KNOWLEDGE MANAGEMENT AND

INFORMATION SYSTEM
A CASE STUDY OF TESCO PLC
STUDENT IDENTIFICATION NUMBER:

TOTAL WORD COUNT ( EXCLUDING IN- TEXT CITATION ):

3,421

Table of Contents
INTRODUCTION...........................................................................................................................3
Knowledge Management System................................................................................................3
Customer Relationship Management (CRM) System.................................................................4
History Tesco Plc......................................................................................................................5
PESTLE analysis of Tesco...........................................................................................................6
Key elements of CRM.................................................................................................................8
Introduction of CRM.....................................................................................................................10
Launch of Tesco Clubcard.........................................................................................................10
Perceived benefits......................................................................................................................12
Impact of CRM..........................................................................................................................14
Success of Tesco Clubcard........................................................................................................15
CONCLUSION AND RECOMMENDATIONS...........................................................................15
Emerging trends and technologies.............................................................................................15
Recommendations......................................................................................................................16
References......................................................................................................................................17

INTRODUCTION
Knowledge Management System
Initially, knowledge management was described as the method of appertaining to a systematic
perspective of capturing, organising, managing and disseminating knowledge throughout a firm
in working faster, reusing the best practices and reduction of expensive rework from project to
project (Ahn and Jeong, 2015). For implementing the best practices, knowledge management has
proven to be the most affluent. Knowledge management can be described as a system which
inculcates both capturing as well as storing of knowledge outlook along with putting a value on
intellectual property.
Knowledge is one of the most competitive resources and is concerned with the development as
well as cultivation of systems which enable a company to improve, distribute, detect as well as
leverage the assets of knowledge. As stated by (Beckett, 2000) knowledge management (KM)
consists of the following steps, which are:

Generation of knowledge

Sharing knowledge

Adaptation to knowledge

Application of knowledge

Creation of new knowledge.

It can also be viewed as a process of input and output where the individual knowledge of a
person is represented as the input which is then generated, created as well as integrated within
the firm whereas the organisational knowledge represents the output. It is to be noted that
knowledge management is to extract the optimal knowledge from the resources possessed by the
company. Ishikawa and Naka, (2007) entailed that, on the organisational front, knowledge
management is very well connected to the notion of intellectual capital. This intellectual capital
consists of Human Capital, Structural Capital, and Social Capital. Human capital is expressed by
the level of education, skills, expertise and attitude. Structural capital consists of brand names,
system, and processes and sorts of management philosophy. Social capital is concerned with the
relationship of the organisation with its customers, partners, employees and other stakeholders.
The initiatives for knowledge sharing should focus on the creation of an environment which
would promote various cultural factors which incorporate the structures of communication and
cohesiveness as well as professional autonomy. This would result in the formation of mutual
social relationships along with increasing the intentions of sharing knowledge. Furthermore, the
inception of a knowledge sharing system is ought to aggrandise knowledge sharing and
communication at the workplace, specifically in organisations which are geographically
dispersed from a technological viewpoint. Organisations should also focus on creating
communities for practice within the workplace, since the best way to attain knowledge sharing is
through networks of humans. The employees should receive appropriate and adequate feedback
from the managers regarding their achievements (Smedlund, 2008).

Customer Relationship Management (CRM) System

According to (Chris Adalikwu, 2012) customer relationship management refers to the way of
interaction of a business with its customers. CRM comprises of acquiring information about the
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customers and utilising that information to meet the demands and requirements of existing
consumers as well as detecting new ones in order to generate higher revenues. CRM makes every
customer feel special by having one-to-one conversations with them. Through an effectual
practice of CRM, a business can prove to the customers that they are known and recognised.
Their problems are understood and customers are made to feel that the company cares about their
concerns, questions, and needs. It is noteworthy that an efficacious customer relationship is a key
to the affluence of a business (Jones and Ranchhod, 2007).
La and Yi, (2015) stated that CRM is basically an amalgam of various principles procured from
relationship marketing as well as the wider issue of management that is focused on customers.
The infrastructure provided by CRM system aids in building a long-term relationship with the
customers. Some examples are reporting tools, decision support, data mining, data warehousing
and sales force automation. The replication of data entries is reduced by CRM and the
maintenance is done by providing a centralised firm-database of information about the customer.
Tesco uses data mining technique to determine the time and location of the purchases, product
types purchased and amount spent on them (Rowley, 2005). These patterns of purchasing and
behaviour are utilised as grounds for customer segmentation and for targeting them with tailormade campaigns and advertisements, as well as regular mailings of a mass-customised
magazine related to Tescos offer, and third-party ads (Hassan and Parvez, 2013).

