Table of Content Introduction 2. Profile of Tesco 3. Objective of The Report

Transcription

1 Executive Summary In today's competitive business world, Information Systems (IS) and Information Technology (IT) is one of the critical aspects of firm's strategy formulation and implementation because 'information systems offer distinct opportunities for competitive advantage for a company' (Ives and Learmonth, 1984). Moreover, Mata, Fuerst, and Barney (1995) argue that 'IT can add value to the firm by minimizing cost or increasing revenue' thus improve firm's performance. A firm's success largely depends on how effectively it can integrate and manage the information system and technology in the process of strategy formulation. but rapid advancement of technology and increasing cost of managing information system make it difficult for the firm to effectively manage their information system and technology to create sustainable competitive advantage. Therefore, every managers must have a clear knowledge and understanding of all the aspects of information system and technology to be successful in this competitive business environment. Therefore, this report aims to explore the role of information and technology in firm's strategy formulation and implementation. In this regard, the paper analyze firm's competitive environment using some competitor analysis tools and identifies how information system and technology facilitates an organization to achieve competitive advantage. The study is based on secondary sources of information resources. The report investigates different concepts, issues, models, ideas, and practices of information system and technology to explain the concept by using the organization "Tesco PLC" as an example. The report uses different books, journals, reports to collect information about the issue. The www and online study also contribute a lot in this regard. 1

2 1. Introduction 2. Profile of Tesco 3. Objective of The Report Table of Content Pages Porter Five Process as Competitive Analysis Model Porter Five Forces Analysis: Tesco Perspective Threat of substitute products and services : Threat of new entrants Rivalry among exiting competitor Bargaining power of customer Bargaining power of suppliers Information System (IS) Use of IS and IT in Tesco Strategic Goal Tesco: IS support to achieve Strategic Goal Current Business Process: Tesco Impact of IS in Business Processes of Tesco Competitive Advantage of Tesco Conclusion References and Bibliography Appendices

3 1. Introduction Now a day's most of the organizations are using information and technology to successfully manage their activities to achieve their desired objectives because IS and IT helps managers in quick decision making and exploit the opportunities to become competitive. Moreover, IS and IT facilitates coordination between departments or divisions and assists in managing the vast amount of diversified activities especially in retail industry where a huge number of transactions take place every day. Therefore, for a global retailer like "Tesco PLC", the successful use of IS and IT is very crucial to remain competitive in this volatile business environment. 2. Profile of Tesco Tesco PLC (Tesco) is a multinational grocery and general merchandise retailer which was founded by Jack Cohen and now Sir Richard Broadbent is chairman of Tesco (Global Data, 2013; Tesco PLC, 2014). Now the headquarter of Tesco is located in Cheshunt, England (Tesco PLC, 2014). Tesco operates 6784 multi-format stores in 12 countries all over the world which includes Homeplus, Superstore, Extra Stores, Metro, Express and Hypermarkets and employees work with Tesco who serve ten millions customer every week (Global Data, 2013; Tesco PLC, 2014). Tesco produces a wide range of foods and non foods products such as clothing, household appliances, home entertainment, consumer electronics products and electrical goods, telecom, banking, stationery, health and beauty products, kitchen utensils, soft furnishings, fuel and other related products (Global Data, 2013). According to , Tesco's revenue is million GBP and net profit is 124 million GBP (Global Data, 2013). As the strategic goal, Tesco build the relation between customers and colleagues and high quality assets around the world which provides multiple growth opportunities (Tesco PLC, 2013). 3. Objective of The Report The main purpose of the report is to describe the role of information system and technology in strategic development and implementation. Some other objective includes :- To indentify the importance of IS and IT link strategic development. To analyze how IS and IT facilitate in achieving competitive advantage for a company. To explore how Tesco uses IS and IT in formulation and implementation their strategy. 3

