Analysis Of E-business Strategies & Impacts On Profit: A Case Study Of Tesco Essay.

Research Question: Does the e-business strategies innovate service operations of Tesco and how it increase the profit level of the organization?

a. Analysis and critical evaluation of current e-business strategy and activities. (There must already be some significant e-business activity.)

• You decide how to carry out the appraisal, using your own selection or those techniques taught on the module.

b. Proposal and justification for a systems architecture to support e-business. (The organisation must have little or no significant e-business activity now).

• Summarise the applications that are needed.

• Outline their interfaces with each other, and any necessary standards.

• Explain how the applications differ from current systems.

• Identify the benefits and how they will be measured.

c. Migration plan to develop e-business capability from scratch.  (The organisation must have little or no significant e-business activity now.)

• Identify impacts on the organisation and changes to infrastructure.

• Identify major benefits, with suggestions for how to measure them.

• Identify major risks, with strategies to avoid or minimise them.

d. High level design for a completely new e-business application.  (Must be relevant to the needs of the organisation and not closely based on any existing system.)

• Explain the need and justify the design decisions in a brief report.

• Design to include systems architecture, functional requirements, technical interface requirements, data storage requirements and sample user interfaces.

• May consist mainly of diagrams and models.

e.Proposal and justification for an e-business strategy. (The organisation must have little or no significant e-business activity now.)

• Outline the strategy and summarise the main changes expected in the organisation.

• Implementation plan should show how the changes will be achieved.

• Identify the benefits and explain how they can be measured.

Over the period, e-business strategy has become one of the conclusive aspects of successful operation. In the cutthroat market place, organizations, irrespective of the field in which it operates emphasized on e-business strategy to gain competitive advantage. If the retail industry has been taken into consideration in this context, then it can be found that they are improving their productivity level with the frequent use of this strategy. However, there exists little evidence that has shown a positive association between effectiveness of e-business strategy and firm performance. Therefore, this specific study has aimed to execute a study with respect to the retail giant TESCO. The research question which will be used for this study is mentioned as below:    

“Does the e-business strategies innovate service operations of Tesco and how it increase the profit level of the organization?”

This research question is designed to measure the effectiveness of e-business strategies adopted by Tesco and its impacts on the organizational profit. E-business strategies comprise of complex technologies and tools, needs a reliable website and many others which require proper maintenance. In addition, analysis and illustration of above question will help to ensure the fact that customers of Tesco are satisfied with the provided e-services or not. There is a hidden fact in the above mentioned question such as whether the e-commerce strategy is technically economically feasible or not. Security is a major concept in e-business strategy to provide reliable and secure services to the customers. The organization should provide a user-friendly website, and that should be strengthened with advanced security applications such as encryption technique, the firewall application, and many others. In addition, personal and confidential information of the customers should be protected to maintain organizational reputation intact. This will help to identify the loopholes of the organization so that improvement areas can be identified. Higher customer satisfaction will help to maximize the annual profit of the organization which is very crucial for organizational growth.

Research Methodology

Research methodology helps to solve above mentioned research question with proper evaluation. In order to do that, the inductive approach will be followed including secondary data collection and quantitative data analysis technique. Inductive approach is useful to select appropriate research tool and technique that can help to collect data from reliable sources (Al 2013). Furthermore, this research approach also helps to analyze data with proper data analysis technique and for this, that is quantitative technique. Quantitative analysis technique records data from a large number of participants to add clear and better descriptions related to the selected topic. Moreover, quantitative data analysis technique uses statistical facts and numerical data to extract useful information from the analysis of e-commerce strategies used in retail business applications. This study will be conducted with Tesco. Five staffs and 48 customers of this organization are selected, and structured questionnaire will be distributed amongst those respondents. The responses will be measured through Likert scale analysis. Likert scale analysis measures the responses by giving the rank in between 1 to 5, where one signifies strongly agree and five signify strongly disagree (Eaton 2013). By the use of test-retest method validity of contents and facts can be checked. The entire data analysis will be illustrated in the following section of the report which will help to draw an accurate conclusion at the end of the work.

Introduction

Business running on the e-commerce platform is the key aspect to change the economy of the organization with positive growth (Mohapatra 2013). E-business has evolved the way of thinking of the business owners and offer new opportunities to achieve competitive advantages.

This report is presented on one of the leading retail industries of the world, namely TESCO to analyze the impacts of e-commerce strategies on the business performance of it. Integration of e-business strategies not only enhances the productivity but also encouraged higher customer satisfaction. Analysis of e-business strategies on Tesco is done to measure whether the integration of e-strategies into the business platform is effective or not.

