Executive Summary

In today's competitive business world, Information Systems (IS) and Information Technology
(IT) is one of the critical aspects of firm's strategy formulation and implementation because
'information systems offer distinct opportunities for competitive advantage for a company' (Ives
and Learmonth, 1984). Moreover, Mata, Fuerst, and Barney (1995) argue that 'IT can add value
to the firm by minimizing cost or increasing revenue' thus improve firm's performance. A firm's
success largely depends on how effectively it can integrate and manage the information system
and technology in the process of strategy formulation. but rapid advancement of technology and
increasing cost of managing information system make it difficult for the firm to effectively
manage their information system and technology to create sustainable competitive advantage.
Therefore, every managers must have a clear knowledge and understanding of all the aspects of
information system and technology to be successful in this competitive business environment.
Therefore, this report aims to explore the role of information and technology in firm's strategy
formulation and implementation. In this regard, the paper analyze firm's competitive
environment using some competitor analysis tools and identifies how information system and
technology facilitates an organization to achieve competitive advantage.
The study is based on secondary sources of information resources. The report investigates
different concepts, issues, models, ideas, and practices of information system and technology to
explain the concept by using the organization "Tesco PLC" as an example. The report uses
different books, journals, reports to collect information about the issue. The www and online
study also contribute a lot in this regard.

Table of Content
1. Introduction

Pages
03

2. Profile of Tesco
3. Objective of The Report

4. Porter Five Process as Competitive Analysis Model ------------------------------

04 - 05

4.1. Porter Five Forces Analysis: Tesco Perspective ---------------------------------

05

4.1.1. Threat of substitute products and services---------------------------------------

05

4.1.2: Threat of new entrants ------------------------------------------------------------

05

4.1.3. Rivalry among exiting competitor ----------------------------------------------

06

4.1.4. Bargaining power of customer --------------------------------------------------

06

4.1.5. Bargaining power of suppliers ---------------------------------------------------

06

5. Information System (IS) --------------------------------------------------------------

06 - 07

5.1. Use of IS and IT in Tesco ----------------------------------------------------------

08

6. Strategic Goal --------------------------------------------------------------------------

08

6.1. Tesco: IS support to achieve Strategic Goal -------------------------------------

08 - 09

7. Current Business Process: Tesco ----------------------------------------------------

09

7.1. Impact of IS in Business Processes of Tesco -----------------------------------

10

8. Competitive Advantage of Tesco ---------------------------------------------------

10 - 11

9. Conclusion -----------------------------------------------------------------------------

11

References and Bibliography -----------------------------------------------------------

12 - 15

Appendices --------------------------------------------------------------------------------

16 - 17

1. Introduction
Now a day's most of the organizations are using information and technology to successfully
manage their activities to achieve their desired objectives because IS and IT helps managers in
quick decision making and exploit the opportunities to become competitive. Moreover, IS and IT
facilitates coordination between departments or divisions and assists in managing the vast
amount of diversified activities especially in retail industry where a huge number of transactions
take place every day. Therefore, for a global retailer like "Tesco PLC", the successful use of IS
and IT is very crucial to remain competitive in this volatile business environment.
2. Profile of Tesco
Tesco PLC (Tesco) is a multinational grocery and general merchandise retailer which was
founded by Jack Cohen and now Sir Richard Broadbent is chairman of Tesco (Global Data,
2013; Tesco PLC, 2014). Now the headquarter of Tesco is located in Cheshunt, England (Tesco
PLC, 2014). Tesco operates 6784 multi-format stores in 12 countries all over the world which
includes Homeplus, Superstore, Extra Stores, Metro, Express and Hypermarkets and 537784
employees work with Tesco who serve ten millions customer every week (Global Data, 2013;
Tesco PLC, 2014). Tesco produces a wide range of foods and non foods products such as
clothing, household appliances, home entertainment, consumer electronics products and
electrical goods, telecom, banking, stationery, health and beauty products, kitchen utensils, soft
furnishings, fuel and other related products (Global Data, 2013). According to 2012-2013,
Tesco's revenue is 64826 million GBP and net profit is 124 million GBP (Global Data, 2013). As
the strategic goal, Tesco build the relation between customers and colleagues and high quality
assets around the world which provides multiple growth opportunities (Tesco PLC, 2013).
3. Objective of The Report
The main purpose of the report is to describe the role of information system and technology in
strategic development and implementation. Some other objective includes :

To indentify the importance of IS and IT link strategic development.

