Diploma in Marketing

International Business
BM0180_MK1423
7-Eleven
Entering the Indian Market
Liang Jun (146732J)
Shermin Ng (142335G)
Neo Jieying (144265B)
Adelynn Wong (134228K)
Ong Poh Hui (141096W)
Matthew Ng (143116U)

Submitted to: Ms Mindy Tan

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Allocation of Responsibilities among Team Members

Tasks
Executive Summary

Liang Jun

Introduction
Task on Country Risk Analysis (PESTE model)

Nicole, Liang Jun

Shermin and Adelynn

Political
Economic
Social
Technological
Environmental
Business/Industry Attractiveness Analysis
(Michael Porters model)
Threat of New Entrants
Bargaining Power of Buyers
Bargaining Power of Suppliers
Threat of Substitutes
Intensity of the Rivalry among existing firms
Conclusion
Recommendations(Entry mode: Cube Model)
References & Appendices

Liang Jun
Shermin and Adelynn
Nicole
Matthew
Poh Hui

Poh Hui
Nicole
Matthew
Liang Jun
Shermin
Poh Hui
Adelynn
Matthew, Liang Jun

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Table of Contents
Cover page ..1
Allocation of work ......2
Table of Contents 3
Executive Summary.4
I.

Introduction 4

II.

Country Risk Analysis (PESTE model)

1.
Political 4-6
2.
Social ...6-7
3.
Technological ......7-8
4.
Environment ....8-9
5.
Economic .....9-11

III.

Business/Industry Attractiveness Analysis (M.Porters model)

1.
Threat of New Entrants ...11-12
2.
Bargaining Power of Buyers ...13
3.
Bargaining Power of Suppliers ...13-14
4.
Threat of Substitutes ...14-15
5.
Intensity of the Rivalry among existing firms ....15-17

IV.

Conclusion ....17

V.

Recommendation ..17-19

References & Appendices .20-27

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EXECUTIVE SUMMARY
Since the deregulated FDI policies came into place, entry barriers for foreign retailers have been
significantly lowered. After substantial research and analysis, our group found out that the retail industry in
India is especially profitable due to the rising income level of Indian residents and high local demand for
foreign brands. This report therefore aims to assess the factors affecting the competitiveness in Indias
retail industry, and discuss entry methods for a foreign retail brand, 711, to expand into the Indian market.
Despite obvious opportunities, threats of substitutes are significant. This is mainly caused by the
proliferation of grey markets such as unorganized and unauthorized retailers in India. Therefore, our group
attempts to employ Michael Porters Model as the theoretical framework, in order to assess the
attractiveness of Indian retail market and give recommendations for 711 to maximize its profits in India.
I.INTRODUCTION
Background Information: 7-11 started off as an icehouse in Dallas, Texas and is now the worlds largest
retailer with an international chain of convenience stores. Founded in 1972, it now operates worldwide,
primarily as a franchise. Their companys mission is to be Your convenient neighbourhood store, to
make the purchasing of products easy, especially with the wide range of items that are fresh and of high
quality and are sold at affordable prices. 60% of 7-11s sales are from merchandise sales while the 40% is
made up of petrol sales. 7-11 operates in U.S and Canada, and Japan, Taiwan, Thailand, South Korea,
China, Malaysia, Mexico, Singapore, Australia, Philippines, Indonesia, Norway, Sweden and Denmark
with more than 55,800 stores in 16 countries, of which approximately 10,500 are in North America.
Why India: Our group has decided to venture into India, New Delhi as it is the image of old and new
India. Delhi is densely populated by both the rich and the poor, the traditional minded and trend-setting
people. Being the capital of India, it also offers lots of attractions to foreign travellers. So running a pilot
project in Delhi is a good choice as it allows us to see which demography to target will maximise our
profits. Also, India has been and is one of the largest economies in the world and is said to surpass China.
Due to Indias growing middle class and middle aged working class, and Chinas growing ageing
population. Furthermore India has a large population with booming potential.
Proposed Business: This industry has its primary emphasis placed on providing the public a convenient
location to quickly purchase from a wide array of consumable products. Grocery merchandise is estimated
to be the largest percentage of convenience store revenues. Although industry competition is intense in this
industry, the industry revenue has been on the rise, 7-11 offers ready to eat foods, to snacks, beverages like
soft drinks to juices, water, alcohol, household items, electronics, cigarettes. 7-11 also provides top up
services, courier services, ticket sales, online shopping payment/collection and cash withdrawal. In years
2013-2015 alone, 7-11 achieved 28 awards. (7-ELEVEN)
II. PESTE Mode
1.POLITICAL
Political stability: Indias incumbent government is stable as it has the ability to stay in power. It was
elected through a general election in 2014, which records the highest voter turnout at 66.4%. This even
surpasses the 64% polling witnessed in the 1984 polls. Comparing Indias voting system with other
emerging economies in South Asia, where politicians are directly elected by the previous Parliament,
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Indias election demonstrates are more transparency and democracy. This makes India politically stable, as
the government is voted into power by the citizens and has support from the majority.
Indias policies are also stable. According to The Economist, Indias way of promoting reforms are steady
procession of changes, each announced in turn, discussed, weighed for its merits, perhaps discussed in
parliament, eventually accepted and implemented with care and precision. Therefore, investors do not have
to worry about frequent change of policies or sudden forceful turnovers in India. Indias stable government
and policies make it attractive for foreign retailers like 711 to enter the market.
Social stability: There is possibility of unwanted consequences arising from political activity. Ownership
risk is risk of damage or loss of business assets and lives of employees. In 2014 alone, India underwent 4
terrorist attacks, namely Blast in Jharkhand, Blast in Budgam District, Chennai train bombing, Maoist blast
in Gadchiroli District, and Bomb blast at Church Street, Bangalore. Fortunately, Indias new government
has taken steps to counter terrorist attacks. Prime Minister Narendra Modi held extensive talks with
Afghan President Ashraf Ghani. Both leaders agreed to work together to dismantle terror networks and
make Afghanistan the "graveyard of terror". This shows that India is becoming a safer and more peaceful
future. Terrorist attacks will be minimized and investors like 711 will have less worry about terrorist
attacks and ownership risks.
Moreover, since the New Delhi gang rape in December 2012, tough laws against sexual violence were
enacted. There is a hopeful amendment in the Criminal Procedure Code. The new laws increase jail terms
in most cases, and bring in the death penalty for a repeat offence of rape. The new Prime Minister, Modi
also vowed to dedicate his government to the "safety and security of the mothers and sisters". Indias low
record of unrest means retailers like 711 will face low risk of protest. Moreover, since the government is
looking after the safety of its people, investors and retailers will face low operating risk in India. Thus,
Indias social stability makes it attractive to foreign retailers.
Participation in International Organization: According to the World Trade Organisation (WTO) website,
India has been a member of WTO since 1st January 1995. (World Trade Organisation, (2014)). Indias
participation in WTO improves investors confidence as this means that India supports free trade and the
transparency and democracy of Indian government are proven.
Relationship between governments
Between India and neighborhood countries: India shares boundaries with Pakistan, Nepal, Bhutan, China,
Bangladesh, Myanmar and Sri Lanka. Although there are border disputes between India and its neighbors,
the new government is trying to improve the situation through agreements and trade. For example, in 2015,
India and China had border trade at Nathu La, Lipu-Lekh Pass and Shipki La. India signed four agreements
with Sri Lanka and promised to cooperate on the peaceful use of nuclear energy. Also, the India-Pakistan
Non-Attack Agreement had prohibits attack against nuclear installations and facilities. Good ties with