History Tesco Plc

Tesco Plc. is a multinational grocery and general retailer of merchandise. It is headquartered in
Welwyn Garden City, Hertfordshire, United Kingdom. With respect to profits, it is the third
largest retailer in the world and the second largest in terms of revenue generated. There are stores

in 14 countries all over the world and it is the leading grocery market in London, Malaysia,
Thailand and Ireland.
It was founded by Jack Cohen in 1919 in the form of market stalls. The name was coined in 1924
when he acquired a shipment of tea from T. E. Stockwell and added the initials of his surname to
that. The first store was opened in Burnt Oak, Barnet in 1931 (Brannen, Moore and Mughan,
2013). The expansion took place quite rapidly and there were over 100 stores spread all over the
country by 1939. The geographic diversification occurred since the 1990s and unrolled into
retailing of petrol, toys, clothes, furniture, electronics and books along with internet, telecom and
financial services (Wood, Wrigley and Coe, 2016).

PESTLE analysis of Tesco

Political factors
Due to its operation across the world, the performance is hugely impacted by the political factors
present globally. These factors comprise of legislative acts, tax rates as well as the stability of the
country of operation. Retailers are encouraged by the government of the respective country to
create jobs for the domestic population due to financial instability raging across the world. Tesco
creates opportunities for jobs, which helps in increasing the demands for products and services
offered by Tesco (Adejumo Wahab Adewuyi, 2016).

Economic factors
Larkin, (2005) stated that the economic factors are a cause of concern for the company since they
leverage prices, profits, demand and costs. Hence, it is required of the company to be acquainted
with the policy changes such as, taxation changes or any other changes which are likely to make

finances difficult to access. It is mention worthy that although the company is rapidly expanding
in the international market, it still has a share of 30 per cent in the UK market and is mostly
reliant on it (Brannen, Moore and Mughan, 2013).
The two significant strategies followed by the company are diversification and
internationalisation. These strategies have assisted in making the company successful to a great
extent (Larkin, 2005). In addition to these, the focus of Tesco has been shifted towards
advertisement of value brands instead of luxurious ones since there has been a reduction in both
household incomes and disposable income levels.

Social factors
According to the trends, customers have shifted towards one-stop shopping and bulk shopping
due to several changes in the society. Thus, the amount of non-perishable items for sale has been
increased by Tesco (Wood, Wrigley and Coe, 2016). The demand for products and services is
influenced by the attitudes and beliefs of the customers which are further affected by the
conditions of the society. The perspectives of people towards food are changing due to raised
levels of health awareness. Therefore, Tesco is constantly adjusting to these changes by being
indulgent towards organic food items.

Technological factors
Several opportunities have been presented to Tesco due to technological advancements.
Researches by (Zalengera et al., 2014) have revealed that the first advancement is the
introduction and development of online shopping with an added option of home delivery. The
other one is the self-service checkout points which have bestowed consumers with ease and

convenience and have also diminished the labour costs. Moreover, adequate amounts have been
invested by the company on projects that are energy efficient to deliver one of the long-term
objectives of reducing the carbon footprint.

Legislative factors
The performance of the company is also affected by legislations and policies made by the
government. Take, for instance, the Code of Practice which was suggested by the Food Retailing
Commission. According to the code various practices such as altering the prices of items without
any prior information to the customers are required to be banned. In accordance with these
policies, Tesco provides price reductions on fuel purchased by customers in compliance with the
amount spent on grocery (Adejumo Wahab Adewuyi, 2016). Furthermore, various promotion
offers are provided where there are reduced prices.

Environmental factors
The waste generated in the stores is getting reduced by Tesco by making their customers socially
conscious. Moreover, it is fulfilling the objective of lowering its carbon footprints by 50 per cent
by the year 2020 (Adejumo Wahab Adewuyi, 2016).

Key elements of CRM

There are four critical (key) elements of customer relationship management. These have been
described below:

Interaction management

When a company is keen on establishing a stable relationship with its customers, the interaction
can be carried out in several ways comprising of interaction along distribution channels and
touch points. As evoked by (Safarnia, Akbari and Abbasi, 2011) the key impetus is to discover
when and how a customer wants to interact with the firm. The activities for interaction should be
well organised as well as customised through the accessible touch points. The touch points assist
in developing customer profiles on the basis of the data accumulated from previous customer
records. These touch points should be utilised for distributing various goods and services as well
as for communicating with the consumers. The implementation of interaction management is
done by receiving feedbacks from customers and increasing the number of interactive sessions
through attractive methods such as the social network.

Relationship development
The investigation of relationship development basically includes exploration of designs along
with processing the connection between the supplier and the customer. The process of
development is concerned with a synergy where links are formed between two parties.
Monitoring of the process of relationship is the most significant activity in the achievement of
relationship development. It includes the management of complaints or services, as stated by
(Munshi, 2012). These processes are composed of activities, schedules, mechanisms and
procedures where the products have already been delivered to the consumers. The organisation
should set the key indicators of performance such as customer satisfaction, lifetime value for
customers and rate of retention. A relationship can be well-developed when the customers are
made to believe that their feedbacks are being taken seriously into consideration (Clow and
Stevens, 2009).

