Tesco has a history of using technology and innovation to gain market share and achieve growth. However, does Tesco have a sustainable competitive advantage delivered by IT?
The success of the Clubcard program, introduced in 1995, was the catalyst that catapulted Tesco to the top of it's industry in terms of market share. Through the Clubcard, Tesco was the first UK retailer to implement a technology based loyalty program. The success of this loyalty program was driven by Tesco's ability to gain insight on customer profiles and preferences and to deliver an offering that was catered to multiple consumer segments.
Tesco did not stop innovating despite the success of the Clubcard program. Tesco has made an aggressive foray into the online retailing space by making strategic acquisitions. This has opened up a new, highly profitable division for Tesco but this new division also has it's fair share of competitors. While the online business is lucrative for Tesco, it only accounts for a small portion of it's revenue. Tesco now has to discover a method of growing it's online business while not cannibalizing on it's traiditional retail business.
IT innovation has definitely been a key factor behind Tesco's escalation in the UK retail market space. However, the innovation that it has done so far will not be able to sustain it's growth in the long term and the key for continued long term growth will be continued innovation. For example, Tesco could incorporate technologies like FourSquare into it's loyalty program. This would enable Tesco to continue to gather information on it's customers as the concept of a loyalty card becomes obsolete in the eyes of Generation Y.
In conclusion, while IT innovation has been key in enabling Tesco to gain a Competitive Advantage, the only way to keep this advantage is to continue to innovate in a way that adds value to customers.
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