MM30320 Strategic Marketing

Ang Pua Xuan 3157 190181998

2645 Words
Table of contents
1.0 Introduction
2.0 Company Background
2.1 Product/Service
3.0 Analysis of Porter’s five forces
4.0 Advantages and Disadvantages of Porter’s five forces
5.0 Strategic Marketing Decisions
6.0 Conclusion
7.0 References
1.0 Introduction
This report will discuss the porter’s five forces such as the advantages and
disadvantages of the five forces. Besides that, apply the porter’s five forces analysis to
analyze the 7-Eleven Malaysia and identify how the five forces helps the 7-Eleven
Malaysia to make strategic decisions.

2.0 Company Background

7-Eleven was founded by Joe C. Thompson at Dallas in 1927. 7-Eleven
Malaysia was established in 1984. The first 7-Eleven convenience store is located at
Jalan Bukit Bintang, Kuala Lumpur. 7-Eleven Malaysia was listed on Bursa Malaysia
in 2014 and named 7-Eleven Malaysia Holdings Berhad.(7-Eleven Malaysia, 2021)
The industry that 7-Eleven Malaysia operated in retail industry. Retail means
that the action of selling goods or services are straight away to the end-users or
customers. Retailing mostly carry out in retail stores or convenience stores but is able
to carry out through direct selling too. For example, selling the product using vending
machines or electronic channels.(Pride, W et al, 2018)

2.1 Product/Service
Product
 Anda - ANDA Natural Mineral Water is taken from natural tropical rainforest
that is free of pollution and did not touched by the hands.
 7- Select - 7-Select is all kind of competitively-priced products offered to fulfill
the needs of the customers.
 7- Eleven Bakery & Fresh Food - They offer baked goods and fresh food. The
food are sent everyday, packaged correctly according to their rules and
regulations and certified Halal.
 Slurpee - The original frozen beverage is only able to find in all 7-Eleven
convenience stores. Moreover, there are some other flavors such as Mangoda and
Tutti Fruiti.
 Hot beverages - They sell fresh brewed coffee and sell premium roast coffee and
local delights like Teh Tarik sometimes.
 Boots - Boots, the best Skincare Brand in United Kingdom is selling at 7-Eleven
convenience stores.
Services
 Razer Parcel + - Customers is able to go to their nearest 7-Eleven store to collect
their parcels with Razer Parcel+ by request.
 Razer CASH - Customers can look for the Razer CASH logo on their online
shopping site and pay cash for their online purchases at the 7-Eleven convenience
store by showing the transaction ID.
 Razer Gold - Razer Gold is the unified virtual credits for gamers. Customers is
able to top up the credits at 7-Eleven.
 Touch 'n Go eWallet - Customers is able to pay for their purchases at the stores
using Touch 'n Go eWallet.
 Touch 'n Go Reload - Customers can reload their Touch 'n Go card at 7-Eleven.
 Bill Payment and Reloads - Customers is able to pay their postpaid bills such as
electric bill, water bill, Astro bill and others at 7-Eleven convenience stores.
Moreover, customers is able to reload for their prepaid plan such as Celcom, U
mobile, Maxis and others.
 Credit & Debit Cards Now Accepted - Customers is able to pay with their credit
or debit cards at 7-Eleven. Customers can use Swipe or Wave which is more
easier and convenient during the payment.
 Alipay - Customers is able to pay for their purchases through Alipay.
 B Infinite - Customers can collect BPoints if they show their BCard to the store
when they make payment. The customers can redeem different items with their
collected BPoints.
 Gift Cards - They sell different kinds of gift cards that customers can use online
such as Spotify, Google Play, Zalora and others.
 Other services - There are ATM machines, fax and photocopy service and WiFi
provided at the stores.
(7-Eleven Malaysia, 2021)

3.0 Analysis of Porter’s five forces

Porter’s five forces
A company or business is able to use Porter’s five forces to analyze their
competitive nature and identify how to attain competitive advantage in a particular
industry. The five forces model consists of threat of new entrants, threat of substitutes,
bargaining power of customers, bargaining power of suppliers and rivalry among
existing competitors.
The diagram above shows the Porter’s Five Forces.(Bruijl, 2018)

Threat of new entrants

Threat of new entrants means that there are competition formed as there are
new entrants joining the market. The threat of new entrants can be identify based on
the barriers to entry, economies of scale, loyalty to the brand, the amount of capital
needed to operate the business, experiences to the business, rules and regulations of
the government and access to the channel of distribution.(Hill and Jones, 2013)
The new entrants is able to kick the existing companies out of the market such
as in the case of Apple and Nokia where Nokia is no longer obtain big amount of
market share in the mobile phones industry.(Kenji Explains, 2020)

 The threat of new entrants for 7-Eleven Malaysia is quite low. Firstly, 7-Eleven
Malaysia had already established a huge coverage of convenience stores in
Malaysia which also means that they have cost advantages. Therefore, 7-Eleven
Malaysia has strong customer base and high brand loyalty from the customers.
Even though there is no much requirement of technology in order to join this
industry, new entrants is required to invest a lot of capital into the business such
as the rental of the stores, cash, inventories and others.

