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Introduction
Tesco is one of the major retailers in the British grocery market, and is now believed to be the largest retailer in the UK, currently employing more than 260,000 people in the United Kingdom, Continental and Eastern Europe and Asia, and operating 2,762 supermarkets, superstores and convenience stores.
Tescos journey started from its modest origins, established by Jack Cohen who operated as a street-market barrow-trader financed by his war pension. He founded Tesco 70 years ago in the stalls of Londons East End markets, which later made him one of the retailings truly amazing characters, earning him the sobriquet Slasher Jack. (Seth and Randall, 2001, p. 23)
For a bit of history, Jack Cohen was born in 1898, the son of a first-generation East European Jewish father, Avroam. Jack learned his trade the hard way and in the unforgiving company in the rough and tumble ways of the street markets of East London, in Hoxton, Hackney, Whitechapel and the Caledonian and Essex Roads. (Seth & Randal, 2001, p. 24)
Tescos subsequent growth was due to Cohens merger-and-acquisition moves and the programs entitled: Pile It high, Sell It Cheap supermarket chain, public ownership, expansion through Home n Wear, the involvement with Green Shield stamps, to todays massive food retailing empire. (Channer & Hope, 2001, p. 31)
Jack was joined in by a number of well-known figures in the business. There was Hyman Kreitman, Cohens son-in-law, who was a thinker with an eye for innovation. He would clash fiercely with Slasher Jack. And then there was also Daisy Hyams, another formidable personality in a period when women were not too trusted in the art of business. Jack and Daisy got along together.
By the mid-1950s, Tesco had 150 small stores but most of them had their own self-service formats. Then in 1956, Cohen opened his first Tesco supermarket. However, big trouble lay ahead. Cohen ran it all alone refusing innovation, but products were cheap bargain price. (Seth & Randal, 2001, p. 24)
Innovations and globalization challenges motivated Tesco to introduce a format for its various businesses. Tesco has a format involving four divisions for its many branches worldwide: Tesco Express, Tesco Metro, Tesco Extra and Tesco Superstores. Without adequate knowledge management and a secure IT infrastructure involving a large enterprise, Tesco would never have succeeded and functioned smoothly even up to this day with hundreds of thousands of employees, hundreds of branches, and millions of customers worldwide.
Tesco is now a fast-growing company involved in various businesses including financial services. It has introduced Tesco Personal Finance, which is now averaging 5 million customers for its 11 products, and in 2004 made profits of £200 million. It has lent £1 billion in personal loans, 500,000 customers have insured their cars using it, and more than 250,000 pets have also been insured from their supermarkets bank. Other services include savings accounts, online banking, and insurance. (Tesco Financial Highlights, 2008)
Tesco has stores in the cities of Warsaw, Hong Kong, Seoul, Bangkok and Taiwan. There are also Tesco supermarkets in the Republic of Ireland, the Czech Republic, Slovakia Hungary, and in 2006, Tesco announced its entry of Tesco Express stores in the worlds most competitive grocery market, the United States. (Humby, et al., 2007, p. 4)
The last 10 years of the 20th century were brought in new perspectives for Tesco as a global organization. Vast mergers and acquisitions were witnessed for many of the worlds large companies which introduced new strategies such as online marketing, and new categories of products.
From all these challenges, Tesco has emerged the strongest. By 2005, it had been the biggest of the Big Four Sainsburys, Asda and Safeway (now part of the Morrisons group) are the other three. (Humby et al., 2007, p. 3)
The firm has expanded all of its grocery stores to include non-food items, such as books, software, electronics and music.
IT Infrastructure: Issues and Challenges
The size and complexity of this firm require effective knowledge management and information systems. Its IT infrastructure has to accommodate the many stores and branches worldwide and millions of customers. Tesco has to introduce knowledge management to be able to ensure that its products and services are effectively delivered and that its supply chain is on the right track.
IT management at Tesco is emphasized particularly on its supply chain. Supply chain management excellence is crucial for customer satisfaction, at the same time customer satisfaction is critical to customer loyalty, with loyalty being critical for profitability (Reichheld 1996 cited in Flint et al., 2008, p. 258). This is what Tesco management believes.
