1, Analyze Albertsons using the value chain and competitive forces models.

CEO and president of Albertsons, Larry Johnston is using IT to be more successful by keeping
prices competitive and offering the customer a better shopping experience. One of the
technologies Johnston is applying to his stores is self-service checkout stations so you don’t
loose time making line at the cashier, but also he is saving approximately $100 million of the
payroll salaries. In terms of logistics Johnston consolidated distribution centers that are
coordinated using the web to reduce cost and gain efficiency. Also, Albertsons strategy by
implementing this technology is to encourage customers to buy more products that they usually
do. If Johnston’s strategy works with success he would have a great success but he faces a hard
opposition to change by the customers and employees.

2, What role do information systems play in Albertson’s business strategy? How do systems
provide value to Albertsons?
Information systems are the most important role in Albertsons business strategy because its value
relies there. They aren’t cheaper than Wal-Mart so they need to reduce costs so they can lower
the prices and give customers something that the competition doesn’t have. Information systems
provide value by reducing costs, more efficient warehouses and giving their customers a new
shopping experience by applying technology.

case Study: Can Albertsons Trounce Wal-Mart with Advanced Information Technology?

1. Analyze Albertsons using the value chain and competitive forces model.

The grocery industry as a whole is competing aggressively for razor-thin profit margins.
Albertsons has much to do to gain a competitive advantage against Wal-Mart who are famous for
keeping the prices of its merchandise low, but still reap a 3 cent profit for every dollar of sales
whereas the industry average is one cent per dollar of sales and Albertsons is about 1.4 cents.
Albertsons value proposition is to keep costs as low as possible but try to provide superior
service and product selection, since its costs will never be as low as Wal-Mart’s.
 In the value chain model, Albertsons commits a substantial amount of resources toward
implementing new technology,and beefing up its administration and management support.
Albertsons uses technology in order to reduce costs in its supply chain by consolidating
distribution centers and using the Web to coordinate shipments and to reduce billing and
invoicing costs. The company has also upgraded its core corporate systems, moving financial
applications to software from Oracle and its human resources management to PeopleSoft
sofware. The company’s high-speed network infrastructure has also been upgraded and
electronic data interchange capabilities have been added, resulting in better processing of
transactions with suppliers. Albertsons must work on its marketing strategies to gain customers
who are open to the use of such innovative technology.

In looking at Figure 3-15, “Porter’s competitive forces model,”

Albertsons has not given enough attention to the fact that the traditional industry competitors will
be a momentual challenge. The nature of the top three players in the industry and their relative
bargaining power will greatly determine industry structure and the overall profitability of doing
business in the grocery environment.

2. What role do information systems play in Albertsons’ business strategy? How do

systems provide value for Albertsons?

Albertsons uses information systems to create new services for their customers in order to
distinguish themselves from their competitors. Through product differentiation, Albertsons hope
to be able to prevent the competition from responding in kind. Albertsons is attempting to
become a customer-focused business in order to gain a competitive advantage over its main
competitor вЂ" Wal-Mart.

3. Compare Albertsons to Wal-Mart in terms of business strategy, current success, and future
success.

Albertsons:

• Business Strategy вЂ" use information technology to keep prices competitive
while making the shopping experience more compelling. Bolster the company’s
leadership with the best minds available and use motivational techniques to invigorate
employees. Albertsons is working on reducing costs in the supply chain so that the stores can
offer prices more competitive with Wal-Mart’s.

• Current Success вЂ" currently earns 1.4 cent for every dollar of merchandise
that is sold (compared to the industry average of one cent for every dollar of sales).

• Future Success вЂ" must dramatically close the profit margins if it is to become
the number one grocer in the United States. Merchandise currently sells for 20 to 25 percent
more on average than Wal-Mart’s product offerings. Self-service checkouts may be a
major draw for some customers however; it may be also overwhelming many others. Employees
may be harder to attract and retain because they realize that the company is aggressively
eliminating people in favor of sophisticated technology. Implementing such a radical change in
shopping habits will not be easy. Albertsons will have to persuade both the employees and
customers that such changes are a good idea. If successful, Albertsons may be able to gain a
significant edge over Wal-Mart. Albertsons is betting that a specialized, customized, and
technologically advanced shopping experience will be appealing enough to keep customers from
the allure of Wal-Mart’s lower prices and simple, no frills presentation.

Wal-Mart:

• Business Strategy вЂ" Keep inventory down to the necessary