Evaluation of Information Systems of the Tesco Company - Case Study Example

 Evaluation Of An IS in An Organization Role of Information systems/IT systems In the Business Environment We can define information systems as follows: Information systems find their meaning in organisations, usually businesses; they are based on IT; and they develop their complexity because they are socio-technical systems. Why is that information systems are of such central importance in business? One possible answer is that businesses are eminently dependent on information. Markets can be interpreted as the (theoretical) places where supply and demand meet. They are therefore subject to functioning exchange of information. (Stahl, B. 1968) Tesco: an introduction Tesco is the biggest private sector employer in the UK. The company has more than 360,000 employees worldwide. In the UK, Tesco stores range from small local Tesco Express sites to large Tesco Extras and superstores. Around 86% of all sales are from the UK. (Tesco website) Reason for choosing Tesco As explained by a branch manager at Tesco By the early 1990s we faced strong competition and needed a new strategy. We were good at buying and selling goods but had begun to forget the customers. Sir Terry Leahy, who became Chief Executive in 1997, asked customers the simple question – “what are we doing wrong?”. We then invested in the things that matter to customers. For example, we launched our loyalty scheme Clubcard and Tesco.com, our internet home shopping service. Going the extra mile for customers has been key to our growth. We want to make customers’ lives easier and better in any way we can. We want to appeal to every customer and give them a reason to come back to Tesco. (irisys.co.uk) The reason of selecting Tesco as a case for this discussion is its loyalty card system or as they say Tesco clubcard. In 1995, Tesco became the pioneer to launch its own loyalty card known as Tesco clubcard in the UK. After investing millions of pounds in this system, and within five years time, the number of its clubcard members has grown to nearly ten million throughout the UK, and the reason behind that is the versatility of its clubcard, which is a perfect example of the IS systems used by Tesco. When Tesco introduced its loyalty card to its customers in 1995, it was the beginning of the internet boom, so in order to make the loyalty card a success, they made it internet users friendly, as Tesco’s official website for club card describes it: You can collect points on almost everything you buy in-store at Tesco.com, as well as when you fill up your car, buy your items from Tesco direct or use your Clubcard credit card. Click below for a full list of places you can collect points.(Tesco website) Tesco clubcard is actually a loyalty card which retains all the information of the member and on which a customer can collect points when shopping in-store, online shopping or a Tesco petrol kiosk and can earn points. The point system works in such a manner that when a customer spends one pound, he earns one point, and these points can be redeemed in the form of either vouchers posted out by tesco or online while shopping, thus rewarding customers for shopping with Tesco. As the number of the clubcard members grew, and the revenues boosted up in the last decade or so for Tesco, they introduced Tesco banking, basically by issuing Tesco credit card which is again a clubcard or loyalty card but with a credit limit on it, so the customer is not only saving money on the purchases but also spending credit provided by Tesco, benefiting the company in both ways. It also gave Tesco a massive amount of information about the customers who visited its stores, what they bought, the regularity with which they bought them and how they responded to the in-store promotions and special offers. Sainsbury’s dismissed the card as a gimmick but were soon to lose out on sales to Tesco and in the latter part of 1995, Tesco became the market leader with a market share of 17%. (Times newspaper) Factors/Need for IS/IT systems in Tesco We are living in a time of great change and working in an Information Age. Managers have to assimilate masses of data, convert that data into information, form conclusions about that information and make decisions leading to the achievement of business objectives. For an organization, information is as important resource as money, machinery and manpower. It is essential for the survival of the enterprise. Before the widespread use of computers, many organizations found difficulties in gathering, storing, organizing and distributing large amounts of data and information. Developments in computer technology made possible for managers to select the information they require, in the form best suited for their needs and in time they want. This information must be current and in many cases is needed by many people at the same time. So it has to be accurate, concise, timely, complete, well presented and storable. Most firms nowadays depend on IT. (mbaknol.com) For organizations like Tesco, the factors driving the need or use of IS/IT systems can be enormous. A few of them for Tesco are briefly discussed below; Expansion/growth of the company For a retail organization like Tesco, growth is vital for its survival and to maintain its growth and expansion, Tesco requires to acquire key information indicators about its existing customers and new markets, for example, about the likes and dislikes of potential customers based at a particular location or their requirements. For that Tesco carries on market research, customer services and online surveys sometimes with incentives to draw a consumer’s attention towards the organization. Buy offering clubcard, Tesco not only manages to break the barriers with the customers locally but it also helps tesco to market it self globally as if it is the brand ambassador of Tesco. Online shopping trend With the increase in the popularity of online shopping, almost all the retailers and other organizations are offering their products and services online, and Tesco being the pioneer in this field, regularly introduces latest technology and improve or constantly update the existing IS/IT systems it has, making it easier then ever to use for regular online shoppers as well as for those who are new to internet/online shopping. Ease of excess/convenience As the cost of living is increasing day by day, one has to work harder and for longer