Now a day, the use of technology has become rapid and has been spreading like a virus throughout the world within seconds. There is no point in criticizing this technological development because it reduces manual work by which it saves a lot of time. People in different fields have been using these computer systems embedded with special programs and applications to complete a work. In the similar way, a system which was introduced three decades ago is driving giant organizations in achieving success. These systems are said to be "Management Information Systems". There is no point in misunderstanding the difference in information systems and management information systems. Information systems are used at various levels in an organisation but the information systems used at management, strategic levels are said to be management information systems.
This report evaluates the use of management information systems in "Tesco Plc" and specifies how the systems have helped in improving the performance of the company. Generally, optimization should be the primary goal of management information systems. A company also targets to achieve optimization by using integrated management information systems. In this context, "Tesco Plc" is tested on whether it has achieved optimization or not by analysing it on three main functions which are associated within the concepts of integrated management systems. If the company had performed all the three functions, then it is said that, it had achieved optimization with the support of integrated MIS. This report there by concludes giving out the necessary recommendations needed, references used.
Background of the company- Tesco Plc
Tesco Plc is a British based company which has established itself about a century ago and is the holding the No.1 position in the retail industry in United Kingdom, 3rd largest in the world. It has different types of businesses under its belt like it has entered into banking, telecom, fuel, tech support, club cards etc. But the entire operations of it are primarily based on retail markets, has also opened different types of stores across United Kingdom like Tesco Express, Tesco Superstores, Tesco Extra, Tesco Metro etc. It is a very popular brand across the world having opened 2,482 stores in United Kingdom, 2,329 across the world. "The revenue of Tesco Plc has crossed £62.54 billion while the operating income is just around £3.41 billion. Tesco Plc occupies 30.5% of the entire retail industry leaving its competitors-ASDA (16.9%), Sainsbury's (16.3%), Morrison's (12.3%) far behind its reach" as reported by the Tesco in their Preliminary Results 2009/2010 Additional Information (2010). The corporate strategy which Tesco has opted is simply outstanding and appreciable. It implements vertical integration strategy through which it has entered into its subsidiary businesses, not relying on the third party for trading. All the customers of Tesco are given an option of opening personal accounts with Tesco bank which will make them debit the money from their retail provider directly.
Now, this giant organisation has been leading the retail industry since years and for continuing with the same pace requires renovations, improvements, advancements in strategies, proper use of technology. Don't you think whether Tesco has implemented Management Systems by now? It has definitely implemented MIS but the report further evaluates on whether MIS is responsible in Tesco's success or not.
Information systems are those systems which "address the activities involved in gathering, processing, storing, distributing and use of information in operational, managerial and strategic levels in an organization". (Silver et al, 1995)
Fig1: organisational structure
(Source: created by the author )
"Technology and organisations mutually adjust to one another until fit is satisfactory". (Liker et al, 1987)
The above pyramid shows us the different levels persisting in an organisation. Information systems are placed in all these levels having Transaction Processing Systems at the operational (bottom) level, Knowledge Based Systems at the knowledge level, Management Information Systems at the managerial level and Executive Information Systems at the strategic (top) level. Apart from these systems, there are a lot many systems which are introduced in the recent years like the Experts systems, Data warehouses, Office Automation, Enterprise Systems.
Management Information Systems
According to Philip Kotler "A marketing information system consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers". (2006)
At management level, decision making is the primary functionality of the managers. Decisions can be made by analysing the information on sales, profits, customer's choice etc. All this information should be provided to the management in an organisation. Generally, this data is gathered on the activities at the operational, knowledge levels and are sent to the higher levels. This process is automated with the emergence of information systems. Now, as information systems are placed in each level, it has become the responsibility of these systems to "gather, process" the data that is entered into the systems at the operational, knowledge levels and the data is sent into the systems at the management level. The responsibility of the systems at management level is to "analyse" the data that is obtained from the below levels and help the managers in decision making.
Fig2: Overview of Marketing Management Information Systems (Source: Functional Management Information Systems by Ashwin Dedhia)
The management information systems are designed in such a way that they are only meant for analysing, processing, gathering data. They do not have any other functionality other than that is required for the organisation. These systems are well securitized as the entire data needs to be confidential at all the levels. The analysing process takes place by considering the inputs of the data at operational level and converting the data obtained into graphs, pie charts, Venn diagrams which actually represent data in a simple and understandable format which allows the managers to make quick decisions on the performance of the organisation. The MIS will also play an important role in analysing the decisions of the managers.
