The Impact Of ECommerce On Tesco Plc Information Technology Essay

In 1919, Jack Cohen founded Tesco as he began to sell surplus groceries from a stall in the East End of London. On his first day, his profit was £1 with total sales of £4. In 1924, Jack sold his first own-brand product which was Tesco Tea and this was before the company was called Tesco. The name comes from the initials of TE Stockwell, who was a partner in the firm of tea suppliers, and CO from Jack’s surname. In 1929 Jack Cohen opens his first Tesco store in Burnt Oak, Edgware, North London. 1932 and Tesco Stores Limited became a private limited company. Two years later in 1934, Jack Cohen bought a plot of land at Angel Road, Edmonton, North London to build a new headquarters and warehouse. It was the first modern food warehouse in the country and introduced new ideas for central stock control. Furthermore, in 1947, Tesco Stores (Holdings) Ltd floats on the Stock Exchange with a share price of 25p, and in 1956, the first Tesco self-service supermarket opens in a converted cinema in Maldon. The list below shows further expansion by Tesco PLC within the subsequent years;

Annual sales exceed £2 billion

Computerised checkouts introduced into the first Tesco stores

1983

Tesco Stores (Holdings) Ltd becomes Tesco PLC

1995

‘Would I Buy It’ initiative is launched to ensure that products are always of the highest quality for customers

Tesco becomes the market-leading food retailer

Tesco Clubcard is launched

1996

Tesco launches 24 hour trading

1999

Tesco enters South Korea

Tesco launches a new on-line bookstore and on-line banking

Tesco publishes supermarket price comparisons on the internet

2000

Tesco.com is launched

2004

Tesco enters China

Tesco launches own-brand Fair-trade range

Tesco Broadband is launched

Tesco.com becomes first major British supermarket to enter music download market

2005

Tesco exits the Taiwanese market in an asset swap deal with Carrefour involving stores and operations in the Czech Republic

Tesco Homeplus launches

Tesco announces annual profits of £2 billion

2006

Tesco Direct launches

2009

Tesco launches www.tesco.com/clothing

Clubcard re-launched in the UK with £150 million investment offering customers the opportunity to double up their vouchers

2010

Tesco opens the world’s first zero-carbon supermarket in Ramsey, Cambridgeshire

Tesco opens its first ‘Lifespace’ mall in Qingdao, China.

More information on the history and progress of the company throughout the years can be seen on the company’s corporate website.

Here are some common Tesco logos that can be seen around;

http://t3.gstatic.com/images?q=tbn:ANd9GcQaFF1G-B2Pd3iXLWuhEoxiXI2BfXEPatERE12y9C–X7VSkScZ http://t1.gstatic.com/images?q=tbn:ANd9GcS9vEIPDWGJMiMAThPnTWaTjp_LHes8YvMuQ5z_T6EhEzgSlyix http://t0.gstatic.com/images?q=tbn:ANd9GcQqpNKamt2FQnmOZthlHgFaRLyzlO_oRZDKWZ72QS6agwBy811Jhttp://t0.gstatic.com/images?q=tbn:ANd9GcTGdVEEIbImv3nFiGQSkonLltz7w77rmlXaaTEEPeMovbxd5iBM http://t3.gstatic.com/images?q=tbn:ANd9GcTMe4aTQ6V4FOR4f6ULiORWC8nlEBcjLYJ-wu4ATwiFA8VpNt61

HOW TESCO USED TO DO BUSINESS.

In Tesco’s early days, as seen from the original operations, grocery products were sold from market stalls until the first Tesco store was opened in North London in 1929. Then in 1934, the owner bought a plot of land to build a new headquarters and a warehouse and introduced new ideas for central stock control. In 1956 Tesco opened a self service supermarket in a converted cinema in Maldon which meant that people could go in and pick their own items of interest from the shelves and make their way to checkout points or tills for payment. Initially, Tesco’s marketing operations would have involved the use of TVs, Radio, newspapers, mail shots and billboards. Then in 1982, computerised checkouts were introduced into the first Tesco stores and the company’s annual sales exceeded £2 billion. Here we can see the integration of computerised operations including the centralised stock control to get a picture of the early stages of e-commerce making its way into the business operations.

