IT Strategy - TESCO

Presented By: Group 9

 Agenda
• Background
• Corporate Strategy
• Vision and Value
• Industry Analysis
• Organisation Life Cycle
• IT Strategy Design
• IT Strategy Implementation
– Stakeholders
– Critical Success Factors
– ROI Calculation
• IT Applications
• Way Forward
 Background
Headquarter at Cheshunt, Hertfordshire
2482 + Stores in UK
2329 + Stores Abroad

World’s 3rdrd largest Grocery and Merchandising Retail Chain

Second highest profit earning retailer with a revenue of £62.5 billion

International operations in China, Czech Republic, Hungary, India,

Japan, Malaysia, Poland, Republic of Ireland, Slovakia, South Korea,
Thailand, Turkey and United States.
 Corporate Strategy

• Well-defined and consistent strategy for growth

• Expansion in both home and international markets

• Successful diversification strategy, adopted in 1997

• All market segments - market "Finest", mid-range

Tesco brand and low-price "Value“
• Innovative technology to improve its efficiency
 Store Formats
Based on the sizes and range of products sold

• Extremely large located mostly on out-of-town sites

Tesco Extra • Stocking nearly all products

Tesco • Smaller in size and hold much less non-food items

than Extra stores. 455 such stores in
Superstore
• Very small stores located in busy areas like city
centres, high streets of town.
Tesco Metro • Cater the needs of working customer and stock mainly
food-items
 Store Formats (Contd..)
• Located in busy city centre, residential areas, small
Tesco towns etc and stock mainly food items and high-margin
products
Express • “Assisted-service” tills

• Originally from T & S stores business units

One Stop • Have the smallest size

• Stock only non-food items in warehouse-style units in

Home Plus retail parks
• Only 13 such stores in UK
 Vision and Values

“To create value for customers to earn their lifetime loyalty”

No-one tries harder for customers:

• Understand customers.
• Be first to meet their needs.
• Act responsibly for our communities.

Treat people as we like to be treated:

• Work as a team.
• Trust and respect each other.
• Listen, support and say thank you.
• Share knowledge and experience
 Tesco: Every Little Helps
• Stands for What Tesco is
• Glue that binds all of its diversified
businesses
• Four elements
– A Great Place to Work: Treat people how we like to be treated.
– Shopping list: No one tries harder for customers
– The Way We Work: Better for customers, simpler for staff and cheaper for
Tesco.
– Our Community: Together we can make a difference.
 
Corporate Steering Wheel
•Used at Tesco to
measure all
performances in all
businesses across the
world

• Tesco’s version of
the Balance Score
Card

• Helps to stay
focused on strategy
 Industry Analysis: Porter’s Five Forces

Threat of New
Entrants (Medium)

Rivalry Bargaining Powers

Bargaining Power among of Buyers
of Suppliers (Low) Competitors (Medium)
(High)

Threat of Substitutes
(Low)
 Porter’s Five Forces Analysis
• Threat of New Entrants (medium) – Very difficult for a new entrant to make huge
investment in sales and distribution system, operating efficiency, advance use of
technology. difficult to achieve economies of scale and product differentiation

• Bargaining Powers of Suppliers (low) – Suppliers fear losing big business, Intense
competition in the industry

• Bargaining Power of Customers (medium)- customer retention strategy is very

important. more customised products and services, better choices, low price, in-store
promotion etc as awareness is increasing

• Threat of Substitute Products (low) - substitution can be product-by-product or by

emerging new trends like small convenience stores. Tesco has acquired/built Tesco Metro
and Tesco Express to meet this challenge.

• Rivalry among Competitors (high) - Intense competition - similar strategy adopted by all
major players. Market has become matured and flat
 SWOT Analysis
STRENGTHS
• High Brand Value
• Tesco Online : Tesco.com biggest online
supermarket
• High, consistent growth and ROI
• Increasing market share : Tesco's current
market share is 30.7% in UK
• Highly efficient operating system
• Advance technologies in use
• Customer base in 12 countries
OPPORTUNIES
• Growth in non-food retail using existing
infrastructure
• Take advantage of its online services to
venture into new services
• New market exploration, further
international expansion
WEAKNESS
• Highly dependent on UK market;
around 75% of revenue from UK
• Serial acquisitions can lead to problem-
both financial and cultural
• Debt ratio at record level, credit rating
at risk, backlash from fund holders
• Heavy dependency on road transport for
distribution: oil prices rising
THREATS
• Intense competition, less differentiation,
low profit margin
• Recession leading to fall in
international revenue
• Close competition between ASDA(a
Wal-Mart buy-out) and Tesco
• International expansion leading to
heavy investments; debt is rising
 Value Chain Management Analysis
FIRM INFRASTRUCTURE
Planning and control functions required to manage financial aspects. Profit protection departments,
workforce to upgrade anti-fraud software to reduce internal theft.

