

SEVEN-ELEVEN JAPAN
COMPANY BACKGROUND1 Seven-Eleven, Inc., founded in 1927 in Dallas, Texas, is the world's largest operator, franchisor, and licensor of convenience stores. As of March 2010, it had approximately 38,000 stores in 16 countries, serving 35 million customers a day.2 Of these, 12,753 stores were located in Japan, franchised (someoperated) by Seven-Eleven Japan Co., Ltd. (SEJ).3 Most of the remaining stores were located in North America, Taiwan and Thailand. SEJ was established in November 1973 under an area licensing agreement between Ito-Yokado Co., Ltd., Japan's leading supermarket chain, and The Southland Corporation, which operated Seven-Eleven in the United States. Under the strong leadership of Toshifumi Suzuki, chairmanand CEO of SEJ, the company had maintained the top position in convenience stores in Japan since it opened its first unit in downtown Tokyo in May 1974. In 2009, SEJ's total sales including franchise stores reached ¥2.78 trillion, with net profits of ¥92.4 billion, making it the largest and most profitable retail chain store in Japan (see Exhibit 1 for the income statement). SEJ also had thehighest average sales per store per day among the
This case was prepared by Professor Seungjin Whang with assistance from Hide Saito, Steve Van Horne, Casey Koshijima, and Takafumi Ueda at the Graduate School of Business, Stanford University. We would thank Masayuki Sato and Haruo Uchida at Seven &I Holdings, as well as Naoaki Fujino, Yasuo Fukami and Toki Hikita at Nomura Research Institute fortheir valuable time and kindness. Professor Hau Lee also provided valuable feedback to earlier drafts. The case was prepared as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2006 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission toreproduce materials, e-mail the Case Writing Office at: cwo@gsb.stanford.edu or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means –– electronic, mechanical, photocopying,recording, or otherwise –– without the permission of the Stanford Graduate School of Business. Every effort has been made to respect copyright and to contact copyright holders as appropriate. If you are a copyright holder and have concerns about any material appearing in this case study, please contact the Case Writing Office at cwo@gsb.stanford.edu.
1

All information in this case was provided bySeven & i Holdings and Nomura Research Institute unless otherwise indicated. 2 “Fun Facts,” 7-Eleven, http://corp.7-eleven.com/AboutUs/FunFacts/tabid/77/Default.aspx (May 13, 2010). 3 “International Licensing,” 7-Eleven, http://corp.7eleven.com/AboutUs/InternationalLicensing/tabid/115/Default.aspx (May 13, 2010).

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three leading convenience store chains (i.e.,SEJ, Lawson, and Family-Mart). SEJ’s stock price (after adjusting free share distribution and splits) started at ¥100 in 1980, reached ¥2,300 in 1987, and was around ¥9,410 in 2004. In 2005, SEJ became part of Seven & i Holdings Co., a listed company in the Tokyo Stock Exchange. As of May 2010, Seven & i Holdings was the largest retail company in Japan. SEJ's leading market position and performancehad been largely due to its pioneering innovation in rationalizing Japan's convenience retail industry. The Southland Corporation The Southland Corporation initially brought the convenience store concept to Japan, providing SEJ with the necessary know-how to get started. However, SEJ's innovation in supply chain management soon placed it far ahead of Southland in both profitability and business...