Tesco
966
Tesco
Tesco
Leading UK supermarket group, Tesco, can serve millions of Internet customers with home deliveries from its of its stores. In doing this it is not alone – its main rivals, ASDA and Sainsbury’s, also offer home deliveries driven by orders over the Internet. Tesco also runs an on-line bookshop. These are recent developments which have been facilitated by the power and potential of information technology (IT). Price cutting, an important competitive strategy in retailing, does not truly distinguish one food retailer from another, as price cuts can be followed by rivals, although creative advertising can suggest a price differential when one really does not exist. Supply-chain cost savings, also facilitated by IT, however, can be an important source of advantage and improved profitability. This case looks at how Tesco exploited IT in the early 1990s to drive competitive advantage. Since the case was written in 1996 events have moved on, but the basic strategic issues raised here remain pertinent and relevant. Tesco, for example, now shares live sales information with its suppliers and, by embracing IT themselves, more and more suppliers are linked electronically to Tesco. Again using the power of the Internet, e-markets allow any retailer to post up ‘confidential’ information but limit access to it through password-driven ‘firewalls’. Going beyond the advantages discussed in this case, the Internet allows retailers to invite suppliers to engage in bids or auctions when either the retailer has a specific shortage or a supplier has excess inventory. This case has two themes:
• •
the use of information technology by Tesco to strengthen its competitiveness, and the role of information technology in forging strategic linkages between Tesco and its distributors and suppliers.
Information technology has both reduced costs and strengthened Tesco’s competitiveness by improving its overall level of customer service. The case is designed to be used
Tesco
Tesco
Leading UK supermarket group, Tesco, can serve millions of Internet customers with home deliveries from its of its stores. In doing this it is not alone – its main rivals, ASDA and Sainsbury’s, also offer home deliveries driven by orders over the Internet. Tesco also runs an on-line bookshop. These are recent developments which have been facilitated by the power and potential of information technology (IT). Price cutting, an important competitive strategy in retailing, does not truly distinguish one food retailer from another, as price cuts can be followed by rivals, although creative advertising can suggest a price differential when one really does not exist. Supply-chain cost savings, also facilitated by IT, however, can be an important source of advantage and improved profitability. This case looks at how Tesco exploited IT in the early 1990s to drive competitive advantage. Since the case was written in 1996 events have moved on, but the basic strategic issues raised here remain pertinent and relevant. Tesco, for example, now shares live sales information with its suppliers and, by embracing IT themselves, more and more suppliers are linked electronically to Tesco. Again using the power of the Internet, e-markets allow any retailer to post up ‘confidential’ information but limit access to it through password-driven ‘firewalls’. Going beyond the advantages discussed in this case, the Internet allows retailers to invite suppliers to engage in bids or auctions when either the retailer has a specific shortage or a supplier has excess inventory. This case has two themes:
• •
the use of information technology by Tesco to strengthen its competitiveness, and the role of information technology in forging strategic linkages between Tesco and its distributors and suppliers.
Information technology has both reduced costs and strengthened Tesco’s competitiveness by improving its overall level of customer service. The case is designed to be used