E-Commerce Technologies in Current Business - Essay Example

?Introduction The Internet continues to modernize the world’s economy. It is changing the way people live, study, work, participate, and devour. At the hub, of this rebellion is technology. Technology has moved from the "back office" to the leading edge. Namely, the interface between customer and the organization has changed spectacularly. Increasingly, technology is shifting the organization’s associations with its customers from a "face-to-face" to a "screen-to-face" communication. The Internet is not an innovation that concerns only one or two sectors of the economy. Because it revolutionizes the way businesses should prudently systematize their activities and go to market, the Internet affects all economic commotions. The business being conducted on the Internet which is now called ‘Electronic Commerce’ has a remarkable history. The continuous research and development has enables corporate organizations to reconstruct their business strategies. The integration of electronic commerce applications lays the foundation in the organization’s digital business process. This report will display the micromanagement and implementation of the current e commerce technologies in to current businesses. The purpose is to analyze the methodologies and processes required for integrating electronic commerce applications. The organization which is preferred in this report is Tesco PLC. The focus will be on the CRM of Tesco that is envy of many (BrandingAsia.com). Description of company The origin of Tesco was started in 1919 when Jack Cohen started selling groceries from the stall in London. Since then Tesco has claimed itself as one of the leading food and grocery retailers in the world and has over 2000 store worldwide. It was rewarded to adopt award winning online strategy (Award-winning online strategy for Tesco. 2009). Over the years, the organization has focused on maintaining a successful and sustainable business model B2B and B2C.Tesco supports both terminologies in the E commerce terminology. The business to business communication and business logic is conducted between different vendors of Tesco. The deployment of applications has been implemented to support the business model of Tesco in an efficient way. Tesco has implemented GXS trading grid which is a global B2B E-Commerce and integration service to enables the real-time flow of information linking businesses in spite of technical capability, standards preferences, spoken language or geographic location (, GXS - Products - Trading Grid Overview ). The elements consist of diversification of stores in new areas with new services and products. In 2000, Tesco was representing only 8% of the global gross domestic product (GDP). As 65% operations of Tesco selling space are dispersed across the globe representing 53% of GDP. In 1997 the international business generated 1.8% profits. In 2010 the profit grew to 22% which is a remarkable achievement. The organizations recorded revenues till February 2010 were $ 5,494.1 million. The stores are dispersed in Europe, Asia and the Unites States. The geographically dispersed locations of Tesco stores are shown in Fig 1.1. Tesco currently has 472,000 employees. For achieving customer loyalty, Tesco is focusing on maintaining a business model by value added retailing. In spite the recession, Tesco was able to meet customer satisfaction by launching schemes for instance double points, Club cards, Discount brands, Market Value and finest collection ready meals. By implementing the value added retailing, the sales figures were immaculate also changing customer behaviour. In a low growth market this strategy was a successful one for Tesco (DATAMONITOR: Tesco PLC. 2010). FIG 1.1(Wikipedia contributors) Tesco as an international retailer included a variety of non food merchandise in an effective way and represent itself with a variety of products, not just a grocery store. Category types of stores include Tesco Extra, Tesco Superstores, Tesco Metro, Tesco Express, One Stop and Tesco Home plus. The organization acknowledged its existence strongly with the effective and aggressive expansion in the market shares across all categories. Adopting E commerce It is submitted that globalisation whilst fuelling numerous business opportunities, has simultaneously led to market saturation due to the lower costs of market entry under the e-commerce business model within the retail sector. Tesco has started to gain advantage from operating on the internet since 1994. They were the first retailer in the world to offer a robust home shopping service in 1996. Currently they sell significant amount of their other products online which supports their customer’s convenience and comfort. Tesco has developed sustainable business model which is exposing defects to the competitors. Addition of value added retailing to the model, Tesco knows exactly who its customers are and what are their requirements (, Profits from The Lean Business Model by Prof Dan Jones). Previously the organization was developing in-house e commerce application development which suits perfectly according to their digital requirements. The in-house development was the major success as the organization constantly increases growth. Later it was decided to hire a vendor ‘ATG’ for the development of e commerce applications (, Press Release: Tesco Selects ATG). The aim was to give the internal IT staff a message which was “Make a difference rather than writing core software”. The reason for selecting ATG was the similarity of their software with Tesco’s current core systems with enhanced functions and processes. ATG is the arts technology group inc., it has over 1200 corporate clients dispersed over fifty countries including world class organizations (, ATG: e-Commerce, Cross-Channel Commerce, and Optimization Software and Services.). In 2009 James McNuity head of the group IT procurement announced that” We are pleased to enter into a strategic partnership with ATG that will allow us to use this leading-commerce solution in Tesco”. Tesco.com is an independent subsidiary to Tesco PLC and they operate Tesco’s online side (from mouse to house) of the business. This was established by Tesco because they saw it as an important part of their future strategy and wanted it to have a real focus and the relevant resources in order for them to move quickly (Ellis-Chadwick, 1991). One of the reasons that stimulated Tesco to operate online was, to countermove against Wal-Mart’s recent acquisition of ASDA, whose bigger physical presence increased Tesco’s vulnerability at the time. However, the main benefit that Internet brought for Tesco, was overcoming space constraints and it enabled Tesco to compete with Wal-Mart by expanding virtually. On the Internet they were not constrained by space as the store can be as large as they’d like (Ellis-Chadwick, 1991). Tesco CRM Introduction There are many definitions of CRM but generally, CRM is defined as a marketing approach that focuses on building customer relationships and as a result; the sales, marketing and customer service fall within this overall model (Christopher et al, 1991). The globalisation of the retail industry as a result of the e-commerce business model has signalled a fundamental shift in customer and business relationships with an intense focus on CRM. Tesco has been able to sustain growth in the competitive grocery sector as it has been offering continuous services in order to adapt to the contemporary consumer (Burch & Lawrence, 2007). In turn, the relationship between consumers and branding is arguably paramount in determining the centre of how value should be marketed to retain and persuade new customers (Merz, He & Vargo 2009). Tesco like many other companies have embarked on CRM programs. They realised that CRM has significantly re-shaped how businesses approach strategy planning with a distinct shift in solely focusing on product development to implementing strategy that acknowledges the increasing power of consumers. Significant aspect of the efficiency of Tesco’s loyalty program is the use of CRM computer systems for securing valuable consumer information in order to provide specifically targeted consumer loyalty schemes. Clubcard Tesco’s CRM program embarked with an electronic swipe card called Clubcard in 1995. The excellent and unique experience that Tesco brings for its customers by being aware of customer’s behaviour and desires based on the vital information collected. Tesco can access the customer’s shopping habits with every swipe of Clubcard. It provides a mass participation voluntary scheme that encourages users to identify themselves when they shop (Humby & Hunt, 2003, p.36). Clubcard is cornerstone of Tesco’s CRM, as CRM is driven by knowledge which comes from data. For example, this is further evidenced by Tesco’s domestic CRM strategy, spearheaded by the famous tag line “every little helps”. Additionally, they were one of the first big companies to introduce economy goods ranges and a loyalty bonus system to retain customer loyalty (Hill & Jones, 2007). Moreover, Kutner and Cripps propose a four stage CRM model, which dictates the following principles: 1) Customers should be perceived as business assets 2) Customer profitability will always be variable 3) Customer purchasing behaviour and requirements will continuously vary 4) Understanding customer requirements enables bespoke services to maximise opportunities (Kutner & Crips, 1997). Email marketing campaigns run by Tesco; which runs targeted email campaigns which carries targeted special offers such as Clubcard vouchers, often to the value of ?20 or more, as well as discount coupons. Additionally, the structure of the campaign operates through the use of trigger points; which serve to continue to build trust with the consumer whilst simultaneously selling the special offer promotions available. On Internet Tesco.com made home shopping work, when it appeared as something elusive, and all the retailers supposed that it would never work (Humby & Hunt, 2003, p.226). When it came to home shopping, Clubcard gave Tesco a huge head start as provide them with data management skills. Additionally Clubcard database gave them a list of significant customer to go after, and sophisticated understanding of them. Providing them explicit understanding of whom they targeted, counted as a huge built-in advantage when starting up a business. Referring to Tesco terms and conditions; Tesco Clubcard or a Tesco e-Clubcard is an essential requirement to shop at the Tesco.com. The site has caused a strong link between the ‘clicks and brick’ side of the business. The Clubcard offers the same experience that they would gain when