To analyze how IS and IT facilitate in achieving competitive advantage for a company.

To explore how Tesco uses IS and IT in formulation and implementation their strategy.
3

4. Porter Five Process as Competitive Analysis Model

Porter (1980, 2008) developed the idea of five forces model first in 1980 which indicates five
forces that shape an industry's competitive environment. Firstly, if the barriers of new entrants is
low then the industry is less attractive for company to compete (Johnson, Whittington and
Scholes, 2011). Secondly, the bargaining power of suppliers indicates the ability of suppliers
which increase input prices or the cost of industry (Hill and Jones, 2007). The third, bargaining
power of buyers refers large measure on its ability which attract and retain customer and charge
premium prices (Laudon and Laudon, 2012). Threat of substitute products and services concern
that when the threat of substitute is high, customer can switch from company's product to
substitute's product (Robson, 1997). Finally, threat of rivalry determine competitive intensity
within an industry (Rothaermel, 2008).

Sources: Porter, M. E., (1980). Competitive Strategy. and Porter, M. E., (2008). The Five
Competitive Forces That Shape Strategy.
4

This five forces model help to understand manager the industry structure by which manager can
identify threats and opportunities of the industry (Porter, 1980, 2008).

4.1. Porter Five Forces Analysis: Tesco Perspective

Tesco have many competitors in their retailer business such as Sainsbury, Asda and Aldi. Now
there will be discussed Tesco's competitive environment in the perspective of Porter five forces
model.

4.1.1. Threat of substitute products and services

In food items, the threat of substitutes is low and it is medium to high in non food items such
cloths. The main substitutes are off licenses, stores and some supermarket but Tesco sell high
quality product at low price. Tesco operate its own store shop where local shop does not operate
their own store due to expensive. Moreover, Tesco hold their express market in city center and
local town to remove the substitutes to the market (Management Paradise, 2014). However, the
substitutes is moderately high in non food items because of many competitor sell their product to
customer in discount rate (Management Paradise, 2014).

4.1.2: Threat of new entrants

The threat of entry of new competitor is low for Tesco. Because Asda and Sainsbury is showing
high influential movement in the market against Tesco. For this reason, new entrants try to enter
this market which is very lower possibility (Grundy, 2001). Furthermore, four big industry get
place almost 80% in the retail market of UK. So new entrants have to produce batter quality
product in low price to hold the market which is very expensive. Another matter is that it will
take time to get authorization from local government to launch new supermarket (Study Mode,
2014).

4.1.3. Rivalry among exiting competitor

Competitive rivalry in the Tesco's food and grocery retail industry is strongly high. Few similar
size industries directly compete with Tesco for gaining market such as Asda, Sainsbury and
Morrisons which are competing over price, product and promotion (Euromonitor, 2013: 164).
Keynote (2009) report that Sainsbury and Asda are the key competitor in the share market who
increase their share almost similar with Tesco.

4.1.4. Bargaining power of customer

The bargaining power of customer is moderately low. The customers can easily change the
product from one to another where they will get low cost and standard differentiation products.
Moreover, customers are created a center of attention on low price and online shopping where
they can compare the product price with other products (Ivory Research, 2014).

