Tesco Revision Doc 2010

How A Major Retailer (Tesco) Uses ICT To Make and Save Money

Tesco.com screenshot. The link to Facebook is relatively new.

There is also a link to the Clubcard section (CLubcard being key to some of Tesco’s success). Note the other specialist sections . The main image keeps changing to lure customers with offers.

Ctrl+Click on the image to the left to visit Tesco.com if your PC has an internet connection.

Figure 1: Tesco.com Tesco offers a nice opportunity for a case study of how a large retailer takes advantage of Information and Communications Technology (ICT) to both increase revenue and to decrease costs.

Since profits are simply revenue (income) minus costs then the use of ICT to increase income whilst decreasing spending (costs) is an area well suited to study by economists (amongst others). Since Tesco is such a dominant force in the UK retail sector it has been the subject of many studies. This means there is a large amount of material available to students who are interested in this topic. This includes plenty of material within the module itself (See Figure 2) hosted on NOW, as well as links and mentions on the module blog and Delicious social bookmarking site.

Figure 2: Tesco Materials on NOW 1

There are many articles about Tesco tagged on Delicious and postings on the module blog, which are both searchable (See Figure 3).

Module Blog

=http://phil-wane-ics.blogspot.com/

Phil on Delicious

= http://www.delicious.com/Moonglum

Figure 3: Blog and Delicious Services The current lecture PowerPoint is extensive (47 slides) and the Tesco Wikibook (also on NOW) is 74 pages in length. Students should note that the lecture PowerPoint contains some dated/dating statistics but more recent ones can be found via Google, the articles tagged on Delicious, or by visiting the Tesco corporate website (See Figure 4).

Figure 4: Website of Tesco PLC at http://www.tescoplc.com/ The Guardian has a great section dedicated to Tesco on the business section of their website. http://www.guardian.co.uk/business/tesco Yahoo Finance also offers very up-to-date stock information at http://uk.finance.yahoo.com/q/ks?s=TSCO.L

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Figure 5: Tesco Technology Blog An excellent resource is the blog dedicated to the use of technology by Tesco. Ideal for this module. http://techfortesco.blogspot.com/ Many student will find that reviewing the lecture PowerPoint and reading the Tesco Wikibook will provide an excellent starting point for any questions around Tesco and technology. However it is strongly advises that they done some additional research using some of the resources mentioned in this document (module blog articles, Delicious tags, Tesco’s technology blog and corporate pages etc) in order to enrich their knowledge of how Tesco uses ICT with reference to some specific examples of projects or processes, up-to-date facts and figures, and so forth. A study of Tesco is ideally suited to a SWOT analysis approach; of course students do not have to use a SWOT analysis if tackling this topic but whatever approach is used should be in part analytical since it is not sufficient at Level 3 (Final Year Undergraduate) to simply describe stuff. So not just what Tesco does but why.

Key Economic Concepts It is worth bearing in mind some key economic concepts that can be applied to this topic. This next section is not an exhaustive list but is to remind students to use the language of their discipline where possible. Since you are economists you should strive to link theory to practice in places.

Key economic terms and phrases one might associate with this topic (not exhaustive) are: Economies of scale, price elasticity of demand, disintermediation, net profits, Return on Investment (ROI), Supply and Demand, Long Tail, marginal cost.

Students should pause and reflect upon some of the things that Tesco does (described at length in various materials on NOW) and think how an Economist might describe them and begin to analyse them. So one might presume that Tesco benefits from economies of scale, that they seek a good ROI on investment in technology (Clubcard scheme begin a good example), that the marginal cost of providing some additional web based services or maybe even close to zero, that technology helps them to manage aspects of supply and demand, and that the clever use of websites helps them to offer a far wider range of goods and services than if they only had actual “bricks and mortar” (physical) stores thus opening up possibilities for exploiting the “long tail” of demand.

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Visualising the Topic

Tesco Offline

Tesco Online

Figure 6: Tesco Offline (High Street) and Tesco Online There are different ways of picturing this particular topic and one useful way is through the use of a Venn Diagram (See Figure 6 above). Students do not have to use diagrams of any kind in their answer (though they are welcome to do so) but this simple diagram might aid focus and revision.

In this instance a Venn Diagram is used to illustrate the (admittedly simplified) relationship between Tesco as a physical presence and Tesco as an online presence. Some goods and services are best done (or perhaps can only be done) via physical stores, whereas some good and services are best offered (or can only be offered) via an online presence. Finally the reminder that some (possibly quite a lot) of goods and services can be provided either way. Tesco may not mind which way as long as it is Tesco (and not some other retailer) that is providing those goods and services and that it does not have to sacrifice profit margins to do so.

Unlike some supermarkets and other major retailers Tesco sought from the beginning to offer web based services at a profit, seeing them as added value to customers, which customers would be willing to pay for. Tesco has used technology platforms like the Internet to expand the range of goods and services it offers, and it has moved beyond the use of technology of the provision of the technology itself, with offers such as Tesco Broadband and Tesco Mobile (see Figure 7).

Figure 7: Tesco provides technology as well as uses it.

(Tesco: Every Little Helps. Hope that applies to this Tesco revision document too. Phil.)

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