Business at work
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C) Data
Over 10 million customers, over 60,000 products and 586 stores
Current Management Information
Data held on mainframe, PC or on paper
Internal data analysed using SAR reports and MAS analysis tool (see below)
External data received by EDI or on paper
Planned Data Warehouse
Data collected from Tesco operational systems and external sources, and
stored centrally to provide one consistent source of information
Data is stored on customer behaviour, product performance, branch
performance supplier performance, depot performance
Data held at lowest level to enable ad hoc groupings,
e.g. salt sales in stores by the seaside last Easter.
D) Analytical tools
Current Management Information
Mainframe based
FOCUS - report generator
SAR - report viewer
MAS - Tesco-written multi-dimensional analysis tool
PC Lotus suite - spreadsheet and database applications
Planned Data Warehouse
A simple interface with the information using the score card concept, with
top level measures and capability to "drill" to the level of information
required to support decisions
IT populate the Information Warehouse and users control their reporting
requirements
Logical access to information, with user choice of level, groupings,
stores, products, measures, and other parameters
ICT systems used in store operations.
IT is essential to the running of a modern store. It is used for planning,
monitoring and auditing store operations. In fact, the logistics of running
a major store would be severely hampered without IT, and the expansion to
Superstores and Hypermarkets would have been difficult without modern IT
developments.
Tesco stores vary greatly in size, from small Express stores covering 2,500
square feet to giant hypermarkets covering 120,000 square feet. The product
range depends on the size of the store, and varies from 2,000 lines in a
small store up to about 40,000 lines in the biggest. Computerised Store
Merchandising and Planning systems ensure that Tesco get the right products
to the right store, and get the right amount of space on each shelf within
a store. This allows Tesco to get optimum sales for the space allocated to
the product, and gives the customer the most appropriate range of products.
A store can monitor what has been sold through the scanning operation at
the checkout. The introduction of barcodes and scanners not only allows
items to be checked out more easily, but it provides information that is
constantly fed back to the store's computer for the monitoring of sales,
both in terms of stock depletion and money taken.
Barcodes and scanners provide several benefits to company’s customers:
As purchases are no longer entered manually into a cash register, accurate
pricing is guaranteed.
The scanning till is faster, reducing the time for which customers have to
queue by about 15%.
Produce is now weighed at checkouts, removing the need to queue twice (once
for weighing and once at the checkout) as used to happen.
Improved promotions may be offered, such as Multisavers.
The customer gets an itemised till receipt giving details of the product
purchased, price, weight (if weighed), total cost and method of payment. It
also shows the store telephone number, plus details which will trace the
sale quickly if a customer has an enquiry.
Tesco benefits as much as the customer from the new systems. Notably:
Improved transaction accuracy: operator error is removed; fraud is limited
as there is no opportunity to enter a lower price on the keyboard.
Improved customer service - customers are important!
Improved productivity. There is no need to label each item with its price,
which can now be displayed on the shelf edge near to the product. Removing
separate weighing stations removes the need for a manned point in the
produce department; customers move through the checkout faster.
Selective promotions can be initiated.
Stock levels can be reduced as the exact quantity held is always known and
re-ordering can be made more accurate
Wastage of perishable goods is reduced, as they too can be ordered more
accurately.
Monitoring sales analysis and the effectiveness of promotions provides
valuable information for Tesco buyers and also the company's suppliers.
Every product has a unique number, the European Article Number or EAN.
This number is allocated to each product by the Article Number Association,
which oversees the operation of the numbers for all businesses in the UK.
The number can be found below the bar code. The bar code is a
representation of that number in a binary form that can be read by a
scanner. The scanner uses a laser and measures the difference in reflection
to the laser of the bars and spaces.
The EAN and barcodes normally consist of 13 digits, although there may be
only eight on smaller products. The first two digits are a national code,
representing the marketing country. The next five digits identify the
supplier of the product and the following five identify the product itself.
The final figure is a "check digit" based on the other twelve numbers,
which allows the computer to validate the code.
The introduction of IT in shopping has been matched by banks. This has
resulted in new developments in payment. The simplest of these is that
cheque details can be printed out by the till, based on the information
used to produce the receipt. Credit card vouchers can be printed similarly,
and credit card details read electronically from the card.
A further advance has come with Electronic Funds Transfer at Point of Sale
(EFTPOS). This allows Tesco to transfer money from a customer's bank
account or credit card account automatically. Two developments that have
come from this are the debit card and "cashback".
