The Information Technology in Business Organizations - Essay Example

The Information Technology in business organizations Table of Contents Introduction 2 Tesco Supermarket 3 Luftman’s model 4 Model Applied to Tesco 5 Communication 5 Competency/Value Measurement 7 Governance 8 Partnership 9 Scope and Architecture 10 Skills 11 Results and Recommendations 11 Conclusion 12 Bibliography 13 Introduction This report aims to analyze the success of Information Technology Alignment in business organizations. For the purpose of this study, Tesco Supermarket has been chosen as a target organization to apply Luftman’s model and other related concepts in order to reach a conclusion. The report aims to encourage the use of Information Technology and its integration in the overall processes of organizations to improve efficiency in terms of procedures, records, timeliness, accuracy and stakeholders’ satisfaction. The large supermarket chain Tesco, provides the basis of the study and sufficient information on its use of IT in different areas from accounting to security is available. The report is structured in a systematic manner as follows. The first section provides a brief but succinct overview of the company under consideration. This section aims to introduce the organization, its history and main work focus. This section provides details about the organizations goals and objectives, mission statement and strategies to achieve those goals. The section is formulated carefully to provide the history of the company and its aims. It does not incorporate detailed information of the processes and procedures followed to carry out regular company activities. The second section provides some knowledge about Luftman model of IT alignment. This section gives information about the areas covered by Luftman’s model. This section discusses the importance of Luftman model in business field. This section provides the actual direction of the report and aims to clear understanding about the topic which will be discussed. In simple words, this section provides the subject, details and purpose of the report. The third section is the main discussion area of the report. In this section the report addresses the arguments about Tesco’s IT alignment indifferent areas including communication, governance, value measurement and architecture. This section also outlines the weaknesses that exist in the system adopted and strategies followed by Tesco to incorporate and align IT in the business. This section provides an overview about the efficiency of IT for Tesco’s overall operations and business strategies. The fourth section provides the results of the research carried out in order to study the implications of IT on Tesco’s business operations. This section also provides realistic measures and some recommendations to improve the current IT integration in company’s activities. The last section provides a brief conclusion about the report findings and summarizes the main points of the report. This section gives an independent opinion generated from the information collected. It provides a personal opinion about the alignment techniques of Tesco and summarizes the impact of IT on Tesco’s overall efficiency in terms of operations, performance and stakeholders’ satisfaction. Tesco Supermarket TESCO is a multinational which has worked for many different things. Because of its existence in the market for many years it has been seen that TESCO has been able to create a brand image which the customers love. “Tesco operates 923 stores and employs 240,000 people, giving us access to a population of 260 million across our nine markets. Over the past five years, we have expanded from our traditional UK supermarket base into new countries, products and services, including a major non-food business, personal finance and internet shopping. The increasing scale and internationalization of our sales and purchasing operations makes a significant contribution to our efficiency and profitability, as we progress towards our long-term goal of becoming a truly international retailer” (Global Sources). Tesco is a company which has its ventures throughout the world. The revenue that it is able to generate from its retails have helped Tesco to grab the third position globally. Tesco started as a small grocery store in 1919 by Jack Cohen which turned out into a huge venture in 1924. Tesco opened its first store in Burn Oak, Edgware, Middlesex in the year 1929. In 1947, it was introduced into the London Stock Exchange and made public and this floatation started the great success story of Tesco plc which has now emerged as one of the top most renowned supermarket chain in not just United Kingdom but the entire world. The first supermarket under the name of Tesco was opened in 1956 in Maldon. Since that time period, the company has operated such smoothly that it has created standards and is nowadays considered as a benchmark for many of its industry competitors. Over the years, the company took over many other supermarkets to make itself a leader in the United Kingdom region (TESCO 2010). Luftman’s model The IT business alignment is the concept which is developed through in depth research on strategic management and resulted in the essential conception of IT strategic planning. The IT business alignment concept suggests that the IT projections and planning should be in line with the objectives of the business and should support those objectives in the different areas where IT is implemented (Applegate, McFarlan, & McKenney, 1996; Teo & King, 1997). The Strategic Alignment Maturity Model incorporates different management functions and practices which may smoothen the progress of IT-business alignment (Luftman, 2000). Luftman proposes five maturity levels to incorporate IT in the strategic business decisions and planning. The areas of management which are included in the IT alignment model include six different components. Each component has distinct attributes and covers some important areas of the business operations affecting the objective of the business. Therefore, each component should be given proper attention in order to mature the IT-business alignment effectively. The maturity levels are clearly defined by the model to measure the level of alignment in