Service quality
The notion of service quality has gained increased importance since it is a major determinant of
customer satisfaction. The quality of service is also positively associated with customer loyalty
and in turn, with the profitability of the organisation. According to (Clow and Stevens, 2009) the
following methods might be employed for the implementation of service quality:

Meeting the expectations of customers by providing a good level of service along

with having a variety of products in stock.

Good quality of goods should be provided at considerable prices.
The complaints of the customers should be tactfully handled.

Behavior of employees
The relationship between an organisation and its customers is more likely to be strengthened
when an employee is compliant to the values and behaviour of the organisation. If an employee
chooses to act his or her own mind, there might be adverse effects which successively might lead
to the deterioration of the company. Furthermore, the customers might assess the organisation
negatively when the symbolic benefits, as expected, are not delivered to them (Popovich, 2010).
A positive effect can be achieved with instant replies to the customers along with ensuring that
the customer is treated in a friendly and respectful manner.

Introduction of CRM
Launch of Tesco Clubcard
The customer relationship management by Tesco is done by the introduction of the Tesco
Clubcard. It has been affirmed by (Boothby, 2007) that the inception of the idea was done in

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1993. Formerly, Green Shield Stamps were used as promotional equipment which provided
rewards to customers but did not aid in gaining any customer information. The change
introduced after the Green Shield Stamps was to develop a magnetic stripe card which would
provide information about customers. Trials were conducted successfully in 1994 and Harrison
and Humby presented the project at the annual board strategy meeting (Tesco, 2007).
In January 1995, a member of the Royal Army Medical Corps named Frank Riolfo blackmailed
Tesco in releasing the loyalty card with threats of injecting blood infused with HIV into stock.
His demand included of loyalty cards being made available to customers which might then be
also secretly used as ATM cards for withdrawal of cash because of the presence of magnetic
strips. National newspapers under his guidance released copies containing the PIN codes. The
loyalty card was introduced and lots of people signed up for the cards. Both Riolfo and his wife
went on withdrawing cash through the card and finally were arrested on 22nd of April, 1995.
The creative team of Evan Scott made two modifications to the design of the card and relaunched it in 2005 where every member had a personalised card which could be scanned rather
than swiping at checkouts (Turner and Wilson, 2006). The Clubcard which we know today was
re-launched in 2008 with major changes in design along with key fobs. After Tesco acquired the
Power Supermarkets Limited in the Republic of Ireland, it introduced the Clubcard scheme there
immediately. Since Tesco Ireland is an extension of the UK scheme the Irish Clubcards can be
used in UK stores too.
The Clubcard also known as the loyalty card was introduced in Malaysia in 2007; initially in
Tesco Extra Stores and later in all the other formats of stores. The Polish stores received the
scheme in 2008 and the card was introduced in Slovakia by late 2009. The Slovak and Polish

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stores are independent ones and thus, the British and Irish cards cannot be used in those
countries. Hungary and Czech Republic received the Clubcard scheme in September and August
2010, respectively (Safarnia, Akbari and Abbasi, 2011).

Perceived benefits
Customer satisfaction is linked to a loyalty program. If the loyalty program in practice is
effective, it can maintain customer loyalty and it, sequentially, will increase the business
performance of the organisation. Considering the instance of retail supermarket sector, each
company has its own customer support program to maintain relationships with customers.
Quoting (Boothby, 2007), An effective and efficient loyalty program can and will change the
customer purchasing behaviour. There is a repetition of customers regarding specific products
and services. Hence, loyalty card should be made available for adding value to the business to
gain a competitive advantage over other rivals.
A loyalty program does not only generate benefits for customers but also for the company. it has
been affirmed by (Turner and Wilson, 2006), A company wants to acquire both soft and hard
attributes to generate value through products or services offering in the market. Safarnia,
Akbari and Abbasi, (2011) stated that Immediate rewards can generate added values to
customers, for example, price reduction. A loyalty program can generate benefits to customers
like their convenience and cash saving. Nonetheless, people will buy more products if they join a
loyalty program. A loyalty program not only bestows utilitarian benefits but also symbolic
benefits. The symbolic benefits bring social dimension and recognition dimension such as
status (Turner and Wilson, 2006).

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The information gathered through the Clubcard is used by Tesco to send vouchers and statements
to the residence of the customers. Through this, Tesco sends offers which would appeal the
customers in purchasing them (Barnes, 2011). It also assures customers that the personal details
are not shared with any other firm unless the operations require it and the data can be taken off
the system any time the customer expresses the wish to do so.
Along with the effectual targeting of offers, the data obtained is also used to fabricate several
social benefits for the consumers. This signifies that the procurement of data from the Clubcard
is not a one-sided deal. Some examples of the same have been listed below:

The introduction of the Free From range for allergic people provides information about
the commitment of the purchasers and the results help in preparing a fortified case to

continue investing in the range (Boynton, 2007).