Tesco Plc is general merchandise and grocery retailer has headquartered in England, UK. It is the third largest retail companies in the world regarding profits and second largest in the world regarding annual revenues.

Figure 1: Official Logo of Tesco

(Source: Tesco.com. 2016)

This organization has a simple vision, and that is to provide the best quality products at reasonable cost to the customers. In UK, Tesco serves through 66 operators every second, so the major goal of the organization is to ensure that each customer experiences best quality service on each visit. According to the survey, Tesco earned $116 billion (72 billion pounds) by operating through 6,243 stores in almost 13 countries worldwide (Tesco.com. 2016). However, the competitors such as Asda (owned by Wal-Mart) have an annual sale which is eight times larger than Tesco. In addition, other competitors like Sainsbury also hold in the second position in this global retail marketing world. Tesco had almost 27% market share and dominated both the online and offline grocery market, but the presence of these grocery Giants force this organization to expand with new and unique opportunities. Therefore, Tesco.com launched their first e-commerce website Tesco Direct (Tesco.com. 2016). On this platform, more than 8000 products are available from sofas, beds to fashionable clothing, electronics and may be more.

Management Report

Significance of E-Commerce Strategies

Figure 2: Conceptual Framework of E-Business Strategy

(Source: Solaymani, Sohaili and Yazdinejad 2012, pp-255)

Mohapatra (2013) opined that all the information related to products, its features, prices or any discounts made in it is easily transmitted through EDI system which has significant advantages such as faster transmission of data with higher accuracy, complete information about each transaction and enhances the flow of communication inside the organization. As the information are transmitted through an electronic system, ordering of products and services have become easier and economically feasible. The major advantage of adopting e-business strategies is that it can streamline the procurement process and standardize trading procedures through advanced computerization (Fernie and Sparks 2014). Errors and delays in the purchase process are reduced at larger extent. In addition, buying organizations can compare the information of products provided by various organizations on the e-commerce platform which proves as an effective distribution system to match customers’ requirements satisfactorily. Higher adoption of e-business strategies, electronic information sharing and enhanced web capabilities improve the decision making process. 

Analysis of E-Business Strategy of Tesco

According to Colla and Lapoule (2012), e-business strategies handle the business operations of networked digital systems. Organizational authorities of Tesco use the documentation and codification activities in a digital form. In addition, electronic networks help to manage the flow of information to provide unique quality business services. It helps to adapt new technologies and tools that can change the existing service and business model in a unique way. Utilization of e-commerce technologies provides potential benefits to Tesco such as can reduce transaction as well as operational cost, increase the visibility, improve customer service and enables market expansion. Ghezzi, Mangiaracina and Perego (2012) identified that the primary reason for becoming world's top leading retailer organization is that effective integration of e-commerce strategies with business applications.

Figure 3: Major Components of E-Commerce

(Source: Lapoule and Colla 2016, pp-250)

This e-commerce platform helps to establish direct links with the customers by providing new kinds of online services and offers new services. This kind of strong relationship with the customers lowers operational cost, develops loyalty and provides valuable and authentic information about each product to the customers. Magnusson and Sjoberg (2014) acknowledged that by providing a user-friendly website, Tesco allows the users to view products and its detailed features in a colored electronic catalog and can fill out the order form by simply putting the credit card details. The emergence of computer including the implementation of information management system in these e-business strategies has significant positive impacts on industrial purchasing. Furthermore, online facilities of e-commerce strategies not only help to locate resources properly but also locate products and services that match customized requirements within fixed price range (Hirt and Willmott 2014).  Three primary operations conducted over the e-business strategy in Tesco are as follows

Background of the Company

Production Process: This includes procurement and logistic operations, replenishment and ordering of products, processing of transactions and production control. The business sellers use desktop publishing web software development tools to create commerce enabled contents so that products can flow from system to transact for further operations (Carrillo, Vakharia and Wang 2014). The data warehouse system including database application gathers all the personal and financial information of the customers so that products are shipped and delivered in time.

Customer Focused Process: This includes marketing and promotional activities of products over the internet. Tesco also promotes their brands on social media platforms such as Facebook, Twitter which helps to draw more consumers towards the organization (Hubner, Kuhn and Wollenburg 2016). Moreover, the employees present in the retail analytic operation searches the browsing history of consumers to analyze their buying patterns and needs. This helps to meet customer requirements as well as organizational needs properly.

Tesco has integrated one of the best functional strategies in this e-commerce platform by launching CLUBCARD for their potential customers. Since 1995, the introduction of CLUBCARD helps to track customers’ data from personal details to buying patterns (Tesco.com. 2016).

