Seven-Eleven Japan - Operations and Supply Chain Management Assessment Answer

QUESTION ONE 
Read the following and answer the questions that follow:
Seven-Eleven Japan
Established by Ito Yokado in 1973, Seven-Eleven Japan set up its first store in Tokyo in 1974. The company was first listed on the Tokyo Stock Exchange in October 1979. In 2005
Seven and I Holdings Co. Ltd. Was established as the holding company for Seven-Eleven Japan. Ito Yokado, and Denny’s Japan. Seven-Eleven Japan realised phenomenal growth between 1985 and 2013, when the number of stores in Japan increased from 2 299 to more than 16 000. Globally, the firm had more than 53 000 convenience stores by June 2014 and was the world’s largest chain in terms of retail outlets. Customer visits to Seven-Eleven outlets averaged more than 1 000 per store per day in 2013.
Both Ito-Yokado and Seven-Eleven Japan were founded by Masatoshi Ito. He started his retail empire after World War II. After a trip to the United States in 1961, Ito became convinced that superstores were the wave of the future. Ito’s chain of superstores in Tokyo were instantly popular and constituted the core of Ito-Yokado’s retail operations.
In 1972, Ito approached the Southland Corporation about the possibility of opening Seven-Eleven convenience stores in Japan. Southland agreed in 1973 to a licensing agreement and gave Ito exclusive rights throughout Japan. This new concept was an immediate hit in Japan, and Seven-Eleven Japan experienced tremendous growth. By 1979, there were 591 Seven-Eleven stores in Japan; by 1984, there were 2 001. Rapid growth continued,
resulting in 16 086 stores by 2014. In 2005, Seven and I Holdings was established combining Seven-Eleven japan, Ito Yokado and Denny’s Japan. The convenience store sector was one of the few business areas that continued to grow during the prolonged slowdown in Japan toward the end of the twentieth century and the start of the twenty-first century. From 1991 to 2013 annual sales at convenience stores more than tripled (from 3 trillion to 10 trillion yen). Japan’s convenience store sector gradually consolidated with larger players growing and smaller operators shutting down. In 2004, the top ten convenience store chains accounted for almost 90 percent of Japan’s
convenience stores. By 2013 consolidation had resulted in the top five chains accounting for more than 90 percent of convenience store sales in Japan.

Seven-Eleven Japan developed an extensive franchise network that included both company-owned stores and third -party owned franchises. To ensure efficiency, Seven-
Eleven Japan based its fundamental network expansion policy on a market-concentration strategy. Entry into any new market was built around a cluster of 50 to 60 stores supported by a distribution centre. Such clustering gave Seven-Eleven Japan a high density market presence and allowed it to operate an efficient distribution system. Seven-Eleven Japan felt that its market-concentration strategy improved distribution efficiency, brand awareness, efficiency of franchise support services, and advertising effectiveness. It also served as an effective deterrent to competition.
By 2014, Seven-Eleven had stores in 42 of 47 of the prefectures (provinces) within Japan. Seven-Eleven franchises were highly sought after, with fewer than one of 100 applicants being awarded a franchise. The responsibilities of the two parties were as follows:

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