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HOW E-COMMERCE HAS TRANSFORMED TESCO’S METHOD OF WORKING.

With the integration of computerised systems in operations both at stock control levels, database and checkout levels, Tesco launched the Tesco clubcard which allowed customers to earn points from every purchase they made. This involved a brief registration of the customer’s name, phone number and address details and the issuance of a personal card but this also meant that the company now had a database of loyal customers and every time these cards were used by a customer, Tesco could tell what had been purchased in order to calculate the points but in the process, the company could make predictions about certain goods and items and they could also send in offers and coupons to customers based on what they thought each individual customer would be interested in, either based on a previous purchase or based on a new product. This greatly allowed customers who had the clubcard to relate to Tesco on an almost personal shopping experience, but the underlying factor here was in the use of this particular e-commerce application amongst others.

Then the company launched of the 24 hour trading in 1996, which at that stage had a lot to do with the application of computerised and electronic methods of operation, in ways that could maximise the efficiency of the company’s operations from the warehouses to the tills. This involved electronic methods of stock control to assist with constant replenishment when necessary, time management, use of barcodes, Television and radio commercials, coupons and printed flyers promoting the organic range, etc. All this time, Tesco was also busy expanding their International branches to as far as Asia and in 1999, the company launched a new on-line bookstore and on-line banking and also published supermarket price comparisons on the internet. Here again we can see that the company’s use of e-commerce is expanding at such a rate that competitors would have had to have their seatbelts well tight in order to catch up with this giant retailer.

In the year 2000, Tesco launched Tesco.com which basically began the whole Tesco/internet revolution of shopping online with Tesco for almost every household product that the customers needed. With an online platform to advertise and sell products, Tesco.com had made a way for the company to deliver its grocery goods and some other services to customers in the comfort of their own homes and without the need to go to the stores. This was the closest to maximum convenience both for the customer’s who could now shop anytime and have their goods delivered at conveniently agreed times, and also for the company who could now reach a wider range of people both socially and geographically while at the same time reducing traffic in the stores. Customers could pick from all sorts of products including the ‘free from’ products designed for customers with special dietary needs and there was just a wide range of flexibility for the customer regarding the whole shopping experience. Nowadays, the company can be accessed instantaneously via the World Wide Web on computers, laptops and even the mobile phone. Internally, the use of email, fax, databases, computer programmes, intranet and internet has enabled Tesco to maximise its operational capabilities as information can be accessed, processed and sent around important divisions within a short period of time. I.e. functions of purchasing, supply, accounts, management, marketing, sales, etc. Below are some Advantages and disadvantages of E-commerce to TESCO.

THE ADVANTAGES OF E-COMMERCE.

Elderly and disabled customers can shop within the comfort of their homes and all customers have access to a wider range of providers to choose from thereby enabling customer empowerment.

Heightened customer service as customers are enabled to find detailed information online, and intelligent agents can also answer standard e-mail questions in seconds. Also, reviews posted by other customers about the products purchased on a website can help with decision making for the customer. The use of phone and e-mail has also improved communications between the company and the customer as queries and enquiries are usually made directly via these mediums.

Customers also have a wider product range to choose from as they can view the contents of an entire store without physically walking around it, plus round the clock operations online which makes shopping accessible to customers on 24/7 basis.

Reduces Time and money spent as travel time and cost, to and from the store, is eliminated, and with online vendors selling different product ranges at different prices, customers can find a product that best suits their financial and qualitative demands. In some cases, companies will often offer the same products for less if it is purchased online.

E-commerce benefits for the company.

Globalisation in terms of product promotion and sales to reach a wider range of consumers.

More efficient inventory management and stock control to maximise product availability.

Just in Time (JIT) warehousing to eliminate Location and availability restrictions thus saving costs for both the company and the customer.

Corporate image to establish identity and trust which is necessary for direct sales and to affirm the brand image.

