E-Business Strategy
What are the key characteristics of an e-business strategy model?
E-business strategy model defines the future approaches that need to be implemented in the online environment for achieving the set goals (Chaffey, 2007). There are several elements that compose the key characteristics of an e-business strategy, these are:
Internal and external environment analysis implies the scanning of the available resources and competences versus the industry competitiveness standards and the external demands
Clear vision statement and objectives definition that communicates the strategic intentions to stakeholders (employees, customers, shareholders)
Strategy development that aligns the internal resources with systems across the organizational structure in order to meet objectives and applying the most suited strategy after evaluating several alternatives
Strategy implementation focused on allocating resources, defining budgets and timelines, establishing tactics, actions and control
Control and monitoring required for evaluating if the chosen strategy flows according to plans (Chaffey, 2007).
Situation Analysis for Tesco
Situation analysis comprises various methods and process that allows managers to identify where they stand, by evaluating their internal capabilities reported to the external requirements of the industry in which they activate, but also of the socio – politic, economic or technological factors (Frangos, 2015). For Tesco, a reputable international general retailer, the situation analysis should provide managers the opportunity to clearly visualize the internal environment, in order to understand how to best optimize the industry and environmental challenges. The clear identification of the internal environment can be reached by applying specific methods, which constitute key elements that reflect the internal situation.
An analysis of Tesco’s strengths, weaknesses, opportunities and threats (SWOT) would result in an accurate description of its present internal situation (strengths and weaknesses), but also an overview of the external environment that can affect its business (Johnson, Scholes and Whittington, 2008). Strengths, such as being UK’s leading general retainer brand, incorporating a diverse and numerous range of products, the advanced technology visible in its self – service check – outs and in its click and collect features offer a good grasp of Tesco’s internal capabilities (Datamonitor, 2014). On the other hand, its limited international presence and over dependence of the UK market, plus its limited cash flow caused by the aggressive expansion on the domestic market are aspects that Tesco’s management should correct (Datamonitor, 2014; Tesco, n.d. “Click + Collect”). SWOT analysis also reveals opportunities that the organization could grasp, such as pursuing a more consistent international expansion or diversifying its products for increasing its market share. This analysis also allows the identification of Tesco’s threats, such as its relative high costs compared with rivals like Aldi or Lidl, the strong competitive power of Wal-Mart or ASDA that threaten Tesco’s international expansion, or the economic recession and instabilities in the EU zone (Datamonitor, 2004).
On the other hand, a resource and competence analysis is an element that should be comprised in Tesco’s situation analysis, as it focuses solely on describing the internal environment, especially the retailer’s resources (tangible and intangible) and competences (skills and abilities), which reflect threshold or unique capabilities (Johnson, Scholes and Whittington, 2008). Tesco’s tangible resources refers to is impressive human resources (more than 480.000), its mix of physical stores (6.814) and online presence, its technology and overall sales (£69.7 bn for 2014/2015) (Tesco, n.d. “Key Facts”). Its intangible resources comprise elements such as its brand awareness and reputation, industry know – how or its market share. The threshold capabilities refer to the standard features specific to retailing, such as customer service, modern technology, good in – store logistics. Tesco’s unique capabilities refer to its power of customizing the stores based on consumers preferences self-service checkouts, which cannot or are difficult to be imitated by competitors.
For a comprehensive external analysis, two main elements (processes) must be comprised in the situation analysis, respectively Porter’s 5 forces for reviewing the industry competitiveness and PEST analysis, for understanding the challenges impose by factors external to its industry. The five competitive forces, the bargaining power of consumer, the bargaining power of supplier, the threat of new entrants, the threat of substitute products and the existent rivalry impose high entry barriers for new entrants and indicate an intense rivalry, with powerful competitors such as Asda, Sainsbury, Lidl, etc. (Pettinger, 2014; Porter, 1998). The bargaining power of consumer is high, as clients have similar options to choose from, pressuring retailers to continue to improve quality and prices, but the suppliers have a low bargaining power, as they have a continuous business with Tesco, which is beneficial for their operations. The substitute power is moderate, with many convenient stores as alternative, but the one stop shop concept minimizes this threat (Tesco Annual Report, 2015).
Finally, PEST analysis refers to the political environment, which can impose taxes or change employment or pension system that can affect the company’s business, to economic dynamic, such as depression versus prosperity, consumer trends and technological opportunities (Chaffey, 2007). Tesco is challenged by a possible supermarket tax “Tesco tax”, which will decrease its revenues. The economic uncertainties also influence the consumer purchase power and the tendency for the online shopping challenges the retailer to continue to innovate.
Method and Metrics for defining e-business objectives
Tesco should define e-business objectives that would answer the sophisticated customer demand, by setting SMART (specific, measurable, attainable, realistic and time bound) objectives. For measuring the e-business objectives, the retailer should use as metrics the financial results, the online customer value (unique visitors) or operational processes (the number of orders through the online shopping platform) (Chaffey, 2007).
Strategic Options Assessment to Adopt for E-Business
According to Ansoff matrix, there are specific strategic options that can be pursued, which are market penetration, new market development, product development or diversification (Chaffei, 2007). For Tesco’s e-business, market penetration would be redundant, considering its impressive number of physical stores. Product development would be an effective strategic option, but it could be easily imitated by its competitors. Entering new markets (market development) and diversifying would generate a competitive advantage for Tesco. Using e-business channels for grasping new markets and selling diversified products would further enhance Tesco’s leading position, as it would position its business on a new industry, complementary, yet different from its main activity.
Bibliography
Chaffey, D. 2007. E-business and e-commerce management: Strategy, implementation and practice. Edinburg Gate: Pearson Education Limited.
Datamonitor. 2004. Tesco PLC. Datamonitor.
Johnson, G., Scholes, K. and Whittington, R. 2008. Exploring corporate strategy. Essex: Pearson Education Limited.
Petting. T. 2014. The battle for market share in UK supermarkets. [Online]. Available from < http://www.economicshelp.org/blog/11947/economics/market-share-in-uk-supermarkets/>. [Accessed 28 January, 2016].
Porter, M.E. 1998. Competitive strategy: techniques for analysing industries and competitors. New York: The Free Press.
Tesco Annual Report and Financial Statement 2015. 2015. Hertfordshire: Tesco PLC.
Tesco official website. N.d. Grocery Click + Collect. [Online]. Available from < http://www.tesco.com/collect/ >. [Accessed 28 January 2016].
Tesco official website. N.d. Key facts Available from < http://www.tescoplc.com/index.asp?pageid=71 >. [Accessed 28 January 2016].
