The purpose of this blog is to examine Tesco from an information systems strategic alignment perspective. In my undergraduate degree I took a module on food retail and supply chain management. I want to use some of the information I learned in this module to look at Tesco and their use of IT and investigate whether it aligns with their strategy.
In recent years Tesco’s strategy has been to brand themselves as a discount retailer. Evidence of this strategy can be seen in the way they design and lay out their stores. They display signs in store displaying products which they sell at a cheaper price than their competitors. The type of packaging they use to display products in store also lends itself to the discount retailer look. Tesco also retail and market their own brand products which are cheaper than other better known brands in the market.They display meat in crates placed in the cold counter and display milk in metal crates which are wheeled from the storeroom out to the cold display unit. Tesco also make use of shelf ready packaging to display most of the products in their stores. All of the forms of display above give Tesco’s stores the look of a low cost retailer making them look almost like a warehouse in appearance. The use of shelf ready packaging like those listed above also means that staff spend less time filling shelves, this in turn increases an individual’s productivity meaning less staff are needed, which drives prices down further again. This virtuous cycle means that Tesco’s chosen strategy of a discounter is being continuously reinforced by the savings being made.
How does IT fit into Tesco’s strategy of being a discount retailer?
Their use of self service checkouts is one such example of this. Tesco’s self service service checkouts were originally introduced in 2002 and are now used in nearly every Tesco store in the world, they even went as far as to open their first completely self service shop in Northampton in 2010. These self service checkouts allow customers with only a small amount of items to quickly complete their transaction and avoid lengthy queues in the process, they also allow Tesco to reduce the number of checkout staff needed in each store (again reducing costs which are eventually passed onto the customer, reinforcing its discounter image further). In my opinion Tesco’s self service checkouts and the image they present lends itself to its discounter brand strategy also, more up market retailers like Marks and Spencer and Supervalu haven’t taken to self service checkouts in the same way as they don’t align with their respective strategies. In Supervalu’s case they have presented themselves as a local and Irish owned company.
Tesco have also utilised heat-sensing technology in conjunction with self service checkouts in its stores to monitor lines and to reduce the amount of time customers wait in queues. They have also introduced an online order system where customers can order groceries for delivery. They have also utilised IT in their supply chain to cut costs and increase efficiency. A new system of hand held computers was introduced to staff in UK stores to simplify the process of monitoring stock levels and orders of replacement products.
http://www.cio.co.uk/news/3204/technology-helps-tesco-beat-crunch/
In one of my previous blogs I examined the IT Strategic Alignment model by Venkataraman. https://sopinion8ed.wordpress.com/2012/11/06/it-and-strategic-alignment/ This model showed how different business domains depend on one another. I think the Tesco example and their use of IT can be applied to this model as their use of self service checkouts is dependent upon their continued dedication to reduce costs and present themselves as a discount retailer.
In my opinion Tesco have successfully aligned IT with their business strategy. Does anyone have any views or thoughts on Tesco’s use of IT?
So Opinionated ... 
Good piece Tesco gains a clear competitive advantage from its robust use of IT has placed them at competitive advantage as evidenced by their use of self service check outs. Alignment enabled IT has allowed them to carry on as a low cost retailer.
Tesco’s use of IT was very helpful to me on one occassion in my earlier college days when I was coming home from a student night out back in 2005. It was helpful to me as I was rushing home to make work and also my job was at risk if I was to be late on that occassion which is where Tesco’s use of IT came into play.. On the way home from a mates house I stopped off at a Tesco withdraw money from an ATM which I needed to pay for the taxi and went on into the supermarket to to pick up an isotonic drink which I needed to practically stay alive (LOL) as it was a heavy night. Celebrating end of exams. But as I approached the checkouts each one of them was full with customers checking out and paying for their goods.
At this stage the taxi was waiting for me outside the supermarket and I needed to pay for the isotonic drink as fast as I could so I could get home and make work on time. I was in quite a stressful situation as all checkouts were 2-3 customers deeps with full trolleys. It felt like Black Friday. So I began to panic. But, In my peripheral vision I noticed a vacant so called ‘self service checkout’ which I never saw before at the time and quickly used it to my advanatage as I only had one product to check out. So an initial wait of 10 minutes turned into 1 minute due to Tesco’s implementationof a self- service checkout which allowed me to make work on time in effect saving me from being fired. Till this day I owe that summer to the self service checkout that kept me in the job. Otherwise I would have been selling big issue magazine to strangers for less pay.
Interesting piece pm1083 especially on the layout of the actual store giving the customer a feel like they are in a traditional market for example ”They display meat in crates placed in the cold counter and display milk in metal crates which are wheeled from the storeroom out to the cold display unit” which allows them to cut staffing costs and giving the customer a more traditional and low cost feel as opposed to how Marks and Spencers would display theirs which would provide the customer with a more ‘snob value’ element to their shopping experience at a more increased price.
Nice anecdote Irishtechylad, it shows the value in these self service checkouts from a store management perspective in that it frees up checkout staff and allows staff with few items to complete their transaction as quickly as possible.
Very interesting blog pm1083. In one of my previous blogs I mention the use of Marks & Spencer’s ‘Plan A’ in which they develop a competent alignment of strategy. They do this by taking a more environmentally friendly approach. Take a look at this page: http://plana.marksandspencer.com/ It gives a good explanation of the concept. Hope it’s of some interest to you.
That plana from M&S is very interesting ctpk7. Good initial blog and anecdote aswel irishtechylad