Debit cards are a means of purchasing without cash or a cheque. Unlike
cheques, there is no limit to the amount a customer can spend with a debit
card as the transaction is automatically checked at the customer's bank
and, providing there are sufficient funds in the customer's bank account,
the payment is then guaranteed to Tesco. Unlike credit cards, the customer
pays at the time of the sale.
The facility to give customers up to Ј50 in cash also comes from being able
to check the customer's bank or credit card account, and has proved a
popular innovation with customers, who are saved the necessity of a trip to
a bank or cashpoint.
Within a store there are two crucial systems that enable Tesco to sell
products. These are the front-end system, called ProgreSS, and the
replenishment system, SBO.
The ProgreSS system holds pricing details of the 60,000 different products
that Tesco sells, their description, and details of any special offers on
them. It records details about each sale, not just the amount of each item
sold, but whether the price has been reduced, the amount of money tendered
and the change given. It also controls Clubcard processing, registering the
points earned on the card. Whilst the system manages the main grocery
tills, it also has the ability to be aligned to specific business
functions. So different "personalities" are used within the garage,
pharmacy, hot chicken counter and pizza areas.
The system is also used to control the back office and cash areas. During a
normal day's operation the system will transmit batches of information to
the mainframe systems at Head Office. This is primarily sales data, but
also includes details on reduction sales and Clubcard details, together
with daily totals and so on. In return it receives price changes, and new
and delisted product information.
The ProgreSS system runs on an RS6000 machine.
The stock replenishment system is called Sales Based Ordering (SBO). As its
name implies, it orders new stock on the basis of what has been sold. It
also manages in-store stock control and the central ranging and ordering
process.
Whilst there are some 60,000 products sold by Tesco, even the biggest
hypermarket will stock only about 40,000 of them. Some Express stores will
stock only 2,000 lines. The system keeps track of what products are stocked
and how much is in the store, and is then able to use this information,
together with the sales data, to calculate how much more should be ordered.
Most products have to be calculated every day, on a one or two day lead
time (the time between ordering and delivery).
The SBO system also manages the recording of all store-based stock
movements (for example damaged goods, out-of-code waste, transfers to other
stores), stock count scheduling and validation. The stores also use the
system to influence their orders, for example factoring up expected sales
of ice cream when a hot spell is forecast.
ICT systems used by Customer Service Centre.
The centre provides a central customer service operation for the company;
it handles requests for information and customer enquiries. It also handles
the management and administration of Tesco Clubcard, and the processing of
orders for the Baby Catalogue and the Home Shopping service.
The scale of the operation, and the efficient organisation of staff to
provide exceptional customer service, requires the extensive use of IT both
in telephone and information systems.
To give you an idea of the scale of company operation, Tesco employs over
400 staff, both full and part-time. The Clubcard loyalty scheme has over 10
million customers. In a typical week Tesco get 100,000 telephone calls,
5,000 letters, and 1,500 e-mails from customers, and company generates
7,000 outbound letters to customers.
Tesco uses IT to manage 100,000 calls a week, both to organise the calls
efficiently and to provide information on the timing and length of calls
for planning and monitoring purposes. Among the systems Tesco uses are:
ACD - Automatic call distribution (Meridian)
This system manages the way calls get routed to Customer Service Centre staff. Calls into the centre are distributed to ensure that call queues are managed effectively. Real time monitoring facilities provide information on service levels.
Call forecasting and scheduling system (QMax)
The distribution of calls varies significantly throughout the week. This system is used for forecasting when calls are likely to be made. The information is then used to schedule staff availability so that they are there to take the calls.
IVR - Interactive voice response
This is a menuing system on the telephone to filter out those calls that can be handled without an operator. The customer selects various options so that calls can be transferred directly to the appropriate service or person.
There are many ways in which IT provides and organises information for
Tesco. For example :
Customer services have systems to assist in logging customer enquiries,
handling responses and tracking progress on outstanding issues.
Tesco has an addressing system, based on the Post Office Address File, that
enables accurate addresses to be captured quickly.
Tesco has a knowledge base on an intranet to help staff deal with customer
queries. This contains frequently asked information about the company’s
stores, products, services and policies, as well as general information
about nutrition and healthy eating.
Management reporting is used extensively to provide information to the
business on customer concerns. Tesco is now looking at new technology as a
way of pro- actively reporting on any serious issues that emerge requiring
close, urgent attention.