neighbor country are extremely important as it lowers the risk of conflicts. With trades and new agreements
in place, India is likely to strengthen political ties with neighboring countries. Therefore, India is less likely
to experience war and more likely to experience relaxed trade policies from other countries. Foreign investors
like 711 will thus enjoy more opportunities in the Indian market.
Between host and home country: Since 711 is originated from the US, it is important to analyse the
relationship between US and India. The United States is one of Indias largest direct investors. From 1991
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to 2004, the stock of FDI inflow has increased from USD$11.3 million to $344.4 million. The U.S. goods
and services trade deficit was India was $20 billion. (Office of the United Stated Traded Representative,
(2014)). Frequent trade between US and India suggests that they share good relations. Moreover, although
US faces trade deficit from India, it still chooses to invest in India. This shows that the US sees potential in
India and values India as a partner. Therefore, 711 can safely enter the Indian market without worries about
unfavourable relationship between the host and the home country.
Legal environment: Indias legal environment is favorable for investment. The new government promised
to cut the red tape. Prompted by India's enactment of the General Anti-Avoidance Rules (GAAR), more
investors invested India. More importantly, the Modi government is pro-FDI. This is also seen in the retail
sector. According to Datamonitor.com, The Indian government has approved 51% FDI in multi-brand
retailing and 100% FDI in single-brand retailing, presenting a multi-billion dollar opportunity for global
retailers such as Wal-Mart and Tesco, which have been operating wholesale businesses with Indian
partners in anticipation for several years. The retail sector will be opened in 53 cities, each with a
minimum population of 1 million. This means that there is great potential in the retail sector, since new
policies allow this sector to expand.
Moreover, according to TheHindu website, India is ranked 131th in 2012 and 134th in 2013 respectively in
the ease of doing business. This indicates that the government has created a regulatory environment
conducive to operating a business in India. (The Hindu, (2014)).
The Indian government has also approved 51% FDI in multi-brand retailing and 100% FDI in single-brand
retailing, presenting a multi-billion dollar opportunity for global retailers such as Wal-Mart and Tesco, which
have been operating wholesale businesses with Indian partners in anticipation for several years. The retail
sector will be opened in 53 cities, each with a minimum population of 1 million.
2. SOCIO CULTURE
Cultural elements of the potential India: Social Structure is defined by Indias caste system, the placement
of people according to occupations, in 5 categories. Language wise, majority of the population speaks Hindi
but 25 percent of Indians speak English. In an office majority communicate English. This makes business
operations smoother in India. Since English is widely used in India, managers from 711 have countless
advantages when communicating with locals. Religion & Beliefs. The culture of karma largely influences
religious and philosophical thoughts and also the belief to follow ones fated path due to changing realities.
Religions & beliefs is not really a concern as Religion and beliefs sets out clearly defined practices for each
individual and thus would affect business. Fortunately, the religions practiced in India are amongst the most
followers worldwide. As such, 7-Eleven being a world-wide company would be able to diffuse any religious
based feuds and properly handle the different practices by the various religions. For values & attitudes in
India, cooperation is required to survive in a family or group. And the maintenance of group harmony and
modesty, one should not speak freely about ones accomplishments, no matter how successful he/she is.
Manners & Customs-Most Hindus avoid public contact between men and women. Only in more westernized
and larger cities, then do men shake hand with Hindu females or foreign females. It is also considered good
manners to arrive 15 to 30 minutes late. In terms of aesthetics, large emphasis is on special spiritual or
philosophical states in the audience, or with representing them symbolically. These are also basic practices
of business worldwide. As such, this is not much of a concern as 7-Eleven a multinational company would
have gone through various business practices and would be familiar with them. (Kwintessential, [2013]).
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Education, as India has a large population, not many people have the privilege to attend school. 4% of the
children in India never start school, only 10% of our children go on to college or further. But there has been
an increase in the percentage of children attending school over the past few years. With the government
emphasising the importance of education and limited seats for higher education, the Indian government is
however, trying to increase the seats for higher education. Therefore, education will not affect between
business and the citizen of India as all would receive basic education.
Overall, the caste system does not play a very large role in Indias more modernised society nowadays.
One still has to be wary of the mannerism and customs so as to not come off disrespectful. As the
community values group harmony and modesty, foreign investors like 711 are likely to see effective and
harmonious teamwork among them. As majority of the workers communicate in English in an office, it
would be advantageous for 711, as they would not have to worry about communication barriers, also there
will always be people ready for employment, as more children are getting educated.
Similarities & differences between US and India: India scored 77 for Power Distance, a high score
showing that the management style in India is top down and the workplace is quite segregated, people
know their place and are divided by wealth/ power/ status. This is advantageous to 7-Eleven as they will
get compliant workers from India. For Individualism versus collectivism, India scored a 48. The society
will have both collective and individualistic traits. This is good for 7-Eleven as it means that the work
environment will be flexible and leaders do not have to change leadership style to meet the local culture. In
the aspect of Uncertainty avoidance, India scored 40 for uncertainty avoidance, a medium to low
preference while Singapore scores a very low score of 8, which shows that people in Singapore do not feel
as threatened as the people in the Indian society but both societies still accept imperfection. Masculinity
versus femininity, India scored 56 which shows that India is slightly more driven by competition,
achievement and success. This is good for 711 as it means that Indians will be more competitive in a
workplace environment and many will strive to be the best and achieve greater heights. As for long term
orientation, India scored 20 which shows people there share a more long term pragmatic culture, thus
most of the people usually forgive the lack of punctuality. 711 can take advantage of such beliefs and
practices and create a lenient and flexible work environment.
What do the similarities & differences mean to investors: Although there are cultural differences in the
way the workers in both societies work, both working environments are easily adaptable as the similarities
of the two countries outrun the differences.
3. TECHNOLOGICAL
Infrastructures: Infrastructure in India includes power, bridges, dams, roads and urban infrastructure
development. India government has been upgrading infrastructures in India, but years of underinvestment
in infrastructure have left India with poorly functioning transit systems and power grids that have further
endangered its slowing economy. For example, India's government has unveiled plans to invest US$ 137
billion in its decrepit rail network over the next five years, heralding Prime Minister Narendra Modi's
aggressive approach to building infrastructure needed to unlock faster economic growth. Over the next
year, India will increase investment to US$ 16.15 billion including funds raised by market borrowing.
Thus, India is technologically ready to receive investments, especially in its IT and telecommunication
technologies.

