2. Group Members:
W.M.J.H. FERNANDO - MS18901290
C. D. N. FERNANDO - MS18911572
K.D.R.S. PERERA - MS18907926
T. BANDARA - MS18908084
K.M.S.H.KARUNARATNE-MS18908152
S.K. BUKHARI - MS18908220
3. Contents
3
• About TESCO
• Question 01
o Porter’s 5 Forces Model
• Question 02
o Porter’s Value Chain Model
• References
4. TESCO
Tesco plc, trading as Tesco, is a British multinational groceries and general merchandise retailer
with headquarters in Welwyn Garden City, Hertfordshire, England, United Kingdom. It is the
third-largest retailer in the world measured by gross revenues and ninth-largest retailer in the
world measured by revenues. It has shops in seven countries across Asia and Europe, and is the
market leader of groceries in the UK (where it has a market share of around 28.4%), Ireland,
Hungary and Thailand
4
7. QUESTION 01
7
Any business should understand the internal and external environments in which
it operates. Porter’s 5 Forces model is used to analyse the external competitive
environment of a firm. Discuss how and why Strategic deployment of Information
Technology at TESCO case study in terms of Porter’s 5 Forces model.
9. IT Investments by TESCO
9
• Distribution system
• Electronic Point of sale (EPOS)
• Electronic Data Interchange (EDI)
• Pre planning supply schedules
• DSS for forecasting
10. Rivalry among Competitors
10
The intensity of rivalry among competitors in an industry refers to the extent to which firms within an industry
put pressure on one another and limit each other's profit potential.
● Competition between online and offline companies
● Level of advertising expense
● Powerful competitive strategy
● Degree of transparency
● Number of competitors
● Quality differences
11. Rivalry among competitors contd...
11
Tesco has overcome the rivalry among competitors by,
● Multiple store formats such as superstores, compact stores, metros, express stores make TESCO more
accessible and provide the unified experience.
● Not having to keep excess stock in stores allow the total space to be used for sales, huge benefit over other
competitors.
● E-POS helped to gain advantage over retailers like Boots and WH Smith where only certain products
contained barcodes.
● Barcode system eliminated the need for individually pricing products thus saved a lot of time when stocking
and restocking.
● Barcode system allowed price changes to implement rapidly and controlled from a centralized location.
● Inventory control and DSS helped the stores to be always stocked based on demand.
● Introducing Multi-temperature composite warehouses
12. Bargaining Power of Suppliers
12
Supplier power refers to the pressure suppliers can exert on businesses by raising prices, lowering quality,
or reducing availability of their products.
● Number of suppliers
● Size of suppliers
● Cost of changing
● Degree of differentiation of inputs
● Impact of inputs on cost and differentiation
● Presence of substitute inputs
● Strength of distribution channel
13. Bargaining power of suppliers contd...
13
Tesco used following strategies for minimize the bargaining power of suppliers,
● Internet allows retailers to invite suppliers to engage in bids or auctions when either the retailer has a specific
shortage or a supplier has excess inventory.
● Exposing an instant record of sales and stock movement via Tradanet Electronic Data Interchange (EDI)
allow the suppliers to monitor performance and pre-plan delivery schedules.
● Investing on food technology and ethical product labelling allowed TESCO to push own brand products, this
keeps its suppliers in check and reduces bargaining power.
● The supply chain backed by IT, only made suppliers to deliver to intermediate warehouses, this reduced
costs for the supplier.
● Warehouses are managed by multiple specialist distribution companies. Not bound to a single company.
● IT is used to monitor warehouse efficiencies – space and vehicle utilization, delivery times linked to route
planning.
● Pre-planning with suppliers.
● Decision support systems to help forecasting, planning and inventory management.
14. Bargaining Power of Buyers
14
Power of the buyers. The pressure consumers can exert on businesses to get them to provide higher quality
products, better customer service, and lower prices. When you deal with only few customers they have more
power, but your power increases if you have many customers.
