Technology Strategy: Tesco Plc versus Waitrose - Term Paper Example

Technology Strategy. Tesco Plc v. Waitrose Introduction The development of technology in all industrial sectors worldwide has offered to firms indifferent industries the chance to increase their competitiveness within a short period of time. Indeed, by updating the technology involved in the development of their activities, modern organizations can improve the quality and the range of their services/ product and develop their communication with the customers. However, in order for these targets to be achieved it is necessary that appropriate strategies are established – the use of advanced IT systems can result to the increase of business performance only under the terms that it is combined with relevant business plans. It is in this context that technology can benefit business performance. The role of technology strategy in the development of business performance is analyzed in this study. The literature published on this subject is presented and critically discussed. Reference is made to the practical needs and implications of technology strategy as identified in Tesco and Waitrose, two major retailers in the British market. It is concluded that technology strategy can be used for supporting the growth of modern firms but only under the terms that it is carefully planned and monitored. 2. Technology strategy – description – role in the development of business performance The management of technology in modern businesses has many different aspects. In order to identify the most appropriate technology management polices for firms in different industries it is necessary to understand the role of technology within organizations. Technology has been characterized as a ‘business asset’ (Watkins 10); despite common business assets, technology is difficult to be evaluated (Watkins 10). This difficulty results by the fact that a specific technological tool, for instance, machinery, can be evaluated by referring to its ‘acquisition cost, book value or replacement value’ (Watkins 11). One of the most important characteristics of technology is its ‘re-useability’ (Watkins 11), i.e. its potential to be used in several operational activities. The above issues need to be taken into consideration by managers of organizations that have to introduce a technology strategy that will respond to all organizational needs. Particular measures should be also taken for the ‘flow control’ (Watkins 11) of the technology used across the organization. The term ‘flow control’ refers to all the tasks in which a specific business (technological) asset can be involved, either directly or indirectly. The ability of business managers to introduce appropriate technology management policies is depended on their ability to understand the potentials of their firm’s technological assets (in terms of their technical characteristics) but also to understand the actual role of these assets within the organization. Cooper and Edgett use a different approach regarding the identification of the elements of a successful technology management strategy. In accordance with the above researchers, the success of technology management policies introduced in modern organizations is depended on the external organizational environment. It is explained that in order for a technology management strategy to be developed it is necessary that the market conditions and needs are carefully examined; the technology management strategy that can respond to the market needs can be characterized as successful (Cooper and Edgett 2). The case of Apple is an indicative example; the managers of the above firm have always set the market needs as a criterion for the development of the organization’s strategies. For example, the introduction of MP3 was decided because of the demands of consumers for products of such characteristics (Cooper and Edgett 2). In accordance with Nieuwenhuizen and Rossouw, the technology strategy is a necessary part of the business strategy but it is not involved in all business plans. Rather, it is used in order to achieve specific business goals – for instance in the context of the business growth technology is used as a criterion for expanding the business activities (Nieuwenhuizen and Rossouw 56). This target is achieved by diversified existing business activities so that the firm’s existing range of products/ services is developed. Doom supported that in all organizations the business strategy is closely related to the technology strategy. However, the terms on which the implementation of technology strategy is based can be differentiated across businesses with different organizational culture. In this context, it is noted that four different approaches can be used for the development of strategic fit within organizations – strategic fit involves in the alignment of business strategy with technology strategy. The first approach is known as ‘strategy execution’ (Doom 37) and is based on the following principle: the business strategy is the basis for all organizational plans – including the technology management policies. In the context of the specific approach a firm’s IT strategy is incorporated in the overall business strategy. In other words, the above approach is based on the uniqueness of business strategy as the framework in which the rules governing all organizational activities are included. A