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Information technology: Information technology in India is an industry consisting of 2 major

components: Services and Business process outsourcing. Indias IT core competencies and strengths have
placed it on the international canvas, attracting investments from major countries. The computer software
and hardware sector in India attracted cumulative foreign direct investment. This contributes to India's
GDP from 1.2% in 1998 to 7.5% in 2012. There are major investments in the Indian IT sectors such as
Tata Consultancy Services (TCS) planning to set up offshore development centres in India for Japanese
clients in a bid to boost the company's margin in the market and Intel Corp planning to invest about
US$ 62 million in 16 technology companies, working on wearable, data analytics and the Internet of
Things (IoT), in 2015 through its investment arm Intel Capital. Indias IT industry is expected be worth
US$ 15 billion and to connect 28 billion devices to the internet by 2020.
Skill level of workforce: Indias youths will not be an advantage to them as many of them lack of skills.
There are currently many skills development initiatives underway, but supporting on the job training in the
massive unorganized sector should be a priority as this is where most jobs are created for the youth. India
has the largest youth population beyond any other countries. However, this does not prove to be a
advantageous as majority has low levels of education and formal skill training. This lack of skilled
workforce is a stumbling block to fast economic growth of India. India has to focus on educating youths to
have a stronger workforce. India then can improve its skill level of workforce and it will lead to having a
better GDP as the salary of workforce will increase. Thus, standard of living in India will improve.
A promising investment: India is one of the leading offshore destinations in delivering engineering
research and development services with a market share of 22%. The information technology and business
process outsourcing sector is expected to register a growth of 11% from 2012 to 2013. Technology has
been improving as India are the fifth best country in the world for dynamic growing businesses, they have
become a key contributor in global research and of growth in the Asia-Pacific (APAC) region, playing host
to one-third of top 1,000 R&D spenders in the world, according to a Zinnov study titled 'Global R&D
Benchmarking Study'.
Overall, India has strong technological capabilities. Indias has good logistic performance and is expected
to be even better in future. This will be extremely helpful for the delivery of goods to outlets across India,
thus easing business operations and reducing any unnecessary costs. Improvement of interstate connectivity
will make operations even easier and hence faster. Indian workers are low cost and have a high education
level and as such will provide high level of competency and competitive labour force. Progressing
technology helps India as a whole in progress forward which in the long-run translates to higher quantities
produced at lower costs and cheaper prices for consumers. (Swati, Bute (2013)).
4. ENVIRONMENTAL
Geography
Natural Resources in India: No natural resources that will aid in 7-Elevens industry in entering India
even though India have lots of natural resources.
Indias Environmental vulnerability index is 385, extremely vulnerable. There is a long list of natural
disasters occurrence in India, which cannot be avoided when it happens. From Maps Of Indias website,
Guwahati, Srinagar, Jamnagar, Meerut, Jammu, Amritsar, Jalandhar and Dehradun are the cities that are
prone to natural disasters. Thus, it is best that 7-Eleven choose the best geographical location that will help
to lessen the chance of natural disasters from happening, preventing of sacrificing labour workers and
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destroying 7-Elevens properties. The frequency of natural disasters is mostly caused by global warming.
The best recommended location is Delhi, Patna top. Also, water pollution, Health and Food Standards are
problems to 7-Elevens business.
Impacts on IB:
Action of changing environmental issues
Since the frequency of natural disasters depends on global warming, India focuses on reducing pollutions
and global warming to reduce natural disasters from occurring as stated below, to name a few:
India PM, Narendra Modi, targeted of generating 175,000 megawatts of renewable energy which
will save 350 million tonnes of carbon emissions each year.
India PM made a formal proposal to amend the Montreal Protocol to phase down the climatedamaging refrigerant HFCs (hydrofluorocarbons), used in air-conditioners, refrigerators and
insulating foams, which is damaging to ozone layer.
Food safety rules are implemented in India in 2014.
With the help of World Bank, India has been improving the waste management system and
accessing of having clean water which aimed to improve the quality of life in India.
The environment in India is unstable but actions are done to change environmental issues. Thus, 7-Eleven
will not be directly affected as their goods are directly imported from external sources. Hence, products are
safe for consumption as they are from reliable sources and under the watch of government regulations. Thus,
7-Eleven do not need to worry about poor sanitations as long as they adhere to government regulations.
5. ECONOMIC
Real Gross Domestic Product (GDP) and Real GDP growth rate
The GDP measures the total market value of all the goods and services produced by resources located within
the borders of a country. Indias GDP stands at 1841.70 billion USD. Its GDP growth has been declining
since 2011 and has dropped to 3.2% recently indicating a slight drop in output levels in India. India would
thus be able to support growing demand of goods and services. The World Bank has projected India's
economy will grow over 6 per cent in 2014-15 and 7.1 per cent by 2016-17 as global demand recovers and
domestic investment increases. [The Financial Express and Central Intelligence Agency (2014)]. New
competition leads to innovation and improvements in production and products. Rival between businesses
results in better prices for consumers and introduction of new jobs for the local. In the long run, the people
of both India will experience higher if not more income for spending thus pushing demand and supply forces
into motion and improving the economy of India. The potency of Indias economy is very attractive, the
introduction of new business would lead to development of the country.
GDP Per Capita: GDP per Capita puts into perspective the standard of living in a country. Despite the
declining GDP, Indias GDP Per Capita has been increasing since 2010 to 2012, from $3,600 to $3,900
ranked 168 out of 229 countries. This shows that albeit Indias total production is slowing down, India
standard of living is getting better. This is a good sign for the market potential of the middle and lower
income. This could be due to Indias strong technological sector that is supporting the nation. In addition,
the GDP per capita is increasing which shows that those poorer people out of the population is living in a
better living condition. One such example is the increasing usage of mobile phones. Today, more than 60%
of Indians own a mobile phone. GDP per capita is expected to experience continuous growth from 2010 to
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2020 due to rising mobile phone subscriptions (The Economic Times (2013)). This shows that India has
higher purchasing power and this is definitely attractive to investors.
Market Size & Labour Force: Indias population is currently at approximately 1.2 billion. It is a huge
market size which could potentially help a business to grow. The current labour force participation rate is
at 52.50%. According to a study, about 7.2 million Indians are added to the workforce annually since
2012-2013. This could eventually bring the total workforce size to 485.6 million by 2016-2017. A growing
labour force means that there are many waiting to be employed, and Indias labour force would be
relatively inexpensive to hire.
In the state of Jharkhand, the government is starting to invest in training their labour force to be more
skilled. Its priority now is to uplift the poor, and commit to making the state more developed, and ensure
all welfare schemes are completed within their estimated time frame. With investments being in the
interest of developing the labour force of India, this will enhance the employability of the Indian people
and thus helping firms to get better skilled employees.
Rising literacy rate is another indicator that India could potentially be an ideal investment destination. As
per the Population Census of India 2011, Indias literacy rate has increased from 65.38% in 2001 to
74.04% in 2011 - a rise of 9 percent within the 10 years. Also, the government is looking to increase
Indias literacy rate to 80% by 2015. With more educated citizens in India, it gives firms a larger talent
pool to pick their employees from and ensures them the highest quality of workers.
Employment Rate: This is important as it has a major influence on consumer spending and overall
economic growth. Between 2000 2014, Indias unemployment rate has increased from 3.5% to 3.6%.
This could be due to the fact that there is slow economic and industrialization growth. Slow economic
growth fails to provide employment for the growing population and slow industrialization growth could
mean that the labour force is not well enough trained for their next job. However, Indias unemployment
rate being below 6% shows that majority of the labour force is employed. With that, it minimizes the
possibility of social unrest as people would be content with the fact that there are jobs for them.
Price Stability: Indias inflation rate has decreased from 10.9% in 2013 to 6.4% 2014.Even though
inflation above 3% is still a problem, its decrease is a good sign as people can start to have higher spending
power, and give firms and consumers certainty. Also, firms do not have to worry about employees
demanding for higher wages since there is no need to counter inflation. Price stability is important as it
determines the value of money and preserves consumers purchasing powers. Price fluctuation is
inevitable, but too much of it could lead to inflation or deflation. With stable prices, businesses can plan
ahead for the future without having to worry about the value of money dropping.
Balance of Payment: Indias Current account sits at a deficit of 21.8billion US dollar. This implies that
India is currently facing trade deficits. Latest data shows that India has been importing more than exporting
which signifies that India is living beyond what it can sustain the demand of foreign goods and services
is much greater than for local. However, this results in the depreciation of Indian currency as Indias
currency is less attractive to investors. Moreover, depreciation of currency leads to inflation and increase in
country debt. India should look to FDIs and portfolio loans to finance its debt or through national reserves.
Since, India requires the usage of reserves, this suggests that Indias capital account is experiencing a
deficit as well. Moreover, the lack of information on Indias Capital account does not bode well for the
countrys technological level. In addition, India could rely on FDIs to improve its infrastructure and other
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national amenities which would improve the quality of life in India, boost business efficiency and create
jobs for the Indian people. These investments are long term and thus when the economy recovers, would
still continue. Furthermore, FDIs are debts free which would pose no detriment to the economy or national
debt (See technology). Indias current fiscal policies expect to receive 36 billion in inbound FDIs, net FDIs
expected to be roughly 24 billion. Moreover, portfolio investments are at 16 billion. In totality, India is
predicted to be out of trade deficit in the coming years. (The Economic Times (2013) and Bloomberg
(2014)).
Conclusion: In general, Indias new Prime Minister brought hopes for better relationships with other
countries, implemented new policies to attract investors, and amended laws to protect citizens and business
assets. He also did actions to lessen global warming contribution which will help to decrease natural disasters
from occurring, thus, international business can be more assured to have their business setup in India. Indias
socio-culture do have some differences but due to having more similarities than differences, investors would
not be worried about productivity and miscommunications in the organization, but be glad that stronger
relations will be built and improved efficiency will be delivered. Indias technology had gained due to the
help of other countries, hence, India is ready for any investment as soon as Indias educates the youths to be
skillfully ready for work. Lastly, for economic, Indians higher purchasing power, large number of
workforce, lower employment rate, more stable price compared to previous years, and being out of trade
deficit soon is attractive to investors. Thus, it is good for investors to invest in India today.
III.M.Porters model
1.THREAT OF NEW ENTRANTS
Economic of Scale: Twenty-Four-Seven is the largest convenience store in India, and they are New
Delhis only organised retail chain that is open 24 hours every day. Now, they are expanding to allow
smaller companies into their organization. From Modi Enterprises website, it states In the next 5 years
with a strategic tie up with Indian Oil Company, the chain is going to expand across India with over a 100
stores, this shows that Twenty-Four-Seven would enjoy economies of scale as they will have different
small groups of suppliers being Twenty-Four-Sevens franchisees. Since Twenty-Four-Seven achieved
economies of scale, whereby unit cost of a product is decrease resulting from mass production, new
entrants have to enter convenience store industry with large-scale operations or their products will be
produced in a higher cost, thus, having production cost disadvantage. However, for 7-Eleven, they may be
able to compete with Twenty-Four-Seven efficiently because there are many franchisees in many
countries, such as half of over 500 stores in Singapore is run by franchisees, and their existing partners and
suppliers are huge multi-national companies, for example, Seven & I holdings Co. Ltd in Japan, which
they can make use of to achieve economies of scale. This can help to protect 7-Eleven when other
companies, excluding Mama Shop and mini mart stores, attempting to enter the same industry through cost
savings as there is a few companies having the same capability as Twenty-Four-Seven. Thus, economies of
scale for this industry is a low threat.
Product differentiation: Product differentiation is important to new entrants as there are a few existing
companies in the convenience retail industry in India. 7-Elevens products are alike within them and related
to other convenience stores, but, they uses advertising to overcome this obstacles, such as creating marketing
& merchandising teams to develop national strategies to develop new products or category. Also, they have
corporate communications and strategic planning for 7-Eleven. As for Indias convenience store, TwentyP a g e 11 | 30