A few of the times, customers who are dedicated to organic products have to purchase
non-organic items due to the non-availability of the former. An organic alternative for
every item in the store is not provided by Tesco. The Clubcard has made it possible for
Tesco to recognise customers who value organic products and the range has been
extended for reorganising the alternatives for non-organic products which are mostly

required (Boynton, 2007).

Around 7000 local products have been launched by Tesco by utilising the data when
customers preferred a locally produced item.

Other benefits include:

Building customer satisfaction: With the improving customer satisfaction index, Tesco has
become more profitable and the sales targets have soared high. Since the customers are more
satisfied, they bring potential customers with them. Repeat sales have increased due to greater

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degrees of customer satisfaction. Customers exhibit low price sensitivity since the products and
services are satisfactory (Boynton, 2007).
Relationship marketing: This has built a bridge of trust, communication and fulfillment of
promises and commitment between the customers and the company. Relationship marketing
thus, has made customers more loyal towards Tesco along with increasing the customer
satisfaction rate. Also, there is an increased chance of multiple cross-selling for Tesco along with
reduced opportunity costs.
Customer retention: The cost of maintaining a relationship with a current customer is lesser
than acquiring a new one and it also has increased the number of repeat sales. Therefore, Tesco is
being profited more with a low investment (Turner and Wilson, 2006).

Impact of CRM
Alhawari, (2013) promulgated that, CRM has several positive impacts on a business and the
people associated with it including the customers, suppliers and staff. Through CRM the focus is
shifted towards the customers from the products. The offer, hence, provided is streamlined
according to the needs and demands of the customer and not according to what the company
wants. It not only enhances the services towards customers but also diminishes complaints,
wastages and costs. It is also effective in reducing the tension of the staffs because CRM aids in
reducing attrition with increased improvement in the products and services. Moreover, it permits
instant research on the market which helps in the creation of new ways of communication with
customers. This, seriatim, helps in gaining a direct reaction of the market towards the products
offered which is anytime better than a market survey. Through a good CRM, the growth of the
business is enhanced, customers stay for a longer period of time; chances of gaining new

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customers are increased along with greater rates of customer satisfaction. The overall service of
the organisation flows easily and the operation is more methodical and everybody stays happy
(Kato and Schoenberg, 2014).
Similar to every other system, CRM, too, is not free from some negative impacts or
disadvantages. Its major focus is on customer retention and not acquisition of new ones. It might
also lead companies into treating some customers better than others due to being more profitable.
This is capable of damaging the firms reputation (Makasi, 2014).

Success of Tesco Clubcard

It has been found from a study conducted by (Boothby, 2007) that the strategy has been
successful since the moment it had been launched but during the re-launch in mid-2009, it was
suggested by several commentators that it was a defense against the structural changes in the
market and was forced upon the company. These changes comprised of saturation of the UK core
market, migration of people towards online shopping, clever initiatives by rivals such as
Sainsburys, Waitrose, Asda and Morrisons and the rise of discount retailers.
The loyalty scheme had been heavily successful and had contributed a lot to the performance of
the organisation; the market started reforming in significant ways by 2011. The degree of
competition became intense and Tescos share in the market took a dip.

CONCLUSION AND RECOMMENDATIONS

Emerging trends and technologies
Enterprise 2.0

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This technology empowers the employees where they can share their views and opinions freely.
It uses social software as potential platforms within companies. It provides a new method for
management of knowledge within a company. Idea management systems are used by large firms
which are useful in fueling the pipeline of ideas (Baghdadi, 2013).

Semantic web
It supports in making web accessible data better compliant to machine processing. It provides a
description of pliable reference mechanisms to contributors and objects of knowledge; use and
creation of knowledge and involving humans in activities for information and knowledge
management (Omitola, Ros and Breslin, 2015).

Ubiquitous technologies
According to (Grieser and Wilde, 2010), ubiquitous technologies circumscribe pervasive,
wireless and mobile technologies and are in close contact with machine learning, distributed
computing, sensor networking and mobile computing. This technology accredits timely and
precise automatic capture of actionable logistics data with little reliance on human intervention.

Recommendations
There are some crucial issues that are required to be looked at by Tesco even if it is doing well in
the market. Although the Clubcard is popular, some retailers are providing better offers for their
loyalty scheme as compared to Tesco. Through this, more attention is being paid to them.
Therefore, it is imperative that Tesco takes some significant initiatives to retain existing
customers and acquire new ones by reaching out to them innovatively. The trends and

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technologies mentioned above are essential in maintaining the top position that Tesco enjoys in
the market.

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