HUMAN RESOURCE MANAGEMENT

All HR activities like recruitment, compensation benefits and talent management. Company plans to have a
robust recruitment system to give better value to customers.
TECHNOLOGY DEVELOPMENT
Having innovative technologies to anticipate and meet customer requirements. It has very robust supply
chain management systems using RFID, improved scanners, better self-service tills and check-out cameras
to reduce queues.
PROCUREMENT
INBOUND OPERATIONS OUTBOUND MARKETING & SERVICE
LOGISTICS 1. Expand service LOGISTICS SALES 1. Efficient delivery
1. Maintains level hours in places 1. Home delivery 1. Clubcard gives of products and
of customer choice required service discounts to loyal services
in store 2. Might be 2. Parking facilities, customers 2. Technological
2. Efficient restricted by law trolley collectors and 2. Advertisements aids like One-in-a
distribution system deposit systems 3. Lower prices queue process
3. Can have quality 3. Efficient till campaign 3. Needs to
control to reduce cist staffs 4. Environment strengthen supplier
from damaged goods 4. Increasing friendly products relationships
turnaround campaigning
Tesco on Organization Life Cycle
IT Strategy Design
 Goals

Five main goals of Tesco Plc:

1. To be a successful international retailer
2. To strengthen its core UK business.
3. To be as strong in non-food as in food.
4. To develop retailing services like Tesco Personal
Finance, Telecoms and Tesco.com.
5. To put community at the heart of what it does.
 Goal 1. To be a Successful International Retailer
Strategy
Achieve flexibility by
adapting a unique
approach towards each
market Localise
offerings based on the
local culture, supply
chain and regulations
Local Skill and
capability
development, so that
they understand Tesco's
culture and business, to
fit it in the local picture
Tactical Strategy
•Use knowledge management
•Achieve customer satisfaction
through localisation
•Supply chain strength is
important. Strong alliance with
local suppliers and tighter value
chain.
•Recruitment Strategies for top
management who fit Tesco
culture.
•Using Knowledge Management
•Performance comparison across
countries and encourage high
performance.
Processes
•Collaborate local
partnerships
•Assess performance of
international operations
and comparative study to
identify areas of growth.
•Based on repository of
knowledge and the type of
stores, arrive on the skill
sets and the number of
people required
•Gap analysis to be done
to understand period &
type of training
 Goal 1. (Contd..)
Strategy Tactical Strategy
Involve in brand •Innovative marketing
building for long techniques
lasting relationship •Incorporating local tastes
with the customer •Building community
oriented brand image.
•Performance Tracking of
promotions and brand
To Use different •Using customer surveys,
format of stores to local demand, business
reach consumers intelligence and local
knowledge to decide on the
type and the number of multi
format stores
Processes
•Localised marketing
campaigns
•Performance tracking of
promotions
•Analysis of customer
requirements
•Identify bands of income, and
tastes and the demographical
information of the people and
cluster it
•Based on the significance and
seasonality of demand
decisions on multi-format
stores can be taken.
 Goal 2. To Strengthen Core UK Business
Strategy Tactical Strategy
Increase Number of •Longer store hours
Customers •Build customer loyalty
•Provide discount offers
•Decrease waiting time
•Increase number of personnel
Processes
•Identify stores in which
customer patterns indicate
requirement at late hours
and introduce new
working hours for that
stores
•Market Research

Product •Invest in locally produced products •Depending on business

choice/range should •Open regional offices to understand intelligence and customer
increase local demand better requirements, open
regional store & offices