Four-Seven, they had earned customer loyalty through being the only 24 hours convenience store. All this
years, they offered customers with the unique shopping experience, variety of products and services. In this
case, 7-Eleven is very similar to Twenty-Four-Seven in terms of variety of products and services, open 24
hours daily and convenience. Thus, the difficult part is to win over Twenty-Four-Sevens loyal customers.
7-Eleven have to use extra efforts in advertising to compete and overcome this barrier, even if it means to
lower the price of products or to bring in new products which Twenty-Four-Seven does not have. New
entrants will find it difficult to enter the convenience retail industry in India with many existing companies,
including Mama Shop and mini mart stores, having consumer familiarity/loyalty. Hence, this will increase
7-Elevens and other new entrants expenses cost of having a business in India. This causes an increase in
the barrier of entry, resulting in having low threat.
Capital Requirements: For retail industry in India, at least 30% of manufactured products should be
sourced through domestic small and medium enterprises (SMEs). For factories and machinery investments
are less than $2 million as found in Bloomberg Business. Also it states that companies will need to spend a
minimum $50 million on facilities such as warehouses, distribution networks and refrigerated storage
centers. The rules of capital requirements are strict and high in India, thus adding to its barrier of entry.
However, 7-Eleven would be able to overcome this barrier easily because of its multinational status. Since
7-Eleven is able to support over 55,000 outlets across the countries with the help of its partners and
franchisees, this shows that 7-Eleven have the ability to compete in this industry with their funds. Thus, the
barrier of entry for capital requirements would be medium, but high to other companies that does not have
the same capabilities as 7-Eleven, creating a low-medium threat of new entrants.
Government Policy: Theres high import duty-rate tax on cigarettes and alcoholic drinks which is
included in 7-Elevens products. Food products of 7-Eleven also have to go through Indias Food safety
and standards authority, such as having license to import and laboratory analysis. Indias tariff has been
considered high as compared to other countries and its economy is growing faster now as they slowly start
to open up their economy. It states that India is among the few in the world that continue to ban foreign
investment in retail trade and it is still considerably restrictive from web.Worldbank.org. However, now,
India starting to believe that the facilitation of imports for India have to become a major player in the
world trade to stimulate Indias economy. Thus, this is the reason for India to push for global trade despite
its difficult rules. Hence, the barrier of entry for government policies is quite high due to its tariffs on
imports. For new entrants, it will be difficult for them to enter India as the expenses for overcoming
government policies is high. As for 7-Eleven, government policies that involves money will not be a
problem. Also, if 7-Eleven is able to meet the standards of various countrys food standards. It would be
able to meet the Indias standards as well. Hence, this would be a medium threat for 7-Eleven as new
entrant.
In conclusion, economies of scale and product differentiation have high barrier of entry, capital
requirements and government policies have medium barrier of entry, thus, the threats of new entrants to be
low-medium.
2.BARGAINING POWER OF BUYERS
The power of buyers is described as the market of outputs. The ability of buyers to put the firm under
pressure, which also affects the buyers sensitivity to price changes.

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7-Eleven convenience stores have grown to become the worlds largest convenience retail. Currently, there
are no 7-Eleven stores in India.
Needs & Demands & Supply: Buyers would naturally choose shops that offer the best products and
services. As 7-Eleven is driven by the constant evolving needs of their buyers, they create powerful
changes that local market needs. Besides that, 7-Eleven is able to satisfy a high demand in convenience
stores through its everyday fresh products such as sandwiches, salads, fruits and pastries and high quality
services. (7-ELEVEN FRANCHISING (2013)). The current population of the Republic of India is
estimated to be about 1.27 billion people and is expected to increase in the following years. In addition,
India is attracting more investors and tourists into the country. This shows that India has an extremely large
number of buyers and that their buying volume is high. Our company offers mainly food products amongst
other items and is an essential for the modern everyday life. Together with on-going promotions and
innovation in pricing, bundles and uniqueness. 7-Eleven offers many choices in each every store. This
ability to choose from a wide variety attracts many customers. Therefore as 7-Eleven can offer different
products to a wide range of customers (supply), with larger numbers of buyer(demand) the power of
buyers is moderate.
Product Differentiation: The products buyers purchase are standard and undifferentiated. If firms do not
meet the expectations of the buyers, they will then switch sellers without any second thoughts and 7Eleven aims to be the first to have great new items, best products in the category and be the only retailers
to carry certain products. (7-ELEVEN FRANCHISING (2013)).
Income Level: The percentage of disposable income for people working have been constantly increasing
form 116010870.00 in 2013 to 127880080.00 in 2015. Indias total consumer spending has also been on
the rise which shows that more people have the ability to afford for foreign goods and convenience goods
that can be purchased in stores such as 7-Eleven or supermarkets instead on the old local markets.
Price sensitivity: Buyers tend to be price-sensitive. 7-Eleven provide favorable pricing and terms that let
franchisees offer products to buyers at great prices while retaining maximum profit margins. Furthermore,
7-Eleven also has a full line of seven select private label products, which offer buyers foods items at low
prices. (7-ELEVEN FRANCHISING (2013)). Although many buyers (Consumers) are low waged, 7Eleven targets the entire populations with their product; mainly food. As such, consumers would be fewer
prices sensitive as it is a daily necessity in addition to the already low prices offered by 7-Eleven.
Therefore, buyers have low power.
In conclusion, setting up 7-Eleven, a multi-brand convenience retail business will mark a new beginning in
transforming India convenience store industry. Since there are a vast number of buyers including citizens
of India, foreigner, tourists, investors and business workers, 7-Eleven convenience stores coming into India
will be profitable and beneficial, thus power of buyer is low.
3.BARGAINING POWER OF SUPPLIERS
Bargaining power of suppliers is one of the Porters Five Factors, it determines the intensity
of competition in an industry. The presence of powerful suppliers reduces the profit potential
in an industry. Suppliers increase competition within an industry by threatening to raise
prices or reduce the quality of goods and services. As a result, they reduce profitability in an
P a g e 13 | 30

