SWOT Analysis for Tesco Managing Information Systems - Case Study Example

Management Information Systems are becoming increasingly prevalent in the contemporary organization; this is evident in the public sector as much as in the private sector. The substantial requirements of the modern day manager are stretched to include an understanding of the application of new technology to MIS and the basic parameters for information systems, whether the system is manual based or technologically based. Let's identify a MIS management process within Tesco Company - one of the largest retailers in the world. Everybody knows that retail is one of the most competitive economics sector. Shops, marketplaces, boutiques, super- and hypermarkets offer us great choice of different goods. That's why if any company has been taking the top positions for almost 10 years, - it is considered as a great success. Britain hypermarket net Tesco is one of such leaders. This company sails one third of all foodstuffs in the country. Tesco can firmly be named as a "national shop". Rich, average and poor customers can find the goods according their wishes and financial abilities. In the beginning of 1990th Tesco took up the small category of retail market for lower-income customers. More expensive line for well-off customers was concerned with J. Sainsbury and Waitrose. Comfortable location, competitive prices, polite staff, great variety of goods and products, mainly, circumspect development strategy helped Tesco to become a really national shop. It has happened neither due to only British goods are sold nor due to the state authorities discrimination of American "Wal Mart" or French "Carrefour. National brand buildup took place thanks to Tesco owners and managers, who understood British customers wishes, whims and the mechanism of decision making. It became possible after using Management Information System (MIS). So let's describe how the information system fits into the organization's information structure and the level at which it operates. In fact company's managers pay much attention to analyzing the customers behavior: what, when and why do they buy and in what way is it possible to lead them to buy more. Tesco set close cooperation with University College London. The scientists offered new methods of gathering, checking, collating, review, storage, access, retrieval and update of statistics information of retail sells. Fed every second by Tesco's 12 million Clubcard holders, the Crucible database could in theory generate about 12 billion pieces of data a year if each cardholder bought just 20 items a week. This information is analyzed very attentively. MIS helps managers to understand what goods are sold better together, to place them accordingly on the counters in supermarkets. Experts, who carry out such analysis for Tesco, insist that the company has one of the biggest customer databases in the world. At first, hypermarket provides constant (season, holiday, single) discounts for that goods and stuffs, which customer buys oftener then others. At the end of a quarter each Clubcard holder gets voucher, equivalent to sum total, he spent in Tesco hypermarkets. Additionally they are rewarded with coupons, which allow discounts to that goods, the customers can enjoy (according to MIS results). Surely, this generated information is based on purchase data analysis. Management Information System (relevant module) defines the consumer goods basket, which can be potentially interested to a customer. During the quarter Tesco sells about 6 million letters with propositions of different discounts to loyal clients. Also Tesco MIS provides detailed sells information, which allows placing the goods on the counters according to consumers' tastes in each particular region or even in dependence of daytime. In the morning customers buy one stuffs, in the evening - another. Tesco shops in the center of London differ greatly from the little out-of-the-way ones. Other MIS module takes into account ethnic and demographic factors, fashion and even the contents of TV programs. Can you imagine customer joy and pleasure of a customer, who feels such a great attention and care from a huge hypermarket This feeling is likely to that when your relative, living far from you, one day brings you wonderful gifts, which you wished for but tell nobody about. Sir Terry Leahy, Tesco manager confirms that Tesco is a mirror, which reflects customers' tastes and wishes. Actually, hypermarket role is not so passive exactly thanks to multifunction MIS. Experts firmly consider that Tesco influence not only the manufacturing but also the "consumer-manufacturer" relationships. Retail cards system presents a unique information gathering methodology. This is an important feed-back for manufacturer. Having paid some money they can gain an access to Tesco database and undertake necessary corrections to their productive and investment programs. As Tesco sells not only foodstuffs, but also much more else (from clothes to financial services), it becomes more essential part in life of tens million of the British. Hypermarket transforms to powerful supplier of great service amount. It changes people's tastes and habits. Officers of different firms enjoy the system, when after some purchase size they can get free launch. Retail and food net combination is one more successful idea. Let's carry out SWOT analysis for Tesco MIS, trying to identify its Strengths, Weaknesses, and examine the possible Opportunities and Threats. So firstly we analyse the strengths of Tesco company, which have been achieved also thanks to its MIS. Strengths: What advantages does Tesco company have The main advantage is that this retailer takes one of the strongest stands not only in the British market but also in the world. It is revealed in the wide net of supermarkets and in the market share. Another advantage is the using of strong and significant managing information system (MIS). What does Tesco do well Of course, this is gathering customer demographics, preferences, lifestyle and life stage, transaction history, returns and even customer service event history. In fact the level and scale of it can be truly considered to be the greatest and that's why unique in the world. What relevant resources does Tesco have access to Mainly it's data resource. There are more than 12 million Clubcard holders. The Crucible database can in theory generate about 12 billion pieces of