The outsourcing of ICT by Tesco

Outsourcing ICT is quite commonly used by organizations as an approach to strategic management. Assess the advantages and disadvantages that outsourcing can bring in developing effective uses of information systems in an organization such as Tesco.

Tesco’s used effectively its resources and capabilities (strength) and developed a competitive advantage over its rivals Asda and Sainbury in the retail trade. Tesco as a supermarket chain dominates the UK by keeping prices low, and having the ability to keep competitiveness high. Tesco is the UK’ most successful retailer. Its strengths are the powerful retail brand name, customers loyalty, trusting customers, financial power, stores, the Tesco’s Clubcard, etc.

Tesco is part of the wider general retail market because the group has about the 20% of the grocery market and 5% of non food by moving to market place where the margins are higher. The group of Tesco sells also books, electrical products, clothing, and CD’s (16% of the market). Tesco’s weaknesses are: lack of the experience and expertise in several areas, large infrastructure demands, the diversity of products and no free cash for innovation.

External environmental factors keep giving great opportunities in broad retail as well to new market areas. Although Tesco’s share of total retail market is 12,3% the group believes that there is a lot far to go. Tesco targets its over-priced high street rivals tries to increase the market share and take the opportunities in broad retailing.

In the last ten years the group was suffering by falling sales, slow profit growth, depressed share price because of the entering of continental Europe in UK. But this was not the only threat from the external environment. Hypermarkets from the other side of Channel, French hypermarkets (20-25% of the electric market), dealings between rivals, fear of losing customers, bid from Asda to buy Safeway are threats too. Wal-Mart’s move to UK was made so Tesco lose its home market.

As Sir Terry says <customers vote every day> and the size of Tesco is no protection.

The competitive environment influenced the process of strategic decision making. Tesco focused on growth strategies for existing and new products, in existing and new markets. Always tries to increase market share as well to find additional markets or expand in new geographical regions with more customers and markets new and riskier areas of growth. Since 1995 Tesco became market leader by developing the marketing, the Value range and the Clubcard loyalty. Tesco in our day has grown from efficient grocery operation to a non-stop supplier of everything and sells in ten countries as well China. Tesco’s strategy focuses on the core UK grocery business, non food, international expansion and retailing services as finance services dotcom business and telecommunications packages.

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Tesco’s effective strategic management helped in operate and respond in new challenges and carry out its competitive strategy.

Today everybody knows about the Tesco’s intention to remain a market leader with concentration of power. For staying in that position and multiply the sales it is necessary to focus on customer service.

Gathered information from the external market, analysing opportunities and strengths forced Tesco to change to be more competitive and have stronger capability by adapting new strategy

The results of two research projects showed that the customers were not satisfied and the levels of staff morale were suffering.

Fundamental decisions and a set of actions should be undertaken with a focus on the future conditions.

The best way to respond, reach the goals and achieve results was to engage a team from Trilogy a three member consortium of specialist consulting companies. The joint Tesco/Trilogy team developed the Living Service Programme a 26 weeks process, undertaken by 660 stores and seven core components.

Tesco used its strong and stable core and decided improvements to the processes by using outsourcing ICT

It was very expensive to use and grow up Tesco’s IT infrastructure while outsourcing ICT was a very good solution.

In our days as technology advances, organizations try to change their needs and stay ahead of their competitors. Outsourcing ICT is the international migration of service employment of information and communication technologies (ICT).

New entry countries try to gain a share in this new highly competitive and dynamic market. Governments set the rules for the best result of their companies’ benefit. Now available knowledge is been transferred anywhere.

Information and communication technology (ICT) consists of all-technical means used to handle information and aid communication, including computer, network, hardware and software.

The advantages of outsourcing ICT are:

Outsourcing ICT gives the organization the flexibility to get expert, skilled service and experienced people or teams. The outsourcing partner is specialized in that particular business process and gives technical support

Outsourcing ICT gives access to world capabilities.

Outsourcing ICT companies with a full support contract provide fast services with high skilled people and assets needed and reduce the organizations’ risks

There is no need to make investments in technology, methodology, infrastructure or on training costs, while these savings in time and money will increase revenue, profit, productivity and much more

.the organizations may gain a competitive edge in the market and may provide the best services to the customers who will be impressed with the high quality services.

