Earl Grey 與 Cheese Cake 的對話

C.     The further development at IS/IT in supermarkets competition

Initially, created the IS/IT strategy just only for the value added. However, nowadays, in the future competition will be based purely on information, leading data warehousing to play a key role. Record the shopping hobbies, personal details of customer, and analyze the figure of in-store products; combine the different industries to improve the service and value added for example baking, finance or insurance service etc. that are the future development of supermarkets industry.

In other words, a useful IS/IT analysis system organize and create a correct decision making is the trend of future. However, it is a huge investment in the IS/IT system. And it should be consideration in term of McFarlan’s six questions (McFarlan, 1984). Which are: Can IS/IT creates defensible entry barriers? Can IS/IT induce switching costs? Can IS/IT cha nge the ground rules of competition? Can IS/IT cha nge competition from cost to differentiation? Can IS/IT build links with suppliers? Can IS/IT be used as a product?

In the new E world, who develop the system first that is meaning who get the key into the future.

D.    TESCO strategy analyze

However, TESCO not just focus on the grocery market. It develops other business and diversification. In 1974 TESCO began to open petrol stations on the grounds of its superstores. The idea was very successful and in 1991 TESCO was the largest independent petrol retailer. It now accounts for 12.5% of all petrol sold in the UK .

In 1997 TESCO Personal Finance service was launched as a joint venture with the Royal Bank of Scotland . During the late 90’s TESCO developed among other business a visa card, home insurance, motor insurance, pet insurance, travel insurance and a mobile phone company. It has also expanded into selling on the Internet and is widely recognized to be "the world’s largest E-grocer".

In the 1990’s TESCO also expanded internationally, opened outlets in Ireland , France , Poland , Hungary , Slovakia , the Czech Republic , Taiwan , Thailand and South Korea . At the time of publication of TESCO's Annual Report and Review 2001, there were 107 stores in Central Europe , mainly giant hypermarkets of over 100,000 square feet, and another 19 planned for the next year. TESCO is also looking into expanding into China and Japan .

Nowadays, Diversification and Globalize is the main purpose in TESCO. At the same time, TESCO use the cha racter of non-boundaries of internet to develop another kind of selling behaviour.

a、     The Customers/TESCO relationship

Because TESCO is so large, it can afford to cut prices to a much larger degree than many of its rivals – for example when there was a general reduction in prices of 2-3%, TESCO prices reduced by 4%. But it is not a good idea in price war. Therefore, today, TESCO wishes cha nge their strategy based on non-price aspect such as quality, widely range of products, service and convenience.

Their stated core purpose is: "To create value for our customers, to earn their lifetime loyalty". Its two values are: "No-one tries harder than we do for customers" "We treat people the way we like to be treated". These values are, however, rather selectively applied to customers and shareholders rather than farmers and smaller competitors.

In 1995 TESCO was the first supermarket to introduce a company loyalty card. Now with the card, TESCO is able to keep a record of exactly what each customer buys and at what time, so that it can tailor its service for individual customers. It creates a new customers/TESCO relationship and increase the value.

b、    Activities of Competition Implemented

With increasing competition from other companies, TESCO like other supermarkets is feeling the pressure to expand into non-food items, including among others school uniforms and electrical goods. Petrol stations on the grounds of many superstores and a deal with ESSO help maintain TESCO as a significant petrol retailer, accounting for 12.5% of all petrol sold in the UK . As yet, TESCO is the largest on-line grocery retailer. At the same time, in order to keep up with the competition, TESCO bought an entire shopping centre in Coventry with which to experiment with Wal-Mart tactics.

c、     The IS/IT develop in TESCO

Nowadays, we can easy to compare the Internet Retail from the website of TESCO, Sainsbury's, Safeway, Asda and Morrisons. You will find out why the TESCO is the biggest Internet Retail. TESCO provide more than 22,000 products on Internet store, the same as a normal store. In September 2001, www.tesco.com was announced, however, many consumers are still unconvinced by internet shopping, not wanting to rely on a third party to choose food, and not really knowing what they want until they enter the supermarket.

For solve this problem, TESCO develop the loyalty card system to record every details about the shopping hobbies, personal details and any information we need.

E.     The Competitive Advantage enhance

According to the information belowbelow, we can easy find out the average market share of TESCO among the top five supermarkets that is approximately 32% ~ 35% from 1997 to Aug. 2001, and this figure was 35% in 2003. In other words, the market share of TESCO did not increase in the seven years recently. In terms of the sales theory, the figures show us that are not a real good thing because it is meaning that all their promotion activities compare other competitors was unhelpful. Even TESCO had done much invest in many ways, like Customer service, Information System build up and Diversification in many different industry etc..