Orders from Home Shopping customers may be received over the telephone, by
fax or via the Internet. These are collated by store and go through a
delivery scheduling system which plans the most efficient delivery route,
and are then transmitted to the stores for packing and delivery.
The Clubcard system enables staff to deal with customer queries related to
the service. This involves managing a large number of routine calls with
regard to changes of address, lost cards, and so on. IVR systems are used
to intercept these routine calls so that they can be handled automatically.
A1
Alternative approaches which might enable the business to better meet its objectives.
The retail grocery market is intensely competitive today and no serious
contender can afford to rest on its past achievements. This should
encourage Tesco to pioneer many new ideas. By listening and responding to
customer needs, Tesco will continue to bring in new ideas and services. Its
latest venture, with the Royal Bank of Scotland, launched in November 1997,
is to offer customers competitive financial services through its stores. It
is fifty years since Jack Cohen opened his first self-service shop, and we
expect Tesco stores in fifty years' time to be as different from those we
know today as Tesco’s current stores are to the stores of fifty years ago.
Non-food retailing is a major part of Tesco strategy. Tesco is increasing
competition and offering customers real value and choice in all areas from
sportswear to software, electricals to spectacles. By introducing these
ranges to more of company’s stores Tesco also offer customers the
convenience of shopping for great value non-food along with their food and
household goods.
More choice in-store includes many new lines for the home and garden,
motoring and leisure, fashion and cosmetics. Opticians, mobile phones and
health and beauty are examples of departments that have been expanded to
meet customer demand. Tesco relaunched its clothing range to offer better
value, quality and choice.
In this year Tesco should continue to bring its customers big names at
competitive prices. Last year, for example, Tesco sold 14-inch Bush TVs and
Vodafone, Orange, One 2 One and Cellnet mobile phones at record low prices.
Film and batteries came down by 30% and cuts of between 15% and 50% are
being made on stationery, pet accessories, video tapes, CDs and DVDs and
many other popular products.
The convenience of shopping for non-food alongside food is what Tesco
should offer customers. At the start of the year Tesco already had 90
stores trading with full non-food offer in the UK. During the year Tesco
should increase this as much as possible through extensions, refits and new
store development programmes.
Through these programmes Tesco will have more Tesco Extra stores including
its newest at Newcastle upon Tyne. It is Tesco’s first UK store to be
designed and built to hypermarket blueprint, using many of the elements
which Tesco has found to be successful in European and Asian stores. It
has given to the company the opportunity to introduce a much wider range of
non-food products to the UK, giving its customers even more choice when
they shop at Tesco.
Through innovating and investing for its customers Tesco is leading the way
in new forms of retailing. Tesco is the largest on-line grocer in the
world, and through the rapid development of its e-business Tesco is now
offering customers real choice and value on the internet.
Tesco.com is new 100% subsidiary company that runs company’s e-commerce
business, which is an important part of company’s future strategy. Tesco
should ensure that it has a real focus, the relevant resources and can move
quickly.
Grocery home shopping business offers customers shopping on-line choice,
value and convenience. Hundreds of new customers are registering every day
and Tesco has the capacity to grow this business at a significant rate.
On the internet Tesco is not constrained by space as the store can be as
large as you like. Company’s Internet customers now have an exciting range
of non-food offers beyond food shopping - just a few clicks away. Tesco’s
new book store offers a choice of 1.2 million titles, with 50% off top
lines and Tesco has an entertainment store selling over 300,000 CD, video
and DVD titles.
Tesco’s European business is focused on the Republic of Ireland and the
four Central European countries of Hungary, Poland, the Czech Republic and
Slovakia accessing a population of 68 million people. In Ireland the
business is progressing well as Tesco near completion of rebranding
programme. And in Central Europe Tesco continue its rapid hypermarket roll-
out opening 11 stores and 1.3 million square feet in the year.
Regional focus and market leadership is a key objective of Tesco’s strategy
in Central Europe. Tesco is the only retailer in all four countries -
Hungary, Poland, the Czech Republic and Slovakia. Company’s portfolio now
includes 19 hypermarkets totalling two million square feet of retail space.
Tesco is meeting and stimulating demand in these markets as customers begin
to recognise the better choice, quality and value that Tesco offers.
Tesco is pursuing an active programme of store openings which will take the
company to 69 hypermarkets by the end of 2002, and will make the company
the market leader across the region.
