The case is based in the retailing firm ABC UK. The company is seeking to offer the consumers with high quality products at the lower prices. The retailing industry is a highly competitive one and there are many players in the market. Further, they all seek to minimize the costs and maximize their revenues. It is also important to note that they seek to develop their competitive advantage in many different areas. The company is also trying to source much of the products from within the UK; currently this is around 70% (ABC, 2018). This is another competitive advantage factor they seek to maintain with the operations effectiveness.
The retailing landscape in UK is changing. Online shopping is gradually gaining prominence even through the share of the online shopping is still less. The company has been able to increase the penetration of then operation within a relatively smaller period of time. For instance, currently they have 650 outlets in UK and there are around 20 distribution centers. This shows that after starting the operation in 1994, they have been able to grow the business within a relatively small period of time (ABC, 2018). This shows that they have the growth potential. Sourcing of the produces locally allows them to collect these products from the sources and mitigate the logistical costs to a higher degree. Thus, the above areas contribute ABC to control the prices of the items they offer in the markets.
Strengths – Sourcing local reducing the logistical costs. Aggressive growth of adding 40-50 stores annually leading to scale benefits and gradual growth of the market share to current 5.3% strengthening the market position.
Weaknesses – Only occupying the 6th position; more room for growth and lack of online sales portal. Further, lack of door to door distribution system is also a concern.
Opportunities – Growth of the demand for the online retailing and growth of demand for locally produced trusted products and brands are areas of concern.
Threats – Rivalry between the market players make it tough to survive the competition is the primary threat.
There are various methods that could be used for identification of the problem; in this instance, the problem is of unstructured in nature and an appropriate structure has to be developed into the problem to solve this. The best approach in such an instance is the soft systems methodology (SSM). This allows development of an appropriate structure into the problem area and solve the problem effectively (Gasson, 1994). There are several stages in this approach.
Figure 1 – Sift systems methodology (source; (Gasson, 1994))
The supermarkets see that demand for online retailing is growing. However, the current online share of the supermarkets is low; in 2016, Tesco had seen the highest of shares with 7% while Sainsbury and Waitrose had 4.7% share each (Statista(a), 2016). However, the growth of the demand in 2017 was relatively high. All food items have seen a growth of the demand for online sales around 10.3% while this was as high as 39.1% for clothing. For all retailing items, the growth reached an average of 14%. This shows that the growth of the retailing operation is likely to be high (Statista(b), 2017). This shows that if ABC fails to upgrade the trade system to include an online retailing operation, they could lose customers who do not seek to visit and shop.
ABC naturally needs an online trading system in place; this will allow them to have the regular outlets as well as the online system. This will allow ABC to be able to reduce the congestion at their regular outlets. They will have to work to develop the online system as well as a delivery system in place. It is also important to manage these systems well and promote the be system to the potential customers of the new system. These will maximize the benefits of the new system to the parties. The system could be handled in three ways, full internal control of ABCL, partly outsourced operation and the fully outsourced operation. The details are highlighted in the “rich picture diagram”.
Figure 2 – Rich Picture diagram (author developed)
It is important to develop the input and the output diagrams and the key route definition areas in this context. There is a part of the customers who find in inconvenient to visit the store (Checkland, 2000). They are looking for ways to mitigate their inconvenience by shopping online. As ABC does not have an online shopping system, the potential customers could leave the company. This is why there has to be appropriate steps taken to prevent this from taking place.
Figure 3 – Input and output diagram (author developed)
Thus, ABC has to develop an online system in order for them to cater to the growing need of the online shopping. CATWOE model could be used to evaluate the components of root areas further.
|Customers||The system is developed for those who seek to shop online for the retailing items at ABC|
|Actors||The system administration has to be able to provide the platform for displaying of the items, selection of the items from the list and selling them. the payment gateways etc also have to be facilitated.|
|Transformation||This is the process where the customers will purchase these product from the online retailing operation. Once purchased, these products have to be distributed to the customer premise.|
|Weltanschhaung||The company will be able to develop a better image as a supermarket that offers the customers with the needed services. They will be able to attract new customers based on this.|
|Owner||The supermarket top management has the power to carry out, take decisions or change the details associated with the project.|
|Environment||Finding a suitable vendor for the required services is likely to be a challenge for the company and they have to also promote this new way of purchasing to the customers.|
Table 1 – CATWOE (author developed)
This is the model that indicates the desired operational model for the selected firm; the development of an appropriate model in this regard is important to ensure the desired results are reached (Burge, 2015). Thus, the conceptual model has to be developed and this indicates the new business operating model that has to be in place.