shopping in-store by positing their favourite items as a saved shopping list; they also offer the same rewards for their loyalty scheme (Humby & Hunt, 2003, p.244). Smart strategies were used by Tesco for the online website. For example Tesco gave customers e-coupons which they could only use online. This was to encourage more shoppers to complete their transactions online. Tesco applied smart strategies by offering exclusive privilege to its online customer to encourage them; relative example of this is E-coupons which is money saving online vouchers that can only be used online. Partnership with South Korea Moreover, Tesco’s strategy management and effective implementation of CRM has expanded the brand beyond the UK grocery market (Capon, 2009). This is further evidenced by Tesco’s CRM strategy and implementation via partnership with Accenture in South Korea. Tesco entered the Korean business market through introducing the HomePlus discount store to Seoul. In partnering with Tesco, Accenture was responsible for providing CRM support technology for the retail joint venture between Samsung and Tesco as part of Tesco’s expansion plans for the Korean market. The Korean retail market is extremely competitive and has significant cultural and socio-economic barriers to market entry. Accordingly, Accenture point to the fact that Tesco had to create a niche market to maximise chances of success. To this end, it appointed Accenture to implement the CRM strategy. Additionally, Accenture argues that it was their implementation of the CRM strategy that contributed to the success through the use of customer profiling and categorisation of customer types. Once this was undertaken; Accenture then utilised its customer profiling data to formulate CRM strategy to ensure that the Tesco Homeplus stores secured a share of the customer marketplace. The impact on the company and customers The main impact of CRM on Tesco is to identify, qualify, acquire, develop and retain increasingly loyal and profitable customers by delivering the right product and service to the right customer, through the right channel, which has become particularly pertinent in the multi-channel challenge reshaping retail strategy (Galbreath, 1998 at p.14). Classifying of its customers and identify those who are more valuable based on the frequency of purchase and value of expenditure is another impact of CRM which brings extra benefits as well as keeping customers pleased. By introducing the Clubcard, Tesco has raised the bar on expectations expected by the customers. The customers will want an offer which shows them that Tesco is taking note of what feedback is given and improving to match their needs. Clubcard raise the bar of expectation. It implies that the company is trying harder to get its offer right for its customers. It opens up a two-way dialogue, which means that the company has to take note of what its customers are saying, and respond. (Humby & Hunt, 2003, p.22). The tangible impacts of online service on Tesco are to retain and persuade new customers as there are 1.3 million visitors to the tesco.com site every month, and two out of five customers that come to Tesco via the Internet are not regular shoppers of Tesco supermarkets. It is submitted that a significant element of Tesco’s success is the ability to spot gaps in the pre-existing saturated “mature market” for profitable gain (Sadler & Craig, 2003, p.231). CRM has enabled Tesco to implement new marketing initiatives to increase the perceived value presented to customers in persuading them to continue shopping at Tesco (Sadler & Craig, 2003, p.231). Moreover, a significant element has been the ability of Tesco to adapt to consumer habits in the multi-channel retail marketplace. Indeed, Tesco’s strategy statement highlights that its ability to diversify has been “the foundation of Tesco’s success in recent years” (tescoplc.com). This is further highlighted by Tesco’s diversification into non-food services and a commitment to the increasing public consciousness regarding fair trade and the environment with its corporate social responsibility strategy objectives being committed to environmental concerns in ensuring ethical product supply (tescoplc.com). By analysing the Clubcard membership by postcode, the data defined how far valuable customers were willing to travel to get to a Tesco store. They were able to see in which neighbour hoods there was the most competition against the other stores as they could see customers which were willing to go further to Tesco and not to the competing stores which were on the way. By analysing the penetration of Clubcard membership by postcode, the Clubcard data gave a sharply defined picture, store by store, of how far valuable customers were willing to travel to shop. It showed in which neighbourhoods the competition was really biting. Customers can get used to loyalty programmes so when they are discontinued by the store customers can react in a negative way. It is always important to keep the customers in mind when companies are about to do this. Loyalty programmes take on a life of their own once they start, so mistakes can be very hard to correct. Even programmers with low benefits become entrenched in the minds of customer, who must be informed when they change or come to an end. Customers react pessimistically to any perceived “take away “once a