● Number of customers
● Size of buyers (Buying capacity/ability)
● Buyer switching costs
● Buyer information availability
● Availability of existing substitute products
● Buyer price sensitivity
● Differential advantage (uniqueness) of industry products
● Differences between competitors.
15. Bargaining power of buyers contd...
15
Tesco’s strategies that applied to overcome the bargaining power of customers are:
● Tesco has been a pioneer of loyalty or frequent-purchase cards. Tesco’s Clubcard has a magnetic
strip which records a customer’s purchases and awards a credit for use with future purchases.
● They are offering customers the best value for money and the most competitive prices
● They have big product range. Larger stores, quite simply, offer wider ranges.
● Product availability is high. Shelves must be stocked and quickly replenished.
● Competitive prices – which in turn depend in part on controlling costs.
Porter’s Five Forces of buyer bargaining power refers to the pressure consumers can exert on businesses
to get them to provide higher quality products, better customer service, and lower prices.
16. Threat of New Entrants
16
New entrants eventually will decrease profitability for other firms in the industry.
● Government policy
● Capital requirements
● Absolute cost
● Cost disadvantages independent of size
● Economies of scale
● Product differentiation
● Brand equity
● Time and cost of entry
● Specialist knowledge
● Technology protection
Are few of the reason to companies won’t be handle the situation of the business industry.
In Porter's five forces, Threat of new entrants refers to the threat new competitors pose to existing
competitors in an industry.
17. Threat of new entrants contd...
17
How TESCO handles this…
● Move with latest technologies.
● Keep full potential of networked supply-chain management has not yet been achieved by any retailer.
● Due to high capital investment required and brand name recognition, competing is difficult for new
entrants.
● Come up with new innovations.
● Always they use latest technology and move on with the trend other than holding on one technology.
● They have strong supply-chain management system. By using power of internet, e-marketing, shares live
sales information with its suppliers. Suppliers are mainly asked to deliver to Tesco’s various warehouses,
and consequently a fresh-food supplier will have just eight delivery points. The actual orders are
increasingly transmitted by EDI
● The increasing predominance of retailer own brand food products has increased the need for close co-
operation between the store chain and its suppliers
● They have introduced new system which have meant lower costs and greater certainty for suppliers, and
in turn lower prices for Tesco.
18. Threat of Substitute Products and
Services
18
A substitute product uses a different technology to try to solve the same economic need. Potential factors:
● Buyer propensity to substitute
● Relative price performance of substitute
● Buyer's switching costs
● Perceived level of product differentiation
● Number of substitute products available in the market
● Ease of substitution
● Availability of close substitute
19. Threat of substitute products and
services contd...
19
The way that Tesco company overcome this issue is,
● It facilitates the achievement of the ‘right’ good at the ‘right’ place, at the ‘right’ time, and at the ‘right’
price.
● They are maintaining a huge range of products. Non food and food items can buy from one place.
● They are using internet to build a relationship between customers and company. They have facilitated
home delivery to their millions of customers.
● Keep full potential of networked supply-chain management has not yet been
-Achieved by any retailer.
-Due to high capital investment required and brand name recognition, competing
-Is difficult for new entrants.
20. 20
QUESTION 02
In 1985, Porter introduced a generic value chain model that comprises a
sequence of activities found to be common to a wide range of organisations.
Porter has said that it is how a company links activities together, rather than the
activities themselves that gives a company advantage over others. Analyze the
TESCO case study, strategic deployment of Information Technology using value
chain analysis.
22. Key Elements
22
Electronic point-of-sale (EPOS)
● It is self-contained, computerized bar coded system that enables an effective
recording of the sale of goods or services to the customer
Electronic data interchange (EDI)
● Electronic Data Interchange (EDI) is the computer-to-computer exchange of
business documents in a standard electronic format between business
partners
23. Inbound Logistics
23
These are all the processes related to receiving, storing, and distributing inputs internally. Your supplier
relationships are a key factor in creating value here.
Electronic Point-Of-Sale (EPOS)
• Inspect the goods on shelves & bar code scanning using portable data-capture machines used for
checking shelf stock levels and send the data to centralized system.
• Based on centralized system figures monitoring warehouse efficiency, space and utilization.