The operating costs (research, development, marketing and deployment) are reduced and the completive advantage may be increased with improvements in measures as cost, quality, service and speed.

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there are more profitable and productive activities,

.with outsourcing ICT the operation functions may be carried out by outsider experts.

Tesco is using its strong and stable core functions efficiently in house, focus on core subjects, increase the profits while the non-core company’s functions will be performed by the outsourcing partner (Trilogy)

Organization as Tesco businesses may find a team or a partner for support their network management, helpdesk and server operations

Outsourcing ICT is growing in EU as well in other continents. International outsourcing ICT in emerging market countries enables the organizations to find services with lower cost far away with well trained staff as engineers, programmers, IT technicians and pay them with lower wages

Very often the employees don’t work efficiently or don’t use the computer application or the technical support is not enough. The small organizations prefer outsourcing ICT because they don’t want fixed costs and the large organizations use outsourcing ICT because they need skilled people

The organization may search for lower cost, high quality, and deliver effective manage service

The disadvantages of outsourcing ICT are:

The outsourcing ICT main disadvantage is that many employees may lose their jobs because the outsourcing partner is specialized in that particular business process and gives technical support. This unemployment usually come from North America and Western Europe.

In some contracts may be not any quality defined due to low price. Under these circumstances the service and the buyer-supplier communication are poor.

In offshore outsourcing people are hired with less money. The organization’s productivity depends on these employees.

Confidentiality of the information being transferred to the outsourcing firm is very important but any theft may occur.

In that strategic management there is a risk. Some outsource ICT don’t follow the signed contract

The effective uses of Information Systems in an organization are many. The IS handles the flow of information, supports the organization’s decision, helps to analyze complex problems and helps the organization to expand into global markets. Effective information systems deal with the development, use and management of an organization’s IT infrastructure. The IS’ components are human resources, technical service, managers, computer programmers, operators, analysts and designers.

In the organization, information about production, customers, sales and others may be distributed and help the organizations’ executives and the management.

The most effective use of Information systems is that influence the organization’s performance without caring about increasing the sales or introducing new products.

Also Information systems are related with the organization’s growth strategies.

What do you understand by Knowledge management and knowledge management systems. Analyse how useful such a system could be to Tesco and why it is often difficult to persuade employees to use such systems.

Knowledge management (KM) includes ies and practices used by an organization to identify, create, share and distribute the knowledge. Knowledge is a resource that the organization uses to make significant investments in the latest technology systems and infrastructure to support knowledge management. Organizations like Tesco have these resources which are part of their business strategy. Individuals try to encode their knowledge into a shared database. This reduce time and cost.

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Collection of data is not information but the pieces of data. Data represents facts or results.

Information is a statistic in time. Relation between data and other relation represents information which may be figures about market size, customers’ needs, current production capacity etc.

It becomes knowledge when an individual may understand the results patterns of relations of data and information and other patterns represent knowledge. This gives the opportunity to estimate.

When someone understands the principles then there is wisdom.

Knowledge management captures and understands how all these knowledge can be together and given to others in order to be effectiveness.

Knowledge management is getting the right information, to the right people at the right time in order to do the right actions. Innovations may be necessary.

Knowledge management systems (KMS) is a class of IS and refers to manage of knowledge. KMS supports creation and transfers the application of knowledge in organizations. Effective development and implementation of KMS requires a foundation of several rich literatures that exists in different related fields. KMS enables employees to have ready access to the organizations’ documented base of facts, sources of information and solutions. Software tools are a collection of technologies not necessary acquired as a single software solution added to the existing information technology infrastructure. This is a great investment in the latest technology, systems and infrastructure supports the KM.

Knowledge management systems (KMS) is a generally IT system for managing knowledge. Sharing the information widely and distributed databases new ideas come in mind for new or improved equipment. Employees have access to organization’s documents, source of information and solutions. Users are active, participate in knowledge networks.”

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How useful such a system could be to Tesco

Knowledge is information which may be transferred in the organization by a common database. Employees are allowed to obtain knowledge, expertise, get ideas relevant to their work and know how to work efficiently.

Cultural change is very important capital for the organization and drives to managing innovation facilitating the organization learning across the organization and solves difficult problems.

Sharing valuable information the employees avoid non sense works and training time. ”

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