4.1.5. Bargaining power of suppliers

In the perspective of Tesco, bargaining power of suppliers is low. Tesco have good relation with
their suppliers and they have many suppliers who supply them high quality products at low price.
For example, recently Tesco made contract with 200 lamb supplier included the premium market
price for lamb which develops the relationship with suppliers (Tesco PLC, 2014).

5. Information System (IS)

Information system (IS) includes people, hardware, software, communication networks and data
recourses to store retrieve transform and disseminate information for a organization and assists
business processes and operations to help manager in decision making and support strategies to
achieve competitive advantage ( O'Brien and Marakas, 2011: 38). Laudon and Laudon (2012)
state that IS facilitates decision making coordination and control for an organization as well as
assists manager to analyze problems visualize complex subject and create new products.

The following figure developed by Powell and Dent-Micallef (1997) show that the range of IT
linkage in the retail industry which involves with stores, home offices, distribution centers and
suppliers

Manufacturer

EDI
Distributor Center ITs

Scanners
Inv management

Home office ITs

Electronic invoicing
Auto replenishment
Adv shipping notice

Paperless funds transfer

Customer database
Marketing ITs

Satellite
Fax
E-mail

Automatic reorder
Electronic manifest

Boston Store
Dallas Store
In-store ITs

Fax
Inv data-sharing
E-mail

In-store ITS

POS scanning
Inv management
Admin
HRM
Energy management
Local marketing

Source: Powell, T. C., & Dent-Micallef, A. (1997). Information technology as competitive

advantage: the role of human, business, and technology resources.

5.1. Use of IS and IT in Tesco

Technology is the heart of the business at Tesco which improves customer's shopping
experiences and strategic decision (Tesco Careers, 2009). Tesco collects customer experiences
by using checkout process and new technology self checkout process (Tesco Careers, 2009).
Moreover, Tesco's Customer 'Club card' loyalty scheme provides a vast database of customer
information in which has 16 million members (Davies, 2013). Tesco also collect the data by
using their web page registration form and tracking sales data which is processed in marketing
research, marketing purpose (Tesco PLC, 2014). Furthermore, Tesco use a number of IS for
supporting their stores, loyalty card, car insurance policy system such as RFID systems, CCTV,
order-processing systems, scheduling systems, hand-held devices, financials and HR software, ecommerce and e-business systems, supply chain systems and communications technology (Kelly,
2009).

6. Strategic Goal

Generally organization uses three types of strategic management support system to achieve its
goals; first, management information system (MIS) which are routine reporting system used to
control and monitor business, second, decision support system (DSS) that is used to solve semistructured problems and finally, executive support system (ESS) which provide generalized
computing and telecommunication facilities to senior manager for monitoring and controlling a
business (Laudon & Laudon, 1998: 601-602).

6.1. Tesco: IS support to achieve Strategic Goal

Tesco have five vision and strategy in their business such as a growing business with full
opportunity, wanted and needed around the world, applying skill globally, full modern and
innovative idea, and finally inspiring, earning trust and loyalty from customer, colleagues and
communities (Tesco PLC, 2013). Tesco use electronic data interexchange system with their
computer system which can control all activities and even temperatures of fridges and freezers.
Likewise, information technology help to manage supply chain system and cerate effective stock
8

control which offers available product for all customer, and the company can forecast clearly
when they need stock (Tesco Careers, 2009). In addition, Head Office can make strategic
decision about market segmentation to investigate every individual sales data, customer data and
staff information via internet by using digital information system which provide good internal
and external relationship (Kelly, 2009). Actually, technology operates all procedures in Tesco
where have a number of internal system and electronic links with their suppliers and about 5000
official user (Tesco Careers, 2009). Tesco business model is based on its core purpose which is
to create value to turn customers loyal for lifetime (Tesco PLC, 2012).

