The Management of Tesco by Incorporating Information and Information Systems - Case Study Example

Using academic models such as (but not only) those supplied by porter, investigate one organization, and answer the question: "is their information systems, enabling technology or strategic weapon" Table of Contents 1.0Introduction 1.1 The operational and strategic value that information and information systems can give to an organization, and relating this to section 2 to 4 below 2.0Competitive Forces affecting TESCO Environment-The PESTLE Framework 2.1Political 2.2Economic 2.3Socio Cultural 2.4 Technological 2.5 Legal 2.6 Environmental 3.0 Tesco and Technological Value Drivers and Distinctive Capabilities and Resources The Value information technology has added to Tesco 4.0 Conclusion and Recommendation on whether Tesco Information technology provides it to perform efficiently in their marketplace or provide them with real strategic advantage 1.0Introduction Founded by Jack Cohen in 1919, Tesco Plc today, has established itself as the largest super store in Europe. According to the company 2007 corporate report and the website, Tesco PLC is an international retailer. Tesco principal activities include food retailing having over 2,000 stores in the United Kingdom. The company also has stores and retail outlet in other countries like the Republic of Ireland, Hungary, Poland, the Czech Republic, Slovakia, Turkey, Thailand, South Korea, Taiwan, Malaysia, Japan and China (Tesco 2006 Review). Tesco operates 165 International Express stores. In addition it operates 39 stores in China, 111 in Japan, 13 in Malaysia, 62 in South Korea, 6 in Taiwan, 219 in Thailand, 35 in Czech Republic, 87 in Hungary, 105 in Poland, 91 in Republic of Ireland, 37 in Slovakia and 8 in Turkey. (Tesco Annual Review, 2006). It therefore operates round the clock which demonstrates its commitment to create customer value which in turn generates superior value for its shareholders. Tesco denotes its success to an aggressive global strategy of geographical diversification, product differentiation, cost focus and it use of umbrella branding. In its attempt to renew the brand and keep it in sync with changing customer tastes, Tesco follows various strategies including international diversification, providing value to customers, product diversification, innovation, acquisition and umbrella branding. 1.1The operational and strategic value that information and information systems can give to an organization, and relating this to section 2 to 4 below In the context of today's global competition, businesses and firms no-longer compete as individual companies but try to corporate with other businesses in their activities (Wu & Chien 2007). These researchers further argue that, this strategy is now quite common in many businesses including the retail chain stores. In the retail chain stores, the conventional vertical integrated company based business model is gradually being replaced by collaborative relationship between many fragmented, but complementary and specialized value stars and constellation (Wu & Chien 2007). In the present state of events, information and information systems are increasingly being used as many corporations as a competitive and strategic weapon. It helps organization such as Tesco to be a goal getter, as it redefines, their activities in terms of cost and time. Information systems help Tesco to adapt and be at the forefront of new product development and change. The management of Tesco by incorporating information and information systems have improved and increase on the processes, improving current operation efficiency and turning it into a competitive advantage. Through Tesco information and information systems, suppliers are interconnected through an electronic data interphase to develop strategic, administrative and operational planning. 2.0 Tesco Environmental Analysis LAYOUT OF THE PESTEL FRAMEWORK According to Johnson et. al (2005), the PESTEL framework can only be used to look at the future impact of environmental factors and how this impact might be different from the past. Thus an understanding of how the factors in the above framework may drive change is only a starting point to an organization strategy management (Johnson et al. 2005, Birkinshaw, 2000).There is a need for an understanding of the key change drivers and this will be explained in section below with respect to TESCO. In China and Malaysia, the activities of Tesco will be affected by the entire factors outline above. Under political the TESCO Plc is affected by both taxation and social welfare policies in these countries. Given the fact that consumer's income is dependent on government taxation policies, it is evident that take home income might either increase or reduce depending on the taxation policies adopted by the government at anyone time. In addition, government spending is greatly affected by its taxation policy. What is the future budget situation of China and Malaysia Is the government striving at a surplus, deficit, or balance The political situation of the China,, Malaysia and the United States is currently unstable; the present financial crisis has worsen the situation with lots of expectation now on the present government. The war on terror and the tooth for tat with Iran, the war in Iraq are all going to affect TESCO domestic and global operations. This is because current faith of world politics depends on the US and the United Kingdom (UK) with the two countries likely to be targets of terrorism attack. China, on the other direction is seen as a rival. Under environmental factors I consider waste disposal, energy