The use of computerised databases, fax, email, computer-aided designs, intranet and the internet as a whole has also equipped Tesco with some necessary tools for maximising operations and communications. From sourcing and dealing with suppliers of products via email, phone and fax, through to marketing towards in-store and online sales and promotions via Television, radio, electronic billboards, internet sites , and finally for customer support via phone, email, etc, e-commerce has completely transformed how Tesco works today.

THE DISADVANTAGES OF E-COMMERCE.

Security and privacy of personal information as a lot of people are still quite sceptical about using their personal bank details for shopping online.

Programmes like viruses could cause a website to shut down and could also affect customers’ computers as a result of using the website.

Product quality and delivery of items could be different from what the customer might be expecting.

Internet speed and bandwidth in certain areas may make it difficult for customers to use the website hassle free.

Staffing. The more e-commerce improves, the less human labour that is required to carry out certain tasks and this can cause a lot of human positions to become downsized or rendered totally obsolete which is not favourable to the workers.

This has also led to the addition of new skill sets (to cope with new operations) which could mean new staff, new job roles and titles, and in some cases also involves retraining current staff in order to keep up with technological changes and all these have had its financial costs to the company coupled with the financial costs of implementing the hardware needed for particular e-commerce- related upgrades.

There have also been some social costs as a result of e-commerce as there are now new job roles and titles which people have to adapt to via a cultural change. Also, since most items can be sold online to a much wider audience while cutting the costs of traditional retailing methods, a company does not have to spend so much on an expensive High Street presence and this in turn means that the traditional social gathering of shoppers is gradually fading away.

RISKS INCURRED IN INTRODUCING E-COMMERCE TO THE ORGANISATION

Social Risks.

In addition to the potential loss of revenue that declines in employee productivity can create due to certain applications of e-commerce, an inappropriate use of the company’s resources can also put a strain on business infrastructure and therefore result in performance and availability issues, causing users who are participating in work-related activities to experience a slow down.

Information risk is another social risk that is impacted by employee use of company resources for personal reasons. Protecting information assets from destruction, loss and corruption is an important preventative measure. As employees use the internet for activities such as shopping, social networking and web surfing, the threats to the company information assets are greatly increased. If employees are using these devices to access personal e-mail accounts or shop online, or are using their work e-mail accounts in relation to shopping, phishing becomes more likely. Phishing can result in many damaging scenarios for enterprises such as loss of customer data, loss of enterprise intellectual property and damage to enterprise data.

Social risks on the part of the customers can involve trust for a company in using their services online, putting out their personal information for transactions on-line, and even a change from the old tradition of shopping to a completely new system of doing things.

Unregulated on-line buying could become a significant social problem as e-commerce spreads. The compulsive buying tendencies of certain consumers coupled with their affinity for the Internet is cause for special concern. Beyond inefficiency in markets, there will be social costs from reduced productivity, personal bankruptcies, disrupted families and ruined lives. Chasing the problem with credit and psychiatric counselling will be expensive both in terms of tax dollars and human lives. By way of prevention, existing fair trade practices prohibiting deceptive promotions and pricing should be extended to e-commerce. Fortunately, many people recover from addictions on their own and many more can learn the self-control required to avoid them, with a little help. Software developed within the Internet community could help on-line consumers maintain self-regulation. It could extend ‘bundling’ by automatically totalling purchases across sites and sessions and provide a running on-screen meter of expenditures and time spent shopping, to promote self-observation. Automatic filtering of sites, types of products, or product stimuli (e.g., jpg files with product images) that foster excessive purchases would reduce exposure to shopping stimuli. To bolster the judgmental sub-function, shoppers could be prompted to make a shopping list before entering e-commerce sites and receive on-screen warnings when they surpassed referential norms or family budgets. Self-reactions could be prompted by forcing shoppers to re-allocate budgets, relate unplanned purchases to initial shopping objectives or respond to remonstrative e-mails from significant others before completing a purchase.

Financial Risks.