4 4. Porter Five Process as Competitive Analysis Model Porter (1980, 2008) developed the idea of five forces model first in 1980 which indicates five forces that shape an industry's competitive environment. Firstly, if the barriers of new entrants is low then the industry is less attractive for company to compete (Johnson, Whittington and Scholes, 2011). Secondly, the bargaining power of suppliers indicates the ability of suppliers which increase input prices or the cost of industry (Hill and Jones, 2007). The third, bargaining power of buyers refers large measure on its ability which attract and retain customer and charge premium prices (Laudon and Laudon, 2012). Threat of substitute products and services concern that when the threat of substitute is high, customer can switch from company's product to substitute's product (Robson, 1997). Finally, threat of rivalry determine competitive intensity within an industry (Rothaermel, 2008). Sources: Porter, M. E., (1980). Competitive Strategy. and Porter, M. E., (2008). The Five Competitive Forces That Shape Strategy. 4

5 This five forces model help to understand manager the industry structure by which manager can identify threats and opportunities of the industry (Porter, 1980, 2008) Porter Five Forces Analysis: Tesco Perspective Tesco have many competitors in their retailer business such as Sainsbury, Asda and Aldi. Now there will be discussed Tesco's competitive environment in the perspective of Porter five forces model Threat of substitute products and services In food items, the threat of substitutes is low and it is medium to high in non food items such cloths. The main substitutes are off licenses, stores and some supermarket but Tesco sell high quality product at low price. Tesco operate its own store shop where local shop does not operate their own store due to expensive. Moreover, Tesco hold their express market in city center and local town to remove the substitutes to the market (Management Paradise, 2014). However, the substitutes is moderately high in non food items because of many competitor sell their product to customer in discount rate (Management Paradise, 2014) : Threat of new entrants The threat of entry of new competitor is low for Tesco. Because Asda and Sainsbury is showing high influential movement in the market against Tesco. For this reason, new entrants try to enter this market which is very lower possibility (Grundy, 2001). Furthermore, four big industry get place almost 80% in the retail market of UK. So new entrants have to produce batter quality product in low price to hold the market which is very expensive. Another matter is that it will take time to get authorization from local government to launch new supermarket (Study Mode, 2014). 5

6 Rivalry among exiting competitor Competitive rivalry in the Tesco's food and grocery retail industry is strongly high. Few similar size industries directly compete with Tesco for gaining market such as Asda, Sainsbury and Morrisons which are competing over price, product and promotion (Euromonitor, 2013: 164). Keynote (2009) report that Sainsbury and Asda are the key competitor in the share market who increase their share almost similar with Tesco Bargaining power of customer The bargaining power of customer is moderately low. The customers can easily change the product from one to another where they will get low cost and standard differentiation products. Moreover, customers are created a center of attention on low price and online shopping where they can compare the product price with other products (Ivory Research, 2014) Bargaining power of suppliers In the perspective of Tesco, bargaining power of suppliers is low. Tesco have good relation with their suppliers and they have many suppliers who supply them high quality products at low price. For example, recently Tesco made contract with 200 lamb supplier included the premium market price for lamb which develops the relationship with suppliers (Tesco PLC, 2014). 5. Information System (IS) Information system (IS) includes people, hardware, software, communication networks and data recourses to store retrieve transform and disseminate information for a organization and assists business processes and operations to help manager in decision making and support strategies to achieve competitive advantage ( O'Brien and Marakas, 2011: 38). Laudon and Laudon (2012) state that IS facilitates decision making coordination and control for an organization as well as assists manager to analyze problems visualize complex subject and create new products. 6

7 The following figure developed by Powell and Dent-Micallef (1997) show that the range of IT linkage in the retail industry which involves with stores, home offices, distribution centers and suppliers Manufacturer Distributor Center ITs Scanners Inv management EDI Electronic invoicing Auto replenishment Adv shipping notice Paperless funds transfer Home office ITs Customer database Marketing ITs Automatic reorder Electronic manifest Satellite Fax Boston Store Dallas Store In-store ITs Fax Inv data-sharing In-store ITS POS scanning Inv management Admin HRM Energy management Local marketing Source: Powell, T. C., & Dent-Micallef, A. (1997). Information technology as competitive advantage: the role of human, business, and technology resources. 7