consumption and environmental protection laws in the US to have a great impact on TESCO. In China and Malaysia, weak environmental policy can be used to the institution advantage. However, today consumers have become more aware and the need of green marketing and how an organisation disposes off its waste products is a call for concern. All environmental factors such as environmental protection laws, environmental disposal laws affect Tesco. All the economic factors can be regarded to have an impact on the TESCO. For example, high unemployment rate, high inflation rates, low GNP trends and slumps in the business cycle will imply low disposable income, more dependence by the citizens on credit facilities, borrowed funds and thus alternative sources of finance. The US dollars is currently falling at an increasing rate, this will mean an increase in the currency exposure. Transaction and translation cost will be high in the US, value of credit facilities if granted in US dollars will fall. The value of TESCO assets in the US will fall when doing reporting in the parent company currency, the British pounds. Under the social factors for example, population demographics have a great impact on the future of it activities in the world. 2.2 Tesco and the Five Forces Analysis Porters Five Forces Approach Application to the clothing industry Relationship with suppliers The suppliers constitute independent artist, cotton farmers, designers, customers. Bargaining power of buyers Low switching cost due to numerous options available to buyers. Threats of new entrants Low threats of new entrants because of the human, time, material and financial resources necessary to set up retail store. However, and entry of a new entrant from other continent like Asia remain a big threat. With individual designers and niche players increasing everyday. Threats of substitutes products or services The industry is characterized with many niche players. Rivalry amongst established firms Fierce competition with flat cost. No major player able to dominate the market. How ever with continuous innovation and design of new products, Tesco has taken over the lead. Porter (1985:4) contends that the Five Forces define the rules of competition in any industry and at the same time marks the bases for understanding a company's success. Porter (1985) went further and argues that, competitive strategy must grow out of a sophisticated understanding of the rules of competition that determine an industry's attractiveness (Birkinshaw, 2000). The researcher further claims that, "The ultimate aim of competitive strategy is to cope with and, ideally, to change those rules in the firm's behaviour." (Porter, 1985: 4). In addition, through a firms' own strategy a firm can take hold of these five forces. At the most fundamental level, Porter (1985) contends that firms create competitive advantage by perceiving and discovering new and better ways to compete in an industry which is ultimately an act of innovation. In this regard Porter assumes that innovations shift competitive advantage when rivals either fail to perceive the new way of competing or are unwilling or unable to respond. This is the situation of Tesco has done and can replicate at China and Malaysia in which the company has shifted in to a generic focus and cost leadership position through understanding of Porter's five forces and use of competition. 3.0 Tesco and Technological Value Drivers and Distinctive Capabilities and ResourcesThe Value information technology has added to Tesco Organisational capabilities are the skills embedded in a company's people, processes, and institutional knowledge (Mintzberg 2003). These resources and competencies unique to organisations give them a fit both to make more money from existing businesses and take advantage of existing opportunities (White, Stephen & Baghai., 1999). Here, through the identification of these capabilities, Tesco's managements should take advantage and push its activities further. Privilege Assets Growth enabling skills Tesco existing knowledge and information of customers can be critical in managing sales. Thus, in an event that the management of Tesco discovers that a competitor is laying emphasis on the BCG growth matrix, their strong brand name and corporate reputation can be extended to launch new products and quickly gain market share without threatening the credibility of the current business. That is cutting down on the number of dogs while using stars and cows to feed on question marks. Their existing network of suppliers and other stakeholders (Distribution network) can be used to increase sales of its existing products or reduced cost of a new product launch. Maximizing this bundle of distinctive capabilities, Tesco has the best chance to be a winner to counter competitor's move. In addition, through an analysis of Tesco value chain process we also recommend the organisations management, to cut on non value adding items within the chain. Through an analysis of Tesco value chain, it can be noted that at the level of the secondary activities, Tesco lean manufacturing technology, internet marketing technology, production technology, the just in time production line, customer relationship management (CRM) represents a big source of Tesco competitive advantage. This is because it will cost time and money for a competitor to replicate this. At the level of the primary activities, the relationship existing between Tesco and its suppliers is a strategic and competitive advantage. They own most of the suppliers thus given room for just in time production manufacturing method, Total quality management etc. they have cost advantage, exhibited in the form of lower prices. Thus a key advantage is source through the inbound and outbound logistics accelerated by the marketing information technology. These flow of resources is facilitated through a pool of information technology, and technology system incorporated into the activities of Tesco to facilitate value creation, for customers and stakeholders. 