7. Current Business Process: Tesco

Tesco offers a variety of business process for their company which is administrated by their
board committee to take strategic decision and guidance. Tesco is providing private labeled
brand, retailing services, online shopping, personal financial, telecom services and customer
research business (Global Data, 2013). The company also produces products into their portals
which is namely tesco.com and Tesco Direct, and they offers the club card reward scheme to
achieve customer loyalty by which customer get valuable shopping pattern (Global Data, 2013).
Furthermore, Selected suppliers of Tesco started shipping goods with new tag system is named
Radio Frequency Identification (RFID), and Tesco already installed this RFID reader in 28
depots and 800 large stores which focus on trays, reusable assets, roll-cases, dollies and pallets
(Watson, 2005). In addition, Tesco built a new virtual subway store which is introduced a new
technology (Tesco PLC, 2014). Tesco (2014) explores their three new ambitions such as creating
opportunities, advancing health and decreasing food waste. In his effort, Tesco built a new
website named "TescoHealthAndWellbeing.com" that provides free health services for their
customer, and they are installing barcode scanner and automatic tracking activities to collect
customer feedback (Tesco PLC, 2014).

7.1. Impact of IS in Business Processes of Tesco

Tesco usually use IS to trade with customer and maintaining their stores in 12 countries. Now
there are no longer people to maintain business, only IS department's people can support each
country's business even which will be fast line support (Computer Weekly, 2007). Moreover, IT
ensure the best technical strategy which administrates the whole organization, and IS provides
employees and their customer a batter technology solution and supplies unlimited opportunities
to move around the business (Tesco Career, 2014). The new website of Tesco about health care
for customer which help to collects customer information such as personal detail, eating habit
and medical condition by which the company analyze customer information to achieve the goal
in future (Tesco PLC, 2014). Furthermore, Tesco is producing a new software is called NextGeneration Network to enable communicating employees each other and they can access in data
store more quickly and improve productivity and customer services (Cisco, 2009).

8. Competitive Advantage of Tesco

Competitive advantage indicates competencies, capabilities and resources which ensures

customer's attention and creates superiority among the competitors (Boar, 1994). It can be able to
a firm to use efficient resources due to superior knowledge and information and can increase
effective revenue, profit and productivity (Laudon and Laudon, 2012). Moreover, IS provides a
specific market focus and narrow target market by which companies can analyze closely
customer buying patterns, tastes and preferences, and they produce new products and services for
customer to get competitive advantage (Laudon and Laudon, 2012).
Tesco collects a number of batter quality data of customer and employees helping to operate
each country's store and understand its customer which is the greatest advantage for the company
(Computer Weekly, 2007). Moreover, Tesco is offering more batter shopping environment for
customer to use IS and IT for which the company achieve more international growth and Tesco
is using unique IS and IT assets to nationwide stores and distribution network to create online
service for customer is called Click and Collect grocery service (Tesco PLC, 2014). Reeves and
Deimler (2011) mention that the successful loyalty card program and online platform
demonstrate the power of experimenting business model of Tesco to customize proposing for
10

each store and customer segment which focus early warning in customer behavior to achieve
competitive advantage. Furthermore, the value chain and SWOT analysis of Tesco which have
shown successively in appendix A and appendix B.

9. Conclusion

From the above discussion, it is shown that a retail industry can take strategic decision and
planning for batter performance of organization by using of IS and IT. Information system is
critical asset for any organization to gain information, expand new business opportunity, increase
the business profits and improve customer value. Moreover, it plays a crucial role to acquire
competitive advantage. Tesco uses the IS and IT to develop their strategic decision, customer
value creation and build better performance for effective business which help to compete with
other organization. Therefore, IS and IT is a vital part in any organization to run the business
smoothly in this competitive business world.

11

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Davies, R. (2013). Buying Pizza? Expect a Healthy Reminder from Tesco: Supermarket giant
will use loyalty card data to see who is eating what. Daily Mail. Retrieved from
http://www.dailymail.co.uk/news/article-2331856/Tesco-use-Clubcard-data-eating-what.html
[accessed on February 9, 2014].