All companies face financial risk, even if they only operate via the Internet. E-Commerce companies may face a harder time securing external financing because they may not have a lot of physical assets to use as collateral or indicate their long-term viability as a company. Banks and other lenders may require a higher level of personal capital involvement by owners and officers before lending money to the company. Generating a positive daily cash flow may also be difficult because of the fees involved with website protection, hosting, electronic shopping carts and credit card companies. These fees are required by vendors of E-Commerce companies and cannot be avoided. To mitigate these risks, E-Commerce companies must employ accountants or use a public accounting firm to ensure that no internal waste of cash is going on and all expenses are relevant to the operation of the company.

Since there are regulations surrounding data protection, consumer protection, distance selling regulations, etc, the company faces a huge financial risk if any of these security measures are breached, and such measures could potentially cause the business to go bankrupt. In general, the security systems needed in place to ensure safety of customer information as well as physical infrastructure of setting up an entire e-commerce system, failure of the hardware and/or software, attack via virus or computer hacker, fire and flooding all poses serious financial risks to the company if the revenue does not meet up with the expenditure used to secure these factors.

THE IMPACT OF E-COMMERCE ON ITS CONSUMERS.

E-commerce has completely changed the way people look at making purchases and spending their money. It has certainly had some positive as well as negative impacts on the consumers. The Tesco system has been active in making sure that the consumers experience the positives while almost making the negatives non-existent.

This system of commerce has affected consumers in the way that many people can now do most or all of their shopping on-line and within the comfort of their homes or anywhere with a computer and internet connection. This can especially come handy for people with very busy lifestyles, the aged or disabled people. This has translated as a kind of empowerment as people can make purchases round the clock and even have their goods delivered at suitable times as well. Also, customer service with e-commerce has enabled consumers to have access to a wide range of specific and detailed information about their goods and purchases online. Intelligent agents can answer standard e-mail queries in record time and the use of help desk software allows human expert services to be expedited with minimal stress.

Consumers can now also make use of a service that allows them to fully customise their products and services in contrast to buying in a store where products are usually merely standard. E-commerce has also allowed people who would otherwise not be interested in the physical side of technology to have somewhat basic ideas of the systems they need to operate in order to make use of the e-commerce systems which in turn is a kind of education in terms of having that new knowledge of how things work.

In the case of the Tesco club card, consumers have been greatly impacted as they feel a personal connection with their retailer of choice that seems to give something back in the way of points and also make relevant offers based on previous purchases or potentially relevant products.

All in all, from the stores using electronic check-outs, centralised stock control, etc to the website where consumers just place their orders and wait for delivery to their doorsteps, e-commerce has had a generally positive impact on its consumers.

HOW TESCO MET THE CHALLENGE OF NEW TECHNOLOGY.

IT systems have played a key role in helping Tesco deliver strong profits. The Tesco website, in which it has invested heavily in during recent years, saw profits leap by 21 per cent to £48 million, on the back of an almost equal percentage sales rise. Online grocery orders have lifted by 10 per cent to £7.5 million. The company has always been ahead in embracing and implementing new technology with an open-minded and optimistic approach despite the social and financial challenges. Advanced in-store queuing systems had improved shopping for 26 million of its customers by reducing checkout lines, Tesco said. The supermarket chain is using heat-sensing technology to monitor lines at tills. It also said improved scanners, better self service tills, and checkout cameras were helping it reduce queues. Self-service checkouts now account for a fifth of all of Tesco transactions. The supermarket took steps in 2008 to ready its technology for the Christmas sales peak, implementing ExpeTune performance management software from Macro 4 to manage its mainframe servers. Tesco has invested heavily in IT over the years, and this has played a strong role in improving sales, the supply chain, and efficiency across the company. The company has an in-house designed supply chain application, running on IBM system p servers based on UNIX. The company’s five-year old warehouse in Croydon, which serves south-east London customers only and was also the company’s first dedicated online hub, became profitable in 2008. The warehouse handles orders with a value of over £1 million per week. Sales in non-food business Tesco Direct increased to £180 million from a virtual standing start. The business, which is part of Tesco’s general merchandise division and has 11,000 items for sale online, had start-up costs and initial operating losses totalling around £25m this year. Tesco said it is aiming to absorb these losses. Launched in 2006, Tesco Direct experienced IT problems that reportedly delayed its opening. The supermarket giant has 3,000 staff working at its offshore site in India, providing IT and administrative support around the world, including the recently launched US operation Fresh n’ Easy. The Indian site provides software development, as well as accounting and payroll services. Tesco also has a long running application development deal with Steria-owned outsourcer Xansa, targeted at ensuring its systems are up to date and in line with business needs. In store, Tesco continued to benefit from thermal imaging technology at checkouts, which speeds up queues and helps the store manage the flow of people and direct them to other tills. The company has a ‘one in front’ policy, meaning that if more than one customer is in front of anyone at a checkout; it aims to open another till if one is available.

