Strategic alignment of IT resources – A case study in Grocery industry (Part 2)

October 11, 2011

Strategic alignment of IT resources – A case study in Grocery industry (Part 2)

	Japan	UK	Spain	US
Effect of economic situation	The effect of recession has prompted Japanese to be more cautious while selecting grocery stores to shop. This situation is breeding ground for underdeveloped private label market in Japan to capitalize on price (32).	Consumers have scaled back spending and repaid debt amid signs of slow recovery. In Q4 of 2009, the UK economy experienced the first economic expansion in six quarters. Low consumer confidence, high personal and government debt, and high taxes will slow recovery (48).	Recession has its impacts on buying habits on Spanish people too. While looking out for cheaper private labels, they also have increased quality sense (60).	Currently, there is high trends that shows shift from eating out to going back to grocery stores and save money (usage coupons etc). There exists high food prices, down economy, low consumer confidence and notion of ‘healthy eating which is required and costly (4).
Technology & Infrastructure Issues	Concerns that old style of doing business is not viable any more. Trying to improve innovation systems (33).	Robust private markets for technology and services. Strong government support for capturing value in public sector (49).	Innovation system highly dependent on foreign technology. Deficit appears to be structural (61).	Major technology thrust pushes industry to take drastic steps towards customer satisfaction and innovation (5).
Integration Issues	System integration issues due to heavy mergers between companies and due to suppliers’ legacy systems.	Applications developers must understand retailers’ business and integrate with its existing systems as part of its value proposition.	Severe integration issues in supply chain.	Major challenge is integration issues while targeting global sourcing and thus being exposed to wider pool of suppliers, providing multi-channel integration for customers and integration with legacy systems.

	Japan	UK	Spain	US
Political Structure	A parliamentary government with a constitutional monarchy. Legal system is modeled after European civil law systems with English-American influence; judicial review of legislative acts in the Supreme Court. Supreme Court (chief justice is appointed by the monarch after designation by the cabinet; all other justices are appointed by the cabinet) (34).	Constitutional monarchy and Commonwealth realm (50).	Basque Nationalist Party , Canarian Convergence and Union Coalition, Democratic Union of Catalonia (63).	Even though current US political setup and administration is convinced that supporting innovation and entrepreneurship is necessary for improving the economic conjuncture, the existing economic recession cause consumer product manufacturers to reconsider their plans to launch new products for Grocery industry (6,7).
Legislation	In 2006, the Internet providers attempted to disconnect users anytime they detected P2P or any other file-sharing software. The Japanese Ministry attempted to block P2P but stopped because of concerns of privacy issues (35).	Growing dominance of large grocery chains prompted Office of Fair Trading to review competitive practices of largest retailers (62). Fear that smaller suppliers and sole proprietorships will be pushed out of markets has prompted lawmakers to consider limiting labor and operational tactics used by large grocers.	Education expenditures amount to 4.2% of the population, which compares to 97th in the world. By law, every public school in the country is required to teach Roman Catholicism. But new legislation has been enacted which has made religious classes optional (64).	Current US administration has put forth various legislative measures to support product innovation and growth of grocery industry, especially when Grocery Manufacturers association is influencing US Senate to modernize U.S. Chemical Safety Laws (8).
Trade Policy	Japan’s weighted average tariff rate was 1.3 percent in 2008. Import and export bans and restrictions, import quotas and licensing, services market access barriers, non-transparent and burdensome regulations and standards, restrictive sanitary and phytosanitary rules, restrictions in government procurement, state trade in some goods, subsidies, and inefficient customs administration add to the cost of trade (36).	The Bank of England periodically coordinates interest rate moves with the European Central Bank, but Britain remains outside the European Economic and Monetary Union (50).	Spain’s trade policy is the same as that of other members of the European Union. The common EU weighted average tariff rate was 1.3 percent in 2008. However, the EU has high or escalating tariffs for agricultural and manufacturing products, and its MFN tariff code is complex.	US trade policies are designed to support grocery industry expansion in developing areas and to reduce overhead for Grocery stores and put in more money for product innovation (4).

Porter’s Competitive Forces Model

Dominant Blueprints & Strategic Focus

Blueprint (Drivers & Constraints)