similar view characterizes the second approach suggested by Doom. In accordance with this approach, known as ‘technology transformation’ (Doom 38), the business strategy sets the rules on which the organization’s IT strategy will be based. In other words, IT managers need to understand the principles set by the business strategy and align the IT strategy accordingly. From a different point of view, the ‘competitive potential’ (Doom 38) approach highlights the importance of IT strategy within modern organization. In accordance with the above approach, IT managers need to identify the potentials of the organization’s IT systems; then, they have to implement a strategy that will help these systems to reach their highest possible level of performance (Doom 38). In this case it is not business strategy that defines the elements and the form of IT strategy; rather the IT strategy is used as the basis for identifying the required parts of business strategy. A similar target is set through the ‘service level’ approach (Doom 38). In accordance with this approach the IT strategy is the basis for the development of the organization’s IT infrastructure (Doom 38). In this case, the priority of IT managers is the development of an IT strategy that will lead to ‘an excellent IT service delivery’ (Doom 38). Business strategy is not particularly taken into consideration while implementing the IT strategy – in all its aspects, as described above. An important aspect of technology strategy is highlighted in the study of Teece: technology strategy can be developed only through specific IT infrastructure. The question that can appear at this point is the following one: should a firm use only its own IT systems in order to develop a particular IT strategy or it should choose outsourcing? The practice chosen by a firm in regard to the above issue is of primary importance for the structure and the performance of the technology strategy (Teece 147). The potential need of external support for the development of a firm’s technology strategy should be clearly highlighted in the relevant strategy allowing the firm’s managers to locate the most appropriate business partner. On the other hand, Li noted that the criterion that is most important for the development of a firm’s technology strategy is the involvement of this strategy in the communication between the organization and its customers. It is explained that current consumer needs have been differentiated compared to the past. The technology has a major role in the alternation of the relationship between the organizations and their customers. In the past, the use of technology by organizations had two main missions: the execution of specific organizational tasks and the transmission of information to the customers. Today, technology has allowed the establishment of schemes that allow the sharing of information between the organization and the consumers. The potentials of a technology strategy to respond to the above trend should be taken into considerations by IT managers when designing a firm’s IT strategy. The differentiation in a firm’s IT strategy in accordance with the market trends and the organizational characteristics and goals is also highlighted in the study of Trott. In the above study it is noted that there are different approaches that can be used by managers in modern organizations in order to establish a successful IT strategy. The form of the IT strategy chosen within each organization can be based on a series of different criteria: a) in the context of the leader/offensive strategy (Trott 201) the IT strategy implemented within a particular organization is based on the following criterion: the uniqueness of the product in the market; in accordance with Trott (201) this strategy can benefit the organization only when the product (technology) involved is introduced in the market prior to the competitors, b) the ‘fast/follower approach’ (Trott 201) is based on the following concept: the company is just interested in introducing its product in the market; the product may be the improved version of the original (Trott 201). In other words, through the specific view, the technology strategy implemented in modern organizations may be highly based on the similar practices of other firms operating in the same sector, c) another approach of such type is the ‘cost minimization’ (Trott 202) approach. Again the technology used by another organization is considered as the basis for the development of business strategy; emphasis is given on the limitation of the cost involved in the development of the relevant processes (Trott 202). The relationship between the business strategy and the IT strategy is not always characterized by the superiority of one or the other; in fact, it is possible that these two strategies are developed simultaneously. This target can be achieved using a technology scorecard, which has the following parts: ‘its first part will be the technology functionalities and the second part will be the value drivers and benefits’ (Bansal 149). These two parts are set side by side’ (Bansal 149) in order to formulate the technology scorecard used for developing the firm’s IT strategy – as it will be aligned with the business strategy. The IT strategy formulated using the technology scorecard – as described above – is expected to highly support the business performance. However, the alignment