8 5.1. Use of IS and IT in Tesco Technology is the heart of the business at Tesco which improves customer's shopping experiences and strategic decision (Tesco Careers, 2009). Tesco collects customer experiences by using checkout process and new technology self checkout process (Tesco Careers, 2009). Moreover, Tesco's Customer 'Club card' loyalty scheme provides a vast database of customer information in which has 16 million members (Davies, 2013). Tesco also collect the data by using their web page registration form and tracking sales data which is processed in marketing research, marketing purpose (Tesco PLC, 2014). Furthermore, Tesco use a number of IS for supporting their stores, loyalty card, car insurance policy system such as RFID systems, CCTV, order-processing systems, scheduling systems, hand-held devices, financials and HR software, e- commerce and e-business systems, supply chain systems and communications technology (Kelly, 2009). 6. Strategic Goal Generally organization uses three types of strategic management support system to achieve its goals; first, management information system (MIS) which are routine reporting system used to control and monitor business, second, decision support system (DSS) that is used to solve semistructured problems and finally, executive support system (ESS) which provide generalized computing and telecommunication facilities to senior manager for monitoring and controlling a business (Laudon & Laudon, 1998: ) Tesco: IS support to achieve Strategic Goal Tesco have five vision and strategy in their business such as a growing business with full opportunity, wanted and needed around the world, applying skill globally, full modern and innovative idea, and finally inspiring, earning trust and loyalty from customer, colleagues and communities (Tesco PLC, 2013). Tesco use electronic data interexchange system with their computer system which can control all activities and even temperatures of fridges and freezers. Likewise, information technology help to manage supply chain system and cerate effective stock 8

9 control which offers available product for all customer, and the company can forecast clearly when they need stock (Tesco Careers, 2009). In addition, Head Office can make strategic decision about market segmentation to investigate every individual sales data, customer data and staff information via internet by using digital information system which provide good internal and external relationship (Kelly, 2009). Actually, technology operates all procedures in Tesco where have a number of internal system and electronic links with their suppliers and about 5000 official user (Tesco Careers, 2009). Tesco business model is based on its core purpose which is to create value to turn customers loyal for lifetime (Tesco PLC, 2012). 7. Current Business Process: Tesco Tesco offers a variety of business process for their company which is administrated by their board committee to take strategic decision and guidance. Tesco is providing private labeled brand, retailing services, online shopping, personal financial, telecom services and customer research business (Global Data, 2013). The company also produces products into their portals which is namely tesco.com and Tesco Direct, and they offers the club card reward scheme to achieve customer loyalty by which customer get valuable shopping pattern (Global Data, 2013). Furthermore, Selected suppliers of Tesco started shipping goods with new tag system is named Radio Frequency Identification (RFID), and Tesco already installed this RFID reader in 28 depots and 800 large stores which focus on trays, reusable assets, roll-cases, dollies and pallets (Watson, 2005). In addition, Tesco built a new virtual subway store which is introduced a new technology (Tesco PLC, 2014). Tesco (2014) explores their three new ambitions such as creating opportunities, advancing health and decreasing food waste. In his effort, Tesco built a new website named "TescoHealthAndWellbeing.com" that provides free health services for their customer, and they are installing barcode scanner and automatic tracking activities to collect customer feedback (Tesco PLC, 2014). 9

10 7.1. Impact of IS in Business Processes of Tesco Tesco usually use IS to trade with customer and maintaining their stores in 12 countries. Now there are no longer people to maintain business, only IS department's people can support each country's business even which will be fast line support (Computer Weekly, 2007). Moreover, IT ensure the best technical strategy which administrates the whole organization, and IS provides employees and their customer a batter technology solution and supplies unlimited opportunities to move around the business (Tesco Career, 2014). The new website of Tesco about health care for customer which help to collects customer information such as personal detail, eating habit and medical condition by which the company analyze customer information to achieve the goal in future (Tesco PLC, 2014). Furthermore, Tesco is producing a new software is called Next- Generation Network to enable communicating employees each other and they can access in data store more quickly and improve productivity and customer services (Cisco, 2009). 8. Competitive Advantage of Tesco Competitive advantage indicates competencies, capabilities and resources which ensures customer's attention and creates superiority among the competitors (Boar, 1994). It can be able to a firm to use efficient resources due to superior knowledge and information and can increase effective revenue, profit and productivity (Laudon and Laudon, 2012). Moreover, IS provides a specific market focus and narrow target market by which companies can analyze closely customer buying patterns, tastes and preferences, and they produce new products and services for customer to get competitive advantage (Laudon and Laudon, 2012). Tesco collects a number of batter quality data of customer and employees helping to operate each country's store and understand its customer which is the greatest advantage for the company (Computer Weekly, 2007). Moreover, Tesco is offering more batter shopping environment for customer to use IS and IT for which the company achieve more international growth and Tesco is using unique IS and IT assets to nationwide stores and distribution network to create online service for customer is called Click and Collect grocery service (Tesco PLC, 2014). Reeves and Deimler (2011) mention that the successful loyalty card program and online platform demonstrate the power of experimenting business model of Tesco to customize proposing for 10

