The Use of Information Systems and Information Technology in Retail Sector - Term Paper Example

Strategic Systems Management Table of Contents Introduction 3 Part A 4 Activity Understanding the Business 4 Activity 2: Industry and Competitive Analysis 8 Activity 3: Evaluating Company Resources 11 Activity 4: Strategy and Competitive Advantage 13 Part B 16 Activity 5: Opportunities for the use of Information Systems and Information Technology in Retail Sector 16 Conclusion 20 References 21 Introduction Marks and Spencer is one of the leading retailers of the UK which offers fashionable, superior quality, enormous value clothing and house products along with exceptional and marvellous quality food products to its customers’ worldwide. The organisation has engaged over 78,000 people particularly in the UK and abroad along with approximately 700 UK stores and an enlarged international business (Marks and Spencer plc, 2012). Marks and Spencer is recognised as one of the principal suppliers of women clothing and lingerie in the UK and has been speedily growing into the financial business market. The organisation also performs online businesses and delivers its products to its customers through online medium i.e. internet (Marks and Spencer plc, 2012). The objectives and the planning of Marks and Spencer lie in focusing upon the core UK business. Their planning especially towards the customers eventually has benefitted them in order to enhance and develop their core ranges in clothing so that the exclusive as well as exceptional class and fashion brands of Marks and Spencer are delivered to its customers’ worldwide (Marks and Spencer plc, 2012). Along with enhancing and developing their core ranges in clothing, the organisation also intends to make a plan in establishing a clear market position in food as a specialist high-quality retailer inspiring the customers with their unparalleled quality and innovation (Marks and Spencer plc, 2012). In this connection, the focus of Marks and Spencer would be on delivering fresh, superior quality products and presenting the ‘Best of British and Flavours of the World’ to their ultimate customers. In order to fulfil this objective, the organisation planned to construct their multi-channel along with international competence. This particular planning that is made by Marks and Spencer would make their brands more accessible to large number of customers around the world (Marks and Spencer plc, 2012). In the paper, Marks and Spencer, one of the leading retailing business organisations in the UK is taken into account. Various aspects that include the organisation’s income streams, costs, measures of performances, value chain and system, apparent goals, competitive position and overall analysis will be discussed. Apart from the above mentioned aspects, the other elements such as evaluating the resources of Marks and Spencer, SWOT analysis, determining strategic options, various opportunities regarding the execution of information systems and technologies and diverse issues resulting from the ethical as well as social impact of information systems and technologies will also be taken into concern in the discussion of this paper. Part A Activity 1: Understanding the Business It has been identified that one of the significant income streams especially for the retail industries generally comes from innovation rather than executing ‘business as usual’. This particular idea of innovation eventually compels the retail business organisations to modify their strategies, structures and proposals (Hristov & Reynolds, 2007). Along with the revenue, the business organisations also experience with certain costs that include the organisations’ financing costs, business operational costs, logistics, research and development processing costs, technological costs, manpower costs and various other business productivity related costs (Hristov & Reynolds, 2007). The various requirements of the retailers lie in managing as well as organising the productivity and efficiency of their business operations and activities. In other words, it can be stated that the various performance measures that are applicable especially to the retailing industry mainly in the areas that include sales, product range, service levels, availability, satisfaction of the customer, employee contribution and operating along with economical performance (Reynolds & et. al., n.d.). In addition, the conception of ‘metrics’ can also be regarded as one of the major performance marker that is applicable in the retailing industry which includes conversion rates, performance of sales staff and other operational elements. By measuring the success of these elements of business operations, retailers set their realistic targets and ultimately enhance the financial performances of the organisation (Price, n.d.). A value chain is usually defined as the range or level of actions that are actively engaged in the design, production as well as in the marketing of a product. However, the conception of value chain can be well defined by considering mainly two approaches i.e. “producer-driven” and “buyer-driven”. From the perspective