businesses. The six components of Luftman’s model are Communication, Competency/value measurement, Governance, Partnership, Scope and architecture and Skills. This initial understanding is further enlightened in the next sections of the report by applying these components to Tesco’s business strategies and IT alignment concept. The aim of this report is to analyze the role of IT alignment in the organizational success and objective achievements (Sledgianowski, Luftman, & Reilly, 2006). Model Applied to Tesco Communication Communication is identified as a major component of IT-business alignment by Luftman and others researching in this field. The inappropriate communication patterns between top managements’ objectives with the staff, managers and others involved in day to day running of the business may end up creating dissatisfaction between business operations and organizational objectives (Calhoun & Lederer 1990). Another research reveals that shared domain to share information and communication creates a positive impact on alignment (Reich & Benbasat 2000). Business and IT alignment is ensured by a proper communication medium which upholds the business knowledge sharing and communication patterns effectively. Knowledge management systems and collaboration is quite necessary for TESCO in terms of business success. Its value chain and strengths are dependent on these aspects because of which knowledge management and collaboration are necessary. If the firm is not aware about their databases through these systems then it would be impossible for them to conduct inbound and outbound logistics as done by them now. Currently TESCO is using the database knowledge management system for its survival. Database management systems are very important when it comes to analyzing the customers and the demand. Data management systems are being used by Tesco so that they can gather information about the customers. Loyalty cards have been used by Tesco so that they can gather the information of the customers and use them to improve their service. These loyalty cards help the brand to change their stockings in accordance to the demand of the customers. The products which are sold are punched in the loyalty cards and this information is then sent to the warehouse where products are changed in accordance to the demand. Other direct market strategies followed by Tesco are the services of Internet, Advertising on television and direct emails. These services help a two way communication between the customers and the company. These responses help to improve the company in accordance to the feedbacks of the customers (Reuters 2009). This clearly shows that Tesco relies on technologically advanced methods to assess consumer demands, and marketing techniques. Application of Luftman’s model clarifies the alignment procedures and efficiency of IT on large businesses for instance retailers like Tesco. The following paragraphs include a discussion about Tesco’s performance and alignment with IT as per the components of Luftman’s alignment model. The Tesco operating model is organized as the organization moves to a new market. This operating model is essential for the established markets as the model is flexible and easier to be modified. The Tesco’s operating model is highly equipped with IT components. This model may be set a model to show IT’s success in attaining the lean status. The incorporation of IT helps in avoiding the risks of technological redundancy and employs automated procedures to eradicate unneeded procedures from Tesco’s supply chain. An efficient IT equipped environment results in a perfectly incorporated supply chain and sales-based ordering procedure which enables Tesco to track sales made by each store, communicate the reorder quantities with partners suppliers and departments within the organization and reordering the agreed level of inventory to avoid stock outs and high inventory holdings. This fast and accurate communication process, hence, helps in overall reduction of costs, customer satisfaction as inventories are available at all times in each store (Wilson & Perumal, 2009, pp. 319-320). Competency/Value Measurement Competency/value measurement points towards the decisions made by management and the strategic options that an organization considers to increase the integration of IT in the organizational structure as well as the plans. The engagement of IT in the value management is one of the most fruitful means for attaining the maximum advantages from IT integration. Such integration and incorporation of IT in the business competency and value measurement helps in IT-business alignment (Henderson et. al., 1996). Tesco uses the technological advancements in this area as well. An example of its critical decision making can be taken as the club cards offered in early 90s for the loyal customers to avail discounts. It firstly boosted up the sales as a promotional strategy and secondly worked as a way to track the sales made to recurring customers, measure the level of satisfaction and competence on the grounds of Tesco’s customer satisfaction and sales forecasts (Proctor, 2000, pp. 271-274). The use of computers and accounting software in order to record, analyze and assess daily transactions help in maintaining the efficiency and cost effectiveness in Tesco’s accounting system. The use of automated techniques to compare and calculate figures for the measurement of performance with the targets and expected results also direct towards IT-business alignment. Since all transactions, transfer of information, collection of data, consumer retention rates and accounting practices are technologically enriched in Tesco, this component may be concluded as an optimized level integration with IT on the Luftman’s alignment maturity model. Governance In terms of IT-business alignment, Governance refers to the distribution of rights and responsibilities in order to prioritize and control budgets and projects related to IT activities. Governance is the process of information gathering, decision making, implementation and feedback and controlling & monitoring (Henderson et al., 1996). Good governance plays a vital role in making an organization successful in its operations investment decisions, on the other hand, bad