The Social Ethical And Legal Issues For Tesco

Tesco retailer store established by Jack Cohen in 1919, he has started selling surplus groceries from a small stall in London’s East End. Tesco first store opened in 1929, which incorporated as Tesco Stores Limited in 1932. The company introduce on the stock exchange in 1947. More expansion of stores across England during 1960s and also started gas/petrol stations in the 1970s. In 1982 Tesco stores introduced first computerised checkouts. Tesco has launched clubcard scheme in 1995. Tesco has regularly started open stores in Europe and Asia in the period of 90s. Tesco started 24 hour trading in 1996. Online banking and bookstore started in 1999 and in 2000 Tesco.com is launched. Tesco starts to introduced natural and fair foods trade, own clothing brands and non-food items like books, mobile phones, finance scheme etc. After the period 2006 Tesco penetrated into the U.S. market. (Tesco plc 2009)

INTRODUCTION

Tesco is top ranking retailers firms not only in UK, but around the world more then 13 countries their stores are spreads as large business network. Globally they have over 3700 stores and more then 440,000 employees are working in these stores.

Following are the names of countries where different stores are in operations:

1. United Kingdom/ Republic of Ireland

2. Hungry

3. Czech Republic

4. SLOVAKIA

5. TURKEY

6. POLAND

7. CHINA

8. JAPAN

9. MALAYSIA

10. SOUTH KOREA

11. THAILAND

12. INDIA

13. U. S. A

As mentioned in above para Tesco business setup starts from a small stall by Jack Cohen in 1919 and grown up gradually time to time with the implementations of different business strategies, policies, especially in technologies sectors and which cause different types invention in business planning and creation of opportunities for people around the world. Beginning from retail sector and then splitting into other areas like internet, telephony, insurance, home mortgages … etc. that gives the boost in order to take the excellent position in the market but now there are also huge competitor like Sainsbury and Asda also trying to capture the business markets. Therefore to lay down these competitors, with strong business strategy they also required Information Technology sector may also required to be improved. The Clubcard was the major achievement from Tesco in 1995. Through this loyalty scheme providing ease of purchasing to customers and also introduced online Tesco.com with internet shopping, Which helps for well maintaining of customers database and their needed products in the store. (Tesco plc 2009)

BUSINESS PLANNING AND STRATEGY

Tesco is providing vital role in the growth of UK business not from past but also have great future progress, strategy and making focus especially on five major areas on which they are long-term committed to improve customers demands and needs as per community environment.

The objectives of the strategy are:

Proving as successful retailer through out the world

Boosting business in UK on core basis.

Providing business in non-food items and as well as in food items.

Developing retail services i.e. Personal Finance, Telecoms and through internet Tesco.com

Satisfactory fulfill community demands and need.

(Tesco plc 2009)

TESCO COMPETITORS

At the moment Tesco has major competitors like Sainsbury, Asda and Marrisons. Tesco remain with 8% growth and the share of 31.5% as compare to their major competitors. Sainsbury and Asda maintaining their growth rate with share and increases of 16.5% and 16.8% respectively, but Morrisons remains constant with the increase sales of 4% from the last year. (Research Portals Ltd 2005-2009)

“Tesco is at the centre of the Competition Commission’s investigation into the UK supermarket sector, given its market share of 32%, streets ahead of its closest rival Asda which commands less than 17%.” (Independent News and Media Limited 2009)

“Tesco, well known as Britain’s leading food retail group with a presence also elsewhere in Europe, Asia and the United States has also been a pioneer online. UK Online Market Share Update in 2008 was: Tesco 27.1%, Asda 10.1%, Aldi (which doesn’t sell online) 9.5%, Sainsburys 6.9% and Waitrose / Ocado on 4.2%.” (E-consultancy.com Limited 2010)

TECHNOLOGY IMPLEMENTATIONS

TECHNOLOGY INFRASTRUCTURE

Tesco is using effectively using information technology in its area of business i.e. managing customer databases, product information update in inventory stock. Tesco is maintaining their customers profiling and history of purchasing products. Tesco introduce their clubcard in the early 90s by which they are providing discounts for their customers. Through clubcard technology they are collecting customer’s data like name, address, birthdays, households, daily requirements, frequency of purchase and analysing of customer history. These filed regarding database use for process to improve marketing both sales and purchases. Although that represented initially a significant cost in percentage of sale, it made Tesco gain market share and break even quickly. In 2001, the TESCO club card had 8 million users making 200 million in store purchases per day. Sainsbury’s has copied the move by launching its own loyalty card. Therefore, my opinion is that it is how the technology is used that really creates the advantage. Tesco did a good job at building its database, and targeting customers with relevant advertising, promotion and specific vouchers.