Product quality •Focus on Quality check •Identify bottlenecks in

should increase •Increase number of personnel exisiting SCM. Improve
•Innovation in SCM with new process and
•Locally sourced Products systems. Encourage
•Environmentally friendly products innovation
 Goal 2. (Contd..)
Strategy Tactical Strategy
Improve Service •Adjust supplies with
Levels seasonality of demand
•Forecast demand
•Train staff better
•Take feedback
•Strengthen relation with
suppliers
•Add more in-store facilities
More options to •Provide home delivery
customers for Store •Align stores to local
location sensibilities
Build new Revenue •Cross sell and up sell
streams
Processes
•Train Staff towards new
processes and optimize efforts
•Give feedback form to
customers. Analyse patterns in
the feedback.
•Introduce improvements
based on it.
•Based on the consumer
patterns, engage business
analyst tools, to increase home
delivery
•Using business intelligence
tools to tightly integrate the
supply chain
Goal 3. To be as strong in non-food as in food
Strategy Tactical Strategy Processes
Offer the same •Increase the number of channels •Launch Tesco Direct
quality, price, •Provide multiple delivery options •Implement Order Management
range and •Make the catalogue more System
services to accessible to customers •Home Delivery
customer as in •Product Range Development •Delivery at Tesco Stores
food business •Low Prices Everywhere •Meet SLA
•Enhance Customer Online •Online Catalogue
Experience •Build Partnership with Suppliers
Integration of •Enhance Supply Systems •Management of Seasonal
Supply Chain •Manage Order Fulfilment Fluctuations and PLC
Management •Collaborative Planning
Systems •Increase Order Processing
Capacity
•Gain knowledge from
customer’s online shopping what
items were not in stock
 Goal 4. To Develop Retailing Services
Strategy Tactical Strategy Processes
Expanding the •Introducing more in-store branches. •Identify training need.
breadth of Tesco •Recruit professionals. •Measure effectiveness of
personal finance •Training. training
•Increase the number of customer •Data mining using the
accounts existing customer data
• Reduce Exposure to high risk driver •Reallocating the loan
• Building technical expertise portfolios
• Launch of new Products
Revolutionizing the •Expanding online shopping into the non •Expanding the product
online shopping food offers through Tesco Direct. offerings in the customer
portal/Tesco.com •Expanding the dot com grocery. database
•Utilizing Clubcard • Accepting online payment
•Innovating through “price match” through credit card.
•Increasing the no of in store Direct desks •Managing customer
•Diversifying the online business into database
entertainment sector. •Increasing Efficiency
 Goal 4. (Contd..)

Strategy Tactical Strategy Processes

Increasing the •Increase the customer base by
scope of Tesco providing innovative tariffs and
telecom generous credit rewards.
•Rolling out new in store Phone
shops.
•Foraying into the contract mobile
sales.(assisted mobile sales)
•Moving forward to provide
broadband services
•Keep a track of
competitor's tariffs
•Recruiting staff with good
interpersonal skills.
•Collaborating with
telecommunication
companies
• Seeking license to
provide broad band
services
• Doing promotional
campaigns for increasing
customer base for
broadband services
 Goal 5. To Put Community at the Heart of
What it Does
Five Focus Areas:

Environment
Community

Buying and Selling Products Responsibly

Healthy Choices

Our People

Strategy
Innovative ways of
reducing distribution
carbon emissions
Help increase efficiency of
local markets
Improve the supply chain's
sustainability
Providing adequate
nutrition facts on products
Enable employees to grow
with the company
Goal 5. (Contd..)
Tactical Strategy
•Reducing emissions in both
existing and new alternate low
emission distribution modes
•Bring more shopping options to
customers
•Help suppliers improve
processes
•Participate in forums for
exchange of information
•Proper system for accurate
labelling of nutrition’s of
products
•Arrange for training programs
•Substantial employee benefits
Processes
•Use the existing vehicles more
efficiently, new technology, to
reduce transportation distance
itself
•Source variety of goods
according to local needs
•Conduct surveys to assess the
needs of suppliers and their
satisfaction levels
•Specify special contents and
side effects
•Customer service training and
health and safety trainings
•Long term reward plans
Integrated Process Flow Diagram:
Domestic Operations
Integrated Process Flow Diagram:
International Operations
Factors Affecting Integration of IT Systems
• Flexible Approach: Dynamic product mix and forecasting activity levels
• Transparency between supplier systems and Tesco’s supply chain management
systems.
• Integration of Order Management System of food items and non-food items
• Different regulations in different countries.
• Integration of orders from different channels- at stores, online or by phone.
• Different store formats
• Secure and robust system for making payments.
• Reliable System and should be available 24x7.
• Different type of views to be maintained for suppliers, partners, vendors and company
itself.
• Different supply chain for food items and non-food items
• Centralized Database
IT Strategy Implementation
 Stakeholders and Objectives
• Customers
• Employees
• Community
• Suppliers
• Technology Service Providers
• Third Party Service Providers – Payment
Gateway Service Providers etc.
• Investors
• Management
 Critical Success Factors
• Alignment with Business Strategy
• Simple and Easy to Use
• Repeatable
• Acceptable Solutions
• Trustworthy Solutions
• Speed and Timely Delivery
• Flexible
• Scalable
• Stability
 Communication Protocol &
Rewards and Recognitions
Tesco Culture
Improving Understanding of
Good Practices

