MURDOCH UNIVERSITY ICT622 INFORMATION TECHNOLOGY STRATEGY Semester 1, 2017 Case Study Note: This case study must be done individually. We will dedicate some time to working on it in class in Week 5, so come prepared. Due: Monday 10th April 2017 (Week 7) Worth: This case study analysis is worth 10% of your final grade Length: Your submission will be as long as it needs to be to present to “management” Submission instructions: You should submit your case study analysis from the ICT622 LMS site using the Assignment course tool (unless alternative arrangements have been made). You can receive email notification that your assignment has been received. Late submissions may be penalised at the rate of 5 marks per day late or part thereof unless prior approval for an extension has been gained. You should submit your case study analysis as a word-processed document. THE FILE YOU SUBMIT MUST BE NAMED USING THE FORM: Unit Code, Semester, Year, surname Case Study Therefore, my submission would be ICT622 S2 2017 Cole Case Study.docx. You must include a completed assignment cover page (at end of this document – copy and paste this INTO your document). You must keep a copy of the final version of your submission and be prepared to provide it on request. The University treats plagiarism, collusion, theft of other students’ work and other forms of dishonesty in assessment seriously. Any instances of dishonesty in this assessment will be forwarded immediately to the University for further action. For guidelines on honesty in assessment including avoiding plagiarism, check out the University guidelines at http://our.murdoch.edu.au/Educational-technologies/Academic-integrity/ A case study in a unit such as ICT622 is a description of an actual situation or organisation. It can be a real situation/organisation, or portions may have been disguised for reasons of privacy, or it may be fictitious. Cases are intended provide you with experience of organisational situations that you probably have not had the opportunity to experience firsthand. In a relatively short period of time, you can have the chance to appreciate and analyse the problems faced by many different companies and to understand how managers tried to deal with them. This case study relates to Albertsons – a big American retail chain store and competitor of WalMart. For this case study, assume you are Albertsons’ CIO (Chief Information Officer). From an IT point of view, you need to: 1. Decompose the following data re Albertsons into SWOT categories (as described in class) 2. Assign each item to a segment of Porter’s Value Chain Model 3. Assign each Weakness and Threat to a segment of Porter’s Competitive Forces Model 4. Assign each Strength or Opportunity to a segment of Ansoff’s Matrix 5. Identify how each Weakness and Threat may be addressed by a Strength or Opportunity. Your resulting table (matrix) should look something like the example below. It may not all fit on one page (ok) and there may not be an entry in every cell of the matrix (also ok for example, not every weakness may not have a strength or opportunity to address it). Write a report in memo format (maximum two page) for the CEO of Albertsons that describes your proposed IT strategies to use the Strengths and Opportunities to address the Weaknesses and the Threats presented by the external competitive forces. Spell check it and get it proof read by a native English speaking person with strong grammar skills. Submit the table, memo and coversheet via LMS. Example table layout: Strengths Value Chain Segment Competitive Force Ansoff’s Matrix ....... Inbound Suppliers New Product ...... Process Substitute Products Weaknesses ...... Marketing Service Addressed by Strength zzz ...... Operations New Entrants Addressed by Opportunity yyy Opportunity ......... ...... ...... New Market Grading: 10% List of Strengths and assignment to categories 10% List of Opportunities and assignment to categories 10% List of Weaknesses and assignment to categories 10% List of Threats and assignment to categories 50% Memo content (how Strengths and Opportunities may be employed to address Threats and Weaknesses) 10% Memo format, spelling and grammar Albertsons With 2,305 retail stores, Albertsons is one of the largest retail food and drug chains in the world. Albertsons’ marketing vow is to “Make Life Easier for Our Customers’. This plays a large part in another of the company’s priorities, which is to make Albertsons the number one grocer in the United States. WalMart currently holds that distinction with $56 million in annual revenue from its grocery departments. Albertsons stands in third place, $20 million behind WalMart in revenue. WalMart has been selling groceries for a mere 16 years, making it a relative newcomer in the industry compared to most of its competitors. Of course, WalMart does have vast retail experience, massive purchasing power, and leading-edge