RFID & SPY TECHNOLOGY

Tesco is using technology that’s track customers buying any products in its stores. If any customer buy some product like toothpaste from stores then his of her picture taken because using of smart tags that’s trigger a CCTV camera when that product is remove from shelf. When that customer checkout from the stores then an other camera takes a picture which may also used for security staff to compare the both images in order to prevent the theft of product. Radio Frequency Identification (RFID) in which a small chips can communicate with detectors up to the range of 20ft away. The chip has some reading of unique serial numbers of details of that product. If not properly checkout from the point of sale then its triggers alarm. So, that product called as Spy Chip Technology because that caused an invasion of customer’s privacy and may be used to keep customers in stealth observation. In other way may be used for tracking the movement of product supply chain. Using RFID technology manufactures stepping a head the FRID tage may still works after that product have been bought. (Guardian News and Media Limited 2010)

CRM AND CLUB CARD

Customer Relationship Management is a key area for Tesco as it strives to develop the bond between themselves and the consumer. The Club Card which was introduced in the mid 1990’s and has grown in its popularity over the years, and has developed into a vital tool in the companies drive to create a loyalty culture with its customers. Tesco’s Club card program boasts 10 million active households and captures 85% of weekly sales. The simple proposing when developing the idea of the Club Card by dunnhumby USA, was:

Know and understand their customers on an individual basis

Communicate with them in a relevant way; and

Manage offerings so that the customer’s shopping experience is enhanced compared to what they have ever had before— with the client or with anyone else.

Through the data captured in the use of the Club Card, Tesco’s has been able to personalise the reward coupons precisely, to an extent that redemptions are in the 20-40% range. Thus customers are realising the benefits of using the Club Cards and further developing the customer relationship.

Pricing: a two billion dollar investment in the past five years has gone into reducing prices on items that are significant to different lifestyle groups.

Promotion: Tesco uses customer insight to evaluate the effectiveness of, and reduce overall cost of, their promotions. Armed with this information, they can find out which shoppers use them and which shoppers like them. If there is a way to focus promotions on best customers how they can take investment from promotions and return it back to the business. Which resulted in over 60% fewer promotions, reduced management cost, the redirecting of money back into the business (further contributing to price reduction), and more tailored, effective promotions.

Shared Insight: Tesco’s major consumer packaged good suppliers, media companies, researchers, space planners, and more, are given access to the customer information that is gained from the Club Card program.

THE INTERNET

Over the last few years Tesco’s has developed its internet site to a significant degree. Not only does it provide the ability to buy the goods from a normal store, but also a full suite of products and services including Car Insurance and Furniture. This is a compliment to the strategy to expand into the non-food sector. In the online space, tesco.com boasts 500,000 transactions weekly, totaling nearly two billion pounds in sales each year. The profitability, plus the size of the tesco.com business and the number of transactions it completes, makes tesco.com a truly unique online grocery store.

OTHER MARKET AREAS

In the area of telecommunications, Tesco have recently launched their own version of the internet phone (VoIP). Again further helping to promote its own brand further into the customer home. Finally, it is with interest that Tesco have launched a suite of “Office” style applications in a number of stores on a trial basis. These products are being launched at £20 each, substantially undercutting Microsoft’s own product. They will be Tesco branded, but suplied by a company called FormJet, which distributes the Ability and Panda’s software in the UK. This will serve two purposes, firstly to compete in a new market area, but secondly and more importantly to promote itself as the champion of fair trade in the eyes of the consumer advocating a better deal for its customers.

TESCO DEVELOP RFID – THE “GOOD”

Over the past five years, Tesco has been developing ideas for the new technology that is RFID, with a view to aligning it to its underlying business strategy.

The question is what is it all about and how does it all work?

Plus will it be successful?

In this article the aim is to look at the benefits of RFID and the positive implications for Tesco’s.

RFID

RFID stands for “Radio Frequency Identification” which is the simplest form the technology that provides a company the ability to tag and track items. However, the implications of this are vast. For example, stock movements can be tracked; items in transit can be monitored, therefore full visibility of all products in the company’s inventory can be viewed at any time.

RFID IMPLICATIONS

Reduction in product pricing:

Improved stock for customer’s availability through tracking stock level live in store, and the ability to automatically reorder when stock levels are low also able to track items en-route into store.

Wastage reduction in store and also better to understanding of stocks and the logistical supply chain.

Product re-ordering in controlled manner, delivery prior to stock outs, with a minimum of in store waste.