4.0 Conclusion and Recommendation on whether Tesco Information technology provides it to perform efficiently in their marketplace or provide them with real strategic advantage Strategic advantages are not always achieved by competition alone. Collaboration between potential buyers and sellers and some other dealers turn to be very beneficial and advantageous when negotiation and contracting costs reduces (Johnson et al. 2005:261). I believe by developing and capitalizing on its service minded employees and reliable service, the company stands a better chance to sail through the five forces framework (Johnson & Scholes 2007). If Tesco is a global player today in the retail sector it is thanks to its unique resources and other value added resource that facilitate it activities. Information technology enables Tesco to perform well at the domestic and international market place, by creating an interphase for the creation of values for the different stakeholders. Here, it is thanks to information technology that Tesco process market information, information about the customers, and pushed products and services to the markets before competitors. Because these information technology resources are not unique to Tesco, they do not offer Tesco any strategic advantage, but enable them to perform their activities quite efficiently and effectively. These values are defined with regard to quality, time and cost tied down to innovation. The higher the accessibility to information technology and cost leadership the higher will be the customer base and thus the competitive advantage of the firm. Effective information technology and information system play an important role in that it explains the product as well as it positions the company and the product (Storey and Easing wood 1998: p. 344). Staff/customer interaction is a measure of service quality as opposed to product quality. This will mean assessing the quality of the service products as customers also tend to evaluate how the service was delivered by the staff. Here, information and information system in Tesco reduces the waiting time, reduces the cost of production and create an added value to the products. Customers look in particular at the welcoming nature of the staff, their physical appearance or outlook, consciousness, promptness and efficiency. Attention could be shifted to these taken for granted assumptions. Here is the role of information system. Thus, it can be stated that the information system is surely compatible with its success factors and are indeed success enabling technology. This could also be capitalized upon. Tesco as a company should use clear values to underpin what they do. Their core purpose is based on customers' value creation. In all, cost-leadership has become part of the organization's culture through symbols and effective processes being respected. Here I have also recommended that, to react to competitors actions with respect to the growth matrix, the company should remain keen to its core values and cost leadership and differentiation strategy. This should become part of the company's culture. According to Johnson & Scholes (2007), organisational culture is a tool in management strategic armory which appears to be invisible yet it influences "why" "how" "what" and "when" things are done in an organisation or "it is the way things are being done here" (Johnson & Scholes 2007:66). In all, through information and information system, Tesco has created its own culture which today is considered as a cost leadership, this is thanks to the pool of technological and information system put in place by the company's management. we recommend Tesco to see such an action from the marketing concept which lay on the premise that, achieving organizational goals depend on determining the needs and wants of the market target and delivering the desired satisfaction more effectively than competitors (Kortler 2002). From the above analysis, one will not hesitate to say information and information system have created a platform for Tesco present cost leadership. Through this platform, Tesco has developed an umbrella branding strategy, products differentiation, diversity programs and core values earned the company a strategic position in the global retail industry. For example, as a vehicle and tactics of market entry, Tesco stresses on innovation, innovations such as metro format Tesco stores. Management also stresses on innovation in products format and variation. Tesco success in the industry can be attributed to its vast experience in the market, product differentiation, assorted brands and cost leadership facilitated by a pool of information system. It business concept of "No-one tries harder for customers, and we treat people as we like to be treated". As one of the supermarkets that place values on the employees, workers are put at the forefront of the business. "If the Tesco team find what we do rewarding, they are more likely to go that extra mile to help our customers". This has become part of the company's culture. In all, information and information system have given Tesco an edge over competitors, as its has redefined their activities, within the strategic triangle of quality time and cost. 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