The hypermarket blueprint is the focus of Central European activities. At
100,000 square feet or more, hypermarkets give Tesco the space to offer
customers extensive food and non-food ranges at outstanding prices.
Tesco is learning all the time. The format is internationally transferable
and adaptable to different regions, and part of the success has been to
supplement UK skills in grocery retailing and customer service with
international expertise.
In the Republic of Ireland Tesco should continue to make good progress.
Without the benefit of any new stores, sales increased by 6.1% in the year.
Cumulative sales growth since acquisition is now 20%, moving market share
to 23.3%.
Ireland and Central Europe are already a significant part of the Group
employing 27,000 people which will grow even further as Tesco move forward.
Asia is the second international region where Tesco is expanding. The Tesco
Lotus business in Thailand now has 17 hypermarkets and is well on the way
to market leadership. In South Korea, through Tesco’s partnership with
Samsung, Tesco now has two outstanding hypermarkets which are among the
highest turnover stores in the Tesco Group. Now Tesco should open its store
in Taiwan. These three markets will give to the company access to 130
million people.
In South Korea, a country where 50% of households own a PC and 78% a mobile
phone, the retail industry has huge growth potential. In 1999 Tesco
invested Ј142m in a partnership with Samsung, which brought two world-class
hypermarkets operating under a top retail brand as well as a number of
sites that Tesco will now develop. Tesco should t expand more hypermarkets
in next years.
Tesco now should move rapidly towards global sourcing, which will enable
company to buy quality products at the best prices and deliver them at the
lowest cost. Tesco has already set up three sourcing centres in Hong Kong,
India and Thailand. These now source 30% of Tesco non-food products
(excluding Health and Beauty). Tesco should move this higher in next
years, with the opening of a fourth sourcing centre in Central Europe.
As a student from Russia (I live in Kazakstan) I would like to see Tesco
further expand its activities in Eastern Europe, and therefore why not
Russia? At the present time there is nothing similar to Tesco on the
Russian market, so I think Tesco won’t have any problems to get into it.
It is difficult to suggest alternative approaches for Tesco’s strategy
because the firm is evidently doing very well. I would suggest however that
Tesco continues to seek markets overseas to further develop its growing
global presence.
As mentioned above, Tesco has been very successful over recent years, and
it is therefore quite difficult to suggest “Alternative strategies”.
However, from my I might suggest the following:
. Expansion overseas – e.g. Russia.
. Increase market share – e.g. merge with Safeway. If Walmart took over
Asda, why can’t Tesco take over Safeway, for example.
. Expand into new market / product – e.g. cars, travel.
. Rewards to staff, introduce a widespread – bonus or share ownership (if
Tesco doesn’t do it yet)
A2
Evaluation of the effects that the alternative approaches might have on the structure and functions of the business, and how it achieves its objectives.
Alternative approaches, suggested in A1 can affect the functions of the
organisation and how it achieves its objectives very much, but they won’t
really affect structure of the organisation, because Tesco’s organisation
structure is very good and there is no point of changing it.
Expand to Russia
If Tesco expands to Russia, in general, it is going to be only benefit to
the company. Of course first Tesco will have to spend some money to build
and open new supermarkets, but it is not going to be very difficult because
there are no other companies like Tesco. Big advantage of expanding Tesco
into Russian market is that straight way after it Tesco will definitely
become a dominant firm on market, because there are not very strong
competitors and very soon Tesco can become a monopoly on the Russian
market. Disadvantage of expanding is that Tesco can get failure as well.
Russian prices and British prices are very different, so if Tesco retails
goods, which are more expensive then in others stores, not many people will
by it.
Increase market share
Every single organisation wants to increase its market share, and the best
way of doing it is to merge or take over another company. And I suggest
that Tesco also could increase its market share by merging another
retailer, for example Safeway. Safeway is not as big as Tesco, so it is not
going to be very difficult to merge it or take it over. The advantage of
the merger is that Tesco will increase its market share very much (by 10%)
and two dominant firms of UK’s market joined together can easy become a
monopoly. The disadvantage of it that it is not very easy to do, because
now Tesco has 35% market share, and if it merges Safeway, Tesco’s market
share will be increased up to 45%. But British law says that firm which has
45% of market share is monopoly, so competition commission won’t be happy
about it and it will never agree with this merge.
