Management of information systems: 99 cents only stores
Value Chain and Competitive Forces Model Analyses
Porter in his seminal work of value chain proposed it as a tool to identify and to analyze the origins of competitive advantages and suggested that the activities of the business could be grouped into two: primary and support activities (Lowson, 2002). The primary activities of the firm under analysis are: inbound and outbound logistics, marketing and sales and service. There are three warehouses that the company maintains to store its inventory, pending delivery to the respective stores. All of them are linked by a Business Information Warehouse module, which provides data mining capabilities that give a complete view of business operations and information automatically, instantly and accurately.
The firm’s IT platform also does the inbound and outbound logistics function of the business for 99 Only Stores, using a virtual front, deploying advanced computer systems to interact efficiently with customers. The service activity composes of the company policy that any item can be returned within seven days if a customer is not satisfied. The support activity, on the other hand, is procurement. As their products are sourced worldwide and new suppliers are constantly coming on board, procurement has become one of their support activities. Grant (2002) mentioned that Porter proposed that an evaluation of these five ‘forces’ in an industry will reveal the intensity of its competition and, therefore, its attractiveness for strategic development.
Threat of New Entrants. The threat of new entrants is very high due to low entry barriers to the industry. The economies of scale, i.e. the very competitive prices in the industry, the not-so-large amount of capital and investment requirements and the easy access to industry distribution channels are some of the contributors to the low barrier of entry to the price-point retailing industry.
Threat of Substitutes. Threat of substitutes is also high, as the price to shift from one price-point retailer is relatively small. As individuals are often looking for ways to save on consumer products through buying cheaper manufactured goods, the buyer’s willingness to substitute is pretty high.
Bargaining Power of Buyers. As there are a lot of price-point retailer chains surfacing in the United States due to the low entry barrier to the industry, the bargaining power of buyers is not as great. This is further underlined by the industry not being the key supplying group for potential buyers, which in this case, are provided by larger supermarkets in the region.
Bargaining Power of Suppliers. Suppliers are almost entirely a positive competitive force for the price-point retailing industry. Suppliers’ concentration is relatively low in all instances due to the fairly homogeneous nature of factor inputs provided to the industry players.
Intensity of Rivalry between Competitors. Rivalry is only relatively intense, as there are only a few dominant industry competitions, and fewer still has powerful and fully integrated IT platforms. However, rivalry tends to intensify as the number of competitors increases and as they become more equal in size and capacity. Therefore it can be said that the intensity of rivalry in the retailing industry where Tesco belongs is increasingly becoming stiffer.
Current Business Strategy and the Role of IT Infrastructure
According to Lowson (2002), the integration of technology and strategy, particularly as they relate to a strategic view of the market is a critical element that executives must address in order to achieve business sustainability in this increasingly information-centered world. A current business strategy is obvious in its business name alone. The firm’s low prices are achieved through purchasing in large batches and very efficient logistics where the ‘flat packages’ keep transportation and handling costs down. This entails that they maintain close communications with their suppliers through IT infrastructure owned by the firm. Entrepreneurial behavior at 99 Only has been bounded by two things: a clear mission to be the world’s largest price-pint retailing company, and a focused strategy with four key elements: (1) expanding the customer base; (2) broadening the trading platform by increasing product categories and promoting new ones; (3) fostering community affinity; and (4) constantly enhancing site features and functionality.
Success and Effectiveness of IT Infrastructure
Because the company is highly responsive to the threats and opportunities that it encounters from week to week, its clear sense of purpose and focused strategy reduce the chance that it will run off the tracks. An important technological effect that can be felt is cost reduction. Technology can be a big help when it comes to lessening the costs that are embedded in the company’s operations (Grant, 2002).
Therefore, instead of looking for more business opportunities and attending to pressing concerns, much of the efforts are focused on those tasks alone. The productivity aspect of the company literally decreases —the extreme side of it is that it can lead to further delays. Yet with the utilization of technology, this aspect has been properly resolved. Perhaps in any setting, that is one of the most acclaimed benefits of an IT infrastructure—data management and storage (Rich, 2002).
The company’s proactive approach to outage prevention appears to be working. Initiatives aimed at solidifying relationships with volume sellers and keeping them in the fold are paying off. IT strategy is like a bullet the company can use against its rivals in the competitive war. The IT strategy used by the company makes it competitive not only within rivals within its scope but potentially rivals in other countries when they decide to expand their market base. Although some IT strategy tends to be questionable for some and inappropriate for others it use and benefit for a company cannot be denied. More and better use of information led to specific, tangible improvements not just for the business, but for everyone involved as well.
It made the company more market-aware and more customer-driven. It improved management systems and methods for communicating and managing within the organization. The availability and ability to process information allowed 99 Only managers to think critically about management systems and how decisions are made. The IT strategy also gives the company increased clients, more profits, additional competitive advantage and achievement of goal.
Nevertheless, there are still a number of difficulties that they fail to deal with using IT. This is the innate weakness of IT infrastructures that unfortunately cannot be remedied. Human resources problems requiring subjective decision-making on the part of the management cannot be aided by the infrastructure. Also, relationship issues with suppliers, customers, stakeholders and other external parties cannot be solved using pure IT infrastructure alone. The power of personal judgment still cannot be undermined in these types of situations.
Grant, R. (2002). Contemporary Strategy Analysis: Concepts, Techniques, Applications. Oxford: Blackwell Publishing.
Lowson, R. (2002). Strategic Operations Management: The New Competitive Advantage. New York: Routledge.
Rich, D. (2002). Relational Management and Display of Site Environmental Data. Boca Raton, Florida: CRC Press.