Friday, June 18, 2010

TESCO to what extent do they enjoy an IT generated advantage? Where does it come from?

TESCO, this is getting complicated...(as a blog writer as well as for you dear readers) I promise that once the Information System sessions are over I will go back to a more day-to-day topics in this blog!

However, today's topic is: TESCO: to what extent do they enjoy an IT generated advantage? Where does it come from?

First of all: What is TESCO? TESCO is the largest supermarket chain in UK, and the second largest company in the food and drugs stories' industry in the world after Carrefour. it was founded in 1919 and is now present in 14 countries with 2,329 stores outside UK, and 2,329 stores only in UK.

TESCO has been characterized by being a value-for-money retailer since their commencements, which has been translated into different formulas to engage the customer and gain its loyalty: From the Green-shield stamps (every purchase you get a stamp and after several stamps you get cash or a gift) to the Club Card, with which the customers could accumulate points, convertible into vouchers, for every £5 that the customer expend for purchases exceeding £10. The importance of the Club Card as a way to collect data about TESCO's customers is crucial for the success of the company and created a trend among the mayor supermarkets and retailers worldwide, and it helps to understand my conclusions for the question at the end of this post.

Since March 2006, TESCO is undertaking a IT standardisation in order to prepare the path for a global expansion. Business processes and systems used for in-store planning in the UK have been chosen by Tesco executives as part of the global standardisation programme.


TESCO has developed an operational model - a set of processes and technologies that is going to be used in its business around the world. For IT this involves four main areas: planning and architecture, development of systems, deploying systems, and operation and support of IT, as the Tesco group IT director Colin Cobain said, "Technology is an important part of the international growth strategy. What we want to do is create a common suite of processes and systems that we can use in all of our countries." This common suite of processes are integrated in what has been defined as "Tesco in a Box" . Philip A Greenwood, Head of IT Development and Support at Tesco defines it the following way: "We are now in the process of implementing a set of applications that include retail ERP (Retek), Teradata Data Warehousing Solution, reporting tools from Business Objects, a human resource solution from PeopleSoft and a finance package from Oracle Financials. We want to integrate these new systems and maintain a common database at a central location in the UK. The integration exercise will be known as ‘Tesco in a box’.
What TESCO is now doing is a good exemple of a necessary ERP, in first place, and a reasonable implementation in order to gain efficience by using the same processes throughout the thousands stores that TESCO has.

But, can we say that the expansion and success of TESCO is due to a policy of high investment in IT when the retail sector has been historically not a big spender on technology?

My conclusion for this post is that TESCO has a track record of using IT to perform better and with the time this has resulted in a competitive advantage: A case that illustrates this was when the company rolled out technology to improve its "one in front" initiative, consisting in installing cameras that use sophisticated thermal imaging technology to measure and predict customers' arrival at checkouts, enabling managers to react in real-time to ensure the right number of tills are open to deliver the best possible service to customers.
To analyze where does this advantage come from, in my opinion, TESCO, since the time they lauunched the Club Card, has understood the importance of the data that is collected from its clients when there is a purchase and the club Card is used. they have been able to understand customers' trends, analize the kind of buyers that benefit from the discounts or promotions and create a very detailed segmentation of its customers, which is clearly a competitive advantage of the use of IT in this sector.

What can be better for any retailer than knowing who, when and how its customers are purchasing their products? Hence, based on the experience of TESCO, it is fair to admit that a huge investment in IT is widely justified and has brought to the company a outstanding market position and revenues.
Today's song was posted in my FB profile some time ago, but here it goes again...This is the last dance

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