Percentage of Market Share of the Top Five Grocery Multiples (by volume)

                        1997         1998         1999         2000         2001(Aug)

Tesco                22.0          22.9          23.4          24.2          22.8

Sainsbury's        19.7          19.8          19.1          18.6          15.8

Asda                 13.3          14.1          14.8          16.3          12.4

Safeway              10.3          10.2          10.0          10.1          9.3

Somerfield            ---             ---             ---             5.7            5.4

Source: Till Roll Share of Trade for 52 weeks ending July by independent retail analysts Taylor Nelson Sofres Superpanel.

However, TESCO had spent several millions pounds to build the IS/IT programme. Is it incorrect investment? Or just only not to fully make use of their system? Is the TESCO’s IS/IT strategy evaluated in term of McFarlan’s six questions (McFarlan, 1984).

We believe that the IS/IT strategy had achieved all requirements above. How can we to use this system fully? How to use this system to increase the profit margin? There are three main steps of suggestion to achieve this purpose below.

a、     Professional Quality control segment develop –TESCO Standard created

What is the difference between TESCO and other competitors? Why people think TESCO is the best one and select for? What kind of things can be developed and must to do in the future?

We believe that TESCO had done many things to increase their margin. And the brand of TESCO should be very strong. However, in the new E world, not just only TESCO want into the future, something should be done in other competitors. May we consider a question: which level of TESCO brand in? Is it a high level or cheap level? Unfortunately, TESCO brand is stand in the cheap position.

However, is it a big problem? May be yes or may be not. It is why I meaning to create the TESCO Standard. For example, like the Mark & Spencer Standard. It is a very difficult to achieve their requirements. Sometimes, their standards are more over the ISO (European Standard), AATCC (American Standard), DIN (German Standard) or JIS standards (Japan Standard) etc. Therefore, the first step we must develop our Professional Quality control segment and to pass the main certificates all over the world.

Thus, we can promote our TESCO products are “the highest level but the best price” and we have the evidences to prove our promotion,

b、    Develop existing equipments/systems – the lowest invest and the best profit

After to create the TESCO Standard and build up the confidence of TESCO brand. Now, we can use the IS/IT programme we had build up fully.

If the market share of a market had achieved 75%, where is the potential market of future? Is it from the other 25% or to get the market from other stronger competitors?

Why we don’t consider developing the other potential products and market we still not develop? Just base on the IS/IT system we had build up. According to the theory of sales, we should put 80% mind in the 20% main customers. How many profit we get from a householder in a week? If we have a retail customer, how many profits we get from this retail customer?

It is possible more cheap to buy the food from TESCO than food dealer or farmer. That is because TESCO have more customer bargain power. Why we don’t want to develop this market? And we can provide the products of international Standard - TESCO Standard products. Even we can offer the retail customer special price if they have a big order or long term loyalty co-operation relationship.

c、     Centre Supply Cha in concept set up

Can you walk to your local grocery store?

The sitting of supermarkets 'out-of-town', has led to a massive dependence on car use for shopping: the distance traveled to shops increased by 60% between 1975 and 1990, and now three quarters of supermarket customers travel by car. This has inevitably led to an increase in traffic.

It also causes “food deserts”: areas where, without a car, there is very little choice of reasonably priced or healthy food. The publication 'Off Our Trolleys' shows that a typical out-of-town superstore causes £25,000-worth of congestion, pollution and associated damage to the local community every week.

When the TESCO products had successful into the retail store. The next step is build the IS Networking and Communications system. We also can provide the net stock system and equipments to our retail customers. Then, they don’t need to buy the goods by themselves or make an order by telephone or computer. They just need to check their stock on the net-board everyday; all information will be sent to the information centre automatically. And we may replenish goods directly.

At the same time, TESCO will give a report every quarter, and make some suggestion to modify the products of order, just like a consultant. When the TESCO retail net is built up, you can buy any TESCO goods in the store of street or order by telephone or internet and pick goods up in the store. In the meantime, we also can development more business like mail and delivery service, make a payment of bills like power, parking or gas etc.

Why we want to destroy retailers? We may create a new partnership to make a Win-Win situation in future.

F.      Conclusion

In conclusion, we may get a result that has more benefit to develop the IS\IT model. Of course, nobody can guarantee that the any kind of IS/IT model is correct or incorrect. Sometimes, a successful model in a country or location, it is not to indicate that can be used in every countries or locations.

We must consider every detail for example culture, history, education, shopping hobbies and policy etc. At the same time, to get the full information that is quite important as well. Then according to all information we have to analyze and make a correct decision. Really not just follow the actions the competitors or other industry done. Even all they are successful. However, it should be a trend to develop the IS/IT system in future no matter in any kind of industry.

G.    Reference

<http://www.corporatewatch.org.uk/>, accessed 16/04/04

<http://www.tesco.com/>accessed 17/04/04

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