systems to apply to its grocery business. Wal Mart’s supply chain management systems are extremely quick and efficient. They keep inventory down to the necessary minimums and operating costs so low that overhead takes a much smaller chunk out of the company’s sales revenue. WalMart’s Retail Link network pulls in point-of- sale data from its retail stores every 15 minutes giving suppliers incredibly up to date information on how their products are selling Other retailers capture sales data only once or twice each day. Albertsons CEO, Johnston, wants to use IT to keep prices competitive while making the shopping experience more compelling. He also wants to bolster the company’s leadership with the best minds available and use motivational techniques to invigorate his employees. By approaching business strategy on these two fronts, Johnston hopes to distance Albertsons from competitors such as Kroger and Safeway and catch up to industry leader WalMart. Albertsons earmarked half a billion dollars for technology advancements in 2004. One goal of this investment is to improve the company’s profit margin. Profit margins are razor-thin in the supermarket business, averaging around one cent per dollar of sales. Currently, Albertsons earns 1.4 cents for every dollar of merchandise that it sells. WalMart is famous for keeping the prices of its merchandise low, but still manages to earn more than 3 cents for every dollar of sales. Working against Albertsons is the fact that its merchandise sells for 20 to 25 percent more on average than WalMart’s product offerings. The technology strategies put forth by Johnston cover a wide range of the company’s operations. Albertsons has begun to install self- service checkout stations in some of its stores. These stations enable customers to scan the items they are buying to create a sales bill and pay for the items by swiping a credit or debit card, all without the intervention of a cashier. Using a handheld scanner, customers may scan their purchases as they place them in their shopping cart, resulting in a checkout process that may take only a few seconds, Not having to wait in line to pay at the supermarket can be a major draw for customers. Albertsons views this improvement to the shopping experience as exactly the type of change it wants to implement to keep its current customers happy, bring in new customers, and thereby increase sales revenue. Of course, self-service checkout stations provide Albertsons with another benefit: they cut staff costs.. Culling payroll is a critical aspect of the company’s repositioning, especially when you compare wage numbers with WalMart. The average WalMart worker earns about $8.30 per hour, the Albertsons worker $13 per hour. In addition, Albertsons extends benefits to its employees, including health insurance and retirement packages that, in some cases nearly double the value of wages. The company line says that installing self-service checkout facilities is intended solely to create a better shopping experience for the customer. Retail analysts seem to think otherwise, saying that eliminating cashier positions could produce savings in excess of $100 million for Albertsons. Johnston’s plans include a completely digital shopping experience that begins in the home and involves the Internet and Global Positioning System satellite technology. Customers would be able to set up their shopping lists from home through an Internet portal that is connected to their local Albertsons store. They could also add information to their accounts such as allergies and dietary restrictions. When customers arrive at the store, they would use a customer loyalty card to obtain a handheld device. The device would download the shopping list and any other important information, and then sync up with the store’s inventory. The device would guide customers through the store on the most efficient path to gather and scan all of their items. In addition, customers could receive text messages notifying them about special offers, photos and prescriptions ready for pickup, and conflicts between scanned items and the customer’s preset dietary or allergy restrictions. Under such a system, a customer account could be linked to a credit card and checkout would be reduced to passing through an electronic gate. Introducing such a radical change in shopping habits will not be easy. For now, Albertsons has deployed handheld scanning devices in only a few stores. To roll out widespread use of scanners and self-service checkout, Albertsons will have to persuade both staff and customers that change is a good idea. WalMart explicitly tries to keep the customer shopping experiences simple. If Johnston’s futuristic store proves to be success Albertsons would gain a significant edge over WalMart. Another Albertsons goal is simply to have current customers buy more when they visit the store. The key to such a goal is