of the retailing companies such as Marks and Spencer, buyer-driven value chains are considered to a certain extent (Gereffi & Memedovic, 2003). “Buyer-driven value chain” refers in which the traders, marketers and brand producers play elementary roles in forming decentralised construction arrangements in various exporting countries. The organisations that fit the ‘buyer-driven value chain model’, together with the traders such as Marks and Spencer and others generally design their value chain system and they are often regarded as “manufacturers without factories” (Gereffi & Memedovic, 2003). A construction of a retailing industry’s value chain is provided hereunder: The enormous competition especially in the retail sector is becoming increasingly difficult to sustain from the viewpoint of the retailers, due to various complexities of global expansion, rapid product cycles, currency fluctuation and varying customers’ likings. In order to sustain in this challenging world of retail sector, the retailing industries generally pay more attention towards their value system to a certain extent (Tapscott, 2008). There lies enormous valuable importance for the retailing organisations to manage and to preserve their value system that ultimately put the retailers to overcome various types of macroeconomic issues such as low rates of customer savings, pressures of customers’ buying power and disrupting modern technologies (Tapscott, 2008). A construction of a retailing industry’s value system is developed hereunder: One of the most significant as well as major goals or objectives of Marks and Spencer would lie upon generating sales by delivering its various business related products to the worldwide customers (Tapscott, 2008). The other various goals and objectives of Marks and Spencer lie in a few aspects that include improving marketing effectiveness, creating incentives for the customers, building more suitable and fitting brands for the customers, enhancing customer reliability through general service enrichment and forming extensive relationships among others (Tapscott, 2008). In addition, the other various goals and objectives of Marks and Spencer lie in creating real-time customer data, determining the profitability, determining the preferences of the customers regarding their products, increasing customer interactions and ultimately increasing or enhancing business progression and advancement along with sales (Anderson & et. al., 2007). Activity 2: Industry and Competitive Analysis The various aspects such as alterations in the market and other economic conditions that include modifications in the interest rates, stock market, exchange rates, unemployment rates and industry specific rates may affect upon the productivity of the retail industries worldwide. The profitability of the retailing industries ultimately alters with the modifications that are related with the market financial circumstances (Qu, 2008). However, the different economic factors such as industrial production and unemployment greatly influence the retail industry to a certain extent. The idea of industrial production is mainly chosen in order to assess a probable monthly business analysis. Industrial production is considered to be an alternative for the aggregated demand changes (Qu, 2008). At the same time, the factor of unemployment is the other economic indicator that is taken into concern. When there has been a high level of joblessness, it causes various difficulties to the financial system as well as to the society. Thus, it can be stated that the two financial aspects i.e. industrial production and unemployment greatly influences the retailing industry to a certain extent (Qu, 2008). Along with the economic factors, the environmental factors such as energy consumption, solid waste production, air and water releases and various food safety issue factors may affect or influence the retailing industries while executing their business operations (Davies & Konisky, 2010). It has been identified that the factor of logistical renovation is one of the crucial reasons that has caused the retail industry to modify its competitive arrangement along with its business environment. Earlier, the prevailing manner of allocation of goods to the stores that are stored into the factories or in the warehouses and then ultimately distributed to numerous small shops was exercised. However, now the retailers invest in local supply centres to join into the deliveries of products from the suppliers and ultimately products are delivered to the stores (Fernie & Sparks, 1998). This particular logistical renovation eventually made the retailing industries to alter their business settings along with competitive arrangement. The five competitive forces generally include the factors such as risk of entry, buyer and supplier control, risk of substitutes and competitive competition. In lieu towards risk of entry, Marks and Spencer possessed an extended deliberate attention that has served as an entry obstruction. As such, it is improbable for Marks and Spencer to have new entrants in its area (Kearney, 2006). In connection with the buyer and supplier