Technology is an integral part of all Tescos business activities. Tesco makes sure products are always available for customers. Simplicity is applied to the procurement of products and subsequent availability to customers. On their website, customers can scan and checkout at will. Tesco applied software that predicts when to order new products from suppliers. (Tesco.com, 2009)
Tescos website has over 500,000 regular users in the U.K. alone. The site facilitates grocery deliveries to 30,000 homes weekly. The website offers books with more than 1 million titles available, CDs, video and DVDs. The firm also operates the Tesco Direct catalog and the Tesco BabyClub. (Plunkett, 2007, p. 10)
In early 2006, Tesco Telecom began offering a cost-effective, easy-to-use Internet phone. Other online businesses include self-branded software, and an office suite retails for roughly $35, well below Microsofts. Tesco is also a shareholder (35 percent) of Safeway Grocery Works, a grocery store chain in the United States. Tesco is also competing with the grocery business in the U.S. with its opening of six convenience stores in Southern California in November 2007. (Plunkett, 2007, p. 10)
Around the mid-1990s, Tesco decided to introduce innovations and IT applications inside the organization. The objective was to encourage responsiveness, be it coming from the buying public or from the people inside the organization. There was tremendous enthusiasm from the employees and middle management, simply because embarking on some culture change was something new.
With the help of a consultancy firm, Tesco measured and monitored what matters to customers, including the supply chain, such as how items are out-of-stock, how quickly its delivery vans make it through traffic, and how it performs relative to various Internet service points across the country. (Schuster and Dufek, 2004, p. 146)
This led to a marketing strategy known as Tesco Direct, a call-center-based operation. It was an online store for customers, selling the same price for the items in the stores, but available only for regular customers in their stores/shops. Online prices were competitive. The customers could order online items and this proved to be very effective. Online stores are so popular today that it is now a common strategy for business.
The challenges Tesco faces involve the supply chain. Products from suppliers have to be delivered on time but not to exceed the needed inventory. Added to this is the desire to attract as many customers as they can and deliver the products not just from their stores but in a different way.
The Tesco Direct team monitors on-time deliveries, the accuracy of orders, and customer satisfaction. They simulate customers online shopping experience to proactively monitor the state of the end-to-end customer experience. This constant monitoring of the conditions that customers are facing helps Tesco proactively sort out problems as they occur. And the customers tastes, including personal information and data, are stored in the websites database. (Schuster and Dufek, 2004, p. 146)
Tesco implemented the multi-format operation designed to cope with customer demands and preferences wherever they may be: Tesco Direct for internet orders delivered direct; Tesco Express for local convenience stores; Tesco Metro for city center convenience stores; and, Tesco Superstores for weekly shopping.
All their products are sub-categorized and available in an easy format for customers. Tesco Organics is a category of organic foods that range from cookies to sausages. Other categories include Tesco Free From which is composed of 150 products available for customers with allergies on certain products. The Tesco Healthy Living category includes over 500 products which are health products with little fat, sugar and sodium. The Tesco Carb Control is for customers who want a low-carb diet. They also have Fair Trade products program which promotes fair trade meaning fair price for countries from the developing world buying their products. Tesco also introduced the Club Card which provide customers with discounts and certain privileges. (Lincoln and Thomassen, 2008, p. 45)
There were some controversial issues that Tesco has undergone in the course of implementing a technology to up their sales and track customer loyalty. In 2003, Tesco admitted it implemented a spy chip technology. This kind of chip is embedded in an electronic tag of a product and when a customer picks it up and removes it from the shelf, a CCTV camera takes a picture of the customer. Another camera is again triggered at the checkout. This incident was reported by Katherine Albrecht, a director of a human-rights group, to the website The Guardian (2003).
Tesco management then reasoned out that the technology used a radio frequency identification (RFID) and it was intended for security purposes. Retailers have rejoiced for this kind of technology for it can help a lot in the supply chain (or inventory of products) and their security problem. But this was opposed by human rights groups as an invasion of privacy. RFID tags are notorious for working even long after the product has been out of its shelf. But RFID makers say that the tag can easily be disabled by erasing its contents after buying it. (Jha, 2003)
Cloud Computing and its Business Benefits and Costs
Cloud computing has lately been a popular topic among businesses and organizations that make use of the Internet and its applications in their business activities, but there has been no definite meaning or definition applied to it.
In an attempt to clearly define it, Larry Ellison (2008 cited in Armbrust et al., 2009, p. 3) argued that Cloud Computing involves anything that we already do, which means it includes anything in the computing business. Andy Isherwood of Hewlett-Packard (as cited in ZDnet News, December 11, 2008 and Armbrust, 2009, p. 3) likewise said that there are many definitions for the phrase Cloud Computing. However, Richard Stallman, an advocate of free software, warned that Cloud Computing could be a trap for individuals and businesses that depend much on it as costs could escalate or terms of service could be changed without the consent of the user.
Be that as it may, we have to find the correct and precise definition for us who aspire to use Cloud Computing for the advancement and development of the business we like to help. In this case, we want to help solve the problems and challenges of Tesco and its voluminous work of processing the products and services of the stores in the UK or even throughout the different parts of Europe and the United States.
