Tesco’s e-commerce strategy and its impact on firm performance
According to Wang and Wang (2015), the availability as well as continued growth of internet technologies has to a considerable extent created significant opportunities for users across the globe. One of such ways is the e-commerce, which has substantially changed how people conduct business. In light of this, Narayana and Newton (2013) have explained that e-commerce typically entails buying or selling or products and services through a computer network, e-commerce usually draws on a wide range of technologies including internet marketing, mobile commerce, supply chain management, electronic funds transfer, inventory management systems, online transaction processing, automated data collection systems, as well as electronic data interchange. According to Abuhamdieh et al. (2013), more and more organisations are now incorporating e-commerce platforms in their convectional business systems. In regard to this, with the advent of the internet as well as smartphones, it has now become easier for organisations to integrate workable solutions that can work for a wide range of customers across the globe. One of the organisations that have considered implementing e-commerce strategy is Tesco.
Founded in 1919, Tesco is one of the British multinational grocery and merchandise retailers, which is headquartered in Hertfordshire, United Kingdom. The company has been regarded as the third largest retailers in the word in terms of profits (Mylan et al., 2015). Tesco has various stores across 2 countries in Europe as well as Asia. Besides, it is the market grocery market leader in the United Kingdom, Hungary, Malaysia, Ireland, and Thailand. Since 1990s, Tesco has diversified into various areas including the retailing of clothing, books, furniture, electronics, petrol, as well as software among others (Wood, et al, 2016). This explains why the company has grown in terms of customer base over the last two decades. In an attempt to increase its customer base through reaching more customers, Tesco has over the last couple, of years used e-commerce strategy. In fact, Tesco has been ranked third in the Internet Retailer Top 400 Europe. The company has invested heavily in e-commerce offering mobile app as well as related services to 70 stores across the United Kingdom (Mylan et al., 2015). This has made it possible for customers to order online from a personal computer of a mobile device. Taking this into consideration, Tesco forms a good basis to conduct a research on e-commerce strategy and its impact on firm performance.
1.2 Research rationale
Given that that e-commerce is a relatively new concept, there has been limited research on the topic. Besides, most of the studies available have focused on the implementation of e-commerce strategy, and have failed to analyse the impact of e-commerce strategy on overall firm performance. Therefore, this study aims to close this gap through exploring the impact of e-commerce strategy on the performance of Tesco.
1.3 Research aim and objectives
The aim of this study is to explore Tesco’s e-commerce strategy and its impact on firm performance. Taking this into account, the study will concentrate on the following research objectives in order to realise this aim.
- To study the factors that stimulates Tesco to adopt the e-business strategy;
- To study how Tesco implements the e-commerce strategy;
- To study the impact of Tesco’s e-commerce strategy on firm performance;
- To study the deficiencies in Tesco’s e-commerce strategy and pose some recommendation
2.0 Literature review
2.1 Factors that stimulates organisations to adopt the e-commerce strategy
Various factors that stimulate organisations to adopt e-business strategy have been explained by various scholars. Taking this into consideration, one of the factors is reducing the overall operational costs. This is according to Levy (2012), who has added that through the use of e-commerce strategy, it is usually easier for the company to lower its operational costs in various aspects of an organisation. Precisely, he has explained that through adopting the e-commerce strategy, organisations can reduce their costs of managing the inventory of goods owing to the fact that they can easily automate the inventory management through the use of web-based management systems. This method, as echoed by Phillips (2016), can to a considerable extent save on the operational costs of an organisation. Wang and Wang (2015) have also echoed this sentiment, asserting that e-commerce typically replaces the manual business operations with automated electronic equivalents, which helps in saving on inventory costs. Additionally, according to Narayana and Newton (2013), through the use of ecommerce strategy in the organisation, an organisation is able to reduce on advertising costs. Precisely, he explains that e-commerce can to a substantial extent reduce on advertising costs owing to the fact that it is usually easier to update an advertisement using software technology. The use of e-commerce strategy also helps organisations greatly in reducing on their labour costs. This is according to Levy (2012), who has explained that labour costs can be reduced considerably owing to the fact that the organisations can automate their online store fronts. As such, Abuhamdieh et al. (2013) have argued that there is usually no need of hiring a lot of employees, which in turn helps greatly in reducing the labour costs as well as overall operational costs.