between the business strategy and the IT strategy is not always achievable – or at least, not at the level expected by the business managers. The reason is that a series of barriers exist that can negatively influence the relationship between the business strategy and the technology strategy. These barriers have been categorized as follows: ‘expression barriers, specification barriers and implementation barriers’ (Bocij, Greasley and Hickie, 526). The above barriers are related to the following organizational problems: a) the business strategy may not clearly set the terms under which the various organizational strategies need to be developed (expression barriers), b) a business strategy may not refer to the role of technology strategy; the latter is then likely to be developed independently from the business strategy – a fact that can lead to inter-organizational turbulences and conflicts (specification barriers), c) when the cooperation and communication within the organization are not satisfactory, then its organizational department is likely to operate independently. Under these terms, the implementation of an integrated technology strategy is not feasible (implementation barriers) – as explained by Bocij, Greasley and Hickie (526, 527). 3. Technology strategy in practice: Tesco Plc and Waitrose The role and the implications of the technology strategy within modern organizations would be made clearer by examining the relevant policies of Tesco Plc and Waitrose, two major retailers in the British market. The key points of each firm’s technology strategy are presented below. Reference is made to the strengths and the weaknesses of these firms in regard to the specific business sector. Tesco Plc is highly depended on technology. The firm has implemented an e-commerce scheme, which offers to the consumers the chance to review online all the firm’s products and services; online purchase of product/ services is also available – by ordering the required product/ service. In accordance with the corporate website, the development of the firm has been based on the introduction of advanced technological features – referring to those features included in the firm’s website. It should be noted that the firm has developed nine different websites– aiming to improve the quality of its online services. The first one is the Tesco.com, which is used by consumers for ordering the firm’s products/ services. The second one is the Tescoplc.com which provides information on the firm’s financial status, its style of governance, its practices in regard to the environment and so on. The other websites of the firm are used for the provision of specific products/ services, like the website for the provision of books, that for health, the one for Gold Exchange and so on. Among the services provided by the firm online are: a) presentation to the public of the firm’s products/ services, b) the visitors of the website can purchase the product/ service they like, c) provision of information in regard to the firm’s financial and governance status, d) provision of information – at real time – like the price of gold and the travel schemes available on a particular day. It should be noted that all the firm’s products/ services are accessible through the corporate website – referring not only to food but also to financial services and retail (see corporate website, 2010). The role of the technology strategy on the performance of the firm can be understood clearer by referring to the strengths, weaknesses, opportunities and threats that Tesco Plc has to face. Each of the above factors/ elements of the SWOT analysis could be described as follows: 1) Strengths: a) the long-term presence of the firm in its market, b) the firm’s brand name, c) the continuous development of the firm’s strategies – including the technology involved in all operational activities, d) extremely high quality of e-commerce scheme, 2) Weaknesses: a) lack of strategic cooperation with other major competitor of the industry, b) continuous expansion maybe hide risks – in case of a strong financial crisis in the British market, 3) Opportunities: a) potentials for cooperation with other firms operating in the same sector, b) potentials for expanding in the global market, 4) Threats: a) continuation of the global recession would cause severe damages in firms operating in the British market, b) potential entrant of global retail firms (referring especially to those operating in the food sector). On the other hand, Waitrose also developed a well structured website. Retailing services and corporate information (information on the specific organization) are provided through the firm’s website. An additional website has been developed for the selling of wine – the Waitrose Wine website. It should be noted that information on the firm’s financial status can be retrieved through the John Lewis website – Waitrose has been acquired by John Lewis Partnership in 1955 (see corporate website). Features similar with that of Tesco are available in the website of Waitrose; however, the following differentiations (also considered as strengths/ weaknesses of these firms) can be identified among Tesco Plc and Waitrose: a) the range of online services/ products provided by Waitrose are quite limited compared to that of Tesco, b) Waitrose has only one website through which its e-commerce scheme operates; it is also through