11 each store and customer segment which focus early warning in customer behavior to achieve competitive advantage. Furthermore, the value chain and SWOT analysis of Tesco which have shown successively in appendix A and appendix B. 9. Conclusion From the above discussion, it is shown that a retail industry can take strategic decision and planning for batter performance of organization by using of IS and IT. Information system is critical asset for any organization to gain information, expand new business opportunity, increase the business profits and improve customer value. Moreover, it plays a crucial role to acquire competitive advantage. Tesco uses the IS and IT to develop their strategic decision, customer value creation and build better performance for effective business which help to compete with other organization. Therefore, IS and IT is a vital part in any organization to run the business smoothly in this competitive business world. 11

12 References and Bibliography Boar, B. H. (1994). Practical steps for aligning information technology with business strategies: how to achieve a competitive advantage. New York: Wiley. Cisco, (2009). Tesco Uses Collaboration Tools To Support Rapid International Growth. Retrieved from [accessed on February 13, 2014]. Computer Weekly, (2007). Tesco Standardizes IT for Global Expansion. TechTarget. Retrieved from [accessed on February 13, 2014]. Davies, R. (2013). Buying Pizza? Expect a Healthy Reminder from Tesco: Supermarket giant will use loyalty card data to see who is eating what. Daily Mail. Retrieved from [accessed on February 9, 2014]. Euromonitor, (2013). Retailing in the United Kingdom, Euromonitor International. Retrieved from [accessed on February 12, 2014]. Global Data, (2013). Tesco PLC (Tesco) Financial Strategic SWOT Analysis Review. Retrieved from [accessed on February 10, 2014]. Grundy, T. (2001). Competitive strategy and strategic agendas. Strategic Change, 10(5), Hill, C. W., & Jones, G. R. (2007). Strategic Management: An Integrated Approach. 7th ed., New York: Houghton Mifflin. 12

13 Ives, B., & Learmonth, G. P. (1984). The information system as a competitive weapon. Communications of the ACM, 27(12), Ivory Research, (2014). SWOT, PESTEL, Porter's Five Forces and Value Chain Analysis of Tesco. Retrieved form [assessed on 10 February, 2014]. Johnson, G., Scholes, K., & Whittington, R. (2011). Exploring Strategy: Text and Cases. 9th ed., England: Pearson Education. Kelly, P. (2009). Tesco: Use of IT and Information Systems-Introduction to MIS. Cengage Learning. Retrieved from %20Video%20Case%20Study%2027.pdf [accessed on February 12, 2014]. Keynote, (2009). European Trends in Food Shopping Market Assessment Retrieved from [accessed on February 12, 2014]. Laudon, K. C., & Laudon, J. P. (1998). Information Systems and The Internet: A Problem- Solving Approach. 4th ed., Harcourt Brace College Publishers. Laudon, K. C., & Laudon, J. P. (2012). Management Information Systems: Managing The Digital Firm. 12th ed., England: Pearson Education. Management Paradise, (2014). A Competitive and Strategic Analysis with Core Focus on Tesco and Sainsbury. Retrieved from 13