Cloud computing enables individuals and organizations to use computer applications without the need to buy their own hardware and software. Such applications include computer processes, data storage, and other software applications. There are a number of Cloud Computing companies providing services over the Internet. (Badger et al., 2011)
This is the cheapest way of using computer hardware and software for applications to products and services without the need to buy hardware and software. There are websites and datacenters that provide computer applications and this can be applied to this company. This is known as Software as a Service (SaaS). The website or company offering this service is known as a Cloud. Various applications and services offered by these websites and data centers include translations, marketing, and other services.
Cloud computing is demonstrated in the figure above. The cloud provider has the hardware and the software. The user uses the various applications.
Other terms related to Cloud Computing are:
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Utility computing refers to the service that the datacenter offers for sale.
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Public cloud refers to the service available when the customer pays immediately after the service is delivered.
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Private cloud means those services for private use of companies or organizations not available to the public. (Armbrust et al., 2009, p. 1)
Moreover, Cloud Computing is adaptable to different technologies with their own configurations. Organizations should know the characteristics of clouds including the deployment models, the kinds of services they can offer their clients (service models), the financial side or the economic risks, the technical aspects, the terms of usage of the system, and, above all, the security aspect of using clouds.
Cloud Computing systems can be set up or deployed in the territory of another cloud customer, or it can be shared with co-customers and can be hosted by other cloud customers. There are various kinds of deployment models and customers can have choices as to how he/she can control the system depending on the resources at hand. (Badger, Grance, Patt-Comer, & Voas, 2011)
A cloud can make use of emails and other software applications, even the traditional software resources. Examples of service models include Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). This last one is more preferable and can offer services which are well-defined for customers. (Badger et al., 2011, p. ES-1)
Cloud computing servicing offers several payment schemes that allow customers to pay only minimal like service charges. Customers can request and receive resources depending on the services they want.
Cloud Computing can provide applications that can be subdivided into small parts. Networking is one of the major activity of cloud computing.
When the organization and the customer agree on the terms of service, they have to sign the service level agreement that refers to the terms of service which must be clearly understood by both.
Like any other computer resource application, Cloud Computing is affected by security risks. It involves networking and thus its vulnerabilities are constantly exposed. Cloud providers should be able to protect and isolate their customers by providing robust security controls. (Badger et al., 2011, p. ES-2)
Security in cloud is complicated and challenging for security experts considering that most public clouds and their infrastructure and resources are owned by private companies who sell them to the general public.
The emergence and popularity of cloud computing has great impact on the systems of organizations and government agencies. There are features in cloud computing that are not in conformity with the traditional model of computing and controls.
Examples of Cloud Computing
Companies that offer public computing are the Amazon Web Services, Google AppEngine, and Microsoft Azure (Armbrust et al., 2009, p. 4). Private cloud is computing that is not offered to the public.
Cloud Computing Providers
Cloud Computing providers are said to have a considerable size of software infrastructure and the necessary expertise to operate a Cloud Computing. The ordinary cost for cloud computing is 10 cents per server-hour. Although this is considered low, Cloud Computing providers can still make a big amount of money from their services because they have the capacity to purchase many computers and a network bandwith. Moreover, the cost of software development can be lowered by these big companies. Cloud computing also provides these companies added revenues to their existing resources.
The economies of scale for the two types of datacenter are demonstrated in the table below.
The costs can also vary depending on the cost of electricity in the area where cloud computing is located. Google AppEngine can provide Cloud Computing through automation of the services of a company.
Amazon Web Services is applicable to Tesco with its variety of products and services offered to the public. Amazon Web Services has simple and cost effective flexibility and scalability.
A company with offices in the UK is DATAPIPE, a Cloud Computing company that offers several services. They work with the company to provide solutions to the complex problem of day-to-day operations. They start by studying the operational details of the company, the complexities of the operations and make their suggestions on how their software can work to simplify the problems. The user is given control of the processes that are applied. Another important application is administration services. This is one of those needed by big companies that are scrambling to the growing administrative problems amidst intense globalization. Datapipes services are available in the UK. (Datapipe, 2011)
Recommendations of Cloud Computing Adoption/Adaption
Tescos IT services and infrastructure has to be managed locally before it goes international. It has many products and services that need to be sorted out. Sometimes, employees are scrambling due to customer complaints. Tesco needs to adapt Cloud Computing in its various operations all throughout the UK and its many branches worldwide. The services offered by Cloud Computing are varied and wide and the costs are relatively low.