this website that the firm’s investors can be informed on various organizational issues and plans, c) the level of performance of the two firms is different; in accordance with the interim results of 2010, the sales of Tesco for 2010 has been estimated to £32,9 – increased from the previous year by a percentage of 8.3% (Tesco Plc, Interim results); on the other hand, the gross sales of Waitrose for 2010 have been estimated to £2.42bn (increased by 11.3% compared the same period last year). The difference in the volume of sales of the two retailers is clear. Tesco’s financial strength is significant, a fact that gives the ability to acquire the IT systems required for the effective implementation of its technology strategy. The SWOT analysis of Waitrose can reveal the difference of the firm from Tesco – and the other competitors of the industry: 1) Strengths: a) long term presence in the British market, b) well-known brand name, c) high quality of products, 2) Weaknesses: a) lack of independency from John Lewis partnership/ limited potentials for business initiatives, b) low gross sales – compared to the other market competitors, c) high prices of products – compared to Tesco, lack of potentials for mass sales, d) the online presence of the firm is not satisfactory; lack of organization of themes and limited number of products/ services available characterize the website of the firm, 3) Opportunities: a) the expansion of John Lewis Partnership could result to the simultaneous expansion of Waitrose, b) potentials for expansion in the British market, 4) Threats: a) further increase of the power of competitors would threaten the firm’s stability, b) the performance of John Lewis partnership is not standardized; a potential loss or limitation of the activities of the specific firm could result to the limitation of the profitability of Waitrose. 4. Conclusion In accordance with the issues presented above, the potentials of each firm to develop effective technology strategy are differentiated. Moreover, the technology strategy has been found to have many different aspects. The IT managers have to choose those issues that need most to be addressed through their firms’ IT strategy. In any case, the design and the implementation of technology strategy consist of many different phases (Van Grembergen 9), a fact that needs to be taken into consideration by IT managers. The examination of the IT practices used by Tesco and Waitrose has proved that not all firms are able to develop integrated technology solutions – this assumption is mainly based on these firm’s websites, as indicators of the quality of the firm’s e-commerce schemes. Both firms operate in the retail industry and their online schemes are the only available sources for examining their technology strategies. In firms operating in other sectors, other criteria would be used for evaluating the quality and the performance of technology strategy. In any case, the relationship between the business strategy and the technology strategy has been verified; in Tesco the level of gross sales is highly increased compared to Waitrose. It can be assumed that the technological advances used by the former has supported the increase of its competitiveness towards the latter – and the other firms operating in the specific sector of the British market. Works Cited Andersen, Michael and Poulfelt, Flemming. Discount Business Strategy: How the New Market Leaders are Redefining Business Strategy. Oxford: John Wiley and Sons, 2009 Bansal, Sam. Technology Scorecards: Aligning IT Investments with Business Performance. Oxford: John Wiley and Sons, 2009 Bocij, Paul, Greasley, Andrew and Hickie, Simon. Business information systems: technology, development and management. New Jersey: Pearson Education, 2008 Cooper, Robert, Edgett, Scott. Product Innovation and Technology Strategy. Ontario, Canada: Stage-Gate International, 2009 Doom, Claude. An Introduction to Business Information Management. Brussels: Academic and Scientific Publishers (ASP), 2010 Douglas, Bruce. Achieving business success with GIS. Oxford: John Wiley and Sons, 2008 DuBrin, Andrew. Essentials of Management. Andover, Britain: Cengage Learning, 2008 John Lewis Partnership, 2010, corporate website, available from < http://www.johnlewispartnership.co.uk/> Li, Charlene. Open Leadership: How Social Technology Can Transform the Way You Lead. Oxford: John Wiley and Sons, 2010 Nieuwenhuizen, Cecile and Rossouw, Dirk. Business Management: A Contemporary Approach. Cape Town, South Africa: Juta and Company Ltd, 2009 Peng, Mike. Global Business. Andover, Britain: Cengage Learning, 2008 Teece, David. Technological know-how, organizational capabilities, and strategic management: business strategy and enterprise development in competitive environments. London: World Scientific, 2008 Tesco Plc, 2010, corporate website, available from < http://www.tescoplc.com/> Trott, Paul. Innovation Management and New Product Development. New Jersey: Pearson Education, 2008 Van Grembergen, Wim and De Haes, Steven. Enterprise Governance of Information Technology: Achieving Strategic Alignment and Value. New York: Springer, 2009 Waitrose, 2010, corporate website, available from < http://www.waitrose.com/index.aspx> Watkins, William. Technology and business strategy: getting the most out of technological assets. Santa Barbara, USA: Greenwood Publishing Group, 1998 Read More