Improved service for availability of products not just what is in store, but also where items are located within a store, i.e. misplaced items can be tracked and placed where the customer expects to find them.

IMPLEMENTATION BY TESCO

Testing of this technology by Tesco has been underway for over a decade. With such a huge prize to be won, it is a key long term objective. The reality is that this process is likely to take another few years of testing. With an expected role out in circa 2010, there is still much left to do. Key issues centre around the huge cost of implementation and role out, as well as a full understanding of a cost/benefit analysis. Another major issues raised by Civil Rights campaigners is the “spy” potential of such technology. There are also issues with RFID data being manipulated by customers, and the possibility of hand held PDA devices editing the tag on a CD to read the price of milk.

CONCLUSION

At the end of the day it is only a matter of time before this technology is used widespread by Tesco and many other retailers. The benefits of such technology are vast, with the ability to deliver less waste and maximise availability, but at the same time reducing waste and keeping stock levels under control. The only fly in the ointment will be the cost and the time taken to make it work, and the real challenge will be the campaigners who are that this technology will be used to manipulate the customer……

TESCO DEVELOP RFID – THE “BAD” NEWS

As discussed in the previous article, RFID is a major technology breakthrough for retailers such as Tesco’s which is seen as a major tool for the delivery of the companies underlying strategy. Tesco’s Chairman Sir Terry Leahy placed this mission statement in the centre of one of the company’s annual reports: “Continually increasing value for customers to earn their lifetime loyalty.” With this in mind RFID will certainly deliver against this statement. However, the question here is:

What are the negative aspects of this technology and its implementation?

Will customers buy into this for the future or will they resist?

SPY TECHNOLOGY

A significant campaign has been headed by CASPIAN (Consumers Against Supermarket Privacy Invasion and Numbering), in which the “Spy” potential of this technology is explored. In essence the argument is that if items are tagged, the item can be tracked after purchase and can be used to “spy” on the consumer. Worse still is that with individual numbering of RFID tags, is that individual consumers can be tracked and profiled without the persons consent or knowledge. The possibility beyond this is very Hollywood like, in that through personal profiling that an RFID chip inside a persons clothing could be read by appropriately set up advertising board, to flash up adverts especially tailored for that individual. Further the individual can effectively be tracked everywhere they go. Sounds far fetched but this is entirely possible. Thus the personal intrusion and infringement on privacy is a significant risk associated with this technology. In fact Benetton has allegedly pulled its RFID program that was in development, due to immense public pressure. So the likelihood of RFID chips and several of them for that matter, being carried around by an individual is actually high, should companies continue to develop the technology.

OTHER ISSUES

There is a lack of cryptography, which means that the technology is open to significant abuse, such as changing the prices for a product, by altering the RFID chip. There are other even more frightening possibilities… How about the “smart mugger”, who will know what items you have on you and whether you are worth mugging or not! Plus Euros are (it has been alleged) fitted with RFID tags, so a mugger will know how much cash you are carrying! How about you walk into a car dealership, and the various RFID chip on you give away your name, address, financial history etc, the garage will immediately know how to treat you, e.g. the guy/gal can afford to be here or no they can’t!! Also corporate espionage is a possibility, with companies tracking other company’s activities and transactions. The implications are huge!

SOLUTIONS

The most obvious is to effectively “kill” the tag after the goods have been purchased, thus rendering the chip dead. There is a distinct possibility but to ensure the privacy issue is overcome, the technology would need to be fool proof. There are other possibilities, such as “blocker tags” which can provide privacy from intrusion outside of designated areas, for example. However, the possibilities associated with RFID tagged products are enormous. For example stolen goods can be tracked. There are even further possibilities for Tesco’s in that kitchens fitted with RFID technology and “smart shelving” can actually generate shopping lists, which could then communicate with the local store, and arrange delivery. Or if you “lost” an item in the house you could locate it. So it is highly likely that when the full potential of these chips is fully explored that people may well by pass the privacy infringement associated, as long as there are tangible (or believable) benefits. At the end of the day the UK has the highest concentration of CCTV camera in the world, and accepts this as it is perceived to be for the public good and safety, so will they be as forgiving of spy chip technology…. time will tell.

CONCLUSION

At the end of the day there has been a lot of exaggerated publicity and consequences of this technology. However, it must also be appreciated, that is used correctly the benefits could be vast. For Tesco’s in particular the technology is a threat to their very strong relationship with its customers, and they will need to be seen to be involved and driving the process to alleviate public concern on these chips. Otherwise they may not see the technology implemented as quickly as it otherwise may have been.