To summarize Tescos IT infrastructure, its all for their products, supply chain and customer satisfaction. They need a careful and well-planned knowledge management system that should be supplied by an IT team with the necessary team working, continuous improvement and the use of the information system to the full. Tesco has invested much on technology and architecture that have guided the operations of the company. The system is simple: from supply, to their stock and inventory, and smooth delivery without delay to the customers. The process is applied online or through their stores and shops. Moreover, the company also develops its own IT people, providing them with needed expertise and organizational knowledge as they grow with the organization. Cloud computing can simplify and add more improvement and emphasis on products and services.
Locally, products have to be properly managed. Presently, the UK segment is looking for health products. Customers are concerned now with their health. Moreover, there are many services that need to be addressed. The strategy of the firm is to focus on customer loyalty and address all complaints and issues regarding their products and services.
Some of Tescos services can be managed by Cloud Computing. The Club Card can be applied with automation through Cloud Computing. Club Card provides discount and benefits to customers.
Another Cloud Computing application that should be applied to the company is administrative services. It can be argued that administrative services for Tesco are becoming too difficult to handle. The resources of the company cannot be enough to cover such a large company with thousands of employees, hundreds of branches and millions of customers. Cloud computing is the solution.
These companies are data centres and there are a number of them in the UK. They are cost efficient and can provide the necessary hardware and software services for Tesco which needs these resources for its hundreds of stores in the UK. Cloud computing can help in environmental solutions because they can reduce data centre energy costs.
There are, however, some issues that need to be addressed in Cloud Computing. This is the issue of security and reliability.
Some of Tescos services can be planned, controlled and stored through Cloud Computing. The Tesco Direct team whose job is to monitory on-time deliveries, orders and customer satisfaction, can be applied with automation. Customers can be asked to fill up simple forms and store these on a database. Cloud Computing will can monitor this kind of service without the need of manpower.
Online shopping will record customer data, sentiments and loyalty. A software can monitor customer experience. This constant monitoring can be supplied by a Cloud Computing company.
The categorization of products is one easy format that should be supplied with Cloud Computing. Automation can pinpoint healthy products which the UK consuming public urgently needs.
Tesco should apply the necessary configuration, deployment, and management in public cloud computing in order to meet the necessary security and privacy requirements. Terms and conditions, and the normal legal agreements for public cloud computing should be followed, although there are instances of negotiated agreements. These negotiated agreements are sometimes necessary in that it can help provide the needed security and privacy requirements for organizations. The data required may include data encryption and segregation, tracking and reporting service effectiveness, among others. (Jansen and Grance, 2011)
Conclusions
Tesco is a business organization that needs Cloud Computing services because of the multiple of products and services that are introduced to the public. Cloud Computing has many benefits for Tesco. It can simplify things and provide flexibility for the company. Cloud Company is also helpful to the environment because data centres are cost effective and save millions of pounds in energy costs by minimizing CO2 emissions. Amazon Web Services are cloud computing solutions applicable to Tesco.
References
Armbrust, M., et al., 2009. Above the clouds: a Berkeley view of cloud computing. Technical Report No. Web.
Badger, L., Grance, T., Patt-Comer, R., & Voas, J. (2011). DRAFT cloud computing synopsis and recommendations: recommendations of the National Institute of Standards and Technology. NIST, US Department of Commerce. Web.
Datapipe, 2011. Managed Cloud. Web.
Flint, D., Larsson, E., and Gammelgaard, B., 2008. Exploring processes for customer value insights, supply chain learning and innovation: an international study. Journal of Business Logistics, Vol. 29, No. 1.
Humby, C., et al., 2007. Scoring points: how Tesco continues to win customer loyalty. London: Kogan Page Limited.
Jansen, W. & Grance, T. (2011). Guidelines on security and privacy in public cloud computing: draft NIST special publication 800-144 on computer security. National Institute of Standard and Technology, U.S. Department of Commerce, Web.
Jha, A., 2003. Tesco tests spy chip technology. The Guardian. Web.
Lincoln, K. and Thomassen, L., 2008. Private label: turning the retail brand threat into your biggest opportunity. London: Kogan Page Limited.
Plunkett, J., 2007. Plunketts retail industry almanac 2008. Texas: Plunketts Research, Ltd.
Schuster, C. and Dufek, D., 2004. The consumer& or Else!: Consumer-centric business paradigms. United States of America: The Haworth Press, Inc.
Seth, A., and Randall, G., 2001. The grocers: the rise and rise of the supermarket chains (2nd edition). London: Kogan Page Limited.
Tesco.com, 2009. Tesco careers. Web.
Tesco Financial Highlights (2008). Tesco plc. Web.
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