period of time. Keeping this in view as a business perspective, Tesco developed the online shopping from basic groceries to clothing to household needs every thing under one website, all a customer needs to do is go online whether from home or work and buy it online, they will deliver the shopping at home at a time selected by the customer without any hassle for the individual offering him ease at his work or home, and with the help of the clubcard, one can have peace of mind that he has saved some money as well while shopping online. By doing this Tesco brings shopping at the door step of the customer. Strengthening of Business-consumer relation In order to compete with other retail giants, Tesco needed to strengthen its relation with the customers, by offering the online facilities and clubcard benefits to the members, Tesco made a pathway to understand the specific needs of the customers. By doing so, this system of swiping the clubcard has enabled tesco to focus more on what customers require from them in a particular region and then formulate a strategy to meet those requirements. Diversifying the Business portfolio As the number of clubcard members grew to nearly ten million in 2005, Tesco decided to diversify its business from a retail giant to financial services and banking, now they offer clubcard credit card to its customers, giving them a more stronger reason to stay with tesco, not only Tesco offers them discounts or points for the clubcard, but also provide credit to spend anywhere they want both at a Tesco point of sale or outside Tesco. Benefits and limitations of IS systems for tesco Benefits The introduction of IT/IS systems at tesco, has revolutionized tesco business and strategic planning in particular and the retail industry in the UK in general. The development of its own online portal or website for online shopping has given the edge to tesco as a market leader and the clubcard scheme has created brand awareness among its customers locally and internationally. Moreover, it has increased its revenue tremendously and helped diversifying its business portfolio on other sectors like insurance and banking. The use of clubcards by its customers has enabled tesco to target its market and as all personal information is available on the card, they can easily judge the demands and norms of the consumer market. Limitations Though the IT/IS systems have changed the phase of the business industry in general, has it gone a bit too far? The answer to this lies in the following article published in the Daily Mail: Tesco sounded the death knell for checkout workers today after opening Britain’s first entirely self-service shop. But critics warn that the move marks the end of basic human interaction during weekly shopping trips and could eventually cost thousands of jobs. The major supermarkets employ around 750,000 workers in Britain and Tesco has the biggest workforce at around 221,000. The retail giant says customer feedback had been positive as the new system removed the need for queueing. (The Daily Mail) This article proves that too much exposure and use of IS system can generate fears among the public with issues like unemployment, redundencies and difficulty to speak to a human staff member while shopping. Also about one third of the population in the UK is still not computer literate and can not go online to shop thus loosing out on what they have can be challanging. Also the use of online shopping and carrying a clubcard are both a bit of hassle for aged community as they prefer to speak to some one rather then use these machines. Thirdly, it can some times be very expensive for retail giants like Tesco, if some thing goes wrong with its IT/IS systems as it happened in 2009 reported by the newspaper The Independent: Tesco has been rocked by an IT failure that has resulted in its main checkout tills being down in up to 150 of its larger stores this morning. A Tesco spokesman said the problem with its electronic point of sale systems was caused by a routine IT update last night and that between 100 and 150 stores were affected. (The Independent) Tesco club card is a key product of the information system used by Tesco. Though it has been extremely benficial for the organisation on one hand, it has been a bit of a pain in the neck as well as during 2005, Gardian reported exchange of personal data by Tesco which is drived from the Club card, Together, Crucible and Zodiac can generate a map of how an individual thinks, works and, more importantly, shops. The map classifies consumers across 10 categories: wealth, promotions, travel, charities, green, time poor, credit, living style, creature of habit and adventurous. How does Tesco get the information? Clubcard is used to target promotions at particular cardholders. But Crucible is separate and Tesco insists that while loyalty scheme data is used by Crucible it does so anonymously rather than a house-by-house, name-by-name basis (The Guardian) This sort of media coverage is damaging for any organisation and specially where it is a case to loyalty card, it is even more difficult to make the situation clear and understandable to customers. Conclusion Though Tesco has managed to rectify its terms and conditions of the Tesco clubcard and provided the explanation of data protection to its customers and general public, it is now facing a slowdown in the demand of its clubcard and clubcard credit card partially because of difficulties in operating and redeeming points and their relavence to each individual customer’s needs. As the cunsumer spending decreases in the UK due to recent credit crunch, Tesco needs to innovate its clubcard schemes and offer more benefits to customers for the amount they spend. Reference 1. Stahl, B. Responsible management of information systems London UK, 1968. Print. 2. http://www.cn.tesco.com/en/aboutus/aboutus_history.htm 3. http://www.irisys.co.uk/media/13539/tesco%20case%20study.pdf 4. http://www.tesco.com/clubcard/clubcard/what.asp 5. http://www.thetimes100.co.uk/case-study--recruitment-and-selection--132-323-1.php 6. http://www.bized.co.uk/educators/16-19/business/strategy/activity/strategic1.htm 7. http://www.mbaknol.com/management-information-systems/why-businesses-need-an-efficient-management-information-system/ 8. Daily Mail reporter, The daily Mail, 14th June 2010. 9. Thompson, James. The Independent Newspaper, 11 May 2009. 10. Tomlinson, H and Evans, R. The Guardian, 20 September 2005 Read More