control, Marks and Spencer demonstrated as well as exercised their likings especially towards British suppliers. The organisation eventually became reliant upon its suppliers and the support of the suppliers made the organisation dependent over exercising enough power towards the customers or the buyers while executing its business operations (Kearney, 2006). The theory of substitution can reduce demand for a particular class of products when the customers switch to other alternatives. These alternatives ultimately provide threats to Marks and Spencer (Kearney, 2006). Under competitive competition, Marks and Spencer faced obvious risks as other organisations entered into the industry with similar class of commodities along with reasonably priced and latest fashionable products. In this particular area, Marks and Spencer could not perform as expected. The organisation was unable to fight against the situation of competitive rivalry (Kearney, 2006). Marks and Spencer is working well and has been operating in 30 countries around the world. Presently, in order to develop or progress its extensive business operations, the organisation supervises a composite international supply chain procedure concerning 650 factories worldwide. The organisation’s priority is to preserve the class of fabrics and clothes wherever they are manufactured (Marks and Spencer plc, 2012). Among the top global retail business corporations such as ‘Wal-Mart Stores’, ‘Carrefour S.A.’, ‘Tesco Plc’, ‘Kroger Co.’ and ‘Safeway Inc’, it has been noted that especially ‘Wal-Mart Stores, Inc.’ generated significant amount of revenue of 417 billion USD in the year 2010 as compared with other top retailing companies. As a likely competitor of ‘Wal-Mart’, ‘Tesco Plc’ generated its revenue amounted to 92 billion USD in 2010 which is quite lower than ‘Wal-Mart’ (IMAP, 2010). This particular statistics regarding the revenue that is related with sales can be considered as one of the performance markers of a business organisation. Thus, it can be stated that ‘Wal-Mart’ is performing well along with maintaining strong financial operations rather than other top retail companies which are mentioned above (IMAP, 2010). Activity 3: Evaluating Company Resources Strengths of Marks and Spencer The various strengths of Marks and Spencer lie in a few important aspects that include its superior class of products, greater position for focusing upon customer facilities, suitable and pleasant shopping environment and excellent manager training system. It has been recognised that high quality is one of the major strengths that eventually made Marks and Spencer successful. The organisation provides high class of clothing, food and homemade products to its worldwide customers (Marks and Spencer plc, 2012). Weaknesses of Marks and Spencer The various weaknesses of Marks and Spencer lie in certain important aspects that include its lack of segmentation in clothing, improper stock control and wasted store spaces. It has been noted that the customers were not satisfied regarding the deficiency of Marks and Spencer’s e-shopping and other delivery facilities of the organisation. To a certain extent, Marks and Spencer also experiences from a distortion between the reserve facilities and Information Technology arrangements that prevailed within the organisation (Marks and Spencer plc, 2012). Opportunities for Marks and Spencer The various opportunities for Marks and Spencer lie in a few important aspects that include technology, encouraging customers to consume the offered healthy food products and expanding to other global markets. It is obvious to the fact that internet technology has developed speedily. Therefore, it offers a probable chance to raise the requirement especially for the online products (Marks and Spencer plc, 2012). Moreover, the organisation operates through a network of successful partnerships in various countries. In lieu of this, Marks and Spencer would like to expand its business beyond the existing areas for further maintaining its business productivity (Marks and Spencer plc, 2012). Threats for Marks and Spencer The various threats for Marks and Spencer lie in certain important aspects that include its strong competitors, transformation of social environment and chemical pollution. It has been observed that the presence of strong competitors is one of the major threats for Marks and Spencer. Except for the strong competitors, the organisation would be influenced by social environment. As the social environment changes, the preferences of the customers also change to a certain extent (Marks and Spencer plc, 2012). Moreover, environment pollution is also a probable threat for Marks and Spencer. Certain initiatives have been adopted especially by the government in order to preserve the environment from various pollutions. This particular potential risk will eventually affect towards the progression as well as the advancement of Marks and Spencer in the long run (Marks and Spencer plc, 2012). Activity 4: Strategy and Competitive Advantage In order to attain cost competitiveness, there lie various aspects or factors that can be readily