Outsourcing and partnerships are other ways in which Tesco has been able to meet new technological challenges. In the case of their energy consumption, Tesco has outsourced the monitoring and regulation of this function to the HSE group to achieve the targeted reduced energy and carbon emissions by monitoring the plant and systems installed to ensure that they run and operate at their optimum. Their scope of services include: Energy monitoring, Plant performance, Management information, System improvement, Minor works and Maintenance. Their key objectives were To monitor the performance of new technologies, To provide feedback on plant and system performance, Management information is provided in a usable format and on a timely basis, Incremental improvements that will contribute to ongoing savings are identified and implemented, To be able to share findings from system performance, technologies and innovations.

“We have learned from our experience that there is often a frustrating gap between being able to identify the technology that is needed – whether on low-energy lighting or lower-emissions refrigeration – and being able to purchase and apply that technology commercially. We will work with our suppliers to reduce and hopefully eliminate this gap.” Sir Terry Leahy (former CE0 of Tesco Plc).

With the pace of consumer technology rapidly developing, Tesco now stocks an increased range of electrical products in-store and online. Responding to consumer demand, the retailer introduced Tesco Tech Support in 2008, making friendly faces available to expertly answer consumer technology queries, guiding them to choose the right product. Continuing to grow, the service now has more than 1000 expert advisors across the UK at 200 Tesco Extra stores and a dedicated UK call centre. The new http:///www.tescotechsupport.com website was created by an in-house team at FuturePlus. The site supplements dedicated online editorial content with all-new “how-to” tech videos fronted by Tesco Tech Support employees.

THE SECURITY ISSUES IT ENCOUNTERED.

TECHNOLOGICAL ISSUES.

Some of the technological security issues the company encountered include the following which could have had disastrous effects on the organisation;

User authentication: A user name and password combination, where the password can vary in length and include numbers and characters. Remember to include a system that prompts employees to change their passwords at regular intervals.

Viruses: A computer virus is a bug that affects your computer in many ways, it can come from almost any source like disks but mostly from the internet or emails, it can copy itself and manipulate a computer’s files. It can alter or even destroy company computers and also the computers of users who log on to such services. By installing anti-virus protection, the company can protect against viruses from affecting the computer.

Firewalls and performance: Effectively, installing a firewall can slow down the computer depending on what it does, and where it came from. Firewalls are programs that monitor traffic, which is the incoming and outgoing data communication that takes place when the user is online. The software needs to be configured to permit or deny communication with websites, as chosen by the user. In general, once configured, there is no real impact on the performance of websites, but it can take time to set up the relevant permissions between the site and the user’s computer.

SSL (secure sockets layer) and HTTPS: A popular implementation of public-key encryption is the Secure Sockets Layer (SSL). Originally developed by Netscape, SSL is an Internet security protocol used by Internet browsers and Web servers to transmit sensitive information. SSL has become part of an overall security protocol known as Transport Layer Security (TLS). Https is not a separate protocol, but refers to the combination of a normal HTTP interaction over an encrypted Secure Sockets Layer (SSL) or Transport Layer Security (TLS) connection. This ensures reasonable protection from eavesdroppers and man-in-the-middle attacks.