Another key factor that stimulates organisations to adopt e-commerce strategy is the need to increase customer base through reaching global markets. This assertion has been elucidated by Paris et al. (2016), who have added that the use of e-commerce strategy usually plays a fundamental role in assisting organisation in reaching global market segment. This sentiment has been echoed by Poggi et al. (2014), who has explain that through e-commerce strategy, an organisation is usually able to reach global areas that would been otherwise difficult. According to Narayana and Newton (2013), over the last couple of years, internet has become accessible in many countries across the globe. Taking this into account, Piller et al. (2014) have found out that it has become easier for organisations to implement e-commerce strategy in an attempt to reach the global markets. This as result has led in increased sales as well as profitability. Specifically, as put across by Levy (2012), the use of e-commerce strategy has allowed organisations in increasing their sales, whole decreasing on the investment costs. Narayana and Newton (2013) have also contributed in this assertion. In this light, he has indicated that e-commerce typically expands the marketplace from local markets to international markets with minimal space, capital outlay, as well as equipment.
Another significant factor that stimulates organisations to adopt e-commerce strategy is the need to monitor the buying habits as well as interests of the consumers. This has been indicated by Phillips (2016), who has explained that through the use of e-commerce strategy, organisations are typically able to monitor the carefully monitor the consumer behaviours for the purpose of tailoring their offers to suit the needs of the various customers. This has asserting has been backed by Narayana and Newton (2013), who have explained that the use of e-commerce permits organisations in tracking the interests as well as preferences of the customers, and the use the information in building an ongoing relationship with the customers. This is mostly through customising the products as well as services for the primary aim of meeting the diversified needs of the customers. Consequently, Wang and Wang (2015) explain that the organisations are able to create customer loyalty, which translates to generation of more revenue.
2.2 How organisations implement the e-commerce strategy
According to Phillips (2016), various organisations usually implement their e-commerce differently. This, according Abuhamdieh et al. (2013), is due to the fact that organisations usually have different structures, cultures, as well as objectives. Nonetheless, Paris et al. (2016) have affirmed that there are key aspects that are usually considered by all organisations craving to implement the e-commerce strategy. According to Piller et al. (2014), the first step in the implementation of e-commerce strategy by an organisation is through ensuring that the website platform is accessible to the customers. Additionally, the products displayed on online stores have to be available to the consumers. Secondly, as explained by Yang et al. (2014), there should be a mechanism of accepting orders. On this, Poggi et al. (2014) have argued that when customers browse through the e-commerce websites and make a decision of purchasing a certain product, there must be a process of accepting the order. The shopping cart, as explained by Yang et al. (2014) is the process that runs this process. The shopping cart typically performs a wide range of tasks including computation of taxes and other levies, process of discounts and other levies, capturing the billing address of the customer, as well as forwarding the customers to the payment gateway. After the customers is done with selecting the desired items, and placing them in the shopping cart, the next step, as espoused by Narayana and Newton (2013) is usually payment. Taking this into consideration, Poggi et al. (2014) have explained that most payment gateways typically provide the customers with a wide range of payment options such as credit cards, debit cards, PayPal, and Skrill among other methods. Therefore, the customer has to select the payment method depending on his or her needs. Nonetheless, Abuhamdieh et al. (2013) have explained that there are some firm which only offer one payment option, which becomes limiting to the customers. Once the payment has been done, Piller et al. (2014) have stated that the seller needs to verify the payment and then set to deliver the ordered items to the customers. Given that Poggi et al. (2014) explain that key to a successful e-commerce is usually logistics, most organisations always ensure that the right products are delivered to the right customers, in the right condition, and well as in the right time. Given that logistics is to a considerable extent a specialised function, Yang et al. (2014) have found out that most e-commerce firm usually outsource delivery to third party companies. This, a s a result typically increases customer satisfaction considerably. Even after the products reach the customer, Wang and Wang (2015) explain that this is usually not the end of the e-commerce implementation. As such, he affirms that the customers may need to be serviced through ensuring their needs are fulfilled. For instance, the customers may have queries regarding the usage, enhancement, or repair of a purchased product. Additionally, there might be error in the delivery such as wrong or damaged product. As such, Piller et al. (2014) explain that reverse logistics is typically conducted, where the customers may get another product or a refund. This as a result helps in maintaining customer loyalty in light of various dissatisfactions by the customer.