Increasing Internal Awareness

Involving External Stakeholders

Implementing a New System at Tesco

Designing and Implementing Systems

• Define the business requirements and processes

• Investment decision on hardware and software

Addressing HR Challenges

• Identifying HR Challenges
• Change Management Team
• Training Programs

Communications and Rewards

• Transparency in communications
• Listening to stakeholders
• Rewards and Recognition like Best Employee Award
 Implementing Change

Define
Identify Metrics
Set up the Assess Evaluate Drive the
the for
Process Readiness Risks Change
Players Evaluatio
n
 Benefits

Customer
Customer

Finance
Finance Community
Community
Every
Little
Helps

People
People Operations
Operations
 Benefits (Contd..)
Customer Community People
• Earn Lifetime • Image • Increase in
Loyalty Enhancement productivity and
• Reduced Waiting • Builds Trust efficiency
Time • Healthy Work
Environment

Operations Finance
• Consistent Delivery • Increased Sales
• Reduced Overhead • Increased Profits
Costs • Reduced Costs
• Time Savings
 Metrics for ROI Calculation
• Sales
• Return on Sales
Merchandising • Market Share
• Average Inventory
• Forecast Accuracy

• Total Supply Chain cost as % of Revenue

• Invoice Accuracy Rate
Purchasing • Inbound Freight
• Supplier On-time Delivery

• Transportation cost
• Inventory Accuracy
Distribution • Inventory Days of Supply
• Inventory Turns
Metrics for ROI Calculation (Contd..)

• Revenue
• Sales
Marketing •
•
Margin
% New Customers Per Year
• % Revenue Growth from Existing Customers

• Increase in Customer Satisfaction Index

• Simplified Management
• Reduction in Overhead Costs
Others • Increase in the availability of products
• Community Benefits
• Increase in Employee Productivity
• Increase in Operational Efficiency
 IT Applications: Tesco-in-a-Box
Earlier Now
• Tesco relied on a set of in-house, • Implementation of a set of
customized legacy systems applications that include retail ERP
• (Retek), Teradata Data Warehousing
Customized IT systems to support
Solution etc.
country-specific requirements
• Integration of all these systems and
• Lack of integration among Tesco’s
maintaining a common database in
disparate systems
UK - Tesco-in-a-Box
• Complexity of incorporating
• It includes the end-to-end lifecycle of
changes spread across geographies how Tesco business operates
• World class systems, repeatable
automated processes and
implemented as and when required
 Tesco-In-a-Box: Business Intelligence

Management Information Loyalty

Store Merchandising Management

Financial People
Operations Product, Supplier, Price, Purchasing, Forecasting, Inventory
management, Invoice Matching

Merchandise/
Warehouse Store Range &
Assortment
Management Ordering Space
Planning

Infrastructure in a Box
Operational Framework, Systems Management and Security Supporting Infrastructure
Tesco-In-A-Box: The Architecture
 Other IT Applications
RFID : Radio Frequency Identification – Ability to tag and track items
Implications for Tesco:
• Improve customer availability
• Reduced product pricing
• Improved service

Continuous Replenishment System: application was built on a mainframe system in the

UK, coded in Cobol, manages inventory and stock control for all of its UK stores, now
part of Tesco-in-a-box

TescoLink: Collaborative portal developed for Tesco’s suppliers

I Don’t Queue: Thermal sensors and queuing algorithms developed and implemented in
Tesco stores, determines number of tills to be opened based on number of entries and
exits of customer at a time.
 Other IT Applications (Contd..)
• Self-service checkout - Automated Checkout Machine from PSI is
easy to use, customer friendly, offers retailers both conveyor-based
and scan and bag self checkout solutions, designed to fit all retail
store formats and sizes

• Environmental Design Tool: A piece of software that gives the

company and its suppliers an unbiased assessments of the different
materials and products used in stores

• Tesco.com – Online Grocery shopping and delivery system

• TescoDirect – Non-food online and catalogue service system

Way Forward: Innovations in Retail
Digital Signage
Virtual Mirrors
Mobile Applications
THANK
YOU!!!