Expand into new market
Non-food retailing now becoming a major part of Tesco strategy. As I said
before, Tesco is increasing competition and offering customers real value
and choice in all areas from sportswear to software, electricals to
spectacles. But still, I think Tesco didn’t get into one very perspective
market – cars. Cars are very important in our time and there is a very high
demand for cars in the UK. I think for Tesco it is won’t be very difficult
do get into this market, because Tesco is known as cheapest retailer in the
UK, therefore people will continue to by everything from Tesco, and cars as
well. But it could be easy and could be not, because currently there are
many different firms on this market, and what I think is that there are
could be some barriers to entry.
Rewards to staff – introduce a widespread
At the present time, many successful firms introducing new types of
rewarding to staff. What I suggest is that Tesco also should introduce a
widespread of rewarding to staff, for example employees could be awarded an
annual bonus, which they can take in cash, vouchers or shares. The
advantage of this type of payment is that if employees take shares, they
will be interested in good work of the company and if they take vouchers,
they will have to spend all salary in Tesco stores. So I think that it is
very good way of rewarding with all benefits to the company.
Affects of the alternative approaches
As I mentioned before, alternative approaches, suggested in A1 can affect
the functions of the organisation and how it achieves its objectives very
much, but they won’t really affect structure of the organisation, because
Tesco now has very good organisation structure with very good consultative
and democratic management style.
If Tesco expands to Russia and merges Safeway, there are will be “Operation
– Russia” department in the organisation chart. More people will be
involved to work for Tesco, so Human Resources department will become
bigger. After expanding to Russia Tesco easy can expand to other countries
of Soviet Union such as Kazakstan, Uzbekistan, Kirgiztan and so on. It also
will definitely help Tesco to prove itself as very strong multinational
firm.
List of resources
1. The main resource was Tesco’s own web site: www.tesco.com.
2. I asked Tesco for some information and they sent me it.
3. Web site: www.bized.ac.uk
4. Business for Vocational A level – book.
5. Newspapers
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Finance department
. accountants
. account technicians
. account clerks
Records all financial data
Chases up slow payers
Collects payments from customers
Provides information to external bodies
Advises managers and budget holders
Monitors and analyses financial data
Advises board of directors
Analyses costs
Production activities
Finance department
Research and development department
Marketing department
Corporate objectives
Demand of labour
. numbers of workers needed
. skills required
. location of employees
Supply of labour
. existing workforce
. skills shown through skills audit
. changes in productivity and working week
Human resources plan
This may require the use of one or more of the following:
. recruitment
. training
. redundancy and redeployment
BUSINESS ACTIVITY
Marketing
Finance
Administration
Human resources
Research & Development
Production
LAND
Labour
Capital
Enterp-rise
GOODS
OR SERVICES
WASTE
Chairman (non executive)
Chief Executive
Deputy Chairman
Company
Secretary
Marketing Department
Finance Department
Retail Department
Commercial Department
Distribution Department
Operations:
Ireland
Business
Activity
Managing director
Research and development director
Finance director
Marketing director
Production director
Human resource director
Production manager
Plant manager
Quality control manager
Production control manager
Assistant plant manager
Supervisor: materials
Supervisor: materials
Supervisor: buildings
Supervisor: mechanical
Supervisor: electrical
Section manager
Section manager
Section manager
Supervisor
Supervisor
Supervisor
Supervisor
Supervisor
Supervisor
Operatives
Operatives
Operatives
Operatives
Operatives
Operatives
Deputy
Chairman
Chairman
(non executive)
Chief
Executive
Marketing
Director
Finance
Director
Retail Director
Commercial Director
Distribution Director
Head of
Operations
Ireland
Company
Secretary
Section managers
Section managers
Section managers
Section managers
Section managers
Section managers
Section managers
Supervisors
Supervisors
Supervisors
Supervisors
Supervisors
Supervisors
Supervisors
Operatives
Operatives
Operatives
Operatives
Operatives
Operatives
Operatives
Dynamic/innovative culture
BUSINESS
CULTURE
Customer driven culture
Bureaucratic culture
Task culture
Risk averse culture
Technological culture
Person culture
Negative culture
Positive culture
Competitive culture
Power culture.
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Board of directors
Marketing Department
Distribution Department
Retail
Department
Employees in Retail Department
Employees in Distribution Department
Employees in Marketing Department
Mission statement
Business objectives
Divisional/departmental objectives
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