Business Plan and Strategy Formulation by Students

There are many opportunities for university students to create and present marketing strategies. For example, in classes, students may be asked to present strategies to establish what they have learned as well as to reinforce their ability to apply those learnings. Also, students hoping to establish their own businesses in the future may participate in business competitions so they can have their business plans evaluated by external business coaches and university faculty.

As an instructor in marketing, and having seen a great number of these presentations, I would like to share two common problems students face whent they develop their business plans.

Depending on IT

The first problem students face is when they easily place IT in the center of business. Typical examples of this are setting up platform businesses on the web connecting infinite numbers of sellers and buyers, or developing websites that attract large numbers of views and earn income from corporate advertising. Of course, these web-based businesses are not the problem. The issue with these plans is not thinking enough about who the target customers are and what their needs are, and trying to come up with businesses that depend entirely on IT, when it should rather be used as a tool for supporting the business. It is a problem of putting the cart before the horse.

The second problem is that many of these students’ presentations are lacking in cohesion and focus, so it becomes difficult to understand the overall picture of the strategy. I believe one possible reason for this is the way in which they use PowerPoint slides. A strategy’s primary objective is to provide a scenario to bridge the gap between the current situation and the goal. Therefore, when formulating a strategy, they should draw a conclusion through causal reasoning that tells the audience the following logic, “If A is the case, then B should happen. If B happens, then C should happen. Therefore…” In text, conjunctions are used to show this flow or chain of cause-and-effect, while arrows perform the same function in diagrams. With slides, however, those connections can be easily lost unless the presenter takes sufficient care to include them. This is because in slide-based presentations, one slide must be removed from view before the next slide can be shown. This digital nature of such presentations makes it easy for the connections between slides to be diluted. Of course, if this problem were only a matter of a lack of presentation skills, there would be no need to be annoyed. However, if even the actual trains of thought employed to formulate these strategies have become “digitalized,” then that is a serious problem.

I would like to offer an antidote to those students who have become so deeply immersed in IT and the digital world, by sharing a case study of 7-Eleven Japan.

7-Eleven’s Business System

It is well known that 7-Eleven is Japan’s largest convenience store chain. Average daily sales revenue per store is approximately ¥660,000, which is over ¥100,000 more than its major competitors.¹ Why has 7-Eleven been able to generate revenue so much more efficiently than its competitors?

“It is often said that 7-Eleven’s business has been built on its information systems, but that is a slight miscomprehension. … Information systems were originally introduced to improve the efficiency of massive volumes of tallying tasks. … Gradually, it was realized that the tallied data could be used to test hypotheses about what would sell in stores. By this, I am not talking about using the system to place orders to replenish stocks of sold items, but about using it to check whether or not an item that we put out in stores because we thought it would do well did, actually, sell as well as predicted.”²

What this comment by Toshifumi Suzuki, Chairman and CEO of 7-Eleven, tells us is that information technology is being used as a means of checking the veracity or otherwise of “prior predictions” that “this product should sell this well for these reasons.” 7-Eleven has also continued to upgrade its information terminals so that even inexperienced casual workers can perform this hypothesis testing.³ This should also be regarded as a means of supporting the improvement of merchandising in stores.

In addition, company headquarters has counselors who assist franchisees with their ordering. If these counselors discover particularly useful hypotheses (an assumption that a certain product sells well at a particular time for such-and-such a reason) at one store, they will swap information about these hypotheses with other counselors, and those hypotheses will then be conveyed to stores in other areas. In other words, the stores in the 7-Eleven chain share, accumulate and renew across all stores the knowledge that has been obtained through what could be described as sales experiments that are repeated every day.⁴

We can interpret from this that 7-Eleven’s great competitive strengths are underpinned by thorough hypothesis testing at each store and the sharing, accumulation and renewal of knowledge among stores. There is also an element of the company’s merchandising capabilities being further reinforced by the information analysis skills and selling capabilities that are honed in the process. For example, many convenience store chains today are developing new products in collaboration with large manufacturers. 7-Eleven, backed by its superior selling capabilities, has been able to get those manufacturers to give top priority to 7-Eleven in the allocation of their excellent managerial resources, and this has contributed to 7-Eleven’s success in achieving more attractive product line-ups than competing chains.⁵ Further, while it is generally difficult to predict demand for the kind of limited edition seasonal products often seen in stores, 7-Eleven, with its sophisticated information analysis capabilities, uses sales data from the day the product is launched to forecast future sales and inventory trends. By securing stocks of products that have the potential to fall into short supply, or conveying its forecasts to the manufacturer, it has been able to win the confidence of these manufacturers.⁶

Analogue over Digital?

Two implications can be drawn from 7-Eleven’s business system. The first is that IT is positioned as no more than a means of supporting in-store hypothesis testing. This is the first thing that I wish my students would understand when they are trying to think of a new business. I would like to have the students understand how important it is not to misconstrue the relationship between the means and objective when it comes to how IT is used.

The second implication is that 7-Eleven’s competitiveness is the result of complex connections and a virtuous circle between a variety of factors. Specifically, the company’s superior selling capabilities are built on an endless cycle of knowledge renewal, namely: thorough hypothesis testing ⇒ knowledge discovery by franchisee ⇒ sharing of knowledge among franchisees through counselors ⇒ trialing of shared knowledge ⇒ adjustment of knowledge ⇒ and so on. An outcome derived from this cycle is the realization of a virtuous circle in the form of: superior selling capabilities ⇒ securing of cooperation and confidence from manufacturers ⇒ development of attractive new products and securing of hot-selling items ⇒ superior selling capabilities ⇒ and so on.

It would be very difficult to formulate an excellent strategy with a so-called "digital thought process" that do not take into account the connections between the various factors that make up a strategy or business. First, one should draw an overall picture, and on that single drawing, plot out a continuous, bird’s-eye diagram of how the chain of causal relationships between the various factors progress. The more complex the world is around us, the more important this kind of thought process is likely to become.

Sho Yuki
Associate Professor, Faculty of Commerce, Chuo University
Areas of Specialization: Marketing Theory, Distribution Theory

Professor Yuki was born in Yamagata Prefecture in 1980 and graduated from the Faculty of Business and Commerce of Keio University in 2004. In 2009, he completed the coursework for the Doctorate Course of the Keio University Graduate School of Business and Commerce, and obtained his Doctorate Degree (Business and Commerce) from Keio University in 2012. He took up his current position in 2011 after serving as Associate Professor at the College of Policy Science, Ritsumeikan University.
He has published Marketing Channel Management and Organizational Outcomes [Maketeingu Chaneru Kanri to Soshiki Seika] (Chikura Publishing, 2014). Published articles include “Channel Expansion and Customers’ Responsiveness: An Empirical Analysis of Manufacturers’ Channel Behavior Based on Learning Theory [Hanro Kaitaku to Docho Kakutoku—Gakushu Riron ni Motozuku Seizo Gyosha no Chaneru Kodo no Jissho Bunseki], Journal of Marketing & Distribution [Ryutsu Kenkyu], Vol. 14 (2012) No. 2_3.