industry where companies cannot recover cost increases in their own prices. There are different types of
suppliers depending on the industry.
Manufacturers: Manufacturers are producers of either the entire product or components that feed into the
end product manufacturing process. If the manufacturer has important expertise or no competing
producers, they will have significant say in the value chain.
Distributors & Wholesalers: These types of suppliers purchase products in large quantities from different
companies, store these goods and eventually sell to retailers. These products may be made available at
higher prices than if bought directly from the manufacturers, but this allows purchases to be made in
smaller quantities than a manufacturer will be willing to supply.
Independent Suppliers/Craftspeople: These people manufacture unique items in small quantities and
provide them exclusively through representatives or trade shows.
Importer: These suppliers will purchase from international sources and sell to local retailers. They
essentially act like domestic wholesalers/distributors for these products.When suppliers have bargaining
power, they can apply pressure on a company by charging higher prices, adjusting the quality of the
product or controlling availability and delivery timelines. Within the five forces framework, there is an
understanding that when suppliers have this bargaining power, they can affect the competitive environment
and directly influence profitability for the company. Suppliers increase power if they are in concentrated
numbers compared to buyers, if there are high switching costs associated with a move to another supplier,
if they are able to integrate forward or begin producing the product themselves, if there are many buyers
and none make up significant portions of sales, if there are no substitutes available, if there are strong end
users who can exert power over the organization in favor of a supplier. When a companys suppliers have
significant power over the value chain, it can directly impact how the company serves its own customers.
Depending on what power the supplier chooses to exert, a company may have to reflect this through
product prices, product quality and quantity available. Too much disruption in any of these areas may even
mean that a company is no longer able to stay in business. A company may need to end operations or shift
to another industry to avoid being dictated by the whims of a supplier.
Pricing: The first issue a company usually has to face from a strong supplier is increased costs. A supplier
who knows that they cannot be removed may insist on raising prices for their raw material too soon, or
ahead of agreed upon timelines. If the buyer has to pay these prices, the resultant increase in total
production cost will either need to be absorbed by the company itself or passed on to the consumer.
Supply/Product Availability: If a supplier is unwilling or unable to meet quantity targets, then the
company may have to deal with demand that outweighs supply. This can happen either in regular scenarios
if the company decides to try and increase sales or at peak sale times such as holidays or special occasions
where people tend to buy more of some types of products.
Quality Issues: There may be cases where the supplier decides to compromise on the quality of the
product in order to bring down costs. This will directly impact the companys product offering and may
create a negative impact on the end consumer if the quality issues are significant enough to impact user
experience. There may be an increase in complaints, returns and exchanges, and in worse cases, an entire
switchover to another product. Within the industry. Supplies are defined as companies which provide
P a g e 14 | 30

another company with the products and services needed to sustain business. This area looks at factors that
give suppliers the ability to command prices when negotiating such as number of suppliers, uniqueness of
products and business essentials, threat of others suppliers by suppliers and business in the industry does
not make up an important part of suppliers own business. For the purpose of this report, supplier is limited
to business that provides the product for 7-Elevens main business.
Number of Firms: Suppliers are powerful if there is a concentration of small number of firms. 7-Eleven
requires a wide range of products and service in order to maintain business operations. These products and
services includes categories such as corporate supplies and logistics, development, environmental,
merchandising, professional services and Real estate (7-Eleven website). Looking at the core suppliers Food items 7-Eleven have a lot of suppliers to choose from within India for merchandising and corporate
supply and logistics. Using a similar industry, supermarkets, Being food exporters from India, it is
presumable that also cater to the domestic market and as such, these business are crucial to 7-Elevens
business operation because 7-Eleven aims to provide convenience to the consumers. To do so, 7-Eleven
would need to offer popular and local food/snacks to the consumers. However, 7-Eleven currently has a
huge number of suppliers. This is suggested on 7-11 web page where it is possible for companies to apply
and register as a supplier for 7-Eleven in. Amongst the various suppliers, there will be major companies
which would make-up the core products (I.e. Slurpee) offered by 7-Eleven; would already have existing
operations in India as India an extremely fast growing economy i.e. Coca-Cola, Pepsi, visa, etc. These
companies are internationally renowned and have great influence over consumers as popular and extremely
sought after products. 7-Eleven would thus be able to make use of its pool of current suppliers for its
products and services. Companies already operating in India and not currently partnered with 7-Eleven will
be able to apply to the existing pool of suppliers and add on as additional products towards 7-Elevens
current large range of goods and services for consumers. Hence, suppliers would not be able to demand
high prices from 7-Eleven as 7-Eleven already and will be able to obtain even more suppliers by investing
into India. This makes the number of suppliers a low threat. There is also a large number of suppliers that
would provide environmental services. The large volume of these service indicates that India is
environmentally friendly. The large number of these companies would also give India an edge as 7Elevens aim of providing convenience would require outlet throughout the large country, thus this is a
low-threat. However, in the areas of development and real estate, 7-Eleven would face difficulties.
CREDAI The Confederate Real Estate Developers Association of India, is a newly set-up association
that aims to unit real estate companies in India under a common ruling. They also would alias with
government in developing future policies in real estate. This is a high-threat to 7-Eleven because CREDAI
is uniting thousands of real estate companies into one organization. This congregation of developers would
thus offer similar rates, prices, and terms and conditions. In league with each other, they would be able to
manipulate the industry with more force than any of the companies alone.
Furthermore, in the long-run, CREDAI would be the one to turn to for any construction related needs, thus
vastly reducing the number of suppliers. Professional service too would have many suppliers. India is vast
countries with many form of labour with wide range of options to choose from. Hence, India has many
suppliers willing to supply professional service. All of the different products and service that 7-Eleven
requires can be easily found in India which thus results in a large number of supplier for the business
operations in India. As such, the power of suppliers is low. (ExportersIndia (2014)); (Indiamart (2014)).
Unique Product: Suppliers also gain power if the products and services provided to the companies in the
industry are unique. This depends on the degree of uniqueness of the product. 7-Elevens product and
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corporate needs is not unique at all. Identical and similar versions products i.e. loafs of bread can be
purchased easily from other suppliers. This put 7-Eleven at an extremely advantageous position as the
products offered by 7-Eleven are convenience products which are fundamentally a persons everyday
essentials which can be purchased nearly anywhere by consumers and thus easily accessed by 7-Eleven.
This gives 7-Eleven the ability to negotiate for better prices leaving suppliers with little space to breathe.
This poses a low threat. In addition, professional services such as accounting are standardized within the
country if not the world i.e. GAAP. From 2002 to 2013, the path toward convergence has been
collaborative efforts of the FASB and the International Accounting Standards Board (IASB) to both
improve U.S. Generally Accepted Accounting Principles (U.S. GAAP) and International Financing
Reporting Standards (IFRS) and eliminate or minimise the differences between them. These professional
need of 7-Eleven as such lack variation and uniqueness. Giving 7-Eleven the ability to negotiate and
bargain, thus making the power of suppliers low as well. However, services from suppliers would be
unique. 7-Eleven offers a wide array of services such as paying bills and courier services by selected
outlets (7-Eleven website). These are services with subtle differentiation from one another and are a result
of the cooperation between 7-Eleven and the respective companies. As the nature of these services makes
it rare to find for consumers, 7-Elevens aim requires the provision of such services. As such, suppliers
have the advantage in negotiations. Thus posing a medium threat. In addition, there would be minimal
switching cost as prices amongst suppliers are relatively stable. Overall, 7-Eleven experience low-medium
threat from suppliers in terms of uniqueness of products and services. Furthermore, services such as
environmental service and real estate services are slightly differentiated. Since 7-Eleven offers a wide
array of products and services, they can be group into different categories such as perishable, nonperishable. The different type of product has different requirements. For example, perishable products
would need cold storage units whilst non-perishable products can be left on the shelf. In addition, the
various locations of 7-Eleven future outlets would have different requirements on buildings because of the
different climate and terrain. Indias energy code for commercial buildings is based on ASHRAE 90:1;
however it has been amended to sit the varying range of climatic conditions within India. This shows that
the location of the building in India has different requirements. Thus giving suppliers more room to
negotiate (Medium power) as these are important aspect of the 7-Eleven business Overall, suppliers would
have medium-low power when it comes to uniqueness of products and service offered to the business.
(Financial Accounting Standard Board (2014)) and (Consumer International (2014)).
Not obliged to compete: Suppliers are powerful when they are not obliged to compete with suppliers of
other products for the sale to the same industry. Such suppliers usually supply manufacturing materials and
the company industry in question manufactures a product as a result. 7-eleven adopts a straight-forward
Business to Consumer model, meaning that 7-Elevens purchases its product from suppliers and sell it
straight to the customer without much modification. Over at least 30 years, supermarkets in developed
economies round the world have acquired an Increasing share of grocery markets, and in doing so have
increased their influence over suppliers (Catherine Nicholson 2012). This requires suppliers to compete
with one another for the rights to supply to the convenience store industry. Competition amongst suppliers
would thus lead to lower prices and larger quantities of products. In addition, the inherent competition
amongst the suppliers would drive suppliers to differentiate their products and search for more efficient
ways to produce and innovative product. As such, this poses a low threat. Moreover, the various categories
of services needed by 7-Eleven need compete with each other for the rights to do business. This
competition is beneficial for 7-Eleven because the competition within the supplier results for better deals in
for 7-Eleven. In addition, professional service providers need not compete for the same business with each
P a g e 16 | 30