available especially for Marks and Spencer while executing its business operations worldwide. The various aspects or factors include ‘Balanced Scorecard Model’ and ‘Economic Value Added Model’ that ultimately makes Marks and Spencer to attain cost competitiveness while operating its retailing business worldwide to a certain extent. The ‘Balanced Scorecard System’ is regarded as one of the most extensively functional performance management related arrangements. This particular arrangement captures certain principal indicators that include satisfaction of the customer, new product development and on-time deliverance as well as a few lagging indicators such as income growth and productivity which in turn presents a more fair and appropriate outlook of business performance (Johnson, n.d.). The ‘Balanced Scorecard System’ usually includes financial outlook, internal business viewpoint, innovation and learning perception and ultimately customer point of view which might be crucial aspects or factors that Marks and Spencer seek to attain cost competitiveness while initialising their business operations worldwide (Johnson, n.d.). The aspect of ‘Economic Value Added’ can also be one of the important factors for Marks and Spencer in order to attain cost competitiveness. The business organisations usually find this important factor to be an attractive measure of cost competitiveness (Johnson, n.d.). There are certain business organisations that apply the ‘Economic Value Added’ considering the principal cost of hiring charges and equipments in order to arrive at an accurate and a sustainable economic profit. This can also be called as a ‘Fractional Economic Value Added’ method which is recognised as a major factor of retail production (Johnson, n.d.). Thus, it can be stated that Marks and Spencer could rely upon the above discussed two aspects that are ‘Balanced Scorecard System’ and ‘Economic Value Added’ methods in order to attain cost competitiveness while executing its business activities worldwide. SWOT Matrix Strengths Weaknesses High Quality High Reputation for Customer Service Convenient Shopping Environment Lack in Clothing Segmentation Inadequate Stock Control Waste Store Spaces Opportunities Threats Internet Technology Encouraging Consumption of Healthy Food Products Market Extending Possibility Strong Competitors Change of Social Environment Environmental Pollution Strategic Options One of the important strategic options especially for Marks and Spencer lie in enhancing its internet procedures. As the internet technology has developed rapidly, it offers an opportunity to raise the demand for the online products. With the increase in the demand for the online products, the organisation would ultimately raise its productivity along with considerable amount of revenue. The other strategic option for Marks and Spencer would be in presenting broad variety of healthy food products to its customers worldwide. In this connection, along with presenting healthier eating, the organisation should also pay utmost concentration and importance towards the quality of life of the customers. Part B Activity 5: Opportunities for the use of Information Systems and Information Technology in Retail Sector With the enlargement in the factor of globalisation of the retailing industries with regard to their ‘points-of-sale’ as well as their ‘points-of-supply’, the information systems and information technology that is largely exercised in the retail industry has increased considerably. Moreover, the information systems and information technology play a mention worthy role in order to manage the overall business operations and has eventually reshaped the competitive environment of the retail industry (Syntel, n.d.). In order to reduce various complexities as well as reshaping the competitive environment, there are various critical areas that include functional retail areas and data cleansing and architecture among others where information systems and technologies play a crucial part (Syntel, n.d.). In lieu of functional retail areas, merchandising systems that had a huge impact upon top-line revenues needs to be configured, customised and managed effectively in order to enhance its top line. In order to attain this, retailers need to effectively extract large amounts of data and influence this data to carry out effective forecasting, successful planning and collaboration with its suppliers so that promotion and other merchandising performances are efficient and effective (Syntel, n.d.). In context to data cleansing and architecture improvement, it is very much essential to remain well focussed towards data cleansing along with architecture improvement because the decision making is mainly based on data. The success and competence of carrying out retail operations is troubled due to inadequacies of various decisions based on data. Thus, it becomes crucial for the data to be well cleaned and re-architected so that the industry can make the decisions efficiently (Syntel, n.d.). In order to attain competitive improvement, Marks and Spencer contracted with IBM in order to refresh its in-store technology and systems along