data a year if each cardholder buys just 20 items a week. Due to the dilative database, Tesco became on of the most serious world retailers. What do other people see as your strengths As we've told this is strong market position. This company is seemed for customers to be more reliable to deal with it (gathering bonuses, points, vouchers) than most of other similar supermarkets. Weaknesses: What could Tesco improve Some customers and experts consider such a Tesco policy to be like interfering into customer's private life. Certainly it'll be useful to pursue some actions with any slogans like *No interfering in your life* or *Scrutinize your habits for your benefits*. So it is possible to attract new category of customers, who treat with suspicion to Tesco's loyalty programs. The improvement of quantity/quality of suggested services can earn additional profits. What does Tesco do badly Frankly speaking, it's obligatory to pay attention to advance the service level of the clients who are the most profitable for a company. In fact 20% of customers make 80% of all company's profits. That's why it can be very essential to do all the best to make them feel some special attention. In such a demonstrative way it is also possible to show average clients the additive advantages of buying more. What should you avoid What Tesco should avoid first and foremost is stopping looking for new contracts with different helpful services and companies, which can offer useful discounts for Clubcard holders. Besides, Tesco should not isolate the sphere of interests only within its existing market scale. Opportunities: Where are the good opportunities facing Tesco Speaking about an expansion of operations we must understand that, for instance, emerging markets of East and Central Europe countries give real opportunities to earn money for such established retailer as Tesco. Surely, it'll take a good deal of efforts and nerve to overcome difficulties with mentality, legislation (like in Belarus) etc., but the profits can be significant enough. What are the interesting trends Tesco is aware of Here we are to mark client database extension, the quick number increasing of suggested services (you can assure yourself with it visiting Tesco's website) and of course, the spreading net of Tesco supermarkets. Adhering these trends help to consolidate strong markets stands. Threats: What obstacles does Tesco face As a rule the main obstacles are generated and can be explained with the increasing number of competitors. Each great city in modern world is full of huge supermarkets. That's not an extraordinary phenomenon as retail sphere is profitable. This is the main threat for Tesco as well. Not only to enlarge but also even to keep the scale of its business, Tesco should fight against great amount of competitors. Some of them are strong and huge (such as J. Sainsbury), another are small, but very ambitious. Exactly this second group can be rather dangerous sometimes because they are ready for any unexpected steps to attract new customers. What do Tesco's competitors do The variety of market methods, which help to reach some desired level of profits, is wide enough to describe all of them. Speaking about small retail competitors they can do a lot of things to widen the amount of new customers. For example, set the goods prices much lower than another huge retailers. Of course, they will not be able to get necessary profits moreover they can even work with some losses first time. But in such a way they try to insinuate themselves into customers confidence. Another kind of strategic steps is to perform advertising actions according to which customers have unique opportunity of getting cheap air tickets or good car insurance. But the main threat from Tesco's competitors is the next. Likely in other countries, the small shops and traditional marketplaces owners are against great supermarkets. Tesco keeps in deep secret the conditions of delivering goods into retail net. Active opponents created "Tescopoly" union. Their main goal is to destroy Tesco, which, they considered, became a monopoly and threatens the British wealth. Are the required specifications for Tesco's job, products or services changing Of course! It can't be otherwise. Tesco is a growing company. To achieve great results it's important to adhere one of the main conditions - high level of helpful services. The quality of goods in the supermarkets must be maximally high if you don't want to loose customers. The legal framework concerning, for example, the quality of goods, changes from time to time. The working standards should change to help the company take leading market positions. That's why the process of required specifications changing is so important for Tesco business. Is changing technology threatening your position Frankly speaking, it's difficult to give positive answer here. Most likely that changing technology helps Tesco to take strong position. Speaking about Information Technologies, we can assert, that application of the IT-achievements of business makes us stronger and more impenetrable for competitors. High technologies permit to process large information contents more quickly, adding even some new operations and functions. Do you have bad debt or problems There can be some problems, for instance, after buying new supermarket net, but mainly Tesco feels itself confident at retail market. Could any of your weaknesses seriously threaten your business State fair trade rules agency analyzed the Tesco business but has not found out any monopoly features. Indeed it is absurd to speak about monopoly each time when somebody has a successful business without any state authorities participation and the market blocking for other retail companies. Nevertheless Tesco started opening small shops to low down the negative boom. Today it is one of the most dynamic segments of retail foodstuff market. As the further development of hypermarket net depends on local authorities, the company invests money into public housing building, education development and something else. Conducting such a kind of business policy, Tesco can avoid a good deal of threats. They all can be overcome and shouldn't prevent Tesco's retail business. Let's describe how the information is used in the decision making process of the organization including use of differing IT systems/applications. In fact, information requirements at each organizational level tend to be unique