other for business. This is because of the sheer number of professional service provider within India. The
large volume of suppliers coupled with the fact that all business requires those services allows the service
providers ample breathing room. In addition, the service often requires input from one another in order to
efficiently operate. For example, if a company wishes to take a loan from the bank, he would require and
auditor to perform a special audit to evaluate if the company has the means to return the loan. The bank
would analyses the auditors report and draft a contract with the company. The company would then
require a lawyer to evaluate the contract to ensure its objectivity before signing the contract. As such, all if
not most professional service is interdependent on one another. Thus suppliers have low threat. However,
for real-estate and development services, 7-Eleven would face some problems. Because of CREDAI,
Developers, in meeting the growing need for managing multiple projects across cities, are investing in
centralized processes to source material and organize manpower and hiring qualified professionals in areas
like project management, architecture and engineering. the developers would not require to compete
much with one another as they are involved within the same association aiming for a common goal. Any
benefit to one company is a benefit to the entire association. As such, the power of suppliers would be
high. Environmental service providers also do not need to compete with others for convenience outlets
such as 7-Eleven. The cold storage facilities now available are mostly for a single commodity like potato,
orange, apple, grapes, pomegranates, flowers, etc. Which result in poor capacity utilization. This shows
that cold storage facilities businesses are more with farmer and the agriculture business then it is with food
retail outlets. This is detrimental as certain products by 7-Eleven require cold storage, especially stocks
that are purchase in bulk. Since there is no need for competition, the suppliers have larger bargaining
power, thus a medium high threat. All in all, suppliers have medium power. (University of Nebraska
Lincoln (2013)] and [Building Policies for a Better World (2013)].

Industry Importance: Suppliers are powerful when the industry is not an important customer.
This is because; the suppliers loss of business with the industry would not impact much on their profit
margins. Suppliers providing merchandise would thus poses a low-threat because the purpose of their
business is to provide such products to other business in order to profit. The loss of business with a
gargantuan such as 7-Eleven would thus have a huge impact on their profits. With international trade
mushrooming and supply chains expanding around the world, third-party logistics providers have taken on
an increasingly important role for multinational manufacturers and retailers. Moreover, there are many
suppliers out there providing identical products and thus the suppliers are extremely dependent on these
deals. Services such as professional-service, environmental services, real-estate and developmental
services are however do not see 7-Elevens industry of convenience and important industry. This is
because their services are needed by all business around the country. The loss of business with 7-Eleven is
not substantial as they would have more business elsewhere. For example, real-estate and developmental
services main customers would be building and infrastructure development companies and the
government. Projects with these customers are more worthwhile for them then with convenience outlets. In
addition, professional services are needed by all companies thus they would not run-out of customers
similarly environmental-services are needed all around. Thus 7-Eleven would not be able to be too
demanding on their suppliers which empower them to charge high prices. Overall, Suppliers have mediumhigh threat. [Building Policies for a Better World (2013)] and [Bank of India (2014)].

P a g e 17 | 30

Overall, Buyers would be of low-high threat to 7-Eleven because of the large number of suppliers and 7Eleven current suppliers together with the lack of differentiated services and products. This thus results in
competition amongst suppliers for the rights to do business with 7-Eleven in this important industry.
4.THREAT OF SUBSTITUTES
Substitutes are different products that yields the same benefits from the consumers point of view. Threat
of substitutes is great when there is a large number of companies that offer products of similar pricing and
benefits to 711s products.
Unauthorized neighborhood shops: There is a high threat of substitutes in the Indian convenience and
retail shop sector. This is because Indian consumers have an array of ways to get daily necessities from.
Among them, homemade products from unorganized retailers post the greatest threat to 711. There are
numerous homemade products in Indian Mama shops, ranging from pickles, spices, sweets, cakes to home
dishes such as Biryanis. (Shoperbucks Dot Com)Those Mama shops offer similar perceived values as 711
in terms of low price and convenience. This is because they can be easily found in nearly all
neighbourhood and they sell fresh products at affordable prices. (Mahavir Food Mart) Fortunately, 711 has
several unique selling points that increase its competitiveness against those unauthorized shops. 711
strengths lie in its 24/7 service, great varieties of products of consistent quality and a modernized
atmosphere in its store environment. Considering those strengths in 711, 711 will have its own market
share and unauthorised shops are thus a low threat.
Modernized shops: Other than those traditional and unauthorized shops, emerging modernized retail
shops that offer 24/7 services also forms a threat to 711. One such example is the Twenty Four Seven
Convenience Stores. Currently the chain has four outlets in New Delhi at key locations and in the next 5
years, the chain is going to expand across India with over a 100 stores. This means that the all-round-theclock service is no longer uniquely 711. (Modi Enterprices) Having said that, 711 is not losing its edge as
it offers top up services, ticket sales, bill paying, online shopping payment, and collection and cash
withdrawal - all of which are not found simultaneously in a single modernized shops in India. So 711 is
still competitive in terms of the various services it gives. Although their major products and price
performance might be similar, 711 has a winning edge in the extra services it gives. So threat from
modernized stores is medium to low.
Online provision shops also posts a threat to 711. This is because online provision shops prove home
delivery service, a number of them is 24/7, and the products are low in price. This means that they are
equally convenient and price-competitive as 711. Local websites like Justidial even sorts out grocery shops
by location, distance and user rating, and allows for online direct ordering from any chosen shop and any
chosen time. (Agarwal Distributors) However, while online provision shops offer similar product and price
benefits to 711, they have some limitations. For one, customers cannot get products as and when they
want, because the delivery takes time and it is not 24/7. Also, customers do not get to see and touch the
actual products, so they might be concern about the quality of products. For these two reasons, online
provision shops are not strong substitute to 711, and therefore they are low threats.
Since 711 has an edge of 24-7 operation, it offers products of consistent quality, it is located at strategic
locations, 711 gives consumers greater accessibility and convenience as compared to its other substitutes.
As for process, since 711 offers convenience of access at any given time and place, prices would not be the
P a g e 18 | 30

primary consideration for people who need this level of convenience. Its substitutes like unauthorized shops,
modernized shops and online provision shops thus form a low-threat.
5. INTENSITY OF RIVALRY
Intensity of rivalry is the centre portion of the Michael Porters model. It is the situation with the other four
forces of the model that were mentioned earlier, as they also contribute to the intensity of rivalry. Here, we
will assess the strengths and weaknesses of the current competitors in the industry. The current competitors
refer to direct competitors - firms that are already operating in the business or selling the same product.
Number of Competitors and Size of Companies: There is a large number of existing competitors in the
food retailers industry, with an estimated 12-15 million outlets which include push carts, wet market and
kirana stores. However, most of the industry is occupied by small (50-200 square foot) kirana stores which
are well-distributed throughout both urban and rural areas. In fact, in India, the biggest rival for 7-Eleven is
the Twenty Four Seven Convenience Stores, one of Indias premiere and New Delhis only organised retail
chain to operate under the round-the-clock convenience store format. This chain is expected to be one of
7-Elevens main competitor as they currently operate 38 stores in the National Capital Region (NCR) along
with four in Chandigarh. They still have plans to open 20 more stores in Delhi/NCR besides expanding to
other cities in North India. Their goal is to expand their operations to all regions of India in the upcoming
years, with a strategic tie up with the Indian Oil Company.
Therefore, since majority of the food retailers in India are similar in power although extremely small as
compared to large chains such as Twenty Four Seven Convenience Stores, competition in this industry would
be in favour of the larger firms that have greater capital compared to the small retailers. With 7-Eleven being
a large convenience store chain, this would help them to successfully penetrate the Indian convenience store
market. Thus, Twenty Four Seven Convenience Stores is the only real threat to 7-Eleven when investing in
India since the rest are of smaller power, causing the intensity of rivalry to be low and as such, the existing
competitors in Indias food retailers industry is a low threat to 7-Eleven.
Product Differentiation and Perishability: In the food retail industry, there is little product
differentiation as the thousands of retailers available sell nearly homogenous products. As such, customers
have a wide variety of options to choose from and there is little that can be done about product
differentiation to build customer loyalty. Also, the products that are sold in this industry are mainly
perishable. For most firms, a bulk of the products is perishable, thus this causes them to want to reduce
prices in order to minimize losses. This could actually be intense rivalry for 7-Eleven but it does not only
offer perishable products, but non-perishable ones as well. As such, 7-Eleven does not have to worry about
losing profits as they would have stock readily available when needed. Therefore, product differentiation
and perishability would pose a medium threat to 7-Eleven.
Industry Growth Rate: Indias food retailing industry is a fast growing market for imported consumerready food products. In 2013, the imports were approximately $3.2 billion and had shown 20 percent
growth, year-over-year, through September 2014. This is beneficial for companies in the industry as they
do not have to compete much for their growths - growing demand and market growth themselves would be
able to facilitate the growth of existing companies. For example, growing demands could lead to larger
profits for them, thus they do not have to put in extra effort to compete unless they wish to achieve market
dominance. Thus, with the fast-paced growing food retailing industry in India, it would be beneficial for 7Eleven to penetrate the market now and start doing business there. However, since this is considered a low
P a g e 19 | 30