RSA Certificates: A digital signature is basically a way to ensure that an electronic document (e-mail, spreadsheet, text file, etc.) is authentic. Authentic means that the user knows who created the document and you know that it has not been altered in any way since that person created it. Digital signatures rely on certain types of encryption to ensure authentication. Encryption is the process of taking all the data that one computer is sending to another and encoding it into a form that only the other computer will be able to decode. Authentication is the process of verifying that information is coming from a trusted source. These two processes work hand in hand for digital signatures.

FINANCIAL ISSUES.

Prevention of Hacking and Identity Theft: Identity theft is when a hacker gets through to a user’s computer via a virus and acquires their personal credit card details, and then uses the details for their own personal use. Hackers get in to the computer system through ports, when the ports are open the hacker can get in, this may be with viruses or other means, users can stop hackers by installing a firewall onto the computer which blocks off the ports so hackers can’t get through.

Payment systems: using payment cards online has always given cause for concern as the information contained in them is quite delicate. The introduction of services like PayPal have ensure that consumers have a reasonable amount of confidence in using online service that require some sort of payment for products or services.

PHYSICAL ISSUES

Physical issues include factors like access to both company and customer information by employees through mediums that make it all too easy to tamper with, destroy, or steal such sensitive information.

HOW THE COMPANY TOOK ADVANTAGE OF NEW DISTRIBUTION AND SALES CHANNELS.

With the integration of computerised systems of data processing and communications, the company had expanded their capabilities in the area of sales and distribution. Products could be sold through channels like the Television, on radio, on billboards, via email, via the internet and affiliate websites, flyers, coupons and even by text on mobile phones. Tesco used all their available resources and avenues to make sure their products were available to a large consumer base both locally and internationally. The application of call centres which made use of numerous phone and computer systems meant that the process from marketing to sales could be run by a unit of dedicated employees.

Tesco’s distribution network in the UK was among the best in the world. The company emphasized the importance of putting resources to the maximum use. Tesco stores in the UK received two deliveries a day one a “fill up” delivery and the other, a “top up” delivery. To keep the things simple for customers as well as for employees, Tesco adopted several new systems such as electronic shelf edge labelling all across the store, through which prices could be changed from a single central point; self scanning tills; self service pre-packaged products, coffee shop on mezzanine floor and also merchandising of fresh produce. Things like next day delivery and named day delivery have also been effective in maximising the use of these new sales channels. For existing customers, email marketing and direct mail marketing to provide special offers and promotions to customers is important. According to Humby (2003), e-retailer Tesco.com use what he describes as a ‘commitment-based segmentation’ or ‘loyalty ladder’ which is based on time of purchase, frequency of purchase and value which is used to identify 6 lifecycle categories which are then further divided to target communications:

“Logged-on”

“Cautionary”

“Developing”

“Established”

“Dedicated”

“Logged-off” (the aim here is to win back)

Tesco then use automated event-triggered messaging can be created to encourage continued purchase. For example, Tesco.com has a touch strategy which includes a sequence of follow-up communications triggered after different events in the customer lifecycle. In the example given below, communications after event 1 are intended to achieve the objective of converting a web site visitor to action; communications after event 2 are intended to move the customer from a first time purchaser to a regular purchaser and for event 3 to reactivate lapsed purchasers.

THE IMPACT OF E-COMMERCE ON THE BUSINESS.

Selling through websites is the fastest growing method of trading worldwide. There are two main forms of e-commerce: Business to business (B2B) trading where companies trade and exchange information using the World Wide Web. Business to consumer (B2C) trading where companies deal directly with customers through web pages, and ordering is carried out online.

Trading online enables businesses to reach much wider audiences while cutting the costs of traditional retailing methods. For example, an ‘e-tailer’ does not have to spend so much on an expensive High Street presence. Although the outlay on developing a good website is substantial the potential benefits can be enormous.

There have been impacts on direct marketing where promotion of products and services have been enhanced through direct, information rich, detailed and interactive contact with consumers. The cost of delivering relevant information and digitized products to customers over the internet is results in substantial savings to the company when compared with traditional methods of delivery.

The process of delivery, cycle times, administrative work and time spent on other fu