14 [pp. 39. accessed on 10 February, 2014] Mata, F. J., Fuerst, W. L., & Barney, J. B. (1995). Information technology and sustained competitive advantage: a resource-based analysis. MIS quarterly, O'Brien, J. A., & Marakas, G. M. (2011). Management Information System.10th ed., US: McGraw-Hill. Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. New York: Free Press. Porter, M. E., (1980). Competitive Strategy. New York: Free Press. Porter, M. E., (2008). The Five Competitive Forces That Shape Strategy. Harvard Business Review, January, Powell, T. C., & Dent-Micallef, A. (1997). Information technology as competitive advantage: the role of human, business, and technology resources. Strategic management journal, 18(5), Reeves, M., & Deimler, M. (2011). Adaptability: The new competitive advantage. Harvard Business Review, July- August, Robson, W. (1997). Strategic Management and Information Systems. England: Pearson Education. Rothaermel, F. T. (2008). Competitive advantage in technology intensive industries. Advances in the Study of Entrepreneurship, Innovation & Economic Growth, 18,

15 Study Mode, (2014). Porter's Analysis of Tesco. Retrieved from [accessed on February 11, 2014]. Tesco Career, (2014). Our Structure. Retrieve from [accessed on February 12, 2014]. Tesco Careers, (2009). Where Do You Fit In? Information Technology. Retrieved from [accessed on February 9, 2014]. Tesco PLC, (2009). Retailing Services Seminar Retrieved from andy_higginson_.pp t. [accessed no February13, 2014]. Tesco PLC, (2012). Annual Report and Financial Statement. Retrieved from [accessed on February 12, 2014]. Tesco PLC, (2013). Vision and Strategy. Annual Review Retrieved from [accessed on February 10, 2014]. Tesco PLC, (2014). Tesco PLC. Retrieved from [accessed on February 11, 2014]. Watson, E., (2005). RFID road rocky in places, says Tesco. Food Manufacture, 80(7),

16 Appendices Appendix A: The Value Chain Analysis: Tesco Porter s (1985) value chain identifies a set of activities within the organization which together create value for the customers. If the company wants to achieve competitive advantage by delivering superior value to customers it must understand which activity are more crucial for delivering value to the customers (Johnson, et al, 2011). Support Processes Administrative Coordination and support Service Collaborative Workflow Intranet Human Resource Management Employee Benefits Intranet Technology Development Product Development Extranet with Partners Primary Business Processes Inbound Logistics Automated Just-in-Time Warehousing Procurement of Resources E-Commerce web portals for Suppliers Operations Computer aided Flexible Manufacturi ng Outbound Logistics Online Point-of-Sale and other Processing Marketing & Sales Targeted Marketing Customer Service CRM Competitive Advantage Porter value chain Source: Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. New York: Free Press The Tesco value is their central strategy to achieve advantage such as delivery, offering great value, rewarding loyalty, simplicity to complex market, club card scheme and price match substitution on grocery home shopping. Moreover Tesco is providing touch-point, multi-channel, 16

17 staff awareness and credibility, long opening hour and easy parking which ensure to get competitive advantage (Tesco PLC, 2009). Tesco PLC (2014) aim to develop the global supply chain, improving products and range, growing brand and high quality supply base which is possible only with the strong information system. Other approaches are end-to-end supply chain, just-in-time stock for store, world class depot operation, borderless distribution, staff productivity, cost efficiency and variety shopping trip (Tesco PLC, 2014). Appendix B: SWOT Analysis: Tesco Tesco offers wide range of operation and products which increase sales and the company's growth to compete with their competitors. The strength of Tesco are global presence, strong foothold and wide range of store format. Besides, there are weakness for Tesco which are product recalls and decline operational performance. In addition, the opportunities are strategic acquisition, strategic initiatives, positive outlook for e-retailing and industry recognitions. Finally, the company also have some counterfeit product, sluggish global economy and highly regulated financial services business. Furthermore, observing all the situation Tesco have more competitive benefits if there is comparison among other retailers who are the main competitors of Tesco (Global Data, 2013). Global Presence Strong Foothold Strengths Tesco PLC, SWOT Analysis Weaknesses Product Recalls Declined Operational Performance Opportunities Threats Strategic Acquisition Counterfeit Products Strategic Initiatives Sluggish Global Economy Source: Global Data, (2013). Tesco PLC (TECO) - Financial and Strategic SWOT Analysis Review 17

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