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In what ways does e-business create value for a business organisation on the example of Tesco

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In what ways does e-business create value for a business organisation on the example of Tesco Maria Maksimova 99132681 BSS44-3 Contemporary Issues in E-Business Environment Bsc Internet and E-business Contents Introduction Outbound logistics Sales/customer service Operations & Inbound Logistics & Marketing Conclusions Bibliography 3 3 3 5 6 7 Introduction Although in a value chain key activities of the firm are represented in a following way: inbound logistics - operations - outbound logistics - marketing and sales - after-sales service, with online retailing the pull factors are stronger than the push ones, because in a way the customers themselves trigger the sequence of firm's activities, they rather demand customized order-based approach than more conventional one. But using the e-business initiatives across all the value chain identifies the key cost drivers in each link of it. Generally there are 2 directions in this process - the elimination of physical processes or making them more cost-effective (Porter, 2001). Outbound logistics In case of online shopping these activities are closely bound together, outbound logistics is an internal operation it becomes crucial in customer perception of service performed. In the early times of internet shopping Tesco concentrated the attention on optimizing the processes in physical movements of the goods instead of heavily investing in building warehouses. Basically they built an effective delivering system instead, picking, packing and dispatching orders in local Tesco's stores, each of them having several vans. The advantage is that customers are able to arrange more convenient delivery times, because smaller vans are covering shorter distances. ...read more.


Still buying online they can be sure that at least less people if none at all touched these products. As commodities are low margin items, to cater to the more sophisticated tastes Tesco is aiming to install the custom-made software at all delicatessen, butcher, fish and bakery counters. Such factors as fees for delivery may also have an influence while being currently very competitive, not covering the costs of the service. With the possible demise of high street shopping and legislation restricted out-of-town formats these fees represent something similar to the salespeople commission at the ordinary shop, while some people argue that out-of-town shops may charge for entry. We can spot similar trends in airline business - with Easyjet, which has no physical ticket office, and charges more for telephone sales. Once people had an experience of buying online, overcoming their uncomfortable feelings, they are not going to use anything else, seduced by the low prices and ease. Orders made online provide an opportunity to capture all the data about the customer automatically, making it easier to predict the demand and devise profiling. Additional value-adding services may be provided such as recipes and favourite items tailored to the customer. There are a lot of opportunities in this field, providing the content to the customers, making them more loyal. Some observers argue that such customization and information rich customization may lead to charging premium for the services once it would appear difficult to switch to another supermarket. ...read more.


Tesco launched a special subsidiary for this purpose, bearing in mind how important is to keep track of their customers. Eventually such systems facilitate crucial decision-making. Apart from introducing new applications and technologies with the increasing importance to be at the cutting edge with its online operations there is a task to keep up-to-date with hardware and software. If to compare bricks-and-mortar operations of the store with the benefits of online based ones around half of a shop's revenue is consumed by operating costs. Much of these costs is associated with floor space, labour and display stock - variable costs that in the internet-model are either removed or directly borne by the consumer. Virtual products stand in for physical products, reducing inventory and obsolescence costs. The customers themselves spend their time and their money on internet service costs to do tasks traditionally done by shops. As an example with banking shows transaction costs are cut by 90 per cent by getting the customers to key in and check information via the web instead of asking a teller to do it (Roper 2004). Conclusions Underpinning Tesco's success is an obsession with operational efficiency and productivity gains, which the company uses to keep prices low or to improve service rather than to increase its operating margins (Child 2002). That enabled Tesco to develop its key value-adding activities and remain on the cutting edge comparing with other competitors while moving further its value chain across the boundaries of the organisation. Their firm online strategy since 1996 allowed them to develop a distinctive competitive advantage over other players in the industry. ...read more.

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