7-Eleven

Eggs, milks and bread- the grocery products that always be treated as essential goods by every family, this simple concept was their first thought to have this grocery store. In 1927, he started selling milk, eggs and bread, these three simple items in front of an ice company which located at Dallas Texas. Due to this business, Joe C. Thompson discovered that selling these convenience items, which would remain fresh longer in ice, was popular. Eventually, Thompson bought the ice company, which he used to work at, and take the first step forward to his business. In 1931, Great Depression caused him to go bankrupt and forced him had a really hard-time. However, Joe C. Thompson took the risk to manage his small business and 86 years later, it has totally turned into one of the largest franchises in the world, 7-Eleven; recently there are almost 50,000 stores in the three continents and had total sales over 76 billion in 2011.

7-Eleven used to sell only eggs milk and bread but has now came out with everything from soft drinks and pastries to cigarettes and also money order services. Thus, the convenience of 7-Eleven has became greater than last time, of course, the demand for 7-Eleven would increase since people would imperceptibly depend on its convenience. Moreover, 7-Eleven can be found out in everywhere as they wanted to give conveniences to people who constantly need to store up essential goods. Normally, demand doesn’t go for a big fall or increasing since 7-Eleven sells the necessity. As a consequence, people do need it for maintain their normal living, the demand and supply would usually stay at equilibrium.

	Short run	Long run	Barrier of entry	Product Differentiation	Number of firms
Perfect Comp	Profit decrease	Normal Profit	No	No	Many
Mono Comp	Profit decrease	Normal Profit	No	Yes	Fair amount
Oligopoly	Profit increase	Above normal	Yes	Yes	Few
Monopoly	Profit increase	Above normal	Yes	Yes	Single

Monopolistic Competition is defined as, there are many producer and consumers in the market; Product differentiation exists in those competitors of suppliers and consumers have the preference to select the product (Princeton University 2013).  In the above definition, 7-Eleven has completely conformed into the condition of Monopolistic Competition market structure. 7-Eleven is considered as a monopolistic since there are varieties of convenience stores exist in the market.  Examples of 7-Eleven’s competitors in Malaysia included KK super mart, 1 Malaysia Stores, Family Mart and many others which are individual.   

Market Demand

According to Law of Demand, market demand is the sum of the individual demand for a product from buyers in the market.  If more buyers enter the market and they have the ability to pay for items on sale, then market demand at each price level will rise.

However, same in any other country, different areas which relate to the income of the residents will affect the demand. Income Effect which means the price of product does not change, yet the income of customers increase, in the same time their purchasing power will increase.For example, person who lives in Kuala Lumpur and person who lives in Kelantan would have different incomes. This case would imply that the person who living in KL would have a greater purchasing power than the person living in Kelantan. Therefore, there are more expensive products are likely to be sold out in KL; whereas less expensive products would be available at a store located in Kelantan.

Substitute product, which means similar products are often to be sold in the same store, and this case will cause a product to replace another alike product which demand decreases drastically( McConnell, C., Brue, S., & Flynn, S. 2011). 7-Eleven provided an example of substitute products which is Coke and Pepsi. A customer used to drinking Coke can select to drink Pepsi if the price of Coke increases. If the demand for tea decreases, 7-Eleven may take a decision of take Coke off their product list completely.

Complementary product, which means a product that is related with another product, an example of complementary products would be peanut butter jam and bread (Mankiw, N, G. 2011). Through common sense, peanut butter jam cannot be eaten without bread, so they are complementary products. If the demand for peanut butter jam increases, so the demand of milk would. In this situation, 7-Eleven would have to increase their supply of both products.

In the situation of future expectation is buyers will increase their demand, if they realize that the prices of certain products were going to increase (Khan Academy 2013). Most of 7-Eleven’s stores in Malaysia have cigarettes for sale. If the government decides to rise up taxes on importation of cigarettes during next year, the demand of cigarettes would increase, since this product can be stored up. This case would imply that 7-Eleven would have supplied more cigarettes to satisfy the demand of their customers.  