Figure 4 – Conceptual model (author developed)
The above model highlights that the customers now have two options; they can either purchase the products from the store or they can purchase the products online. ABC now will need to develop and administrate such a system that is capable of managing these areas well.
The current system has to be identified and the performance aspects of the current system has to be established as well. Knowing the exact details associated with the current system will indicate what are the primary changes that has to be brought about to the current system (Simonsen, 1994).
Figure 5 – The current or “As Is” system (author developed)
This shows that the customers have only a single way of shopping at ABC. The following table facilitates a better comparison of these areas.
|Area||As Is||To Be|
|Visit the store||The customers have to visit the store physically and purchase the items as needed.||The customers can either use the online site or physically order the items|
|Selecting items||The customers will go to the locations and physically select the items they are in need of.||The customers will be able to physically select the items or use the website or the mobile app to select the items they need.|
|Checking out||The customers will need to take the items to the counter and pay for the items||The customers can physical check out if visited the store or can pay using their bank cards online and|
|Taking the goods home||The customer will have to physically take these items home||The customers will have to take them home if they have physically shopped. The customer will get the delivery to home if the shopping was online.|
Table 2 – Comparison between the current and the proposed systems (author developed)
This is the stage that the activities related to the change has to be identified. These will allow the management of the organizations to plan out all their activities to achieve the desired results (Bjerke, 2008).
- The methods for the customers to select the required items online – the website has to be developed for shopping
- The method for accessing of the items – the customer login system has to be developed so they can make purchases
- The method of making the payments – the payment gateway has to be developed in conjunction with a bank
- Delivery of the items – the company has to develop a system where they can deliver the items from the supermarket outlets of the distribution locations they have
Thus, the above discussed aspects have to be looked into and the delivery activities planned to make sure the distribution if these products take place.
In this instance, the 4Vs model has been used to evaluate the digital experience the customer is likely to receive from the operations (Eshelby, 2016). This will indicate as to what advantage the new platform is likely to create for ABC.
|Area||As Is||To Be|
|Volume||The volumes of the sales have placed the company in the 6th position in the current market with a share of 5.3% (Gale, 2018).||With more online demand, the volumes will increase and the demand for the product will continue to grow.|
|Variety||The variety of the product are high; the outlets store many thousands of brands and ensure they cater to the customer needs.||The variety will not change; the company can offer the same products through the same outlets at lower costs.|
|Variation||The company is seeking to standardize their services with the view of reducing the costs.||The online sales will reduce the need for shop space and further facilitate standardization of the services offered.|
|Visibility||The current visibility is moderate with over 650 stores.||With the fast increase of the stores, the online system will facilitate better utilization of the social media etc and visibility will be increased.|
Table 3 – 4Vs model (Eshelby, 2016)
ABC should develop the digital platform that will facilitate digital services to the customers. However, the main challenge in this context is maximization of the benefits provided to the customers through the services. Costs have to be managed while the revenues maximized.
The following table facilitate evaluation of four key strategies.
|Strategy||Customer value||Cost of maintenance||Specialization of services||Resources availability|
|Handling the operation in-house||Medium -Company has to learn the process||High – ABC has to maintain the operation separately||Low – the company does not know about the operations||Low – the company has to develop the resources form new|
|Outsourcing order capturing and processing; distribution in-house||Medium -Company has to learn the process||Medium – the company has to maintain distribution operation||Low – the company does not know about the operations||Low – the company has to develop the resources form new|
|Outsourcing distribution; order capturing in-house||High – the outsourced partners have experience||Low – the outsourced partners have the scale||Medium – the company still have to manage the order processing||Medium –|
|Total process outsourced||High – the outsourced partners have experience||Low – the outsourced partners have the scale||High – the party will manage the total process|
Table 4 – Compiling the different solutions (author developed)
From the above indications, the best solution that is likely to be implemented is that of the total outsourcing of the process. this means an experienced outsourcing partner will handle the order taking and processing as well as collecting form the warehouses and outlets of the company. they will also handle the logistical services and ensure that within a certain specified period, the customers will receive the products that they have ordered from the supermarket.
The above part has identified the need for the changes that are to be carried out in this instance. The vision in this instance is to develop a performance model that will lead to positive results. Having an online service platform will lead to beneficial outcomes and would enhance the customer base of the company. the operating strategy model by Slack and Lewis (2008) could be used to evaluate the approaches for the change.