Threat of substitutes
The threat of substitutes means that there are substitute products that caused
the formed of competition in the market. Moreover, there is threat of substitutes when
the customers faces an option between the products that can likely provide the same
level of usefulness. The threat can be determined according to the amount of
substitute products in the market, switching costs for the customers, the price
performance of the substitute and the differentiation of the products. The threat of
substitutes is high when there is an attractive price-performance substitutes, or when
there is low switching costs for the customers. (Porter, 2008)

 The threat of substitutes for 7-Eleven Malaysia is quite high. This is because
there are a lot of mini markets, small groceries and supermarkets in Malaysia
such as Econsave, Giants and others. Thus, the customers have very low
switching cost. Basically, customers is able to buy the similar products they need
from those substitutes. Therefore, customers can always choose to go to those
substitutes instead of 7-Eleven convenience store. Moreover, there are some mini
markets and supermarkets that sell the similar products at a lower price compared
to 7-Eleven Malaysia.

Bargaining power of customers

The bargaining power of customers refers to the powers exerted by customers
on the company. The power can be identify through various aspects such as the
amount of customers and products they bought, the ability of customers to find
substitutes or similar products, switch cost and price sensitivity. Customers contain
high bargaining power in some industries. For example, if the industry has high fixed
costs but only have a little amount of customers who purchase large amount of
products, these customers will have high bargaining power. This is because the
business needs to depend on those customers to maintain their revenue. Besides that,
customers have high bargaining power if the products of the companies are
homogeneous and the customers do not face high switching costs.(Porter, 2008)
However, the bargaining power of customers can be reduced through
increasing the switching costs for the customers, increasing the loyalty of customers
towards the brand or through differentiating the goods and services which increases
the value-added and changing the buying decision of a customer to a product itself
instead of based on the price of a product.(Recklies, 2015)
 The bargaining power of customers for 7-Eleven Malaysia is moderate. Firstly,
there are a lot of customers as all people needs to buy stuff for their living and the
amount of things they purchased are not much. This will cause the customers
have low bargaining power. However, there are a lot of convenience store in
Malaysia that offer similar products and services compared to 7-Eleven.
Therefore, customers is able to buy from those alternatives with low switching
cost.

Bargaining power of suppliers

The bargaining power of suppliers can be affected by the amount, size, the
uniqueness of the products of suppliers and the ability of company to substitute.
Suppliers that have high bargaining power are able to get more benefits for
themselves by selling at a higher price, restricting the quality of their products, or
shifting costs to their buyer. (Slater and Olson, 2002)
If there are only a few suppliers and selling distinct products, the suppliers will
have high bargaining power. However, the company can always outsourcing their
orders in order to reduce the bargaining power of the suppliers.

 The bargaining power of suppliers for 7-Eleven Malaysia is high. This is because
there are a lot of suppliers providing the similar products. For example, there are
Pringles, Mister Potato and Jacker that are selling the similar product which is
potato chips. Therefore, this gives 7-Eleven Malaysia the power to discontinue
any product anytime if that product have low sales and then introduce new
product to their customers anytime.

Rivalry among existing competitors

The rivalry among existing competitors means the competition with the
existing competitors in the market. The degree of rivalry can be identified according
to the amount of the competitors, intensity of the competition, product differentiation,
barriers to exit, loyalty to the brand and the growth rate of the industry. (Hubbard and
Beamish, 2011)

 The rivalry among existing competitors for 7-Eleven Malaysia in the retail
industry is quite high. There are a lot of competitors in retail industry in Malaysia
 such as KK Super Mart, MyNews, FamilyMart, 99 Speedmart and others. These
competitors provided similar products and services compared to 7-Eleven and
have product differentiation too. For example, Family Mart did not just sell
normal merchandise like 7-Eleven but also focus on ready-to-eat products.(Jayne,
2021) Besides that, these competitors continuously open new stores on the
purpose of growing their coverage of stores and market share in Malaysia.
(Ganesan V., 2021)

