Does Tesco enjoy an IT-generated competitive advantage?

My answer is ‘yes, Tesco has enough competitive advantages generated by IT’, because of 1) its solid database about customers driven by ‘Clubcard’ strategy, and 2) centralized platform with common business process (e.g software for Finance, Purchasing, HR, IS, etc.) across the world.


Tesco, about ninety-year-old successful retail chain, started from England with motto ‘Pile it high, sell it cheap’. At first stage, Tesco sought for high profitability focusing on mass production and low price (at the same time, considering RPM (Resale Price Maintenance) to protect suppliers as well). Later on, Tesco started to invest on computerized checkout system to reduce customers waiting times and provide more convenience to them.


1) Solid database about customers driven by ‘Clubcard’
In 1995, Tesco launched ‘ClubCard’, first supermarket loyalty program in London. This launch strategy, initially, was considered a reward to frequently purchasing customers. In addition to this, more important achievement from this is , actually, let Tesco enable to gather information regards customers (what kind of products/how much/how often customers purchase depend on their gender, ages, income, etc.), to analyze these information for its strategy development . Well, at first, it seemed like there was more negative impact (such as cost increase by call center, update of POS technology & supporting computer system). However, after a few months, it proved that ‘ClubCard’ strategy worked well by increased Tesco’s market share. Since Tesco knew the pattern of customers purchasing behavior, Tesco was able to segment its customers and to target them with proactive strategy on price/promotion/distribution. Beyond sales increase, ‘Clubcard’ brought Tesco to move from off-line retail shopping to on-line (web based) with its Tesco Direct service . In 2001, Tesco proved again their success on e-grocery shopping, whereas its competitors went to bankrupt.


2) Centralized platform with common business process across the world
Besides its growth in England, Tesco has started to expand its business toward overseas. And Tesco’s centralized IT infrastructure (the network from Cable & Wireless, which connects more than 14 countries) made this international expansion happen by linking Financial software (eg. invoicing), HR software, Purchasing system and Management Information System globally.


Tesco is challenging to figure out how they will continue the growth in the matured market, and how they will differentiate themselves to the customers in various markets from England to Asia or USA. I believe above competitiveness of Tesco will strengthen Tesco’s IT capability so that they can keep their position on ‘on-line grocery shopping’ as a first-mover with advantages.