governance may be a root cause of the failure of the organization. As Tesco is in most advanced IT environment and have determination of helping community by providing fresh and quality products to the consumers, it has IT director Mr. Philip Clarke in the board who helps in providing a good governance and aligning IT with Business. The IT team of Tesco designs blueprints and technical strategies to ensure the success of its IT investments. The strategic development of Tesco is dependent on a program which introduces new systems and technologically advanced techniques and equipments to facilitate Tesco’s strategy and improve the systems currently applied. The service analysts, infrastructure specialists, IT specialists, enterprise architectures, managers and other key players of the organization work together in order to maintain good governance and smart investments in the IT area. Partnership This component of Luftman’s model refers to the contribution and understanding of IT and business partners. Ross, Beath, and Goodhue (1996) suggest that the IT and business partners require mutual consent of sharing uncertainties of IT initiatives in order to keep harmony between the objectives of these partners. Clearly, Tesco partners are working in collaboration to achieve the targets and objectives of the company. The higher level management is using strategic decisions to involve IT in their regular activities by employing Self Scan Checkouts, automated supply chain systems, database management systems, scanning devices, computational devices and machines for the ease of accounting department and so on (Humby, Hunt & Philips, 2007). The IT director acts as a role model in the industry who proposes innovative ideas for Tesco and with the help of other staff and IT executives analyzes and foresees the outcomes before implementing a new system. The integration and collaboration of IT professionals and business executives help in selecting the right technology for the organization. The shared decision making further enlightens the concept of shared goals, risks and rewards as a result of implementing a new technology in the stores, accounting departments or any other area of the business. Scope and Architecture Scope and architecture in IT means the decisions and choices made in order to allocate resources for IT infrastructure and to set limitations on the scope of IT decision making power. IT architecture, alignment and infrastructure must answer the organizational goals. IT infrastructure should be considered in the early stages when business goal setting process takes place (Keen, 1996, p. 152). Tesco’s architecture and scope of IT development is wide. It keeps IT as a priority in its developmental and investment decisions. Tesco has been awarded as the first company to introduce loyalty cards, internet retailing and self-scan checkout systems in the industry. Tesco’s strategy which is called ‘Tesco in a box’ aims to introduce new systems and advanced automated processes throughout the Tesco’s network. Tesco Operating model provides an enterprise architecture which targets international business by implementing the advancements in each of the Tesco’s stores worldwide i.e. calls for standardization (Bell & Orzen 2010, pp. 99-101). Skills Tesco has implemented innovative techniques in the working environment which enables it to retain its employees and their satisfaction with the working conditions. The innovations attract customers as well with the flexibility achieved by introducing innovative ideas and flexible store environment. The ability of Tesco to adapt to change is one the secrets of its success. The changes in environment are certain with the powerful role of IT in the business (OECD 2005, pp. 252-255). The innovations that Tesco makes in each department and area of the business may cause difficulties for the staff that are habitual of the older techniques. Tesco, in this regard, may not be flexible for the employees working in the lower management level and working areas. Results and Recommendations As a result of the analysis using Luftman’s alignment model, it can be said that Tesco is highly aligned with IT objectives clearly in line with the business’s overall aim to provide variety with extreme timeliness to the customers. Tesco is up to the level of highest maturity in the Luftman’s alignment maturity model. Each area, infrastructure, goals, employees and customers are involved when making IT investments of decisions to change some aspect of the business operations. Although Tesco has an optimized process of IT alignment the database knowledge system of TESCO can be improved if they move towards a just in time strategy. They can build up databases which can directly inform the supermarket about the sales of products. The system can be improved upon if information technology is brought about some changes. If information technology is enhanced upon the purchases and sales of the supermarkets can directly be reported to the warehouses. These warehouses can then send the desired products to the supermarket as soon as possible. This would reduce the costs of production for the company and ensure better supplies to the chains. Moreover, the advance change management techniques may be used to eradicate the chaos among employees on innovations introduced in Tesco’s infrastructure. Conclusion Information technology has become of primary importance when it comes to different businesses in these worlds. Different businesses are adopting the new technology so they can improve upon their businesses. Tesco has built upon its information technology system so it can compete with other retailers in the world. Telemarketing can also be widely introduced in the knowledge managements of TESCO through which they can get to know more about their customers. Catalina System has proved to be an effective system which receives automated responses from the customers and adjusts itself accordingly. 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Tesco 2010 Wilson, Stephen A, and Andrei Perumal. Waging War on Complexity Costs: Reshape Your Cost Structure, Free Up Cash Flows, and Boost Productivity by Attacking Process, Product and Organizational Complexity. New York: McGraw-Hill Professional, 2009. Print. Read More