barrier of entry, the intensity of rivalry could be higher because then more companies would want to enter
this industry and resulting in a higher number of competitors fighting for a share of this market.
Market Size: With a population of about 1.28 billion currently, India has a relatively large market size. This
gives the current existing firms in the industry the ability to sustain themselves despite the small sizes of
these retailers. With more than enough consumers to go around this industry, competition is unlikely to
happen. Additionally, since food is a basic necessity everyone around the world, food retail would definitely
be earning money and firms do not need to compete with one another for profits. Therefore, the large market
size of India poses a low threat to 7-Eleven.
Exit Barriers: In India's food retail industry, exit barriers are low as well as there are no complicated assets
involved. Goods are delivered and then sold. The processing and delivery of food products are often done
by third party companies. Thus, if a company wishes to exit this industry, its assets can easily be sold to
other food retailers in the industry for their own purposes. This shows that firms in this industry have almost
no barrier when it comes to exiting the industry. Firms that are losing in the industry need not continue to
compete for market share and can simply sell their assets to another food retailer and then exit the market.
Therefore, this is a low threat to 7-Eleven.
Overall, putting into consideration the other four forces of the Michael Porter's Model as well, the intensity
of rivalry in India relative to 7-Eleven is low-high. 7-Eleven, being a large firm can easily conquer the
obstacles that it faces. Most of this is also due to the fact that there is a large market size in India and also
the fast-paced industry growth rate. However, there are also other factors that contribute adversely as well,
but 7-Eleven has shown that it has the capability to overcome those negativities. One of the largest
problems that 7-Eleven would face is the perishability of its products.
IV.OVERALL CONCLUSION
In conclusion, it is feasible to invest in India after analyzing both the PESTE and Michael Porter's Model.
India has a stable government and shows social stability in its country. They have good relations with other
countries which gives investors confidence in investing in India as it shows minimal political risk. For
economic factor, the only problem is the low consumer purchasing power. However, this doesnt cause any
problems to 7-Eleven as it serves to sell at an affordable price. For social factor, Indias literacy rate is
increasing. They speak mostly in English hence making communication easier. However, their religion
beliefs and prohibited practices should be taken into consideration. Also, India is equipped with strong
technological capabilities and improved environmental conditions. According to the Michael Portal Model,
it shows that there is a medium-high threat of new entrants but low-medium to 7-Eleven, low bargaining
power of buyers, low-high bargaining power of suppliers, low-medium threat for threat of substitutes and
intensity of rivalry among existing firms in the industry. All in all, this allows retailing industry in India to
be favourable to invest in.
For 7-Eleven, they will face low-medium threat as the history of 7-Eleven and the fact that it is a large multinational company has proven that it has the capability to overcome these obstacles as compared to other
companies. The largest contributing factor that protects 7-Eleven is their vast expertise in International
business and its large capital funds. Thus, this shows that 7-Eleven would be able to successfully penetrate
into India and its choice of industry would be successful as well.

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VI.RECOMMENDED ENTRY MODE

Our group would like to recommend 100% FDI for 7-Eleven. We recommend green field venture because
India has large land to acquire and it is not difficult to get lands from India especially after their deregulation
of FDI policies. Based on our research, 7- Eleven has large amount of resources. Since India has a large
population and a significant number of them are English-speaking, it is not difficult to acquire resources
from India as well. This 100% FDI will allow 7-Eleven to have full control and full profits of the business.
Since the greatest threat that 7-Eleven faces is only local competition, 7-Eleven should set up its business
from ground up, cultivate its own corporate culture and further develop its unique selling point. Based on
our Michael Model Analysis, 7-ELEVEN is currently at side 2 whereby there is high capability of the
industry, medium to high industrial attractiveness and low country risks. Being at this side, all entry modes
are applicable. The reasons are stated as followed:
Company Capability
Financial Capability and adequate resources: 7-Eleven is responsible for more 33,700 stores in 18
countries with sales of over $43 billion in 2005. It has been a convenience retailer for over 80 years, and a
leader in the franchise industry for more than 40 years. (Daszkowski) This just proves that 7-Eleven has
the financial capacity and means to finance huge investment projects overseas.
Positive International Corporate Name: With all their branches located almost worldwide and having
always been associated with high quality of goods, the name 7-Eleven is internationally recognized. 7Eleven has a positive corporate identity. It also has high financial capability, being a publicly traded
company with its near unlimited capital resources in cash. Thus the capability of 7-Eleven is high.
Industry attractiveness: As seen from the Michael Porter, the threat of new entrants is medium to low.
Firstly, 7-Eleven is highly differentiable. Firstly, it has a modernized ambiance, 24/7 services, top-up and
bill-paying services, affordable goods and it is located at neighbourhood areas. Competitors or new
companies are not likely to provide all of those altogether and gain a large share in the market. Secondly, a
relatively high cost of capital will deter other companies from having the idea of setting up a similar
convenience shop as they might be unwilling and unable to take up the risk. Thirdly, the high Economies
of Scales that 7-Eleven enjoys make companies to think twice before entering the market as the existing

P a g e 21 | 30

companies have already achieved Economies of Scale. This will results in new companies facing
difficulties to compete with existing companies.
The tremendous amount of substitutions available to provide the similar value to 7-Elevens products and
services result in a high threat in substitutions. This is mainly due to the large exposures to choices which
give consumers a chance to pick the substitutes. In addition, some substitutes are charging at a lower price
which gives consumers another reason to avoid 7-Eleven. This threat is only balances by 7-Elevens
unique selling points. The threat still exists and is strong, thus, reducing the attractiveness of the industry to
medium.
The bargaining power of supplier is medium due to 7-Elevens reliance on exports. With a medium
bargaining power of supplier, it means there is room for negotiation when it comes to prices. This might
reduce the profitability of 7-Eleven in India. Thus, a medium bargaining power reduces the attractiveness
of the Indian market.
The intensity of rivalry is low due to the zero number of existing competitors in the market right now.
Moreover, the market is large and still growing. This means that it is not necessary to fight for customers
due to the large availability of them. Secondly, high fixed costs which means high exit costs means losses
suffered will be huge. Thus, there is an intense competition to stay alive in the industry. Lastly, 7-Eleven is
highly differentiable which means it is easy to have customer loyalty. Also, when a product is
homogenous, customers will have a huge bargaining power and competition will be shift to price, a lower
price will be more appealing. Therefore, its low intensity of rivalry increases the attractiveness of the
industry.
In conclusion, the attractiveness of the industry is medium high due to low intensity of rivalry, a mediumlow bargaining power of buyers, a medium bargaining power of suppliers and a medium threat of new
entrants which will helps in generating profits to the business.
Country risks
Economic risk: The Indian currency is declining, this will have a negative effect on 7-Eleven as the cost
and expense will increase because most of their products are imported from overseas. Transfer risks are
risk of not being able to remit funds or profits from host country to home country. This risk is mitigated in
India as India Post offers various remittance-related facilities, such as international money transfers.
Internet-based provision of remittance services is also available in India. Therefore, the risk of not being
able to achieve inward or outward remittance in India is low. This thus forms an investment opportunity
for 7-Eleven to enter India.
Technological risk: As mentioned earlier on in the report, the infrastructure in India are underdeveloped.
Fortunately, 7-Eleven does not need a basic strong physical structure or engineering to be built and
operated. So there is low technological risk in the sense of infrastructure.
Environmental risk: As mentioned before, India has a vulnerable environment due to natural disasters
and pollutions. Although those issues exist in India, measure is already implemented to overcome this. So
environmental risk to 7-Eleven is low.
Political risks: There is possibility of unwanted consequences arising from political activity. Ownership
risk is risk of damage or loss of business assets and lives of employees. In 2014 alone, India underwent 4
terrorist attacks, namely Blast in Jharkhand, Blast in Budgam District, Chennai train bombing, Maoist blast
in Gadchiroli District, and Bomb blast at Church Street, Bangalore. Terrorist attacks are the most
unexpected form of attack, posting ownership risk to investors. Fortunately, Indias new government has
taken steps to counter terrorist attacks. Prime Minister Narendra Modi held extensive talks with Afghan
President Ashraf Ghani. Both leaders agreed to work together to dismantle terror networks and make
Afghanistan the "graveyard of terror". The Modi government states that they are prepared to join the
P a g e 22 | 30