Figure 4: CLUBCARD of Tesco

(Source: Tesco.com. 2016)

In order to meet the needs, an organization established a predictive model with the use of warehouse technology and logistic system. This predictive model allows the stock controllers to gain access to sales uplift forecast. The customers who use Tesco services, CLUBCARD holders gain 1 point for every dollar they spend to buy products. This strategy makes the organization leading retailer organization of UK.

Table 1: Online Business Model of Tesco

(Source: Fernie and Sparks 2014, pp-150)

By analyzing the online business model of Tesco, it can be stated that the e-business strategies of this organization help to earn maximum profits by benefiting the suppliers, buyers, and customers. 

Suppliers who help to meet business needs and requirements properly can be provided real time data and information related to products and service, helps to enhance the decision making process. Economic interactive findings allow searching for similar products in other organization so that bargaining becomes easier (Solaymani, Sohaili and Yazdinejad 2012). The suppliers are allowed to search for particular products and try to provide relevant information to the buyers in order to make impactful decisions.

Using the flexible and reliable e-commerce platform of Tesco, buyers can also view the product ranges, its features from similar organizations and examines the price request modifications of the ordered products. The e-business platform provides products' information through buying guides or electronic brochures which are an effective marketing channel to reach to the customers globally (Huang and Benyoucef 2013). Use of electronic data interchange system allows the buyers to access information of goods and services from anywhere in the world.

Analysis and Evaluation of Present E-business Strategy of TESCO

Mass customization strategy of Tesco provides the opportunities to create specific products for individual customers as per their needs and requirements. In addition, this e-commerce platform creates direct links between the suppliers and customers which allow the customers as well as suppliers to gather detailed data on each others' needs, buying patterns and much other relevant information. 24/7 online support is very useful to meet customers’ demands by optimizing their queries instantly (Shemi and Proctor 2013). Customers are also provided various options to compare and choose best products at reasonable cost. All these advancements help to maintain customers’ loyalty as well as can attract new customers towards the organization.

The potential barriers faced by Tesco while carrying out the e-business strategies are summarized as follows

Technical Issues: Security is the major concern on an e-commerce platform. Unfortunately, the absence of proper security applications such as firewall, intrusion detection system, encryption technique allows the unauthorized users to hack confidential information of the customers stored in the database and organizational crucial information as well (Chiejina and Olamide 2014). DDoS (Distributed Denial of Service Attack), SQL injection attack blocks the distribution channel by inserting malicious viruses in it. These types of attacks halt the legitimate users to use the online services provided by the organization. Not only this, but hackers also steal the confidential information of the customers such as credit card and debit card details which are a greater threat to organizational reputation.

Societal Issues: The IT infrastructure needed for e-commerce implementation is not cost effective at all. Advanced technologies needed to run the e-commerce operations smoothly increase the operational as well as business cost (Afshar Jahanshahi, Zhang and Brem 2013). In addition, skilled personalities required to handle this new system with greater reliability increased overhead cost of Tesco. As a result, customers’ issues are overlooked and not properly solved.

By evaluating the impacts of e-business challenges faced by Tesco, following recommendations are built up

Security Enhancements: The organization should adopt advanced security application tools such as firewall, intrusion detection system and encryption technique to make the organizational and customers' information protected from the unauthorized users. These security tools should be placed in between e-commerce server and internet so that each incoming and outgoing data packets of the network system can be monitored before entering into the main system. In addition, the digital signature technique should be used protect the system from malicious attacks.

Significance of E-Commerce Strategies

Training and Education: Inductive training session is needed for the employees of the organization to make them understand about new e-business strategies and its uses to gain higher customer attraction and satisfaction. This will help the employees to optimize customers’ problems with effective ticketing solutions.

Central Technology and System: Without using different systems for each technology, a central system should be used which can integrate order management system, dispatch system, tracking system and customer support system altogether. Integration of multiple systems can seamlessly synchronize all the information related to products, services, and customers throughout the organization.

Conclusion

By analyzing the e-business strategies adopted by Tesco, it can be concluded that this enhances the business operations with significant growth. Reliable and user-friendly website with enhanced logistic and procurement operation helps to provide best quality retail services to the customers all around the world. Customer centric approaches such as the launching of CLUBCARD help to maintain customers' loyalty and draw more consumers which maximize organizational profit.  However, while implementing the e-business strategy in the internal application, business authorities have to face lots of challenges such as security vulnerabilities, and poor understanding of employees slows down the entire business operations along with the development of e-commerce applications. Therefore, it becomes very necessary to reshape the existing e-commerce model of the organization, especially in retail industries, to offer potential benefits and opportunities to the customers by maintaining their needs on highest priority.

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