Euromonitor, (2013). Retailing in the United Kingdom, Euromonitor International.

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Grundy, T. (2001). Competitive strategy and strategic agendas. Strategic Change, 10(5), 247258.

Hill, C. W., & Jones, G. R. (2007). Strategic Management: An Integrated Approach. 7th ed.,
New York: Houghton Mifflin.
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Ives, B., & Learmonth, G. P. (1984). The information system as a competitive weapon.
Communications of the ACM, 27(12), 1193-1201.

Ivory Research, (2014). SWOT, PESTEL, Porter's Five Forces and Value Chain Analysis of
Tesco.

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form

http://www.ivoryresearch.com/samples/business-essay-example-

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Johnson, G., Scholes, K., & Whittington, R. (2011). Exploring Strategy: Text and Cases. 9th
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Kelly, P. (2009). Tesco: Use of IT and Information Systems-Introduction to MIS. Cengage

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[accessed

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Laudon, K. C., & Laudon, J. P. (2012). Management Information Systems: Managing The
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Management Paradise, (2014). A Competitive and Strategic Analysis with Core Focus on
Tesco and Sainsbury. Retrieved from
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the role of human, business, and technology resources. Strategic management journal, 18(5),
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15

Appendices

Appendix A: The Value Chain Analysis: Tesco

Porters (1985) value chain identifies a set of activities within the organization which together
create value for the customers. If the company wants to achieve competitive advantage by
delivering superior value to customers it must understand which activity are more crucial for
delivering value to the customers (Johnson, et al, 2011).

Support
Processes

Administrative Coordination and support Service

Collaborative Workflow Intranet
Human Resource Management
Employee Benefits Intranet
Technology Development
Product Development Extranet with Partners
Procurement of Resources
E-Commerce web portals for Suppliers

Primary
Business
Processes

Inbound
Logistics
Automated
Just-in-Time
Warehousing

Outbound
Logistics

Marketing &
Sales

Customer
Service

Online
Point-of-Sale
and other
Processing

Targeted
Marketing

CRM

Operations
Computer
aided
Flexible
Manufacturi
ng

Competitive
Advantage

Porter value chain

Source: Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior
performance. New York: Free Press

The Tesco value is their central strategy to achieve advantage such as delivery, offering great
value, rewarding loyalty, simplicity to complex market, club card scheme and price match
substitution on grocery home shopping. Moreover Tesco is providing touch-point, multi-channel,
16

staff awareness and credibility, long opening hour and easy parking which ensure to get
competitive advantage (Tesco PLC, 2009). Tesco PLC (2014) aim to develop the global supply
chain, improving products and range, growing brand and high quality supply base which is
possible only with the strong information system. Other approaches are end-to-end supply chain,
just-in-time stock for store, world class depot operation, borderless distribution, staff
productivity, cost efficiency and variety shopping trip (Tesco PLC, 2014).

Appendix B: SWOT Analysis: Tesco

Tesco offers wide range of operation and products which increase sales and the company's
growth to compete with their competitors. The strength of Tesco are global presence, strong
foothold and wide range of store format. Besides, there are weakness for Tesco which are
product recalls and decline operational performance. In addition, the opportunities are strategic
acquisition, strategic initiatives, positive outlook for e-retailing and industry recognitions.
Finally, the company also have some counterfeit product, sluggish global economy and highly
regulated financial services business. Furthermore, observing all the situation Tesco have more
competitive benefits if there is comparison among other retailers who are the main competitors
of Tesco (Global Data, 2013).

Tesco PLC, SWOT Analysis

Strengths

Weaknesses

Global Presence

Product Recalls

Strong Foothold

Declined Operational Performance

Opportunities

Threats

Strategic Acquisition

Counterfeit Products

Strategic Initiatives

Sluggish Global Economy

Source: Global Data, (2013). Tesco PLC (TECO) - Financial and Strategic SWOT Analysis
Review
17

18