Blueprint	Force	Japan	UK	Spain	US
Multi-Channel Easy To Do Business With	Driver	Acquisition of small wholesalers, mergers and cooperative agreements are in response to need for greater efficiency (39).	Growing interest in shopping online makes retailers pursue web strategies that compliment brick & mortar experience(47).	Efficiency of marketing to consumers who often make decision to buy at point-of-sale(65).	Technology/Innovation infusion in the form of Web 2.0 and mobile technology offers wide options for channel integration and is leading blueprint’s development and alignment of IT (20).
Multi-Channel Easy To Do Business With	Constraint	Shortage of technical capability, attitudinal problems preventing wholesalers, retailers, and manufacturers from working together. Poor penetration of technology in traditional-bound portions of value chain (39).	Ordering more efficient with RFID(51). Loyalty programs track individual consumers‘ and tailor promotions (52).	Today, more grocers are collecting customer-specific data. Large retailers using RFID to deliver targeted promotions (66).	Convincing customers to thinking “My Store” rather than “The store“. Greater reliance on integration for increased sales, customer retention and profitability (16,17,18,19).
Spend Management Low Cost	Driver	The market has shifted its focus to support more discount store models in order to provide lower prices to customer (38).	Spend management encourages higher quality and greater choice (Profit through partnership, 1994), faster replenishment.	Spend management software has been delivered to the enterprise however, Europe was a unique case because of the large number of languages owed to its significant presence in both Western and Eastern Europe (67).	Economic recession compels companies to cut costs on direct and indirect goods/services and they resort to spend management solutions to gain visibility into the area of procurement and analysis(US21).
Spend Management Low Cost	Constraint	Recession is having a major negative impact on consumer confidence, as they look for ways to cut back on daily expenditure and retailers have to drastically rethink their operating strategies in an effort to retain even moderate growth levels (38).	Cash purchases without loyalty card provide no customer data to improve decisions.	Mega-Hubs were launched with promise to provide interoperability between trading exchanges, however companies were not ready to invest into the process because it was a separate entity (67).	Walmart’s efforts to align IT to current spend management blueprint is partly hindered by cultural/language barriers while on its journey to global sourcing (23).
Employee Productivity Multiplier	Driver	A decade of declining economic growth aligned with contextual factors, such as an ageing workforce, has caused Japanese firms to introduce changes to their HRM strategies (40).	Respecting employee rights to privacy and confidentiality requires controls that limit data exchange between applications and by information consumer.	Integrating and automating HR processes and multiple country systems is demanding for service providers (68).	Increased need to reduce the total cost of employee communication per year , improve corporate hiring process and increased productivity improvement ,all influence usage of employee centric blueprint (24).
Employee Productivity Multiplier	Constraint	Regulations, compliance and ethical enforcement activities in many organizations have been confined to a few specific operating silos such as HR, corporate security, and legal, and have been conducted either on paper or on spreadsheets, making the procedures difficult to share across the organization (41).	Data Protection Act, Chartered Institute of Personnel Development, and Information Commissioner’s Office provide extensive guidance on responsibilities and obligations of employers (53).	For many multinationals the cost of administering a pan-European HR & Payroll policy, with all the complexities of EU and country reporting regulations and compensation and benefits variations, has made the HR & payroll outsourcing message a compelling one (68).	Severe integration issues exist when grocers try to implement fined tuned HCM systems to support the blueprint as in the case of Brookshire Grocery store (25)

Blueprint	Force	Japan	UK	Spain	US
Supply Management Fast & Responsive Service	Driver	The smaller supermarket chains around the country are slowly being acquired. Larger retailers are consolidating and expanding their territories. Retailers have too much inventories on hand and they need to cut their cost structure, both in terms of labor costs and store operations, and reducing inventories (42).	Tesco uses RFID tags on milk and DVDs to track product from production facilities to shelf. Supplies can be replenished faster and DVD stocks better organized on shelf (54).	Grocery retailers such as Asda and Tesco have been marked to increase their product ranges, however European companies are still refining the use (CPFER, 3PL, 4PL) infrastructure to stave off the competitive pressures of expansion (69).	Early adoption of EDI as common standardized means of integrated SCM systems communication has smoothened the efforts of SCM integrations between grocery stores and suppliers (26).
Supply Management Fast & Responsive Service	Constraint	focused (42).	Shorter order times, faster payment, interaction by tech, finance and stock management personnel (55).	ERP does not as of yet have a dominant industry association such as Manufacturing Execution Systems Association (MESA) governing its development (70).	The main driver that contributes to alignment of IT towards SCM blueprint is the strive towards service differentiation and the need to remain competitive by being innovative in the SCM arena (27).
Product Innovation Product Innovation	Driver	Health is a key factor in determining customers’ food choices. It is recognized that the consumption of certain foods can promote improved health and well-being and the prevention or minimization of disease. The addition of functional ingredients enables a product to be distanced from other products within the same category, increasing the profit margins and reducing the impact of price wars with competing commodity products (43).	Introducing private label goods as a way to provide low-cost alternative produces conflict with preferred suppliers (56).	CAD application resulted in an explosion of digital data. Because those design applications created many digital files, it became increasingly difficult to effectively capture, manage, and control the output of those systems (71).	One of the major drivers that support product innovation blueprint usage in US grocery industry is the strive for brand focus, which is implicitly offered by the underlying PLM solution (28).
Product Innovation Product Innovation	Constraint	According to GNX’s VP of Product Development, the typical retailer private brand program comprising several thousand products (SKUs) that are constantly changing, and data maintenance can be a significant challenge. Failure to effectively manage this data can negatively impact consumer confidence and market competitiveness (44).	Grocery stores can provide aggregated customer data to reveal preferences, but manufacturers must make independent decision to change how they produce their goods.	By the 1990’s, industry demanded more sophisticated applications to address issues such as product structure, change control, configuration management, and others (71).	Full collaboration with suppliers has been one of the major issues in ensuring complete strategic alignment with the blueprint (28).

Countries Position in Blueprint Evolution

Summaries, Interpretations, and Lessons Learned

•Customer’s are time-consciousness and demand power to establish preferences and satisfaction level has an ever increasing influence on the development and acceptance of multi-channel blueprints.

•Spend management is an essential dimension in business intelligence solutions, enabling better visibility into factors influencing strategic decisions.

•Leading grocery companies have invested enormous time and capital into aligning IT and business processes by standardizing applications.

•Retailers in the grocery industry search for innovative and efficient ways to integrate and standardize supply chain management by leveraging available IT resources to reinforce their business processes.

Conclusion

•Technology and innovation infusion has a positive impact on companies to quickly devise methods to establish effective means to perform sales promotions, improve customer service, provide easier and efficient tracking of products and supply chain management, and cut across multiple channels.

•Leading grocery retailers are distinguished by their significant attention to—and investment in—aligning people, processes and technology.

•To gain competitive advantage, retailers, manufacturers and wholesalers look for ways to reduce costs and improve response time by improving and standardizing their business processes.

•The major influences in the usage of product innovation blueprint are brand focus & subsequent differentiation and the strive towards effective means of product life cycle visualizations and subsequent IT alignment in satisfying a powerful customer.

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