Figure 6 – Operating strategy model (Slack & Lewis, 2008)
The company already has a computer system; the new online system has to be compatible with these internal aspects. Thus, the operating capabilities will have to be developed within the parameters of compatibility with the existing systems. This will lead to the development of the operating strategies. On the other hand, the customer needs also have to be collected. Once the customer needs are identified, suitable steps are to be taken to solve these issues effectively. For instance, the company should evaluate the current customer base and their point of view about having an online system and also how many new customers will they be able to gain with the introduction of the new system.
It is important to ensure that the costs and the benefits of the new operating model are identified. This will allow the organization to be able to achieve the right balance on the operating models and make sure the maximum results are achieved from the operations in the future. The following diagram indicates as to how the operating activities can be planned by the parties to achieve the desired results.
|1||Development of the web interface||32,500.00|
|2||Development of the online order processing system||28,000.00|
|3||Purchase and customization of the delivery management system||31,000.00|
|4||Testing of the new systems||8,500.00|
|5||Finding of a suitable outsourcing partner||10,500.00|
|6||Promoting of the new business model||24,000.00|
Table 5 – Cost evaluation of the implementation (author developed)
When the implementation of the strategies is to take place, it is important that the company manages the change effectively. There are many key areas that needs attention in this instance and the results will be positive in nature. ADKAR model is best suited to use as the change management model in this instance.
Figure 7 – ADKAR Change management model (Shaw, 2015)
The above model highlights how the changes are to be structured into the operations of the organization. The first step is to create awareness. The employees should know as to why the change and how the change would impact them. they have to be communicated that with the change, the organizations will grow and they will benefit eventually. This leads to the desire for the change. Then the employees and the suitable vendors should be selected for the change process. They have to be briefed in detail about the change process and how the change process would impact the operations. The knowledge about the change and the change process has to be developed and the change related roadmap has to be established at this stage. The required skills have to be recruited internally as well as at the consultancy and vendor levels. This will allow them to lead this to establishing of the new operating model. The changes could be reinforced again to reach the desired outcomes.
The appropriate approaches should be used for the purpose of evaluating of the overall performance of the organization. The following model has to be used for the development of the identification of the evaluation of the solutions to the problems.
Figure 8 – Balanced Scorecard (Jusoh, et al., 2007)
There are various indicators that has to be used in the context of the measuring of the outcomes. the following table indicates these key areas that can be used for the measuring of the performance.
|Customer||New customer acquisition percentage|
Growth of the website visitors
Growth of the online orders
Growth of the revenue
Percentage of online business from the total businesses
|Internal operations||Changes to the logistical cost per order|
Changes to the overall cost per order
Revenue per employee
Profit per employee
Revenue per square meter of shop floor growth
|Financial||The revenue growth|
The gross margin
The net margin
Expenses as a percentage of revenue
Net profit growth
|Learning and growth||Number of hours for training the employees|
Number of hours for training the customers
Table 6 – Performance growth (author developed)
The customers have to grow; the new customers will be added provided that the new operations are promoted to the customers. The growth of the online orders has to be appropriate. If the growth is low, the strength of the promotional activities has to be increased. It is important to continue to grow the online business and ensure that the online business becomes a considerable part of the total business portfolio of the company. This will indicate as to how successful the online operations have become for the company. These measures will indicate how the online business has eventually contributed to the customer base growth.
The internal processes have to show how the internal efficiencies have changed. Due to the new system, the logistical costs as well as the overall costs have to be reduced. This is because there are no outlets required for the operations. The revenue per employee and the profit per employee are expected to grow. The revenue per square foot of the shop floor is another indicator of the revenue generating capability of the company and this also is expected to grow due to the nature of the internal operations.
The financial performance of the company has to improve. It is vital that the revenue grow with the new set of targets in place. This is also driven by the profit growth of the operations as well. The margins are expected to grow as the online business is likely to carry higher margins when compared with the shop-based businesses. Thus, these growth aspects will need to be achieved to ensure desired objectives have been reached through the new model that the company has developed.
Learning and growth could be measured through the number of hours that the customers are spending at training. It is also possible that the current customers also require some type of training and the company will be able to provide such training to ensure the customers are also aware of the new operating model affiliated with the company. this also shows as to how they have to interact with the model to make sure that they reach the desired long-term results.
The above discussion about ABC has shown that the company has to work towards the development of the new hybrid system where they can carry out their business online as well as physically through the outlets. The company will be able to attract more customers through this business model. Thus, will lead to the growth of the profits and maximize the benefits to the partiers. The long-term achievements in this context of likely to be high for all the parties involved. ABC will be able to continue to grow their market share through this hybrid approach.
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