4.0 Advantages and Disadvantages of Porter five forces

Advantages
 Helps in estimating competition
Porter’s five forces model helps the company to estimate the competition in
the industry that the company is operating in. The company is able to obtain pricing
power which may allow the company to get great profits if the company is operating
in the industry that has low degree of competition. In short, the competition in the
industry is inversely proportional to the pricing power of the company which means
that the higher the degree of competition, the lower the pricing power of the company.
(Parikh, 2018)
 Helpful in Planning
Industries that need large investments are risky as it is unable for the company
to back off once the investments has been made. Therefore, company is able to
determine those industries on the threat of substitutes and threat of new entrants
through the five forces analysis. This is because if new entrants is able to join the
industry easily, then there will be more competition in the industry which will not be
good for the company. Moreover, the increased substitutes in the industry will reduce
the pricing power of all companies in that industry. Thus, the company is able to
establish plans to join an industry which have higher barrier of entry and lower
amount of substitutes through porter's five forces analysis.(Parikh, 2018)
 Integration with other analytical frameworks or tools
Porter's five forces model can be utilized to broaden the BCG Matrix,
PESTAL and SWOT analytical tools, especially by giving a particular guideline for
the analysis of external factors. Besides that, the five forces model is able to help
broaden the VRIO framework, especially when analyzing the capabilities and capitals
of present and new competitors.(Garcia, 2019)
Disadvantages
 Oversimplifies industry value chains
In certain circumstances, customers are required to be all distinguished and
segmented between distribution channels, intermediate customers and end customers.
For instance, Porter's five forces model is unable to determine which customers are
more significant and their ranking in terms of priority when the manufacturer not just
sells personally but also has its distributors. This is crucial in a lot of industries
because the distributor can at some point in the future compete against the
manufacturer such as selling a similar or the products of the competitor.(Grundy,
2006)
 Static
The Porter's five forces model is static as it gives a snapshot of the industry at
certain point in the foretime. It may be beneficial for establishing short-term strategy,
but the five forces model is unable to give much extra benefits in this modern-day
anymore as the market has higher competition dynamic and change very fast.(Goyal
A., 2020)

5.0 Strategic Marketing Decisions

One of the strategy that is carry out by 7-Eleven Malaysia is Omni-Channel
strategy. Omni-Channel strategy refers to an approach to give the customer a full
integrated shopping experience by allowing the customers to purchase the products
anytime, anywhere and anyway. The company can utilize physical channel together
with e-commerce channel to sell the products to their customers and give the
customers undifferentiated purchasing experience. (Manser P. et al, 2017) For
example, 7-Eleven Malaysia partnered with Foodpanda which is a digital platform to
offer their products to their customers.(7-Eleven Malaysia, 2021)
According to the Porter’s five forces analysis, Omni-Channel strategy is able
to reduce the threat of substitutes, rivalry between existing competitors and the
bargaining power of customers. This is because this strategy move the buying option
of the customers away from price as this will bring convenience to the customers.
Besides that, it can also increase the loyalty of customers to the brand. Moreover, this
may differentiate itself with their competitors as the way 7-Eleven Malaysia selling
their products may be more convenient for the customers than their competitors in
retail industry.
 The second strategy is product development strategy. Product development
strategy indicates that the company stays remain in their current market but at the
same time establish new and different products in the market.(Mbithi et al, 2016) 7-
Eleven Malaysia remain selling their merchandise but at the same time starting to
offer ready-to-eat products and providing a lot of in-store services for their customers
such as bill payment, fresh food, ATM Machines and others.
This may reduce the bargaining power of customers, threat of substitutes and
the rivalry between existing competitors. This is because the company provides extra
products and services for their customers which may increase brand loyalty and
switching cost as there might not have substitutes or competitors that providing the
similar products and services.
The third strategy is franchising strategy. This is a strategy where franchisor
gives the right to the franchisee to sell the products and services under the brand name
of franchisor.(Nijmeijer et al, 2013)
This strategy is able to reduce the threat of new entrants. This is because it
helps 7-Eleven to increase their coverage and market share in Malaysia which will
reduce the market growth rate in this industry. Besides that, the capital needed to enter
this market is relatively high, therefore, franchising strategy allow the new
participants to join the market with a lower capital requirement and able to learn
business experiences from 7-Eleven instead of establishing a new business and
compete with the dominant in the retail industry.

6.0 Conclusion
In conclusion, it was found that the Porter’s five forces are able to help 7-
Eleven Malaysia to make strategic decisions. Through the five forces, 7-Eleven
Malaysia is able to determine the different aspect of the competitive nature in the
retail industry and make the decisions that brings the most benefits to them. However,
the business environment and market always changed, therefore 7-Eleven Malaysia
must always update their analysis of the five forces in order to make the best and
accurate decisions in different circumstances. Although the Porter’s five forces have
some disadvantages, it is still a good tool for the company to make a suitable
decisions instead of making the decisions without any analysis. 7-Eleven Malaysia
can always apply other analysis such as SWOT, BCG Matrix, PEST analysis together
with the Porter’s five forces in order to make their strategic decisions.
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