Electronic Data Interchange (EDI)
• Receive the supplier delivery note and sending the promissory note via EDI.
• Electronic payment and funds transferring.
• Delivery times planning through route linking.
24. 24
Operations
These are the transformation activities that change inputs into outputs that are sold to customers. Here, your
operational systems create value.
• Suppliers have systematically joined Tesco’s network (‘community’)
• Provide knowledge of EDI for suppliers by seminars
• EDI is not just for PO releasing and invoices, but to broadcast forecast information.
• Up-to-date product information
• Faster movement of information and shorter supply times
• Handling large number of suppliers through the network
• Effective operation by efficient procurement and customer services.
25. 25
Sales and Marketing
Attracting potential customers to enhance business or activity of selling goods or services
• Efficient Customer Response (ECR)
• likelihood of stock-outs and the consequent loss of sales is minimized.
• Sales & cash flow monitoring via system
• Loyalty programs through IT discourage the customers from brand switching
• Based on sales patterns through system make sure product availability with competitive prices
• Based on system data statistics planning seasonal offers.
26. 26
Service
All the activities required to keep the product / service working effectively for the buyer after it is sold and
delivered. It enhance the product’s value.
• Introduction of virtual super markets by using IT infrastructure is another competitive advantage.
• Having support desk to facilitate customer care and services.
• Club card records a customer purchases and award a credit for use with future purchases
27. 27
Outbound Logistics
Required to transfer the finished products to the customers via warehousing, order fulfillment, transportation,
and distribution management.
• The company has developed four convenience store formats.
– Superstores
– Compact stores
– Metros
– Express stores
• EDI has developed in parallel with composite, multi temperature food warehouses and trucks.
• EPOS extract updated information from centralized systems. eg. transmit orders via Tradanet, evaluate
profitability.
• EPOS reduce the cost of all outbound operations eg. lower cost to suppliers and company.
• EPOS has developed to predict demand patterns for individual stores.
28. Support Activities
28
These activities support the primary functions above. In our diagram, the dotted lines show that each
support, or secondary, activity can play a role in each primary activity.
• Procurement - Supply Chain Management
(EPOS, EDI, Pre-planning with suppliers, Decision Support System, Streamlined Distribution)
• Technology Development - Centralized Automated Information
• Management System
• Human Resource Management - Structured process for recruitment and Selection
• Infrastructure - Collaborative work systems (Stronger cash flow and improved profit for all parties)
29. Competitive Advantage
29
• The central computer system will contain information on the margin and relative profitability of every
item.
• Making decisions concerning which products to boost and promote and which ones drop.
• Speed up the warehouse efficiency and to reduce the costs of distributing the products.
• Used to minimize duplication. The fewer times that actual deliveries and the support documentation
need to be checked, the speedier and cheaper in the system.
30. References
30
● Core Purpose and Values [WWW Document], n.d. . Tesco Plc. URL https://www.tescoplc.com/about-
us/core-purpose-and-values/ (accessed 10.5.18).
● From Competitive Advantage to Corporate Strategy [WWW Document], n.d. URL
https://hbr.org/1987/05/from-competitive-advantage-to-corporate-strategy (accessed 10.5.18).
● How we do business [WWW Document], n.d. . Tesco Plc. URL https://www.tescoplc.com/about-us/how-
we-do-business (accessed 10.5.18).
● Insights [WWW Document], n.d. . Blue Fountain Media. URL
https://www.bluefountainmedia.com/insights (accessed 10.5.18).
● Manjur, R., 2014. Case Study: How Tesco brought loyalty back to its stores [WWW Document]. Mark.
Interact. URL https://www.marketing-interactive.com/case-study-tesco-brought-loyalty-back-stores/
(accessed 10.5.18).
● Tesco, 2018. . Wikipedia.
● Mindtools.com. (2018). Porter's Five ForcesUnderstanding Competitive Forces to Maximize Profitability.
[online] Available at: https://www.mindtools.com/pages/article/newTMC_08.htm [Accessed 2 Oct. 2018].