2.3 Impact of e-commerce strategy on firm performance
According to Wang and Wang (2015), e-commerce has been seen to have significant impacts on firm performance. Taking this into account, Paris et al. (2016) explain that the main impacts of e-commerce on firm performance include increased sales, ability to operate 24/7, and increased business reach. As regards to increased sales, Abuhamdieh et al. (2013) have explained that through the use of e-commerce strategy, there is usually significant increase in online sales. This has been backed up by Levy (2012), who has found out that over the last couple of years, revenue of a business that uses the e-commerce strategy has increased by more than 250 percent. Narayana and Newton (2013) have affirmed that increased in sales due to the use of e-commerce strategy comes as a result of the fact that most consumers prefer ease access as well as inconvenience that comes with e-commerce platforms. According to Poggi et al. (2014), this is particularly true when it comes to platforms that are able to process credit card payments as well as top online processors such as PayPal.
As regards to 24/7 operations, Phillips (2016) has explained that many firms that do not use e-commerce may find it hard to be open always. This, according to Piller et al. (2014) is due to a wide range of overheads that come with it in regards to staff as well as utility payments. E-commerce on the other hand, as explained by Yang et al. (2014) typically makes it possible for a firm to be open and easily accessible always without any increase in the overhead costs. Additionally, according to Piller et al. (2014), transactions as well as payments can be made automatically without the supervision of the firm any time of the day. Taking this into account, round-the-clock facilitation of e-commerce has to a considerable level made it possible for organisations to increase their performance to a considerable extent. Nonetheless, Poggi et al. (2014) have disputed this claim, indicating that 24/7 operations may inconvenience customers when they system has issues during odd hours, or weekends, when most firms do not have support staff. As such, Yang et al. (2014) explain that customer dissatisfaction may be high, resulting to low sales.
Lastly, when it comes to the aspect of increased business reach, Narayana and Newton (2013) have argued that a business operating entirely offline may have significant challenges in relation to reaching a wide range of customers. However, when it comes to e-commerce, it usually enables even local small business in reaching international masses. On this, Wang and Wang (2015) have argued that there is no limit where internet can reach. Going with this assertion, Paris et al. (2016) have elucidated that through e-commerce strategy, people can purchase goods as well as services from almost every corner of the world. With increased customer reach, Phillips (2016) asserts that it is with no doubt the performance of a firm is boosted to a considerable extent. This is due to increases sales as well as profitability.
As regards to research philosophy, this research will adopt positivism philosophy rather than interpretivism philosophy. This is due to the fact that the study will put a lot of focus on consistent external reality, as opposed to impressions. Taking this into account, this research will use secondary data, which will be obtained from a wide range of sources including websites, journals, as well as books among others. According to Saunders et al. (2009), secondary data is usually economical, given that to help in saving efforts as well as expenses. Additionally, as explained by Mackey and Gass (2015), it usually provides the basis for comparison for the data, which is collected by the researcher. Nonetheless, as explained by Kuada (2012), data collected through secondary data may be outdated. However, in order to overcome these problems, the researcher will consider using references than less than 6 years old. As such, the researcher will be assured of reliable as well as valid data. Through the use of secondary data, the researcher will consider comparing data from the various sources for the purpose of understanding the impact of e-commerce strategy on performance of Tesco. Additionally, in order to ensure ethics, the researcher will acknowledge the sources through proper in-text citations.
4.0 Limitations of the study
Despite the fact that this study will play a significant role in realising the aim and objectives of the study, there are various limitations of the study. One of the main limitations is that the researcher may lack adequate materials regarding e-commerce. This is because e-commerce is a relatively new concept, and thus limited research has been conducted on the topic. Another limitation is that the data collected may be contradicting, this making it hard for the researcher to come up with a comprehensive conclusion.
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