For Example: When a decision in taken on the pricing of a product, the information systems analyse the new price policy with the previous records on the price of the product and gives a resultant on the profit/loss the company gains in a particular term period on adopting the new price. These decisions are later entered into the system and are shown to the executives in the strategic level.
Thus, management information systems help out in performing critical activities, by which a lot of time is saved in making decisions. These systems even proved to be efficient enough in implementing the important decisions with a guarantee of being successful. Because of this reason, almost all the giant organisations in the world are making use of these systems which ultimately resulted in relying on machines rather than human brain.
Fig3: Performance Management
(Source: Taken from http://businessmp.com/Documents/whitepapers/)
Application of Management Information Systems in Tesco Plc
Generally, Management information systems need to be in place where managers are involved, to help them out in their work. So, it is important for the company to keep in place all the management information systems in every store throughout the world. This is a very big challenge which involves a lot of money and technology. But, Tesco neglected the pain caused by the challenge and implemented the information systems successfully. From the bottom level to the top level, it has automated the complete organisation with information systems. This was a clever move from the management of Tesco to place information systems throughout the organisation which helps them finish work quickly.
Coming to the application of the MIS, there are few systems which were implemented recently and are driving the company efficiently. The "One-in-front" camera systems which are implemented at the management level to reduce queuing time of the customers, and notify the managers whether or not to open an extra checkout for billing. About a decade ago, Tesco was facing criticism on the waiting time of customers at the checkouts which consumed a lot of time for billing the purchases and people used to queue for consistently long time. Checkout staff also spent a lot of time on recording the data on the queuing time of the customers. This was immediately identified by the management and had come up with a "One-in-front Camera" system. According to this system, a checkout lane will be opened if a customer has more than one customer in front of him/her in the queue. More till based systems are introduced to reduce the queuing problem. These systems work in the following way- above the checkout lanes, ceiling mounted infra-red solutions are used to detect the number and behaviour of customer groups at the checkouts. These cameras use thermal imaging technology to judge the number of customers arriving at the checkouts, providing the managers to react in real-time to ensure the right number of tills are opened. These systems even calculate the average queue length, average queue time and overall performance of the store against "One-in-front" systems. These systems do not record images of the customers even though they are cameras, but are only used in intimating the flow of customers from time to time and alerting the managers for opening a new checkout. This helps the managers to spend less time on the checkout staffing and concentrate on customer's assistance. (As reported by Tesco in their Queue Management in TESCO stores report, 2009)
Apart from "One-in-front" management information systems, the managers are also provided with few other information systems like the "Symbol MC50" which was introduced with an idea to improve the work efficiency of the managers and to reduce the time spent by the managers at their desk. Tesco faced a situation in which the managers of the store had no time to spend on the sales floor as they need to spend it on their desk by analysing data, connecting to the business IT applications, e-mails etc. So it planned to integrate the work of the managers by introducing mobile devices which can be used from any place. This led to the launch of Symbol MC50 devices which integrate Tesco's Enterprise business applications and also included support for e-mail, phone, scheduling/calendar. This device also integrates into other applications like inventory management and has many capabilities/features like data capture, voice telephony, peer to peer, private bank exchange, smart battery, device level management, wireless, and security options. These devices are also built in with barcode scanners which scan the products very quickly than expected. Therefore, the use of these systems gives the store managers the freedom to spend more time on the sales floor by even simultaneously concentrating on their daily activities. This improved the profitability in each store where the systems are implemented and indulged managers in improving customer's experience. (Tesco case study on Tesco store managers reclaim 7-8 hours with Symbol MC50, 2006)
All these systems are implemented at the management level, but there is a system which is under development for the executives at strategic level. This system is designed to solve a situation which Tesco is currently facing. It is required to reduce carbon emission from all its stores for safeguarding the climate and environment. The managers of Tesco are given a deadline to introduce software to solve the problem but have failed in deploying the software within time. There was no accurate data on the amount of carbon emitted from each store because of which it may take further time to be launched but these systems have created a trend in organizations to adopting systems which eliminate waste products that effect the environment.
It is necessarily important that all the systems that we have seen till now at top levels are connected with the lower levels of the organisation also. This was considered by the organisation long back and had centralized all the IT applications.
Critical Evaluation on the performance of Tesco
Tesco is a service based industry providing services to the people throughout the world in different sectors. It provides its service through its stores situated in different locations around the globe, website. Entire organization follows a hierarchical structure in which all the lower level people are controlled by their above level people. This structure is implemented in every store of Tesco in which the store managers, area managers become the top level beneath them are the shift managers, beneath them are the employees (crew members).