Taste and preferences always make people to have the right decision on purchasing products, and have a direct impact on demand of certain goods (Econport 2013). Slurpee, the drink that is produced by 7-Eleven own, if 7-Eleven come out with a new drink that taste better, the demand of new drink will increase yet the Slurpee will decrease.

Demand for products is always depended on the number of customers in the market (Kash, R. 2002).  When the government upgraded a place to be a higher class place, as human being, people would move away from their area to there. Since this situation happened, the demand of 7-Eleven of the higher class place would increase, the place where they moved out would decrease and vice versa.

Market Supply

According to Law of Supply, it states that the quantity of a good or product supplied in the market is directly related to the supply of goods in the market (What is Economics 2013).

There are several factors that determine what products 7-Eleven supply to the market. Product cost, define that the cost of the selling product can determine the total profit of 7-Eleven can gain on that product and whether the price is attractive enough to make the customer would be willing to pay for that product. For example, the fuel prices increase, that implies the cost of transporting stocks from place to place has increased, moreover the raising of price could not be accepted by the market. As a consequence of unacceptable, 7-Eleven would have to cancel the supply of this product.

Due to the demand of goods depends on their substitutes and complements; it would result in the supply of 7-Eleven goods. Since 7-Eleven would take the substitute and complementary products to be a consideration of whether supplying those goods to the market.

Price of a product expected to rise or decline in the future would have a similar consequent on supply as well as it has on demand. Expect for the store-owner may opt to reduce the supply of that product, when the price of cigarettes is predicted to increase, he could store up the product until the market price has risen up, then he could gain a greater profit of the product, through selling it on a higher price.

Number of sellers is the determination of the quantity of the supply of product in the market (Colander, D. 2012) The more sellers in the market could supply the greater products to the market, as the sellers could have greater amount of capital.

One of the factors that control the supply of certain product is weather and seasons (S-cool 2013). For example, raining coat or umbrella would become more marketable during a raining season; ice-cream or soda could be a fast seller in the summer, meanwhile in the winter, a greater demand for hot drinks would be existed. Since 7-Eleven can be found in everywhere, the supply of product should be depending on weather and season.

The main objective of any company is to maximize profits. In order to do that, the company should utilize the change in microeconomic factors to create the opportunity to gain profit and take advantage of it instead of avoid taking risk to operate the business, and according these changes to do the relevant reaction. The main factors to consider are market supply and demand, product costs, and changes in market structure.

Microeconomic factors play a big role in a company’s profits and well-being. It is vital points for any company to take it as a consideration of how changes in these factors would affect them and to react accordingly in order to maximize their profits and to exist in the market.

Being a franchise, every individual of 7-Eleven store depends on its individual management, with the headquarter in Texas providing the support, advice and resources on how to deal with these changes.

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Reference:

 Colander, D. (2012) Microeconomics. United States of America: McGraw-Hill.

Econport (2013) Factors Affecting Demand. Available from: http://www.econport.org/content/handbook/Demand/Factors.html [Accessed 22 October 2013]

Kash, R. (2002) The New Law of Demand and Supply: The Revolutionary New Demand Strategy for Faster Growth and Higher Profits. United States of America: Doubleday Business

Khan Academy (2013) Change in Expected Future Prices and Demand. Available from: https://www.khanacademy.org/economics-finance-domain/microeconomics/supply-demand-equilibrium/demand-curve-tutorial/v/change-in-expected-future-prices-and-demand [Accessed 22 October 2013]

Mankiw, N, G. (2011) Principles of Micoeconomics. United States of America: Cengage Learning

McConnell, C., Brue, S., & Flynn, S. (2011) Microecomomics. United States of America: McGraw-Hill

Princeton University (2013) Monopolistic Competition. Available from: http://www.princeton.edu/~achaney/tmve/wiki100k/docs/Monopolistic_competition.html [Accessed 21 October 2013]

S-cool (2013) Factors that affect the distribution of agriculture. http://www.s-cool.co.uk/a-level/geography/agriculture/revise-it/factors-that-affect-the-distribution-of-agriculture [Accessed 23 October 2013]

What is Economics (2013) The Law of Supply and Demand. http://www.whatiseconomics.org/the-law-of-supply-and-demand [Accessed 23 October 2013]