successor agreement to Afghan Pakistan Trade and Transit Agreement. India also delivered three Cheetal
Helicopters to Afghanistan to support Afghans military forces. With the Modi government vowing to fight
against terror, investors feel more secured as they know that India will do its best to reduce ownership
risks.
Operating risk is risk of disruption to daily operations of the business. India has no record of violent street
demonstration in the past 3 years. The only major problem is probably sexual assaults against women have
been on the rise. The latest crime statistics released by National Crime Records Bureau (NCRB) is that 93
women are being raped in India every day. Fortunately, since the New Delhi gang rape in December 2012,
tough laws against sexual violence were enacted. The death penalty has been handed down in cases of
gang rape. There is also a hopeful amendment in the Criminal Procedure Code. The new laws increase jail
terms in most cases, and bring in the death penalty for a repeat offence of rape. The new Prime Minister,
Modi dedicated his government to the "safety and security of the mothers and sisters". With proactive
actions taken by the government, chances are that operating risks will be reduced and the safety of female
employees will be protected.
Cultural risks: The cultural risks are low because Indian can speak English and thus, barriers to
communication is low. Moreover, India is moving towards an open society which means that they are more
open to westernized lifestyle and ideas. Managers in India will not face much difficulty in managing the
locals. Although the CASTE system seems to be a barrier between each classes, this is largely irrelevant to
the service and operation of 7-Eleven. 7-Eleven also has no worry about power distance or Asian way of
thinking because it is a large and experienced company that has succeeded in many Asian countries.
In conclusion, for country risks, since economic, technological, political, environmental and cultural risks
are low, the overall risk is low.
Why 100% FDI?
100% FDI is suitable for 7-Eleven as the company has large financial resources. Not only that, 100% FDI
will give India many advantages. It is very profitable and foreign expansion will be really fast in India if 7Eleven uses 1oo% FDI. There is an increasing trend in India where higher income individuals are more
willing to pay more for premium quality products or services. To satisfy the demand, 7-Eleven should not
co-operate with local companies and run the risk of compromising their products. Instead, 7-Eleven should
set up its own stores and stick to its regular practices to ensure that only the best goods and services are
served to customers.
Moreover, 100% FDI guarantees 100% control of company culture and profits. This means that it can
create its own corporate culture in India branches and earn money quickly.
The disadvantage is that 7-Eleven has to bear full costs. If the company failed, no one is going to share the
losses with it. However, judging from 7-Elevens good financial records in other countries, it is very unlikely
to fail in India. 7-Eleven has been set up in many countries in Asia, such as Singapore, Malaysia and China,
and most of the branches are doing well. So 7-Eleven shall not be over worried about the possibility of
making a loss, and adopts a 100% FDI entry mode to enter the Indian market.
(20 pages excluding the first 3)

P a g e 23 | 30

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Business/Industry Attractiveness Analysis (M.Porters model)

Threat of New Entrant
Modi Enterprise. (2010) About Us, [online], Available: http://www.modi.com/about-24x7.html# [18th
January 2014]
7-Eleven, Venturing overseas, Available: http://corp.7-eleven.com/corp/international-licensing [2015]
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[2014]
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https://en.wikipedia.org/wiki/Seven_%26_I_Holdings_Co. [11th July 2015]
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7-Eleven, Strategic planning & corporate communications, Available: http://corp.7-eleven.com/leadershipcorp/stanley-reynolds-executive-vice-president-and-chief-financial-officer [2015]
Modi Enterprise, Products & services, Available: http://modi.com/products-services.html [18th January
2014]
7-Eleven, Products, Available: http://www.7-eleven.com.sg/products/ [2014]
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579448,00.html [18th January 2014]
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Bargaining Power of Buyer

7-ELEVEN FRANCHISING. (2013)] 7-Eleven Brand, [online], Available: http://franchise.7eleven.com/seven-eleven-brand/ [19th January 2014]
7-ELEVEN FRANCHISING. (2013) Business System, [online], Available: http://franchise.7eleven.com/business-system/product-strategy/ [19th January 2014]
7-ELEVEN FRANCHISING. (2013) Business System, [online], Available: http://franchise.7eleven.com/business-system/product-strategy/ [19th January 2014]
Statistics of Indias pops Income
http://www.tradingeconomics.com/india/disposable-personal-income
Bargaining Power of Suppliers
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http://www.exportersindia.com/indian-suppliers/food-products.htm [22nd January 2014]
Indiamart. (2014) Cold Storage Plant from India, [online], Available: http://dir.indiamart.com/impcat/coldstorage-plant.html [22nd January 2014]
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January 2014]
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2014]
Capgemini. (2014). Expertise, [online], Available: http://www.in.capgemini.com/local-professionalservices [22nd January 2014]
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Overview, [online], Available: http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176156245663
[22nd January 2014]
Consumer International. (2014) The relationship between supermarkets and suppliers: What are the
implications for consumers? [online] 22nd January 2014. Available from:
http://www.consumersinternational.org/media/1035301/consumer%20detriment%20briefing%20paper%20
sept2012.pdf
University of Nebraska Lincoln. (2013). Food storage, [online], Available:
http://food.unl.edu/web/safety/storage [22nd January 2014]
Building Policies for a Better World. (2013) India, [online], Available: http://www.gbpn.org/databasestools/bc-detail-pages/india [22nd January 2014]
Building Policies for a Better World. (2013) India, [online], Available: http://www.gbpn.org/databasestools/bc-detail-pages/india [22nd January 2014]
Bank of India. (2014) Cold Storage, [online], Available:
http://www.bankofindia.co.in/english/coldstorage.aspx [22nd January 2014]
P a g e 29 | 30

Threat of Substitutes
The Economic Times. (2014) E-buying picks up as Indians new shop for breads and butter online. 4th July.
7-ELEVEN. About us. n.d.http://corp.7-eleven.com/corp/about.
Agarwal Distributors. n.d. http://www.justdial.com/Mumbai/Grocery-Stores/ct-70444.
Mahavir Food Mart. n.d. http://www.justdial.com/Mumbai/Homemade-Pickle-Retailers/ct-136844.
Modi Enterprices. n.d. http://modi.com/about-24x7.html.
Shoperbucks Dot Com. n.d. http://www.justdial.com/Pune/Homemade-Masala-Retailers-%3Cnear%3EMarket-Yard/ct-105443.
Intensity of the Rivalry among existing firms
http://modi.com/about-24x7.html
http://gain.fas.usda.gov/Recent%20GAIN%20Publications/India's%20Food%20Retail%20Sector%20Gro
wing_New%20Delhi_India_4-24-2012.pdf
http://www.thehindu.com/news/cities/Delhi/twenty-four-seven-store-chain-in-expansionmode/article6327828.ece
http://www.fas.usda.gov/data/india-retail-foods
http://www.worldometers.info/world-population/India-population/

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