with enhancing data cleansing and architectural procedures. The investments that are made particularly for this contract that is usually designed to improve the overall shopping experience for the customers by delivering better and faster service (Marks and Spencer plc, 2012). The future opportunities that the information systems and information technology may bring that ultimately affect the competitive environment in the retail sector lie in several factors. The several factors include offering superior service to the customers’, improving logistical operations, enlarged control over secondary allocation and enhanced ‘supply chain management’ procedure among others (Fernie & Sparks, 1998). In this connection, through the widespread use of information systems and technologies, retailers such as Marks and Spencer can deliver superior service to its worldwide consumers along with other necessary arrangements in order to meet consumer requirement for various products. Moreover, the future opportunities of the information systems and technologies in lieu of enhancing logistical operations eventually will make the products of superior quality along with affordable price (Fernie & Sparks, 1998). Therefore, these are certain future opportunities of the information systems and technologies that might have an effect upon the competitive environment particularly in the retail sector. One of the significant issues that is largely involved in competing in the global market within the retail sector is that the retail industry is experiencing difficulties or hurdles in the supply chain because there lays no official cooperation between the retailers and the suppliers. Demand forecasts and orders are often distorted unless they are developed jointly by the partners (Fernie & Sparks, 1998). These above mentioned factors create a need for supply chain incorporation and a way to provide supporting collaborative forecasting with the goal of raising sales, productivity and reducing inventory savings. The idea of collaboration can diminish waste in the supply chain, but at the same time, it also raises the market openness, satisfaction of the customer and competitiveness among the members of the partnership (Fernie & Sparks, 1998). With enlarged demonstration of a broad variety of contents in a digital form eventually resulted in easier and cheaper duplication and distribution of information. The rapid increase in the information systems as well as information technologies has amplified significant worry within the industry sector (Fernie & Sparks, 1998). The several issues that are resulted from the social impact of the information systems and technologies include decrease in the expenditure of data storage along with dealing with the information, insufficient and indefinite information on the internet and extreme reliance upon technology (Fernie & Sparks, 1998). All retail segments possess various ethical issues that are mainly based upon their information systems and technologies. The retailers use various instruments that include ethical assessment procedure of elevated risk suppliers on labour as well as working standards. The aim of introducing various instruments ultimately ensures supplier conformity towards company’s ethical policy (Fernie & Sparks, 1998). However, the various ethical issues that result from the impact of information systems and technologies include improper or inadequate ethical policies of the companies, lack of technological concern upon supplier management and lack of concentration towards monitoring of supplier working conditions along with their health and safety practices (Fernie & Sparks, 1998). Thus, these are certain social as well as ethical issues or difficulties that generally arise from the impact of information systems and technologies particularly in the retail sector. Conclusion In this competitive world of global financial market, it is very much essential for a business organisation or an industry such as Marks and Spencer i.e. a retailing company to identify its various income streams along with its different costs and diverse performance measures in order to sustain in this competitive market. It has been identified that the information systems and technologies have eventually reshaped the competitive environment within the retail industry. However, there also lie various ethical and social issues that result from the widespread use of information systems and information technologies. It can be stated that by considering the diverse strategies, competitive benefits and widespread use of information systems and technologies, a business organisation such as Marks and Spencer might attain significant economical benefits along with its business objectives to a certain extent. References Anderson, J. L. & et. al., 2007. Customer Relationship Management in Retailing: A Content Analysis of Retail Trade Journals. Journal of Retailing and Consumer Services, Vol. 14, pp.394-399. Davies, T. & Konisky, D. M., 2000. Environmental Implications of the Foodservice and Food Retail Industries. Direct Environmental Impacts. 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