programme is in place. (Humby & Hunt, 2003, p.23). It is posited that Tesco has been able to sustain growth and profitability in a saturated sector through continued innovation in service offerings (Sadler & Craig, 2003, p.231). Accordingly, the Accenture and Tesco CRM strategy highlights the importance of understanding the consumers’ behaviour, the increasing power of consumers in leading business growth strategy and also supporters of the use of CRM by organisations. A central benefit is securing the consistent growth of profit margins via customer retention. Critique Tesco has operations in various countries. It is one of the early adopters of internet technologies and first retailing organisation in the world. Tesco PLC is known for its CRM system. The company is known adopting sustainable business model. The new technologies have been adopted in order in order to integrate different components of business so that business objectives can be achieved. The successful adaptation of technology depends on various factors like business objectives and goals, investment, reliability, change management in the organisation, availability of the staff and synchronisation of business and technology. The organisation focused on customer requirements and kept it on its priority list. The appropriate mapping of the digital requirements and application developments helped the organisation to develop its e-commerce platform. The organisation started with the internal customers i.e. developing the in-house platform as per the requirements of internal processes. Tesco incorporated changes in the use of technology according to the changing technical environment and business demands. In my view, Tesco has created a strong image and brand name as one of the best retailers of the world with the use of latest technologies which helped it improving its business activities from internal business environment to external business environment. Tesco has utilised CRM platform to deliver what company promised to its clients. It delivered expected quality and quantity of products and desired services to the client through the CRM platform. This platform helped it enhancing its productivity and maximising its profits. This also helped in developing a customer database that helped in understanding consumer behaviour and purchasing pattern according to the demographic variations of the client. There are various ways Tesco maintains its relationship with its clients and keeps clients engaged through promotional schemes, offers and added value to the loyal customers. The CRM programs like Clubcard helped it updating the competitive knowledge regarding the consumer shopping behaviour and factors contributing to the loyalty. The customer profitability was provided to be variable. In this way, company enhanced its knowledge and understanding of its customer. Understanding customer requirements and variability of demand on the basis of time, occasion and customer demographics, the company is able to manage its level of inventories. This helped in reducing wastages, warehouse costs and level of inventory to minimum. Internet provided one effective tool to reach the client with new offers and discounts. Any sales promotion program of the company could be made more effective. Company is able to understand the customers and customer requirements in a better way. Tesco initiated various smart strategies for the online website like emails, e-coupons to be used online and more incentives were provided on online shopping. At the same time company also faced challenges as the customer expectations also increased for the company. New systems would have come with new challenges. Company has to put more efforts to meet the expectations of the client. However internet enabled the company to fetch new customers from the competitors and market place. E-commerce is one of the multi-level and multi-channel marketing strategies that allowed Tesco to deal with the growing competition and changing consumer habits in the recent past. Being an early adopter of technology, it provided it added advantaged. Tesco is using CRM and e-commerce platform for various strategic purposes such as online shopping, communication, customer relationship management, corporate social responsibility and developing strategies to keep the inventory moving. Adoption was technology helped in long term sustainability to the company. This helped company to developing favourable image on its major stakeholders. Tesco has a profile of successful retailers due to one reason, which is concern for stakeholders. Understanding customers helped it directing its resources to meet the expectations of the clients. Technology helped in mobilising its resources and efforts to creating value for the operations by making profits and keeping itself in top of the mind of the customers. Referencing Avlonitis, G., & K. Indounas, “Service Pricing: An Empirical investigation. Journal of Retailing and Consumer Services”, 14 (2007) 83-94. Berry, L. L. (1983). Relationship Marketing. In L. L. Berry, G.K. Shostack and G. D. Burch, D. & G. Lawrence (2007). Supermarkets and agri-food supply chains: transformations in the production. Edward Elgar Publishing. Capon, C. (2009). Understanding the Business Environment. Pearson Christopher, M., Payne, A. & Ballantyne, D. 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