to that level, there is a corresponding hierarchy of information systems, from strategic-level systems at the top, to operational systems at the bottom. The most widespread are: Strategic-Level Systems, Management-Level Systems, Knowledge-Level Systems and Operational-Level Systems. Management Information System provides middle managers with reports regarding matters such as current versus historical sales levels. The main MIS components are: sales management, inventory control, annual budgeting , capital investment analysis and relocation analysis. Exactly thanks to this level system Tesco managers use MIS to paint a rich portrait of each customer: a car owner who lives alone with a dog and who likes to splash out on luxury food ranges, say, or a family of four who are all vegetarians, buy fair-trade bananas and prefer Australian wine. Now we review the main principles of Tesco MIS functioning. Today using consumer cards becomes the main survival rule even for small shops. It is normal when a shop gives consumer cards to 70-80% of its customers. The matter is that we speak not about discount cards but exactly consumer club cards (Tesco Clubcards). They are given to a family or a single person. Analyzing the purchases size the hypermarket decides whether to give a customer additional discounts or not (this is the second function). But the main aim is to get information about each customer. Cards must be given only after questionnaire filling. This questionnaire may consist just 1 page. The key questions: phone number, address and some main parameters: age, family, work, another retail shops, he visits. The main aim of using such a card is customer personalizing to have an opportunity to communicate with him and offer new target programs. The main aspect of target programs is not a discount, but the goods a customer can buy. If a consumer doesn't eat meat MIS will not generate a leaflet about new meat sorts in the shop. It will be better to send a leaflet about fish, for instance. But if he buys only salmon, MIS shouldn't generate a leaflet about a choker - it'll be a waste of money and time, - MIS should write only about salmon. As a rule, such events as taste tests, shops master classes etc. are included here. Specialists show there what dish can you do with this foodstuff, how to prepare and serve. Gifts are the main, not the discounts! Tesco gives Clubcards, which formally are discount - it is written "1% discount" on them. More than 2 million of families signed up on such a miserable discount. Why Because according to the loyalty program, Tesco offered a great amount of other parameters and profits. Presents are also important, not only the discounts. Hypermarket can thank its customers for their loyalty with different small courtesies. It'll be even better not to emphasize the word "discounts". According to mass surveys, not more than 25% customers visit thanks to discount. The majority of consumers, especially those, who make big purchases, needn't such miserable discounts - they will not notice them at all. Presents are more interesting. What is also important, this presents can be not only from a supermarket, but also from its partners in common marketing programs. Let's take an example with movies or entertaining complexes tickets here. During a year Tesco became a heavy Disneyland Paris tickets buyer. Why It's clear and clever. Retailer buys 2 million cheap tickets for regular customers annually. On the other hand Disneyland gets a good deal of Tesco clients. All win! Another example. A customer has a real opportunity to travel to Monte-Carlo paying only 35, including fly and living in a good hotel. Of course, it refers to customers with certain purchase size. Speaking about the exclusiveness of Tesco MIS we should mark new online service for blind customers. Together with Royal National Institute for the Blind (RNIB) Tesco developed a new system using a technology, which converts text to sounds. With it help Tesco goods characteristics can be described on Tesco Direct Web site. Tesco representatives insist this site is the only of such a kind. Before this technology appearing, blind users should use special software, but it was inefficient, especially working with complex multimedia sites. As we see caring about different customer categories is one of Tesco strong sides. It's time to make a conclusion about Tesco Management Information System. Apart from delving deep into the technical side of databases, data warehouses, data relationships, and structures, we observed details the how, when, where, and why of data collection and aggregation. It describes the many uses that customer data can be put to, including: Customer behavior profiling Customer lifestyle & demographic profiling Customer product preferences and repertoire Customer targeting and differentiation Best customer marketing and win-back Product category relationships & cross-selling Planning and merchandising Online shopping suggestions Pricing policies Business intelligence starts with data. The uses of the resultant data, given all the technologies that are now available to analyse it and turn it into useful support for business decisions, are potentially endless. In recent months mighty Tesco database has been receiving lots of attention in the press due to the extraordinary power and depth of analysis it can achieve. But not so much database as the whole Tesco MIS. Database is just an information luggage, and MIS is that instrument, which can operate with it and bring profits to a company. 1. www.tesco.com 2. http://news.bbc.co.uk/1/hi/uk/4020023.stm 3. http://www.nocards.org/ 4. http://www.reppel.co.uk/loyalty-cards.html 5. http://www.mckinseyquarterly.com/article_abstract_visitor.aspxar=1221&L2=16 6. Bill Gates, Business @ the Speed of Thought (New York: Warner Books, 1999), p. 22. 7. Emily Nelson and Evan Ramstad, "Hershey's Biggest Dud Has Turned Out to Be New Computer System," Wall Street Journal, 29 October 1999, p. A1. 8. Kenneth Laudon and Jane Laudon, Management Information Systems, 5th Edition (Upper Saddle River, NJ: Prentice Hall, 1998), p. 608. 9. Shah, S.K. "Improving Information System Performance through Client Value Assessment: A Case Study," Review of Business, Spring 2001. 10. Back, W.E. and Moreau, K. "Information Management Strategies For Project Management," Project Management Journal, March, 2001. 11. Dessler Gary Management (active book), 2/e. Pearson, 2004. Read More