cataloguing and analysing purchase data. Albertsons invested $50 million in a data warehouse to examine customer buying habits. By providing customer loyalty cards, Albertsons can give loyal customers special offers and track exactly what they buy and when they buy it. Analytical software enables Albertsons to determine, for example, whether lowering the price of a box of Wheaties by 15 cents will bring in more profits by increasing sales than would increasing the price by 15 cents. The software will also tell Albertsons which products, such as milk and bread, need lower prices to prevent shoppers from defecting to WalMart and which items aren’t so critical. Albertsons is working to reduce costs in its supply chain so that its stores can offer prices that are more competitive. Johnston has consolidated distribution centers and is using the Web to coordinate shipments and to reduce billing and invoicing costs. CIO Dunst intends to overhaul 90 percent of the company’s applications within 3 years. Albertsons had already added electronic data interchange (EDI) capabilities, which enable better processing of transactions with suppliers. However, Albertsons does not yet have a system comparable to WalMart for sharing sales data with suppliers and for automatically placing orders in reaction to sales that are taking place in the field. Albertsons will not be relying solely on computing power. CEO Johnston believes that brain power is just as critical to the success of his company as technology is. He hired CIO Dunst away from competitor Safeway where Dunst had 25 years of experience developing applications, working with loyalty card systems, and using advanced technology to analyse data The supply chain management team has been stocked with technology pioneers and top guns who bring their expertise from such companies as PepsiCo, Dell, and even WalMart Analysts are impressed with the crew that Johnston has assembled and believe that he is taking the right approach to competing with WalMart, but the benefits of a first-rate staff have been slow to materialize. Johnston has saved Albertsons approximately $500 million already but sales haven’t increased significantly. Meanwhile, WalMarts grocery sales continue to grow steadily. Also worrisome is the introduction of WalMart’s Neighborhood Markets. WalMart is traditionally known for its Supercenters, giant stores that cover expansive square footage and offer extensive product selection. The Neighborhood Markets are significantly smaller and are intended to reach the local markets that aren’t always covered by a WalMart store. In many cases, these markets contain the customers that Albertsons has targeted as crucial to its success. Albertsons has already lost significant market shares to WalMart Supercenters in various parts of the country. WalMart’s Neighborhood Markets are strengthened by the same low prices and powerful supply chain that make the company’s Supercenters a seemingly unstoppable force. The Neighborhood Markets are decidedly no-frills in comparison to the average Albertsons store, which often has its own butcher, baker, and gourmet coffee bar. Albertsons is betting that a specialized, customized, and technologically advanced shopping experience will be appealing enough to keep customers from the allure of WalMart’s lower prices and simple presentation. Albertsons has the financial backing to continue investing heavily in advanced information technology and it is fortified by strong chains of drug stores, which tend to see greater profit margins than grocery stores. The company has recently joined WalMart in requiring its suppliers to use radio-frequency identification (RFID) tags on all product shipments The use of RFID will increase Albertsons’ ability to manage its supply chain more precisely. Additionally Albertsons stores have fared well in inner city markets where WalMart has struggled. Overall, however, WalMart has set the bar very high. Albertsons remains convinced that it can soar to greater heights. School of Engineering and Information Technology ICT622 CASE STUDY COVER SHEET SEMESTER 1, 2017 Student 1 Name: ________________________________________________ Student 1 Number: _____________________________________________________ Assignment Due Date: ___________________ Date Submitted: _______________ Your assignment should meet the following requirements. Please confirm this (by ticking boxes) before submitting your assignment. • All details above are complete. • Submitted files contain no viruses. • We have kept a copy of this assignment. • Declaration below is completed. All forms of plagiarism, cheating and unauthorised collusion are regarded seriously by the University and could result in penalties including failure in the unit and possible exclusion from the University. If you are in doubt, please contact the Unit Coordinator. 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