The performance of Tesco has been consistently good through years but it has shown good results after the implementation of MIS. It has achieved optimization by performing all the three functions which are necessary. The systems had helped the company in improving its performance in different means like the "one-in-front" cameras systems have reduced queuing time because of which the processing at the checkouts have become quicker and gained customers satisfaction. This created an impact on the customer in choosing Tesco over other retail shops.
Providing information across various departments
The implementation of centralized IT applications like oracle financials software used for invoicing, peoplesoft HR software and Terradata Management Information Systems used for measuring budget targets helps in providing information on the status of the company in different locations by making use of a single network. The company aims to have a common technology in tandem with common business processes to remain in the competitive market and to continue to run as a group but not individually facing the competition. By adapting to the process of deploying centralized purchasing systems and processes in a country, it has eliminated the risk and threats on entering into foreign markets. On a country wise basis, centralizing all the departments in the organisation helped the Tesco organisation in improving its productivity and competing with the market.
Facilitate decision making at the three tiers of management.
The symbol MC50 devices have helped the managers to step on to the sales floor which ultimately allows him to take control of the stock present in the store and to make note of the sales of the products. This will thereby improve the performance of the store as the manager is directly stepping in to investigate the activities in the store. The decision making is facilitated at all the three levels in the organisation as the managers use the systems like symbol MC50 to contact the higher level management if in case of a debacle. These devices are integrated to all the applications in the organisation which allows the managers to connect to any of the departments in case of any need.
Serve as effective means for managing business processes
Integrated MIS has also achieved this functionality as the use of MIS has been successful in achieving effectiveness in managing the business processes of Tesco. As the business market of Tesco is huge, it has many processes which it needs to carry on consistently. As a part of Tesco, Hindustan Service Centre is established in Banglore, India which is the main hub of all the management information systems. It also has a call centre facility in interacting with the customers throughout the world. This service centre is responsible for integrating all the processes happening in all the stores throughout the world. Club cards are a service product of Tesco which are used by the customers during shopping. The MIS has helped the club card processing easier because of which millions of customers are using the cards effectively. One of the most important processes in Tesco's is managing the supply chain. Tesco has introduced an integrated MIS for retail suppliers which helped the supplier to directly deliver the stock to the stores without delivering them through the warehouse. This improved stock control and efficient handling of returns.
Unique Corporate Strategy
One of the other areas in which Tesco is not critically evaluated is regarding its mergers and acquisitions. It hasn't merged with any other biggest companies or acquired any bigger firms while its expansion throughout the world. It has expanded on its own in all the countries with no support from the related country's retail industry. Wal mart (America's biggest retailer) has occupied ASDA (retail chain in UK) to enter the United Kingdom retail market. But Tesco has no such marketing strategy and has moved forward as a group. This has helped it achieve good reputation but took a lot of time in settling down in a country as it didn't know about their markets. Even though it took a lot of time, ultimately it has achieved profits and stood in the third place in the world. It might be in the first if it has amended its strategies over expansion throughout the world.
Not all organisations achieve success for a long time. The growth of the company gets saturated at a certain point of time. This has happened with Tesco too. The organisation has been established decades ago and had faced the same saturation situation but from time to time it tried to get out of the situation by implementing the latest technologies and following the latest trends. This is the reason why it implemented management information systems as they are very helpful in carrying out the business processes. Ultimately, the organisation has achieved optimization by implementing these systems. It has reduced manual power, centralized all the systems in all the stores, reduced costs in spending on qualified labour and incurred profits. "Considerably from the point of implementation of MIS, the revenue of Tesco has been raised from £1043 million to £2954 million" as reported by the Tesco in their Annual Report (2008) . The success of Tesco should not only be credited to the personnel management but it should also be credited to the management information systems which are used by the management.
Information systems are not 100% efficient. It is important to rectify the faults and correct them as soon as possible for a better growth of the organisation. The following are few recommendations which might be considered if needed-
Tesco issued club cards to its customers through which customers collect points on purchases made. These points are redeemed as discounts. While they are redeemed, the points are to be deducted but actually they are not getting deducted for many customers. This might help the customers but results in a loss to the company. So the software that is used in deducing the collected points needs to be revised and upgraded.
Tesco needs to be quick and effective in implementing the carbon management software to reduce the emission of carbon from its stores. For this, it should indulge in a contract with top IT companies like Microsoft, IBM rather than relying on its Hindustan Service Centre.
Tesco does not use Enterprise Resource Planning model which actually is more efficient and effective than ordinary models. As Tesco is expanding its services globally, ERP would fetch profitability through integrated MIS.
The marketing strategy of Tesco is poor in the foreign countries like India, Japan, Malaysia. Emphasizing on their cultural heritage in those countries would be a suitable way to improve marketing.