Hyperone is the first fully Egyptian, combined hypermarket-department store in t
ID: 332245 • Letter: H
Question
Hyperone is the first fully Egyptian, combined hypermarket-department store in the country, covering 40,000 square meters in the Sheikh Zayed District, a suburb of Cairo. Established in 2005, the chain's success speaks for itself; it employs more than 1,600 people and has an average of 45,000 visitors a day. Hypermarkets use economies of scale to keep prices low. Their business model is based on low overheads, a result of expansive stores located on the outskirts of cities (where property prices are lower) coupled with sales of large volumes of goods at low profit margins. The savings are passed along to the consumer. As Hyperone continues to move into big retail prominence, the IT structure of the organization played a major role in this success story.
Market Analysis
Egypt is a big market experiencing significant growth in retail industry in recent years and a very attractive place to be in. But at the same time the entry and exit levels are high and it is getting mature quickly and have low profit margins. New entrants are always possible, but to seriously compete with Hyperone they will need enormous capital. The company is expanding rapidly leaving less room for new competitors. Hyperone national plans to open and or expand 120-130 units in existing markets becoming a phenomenon. With sales increasing at 12.3% in 2008, potential competitors to this market will have to act quickly and have a highly effective business model to enter the Hyperone dominated market. As the retail industry sells products of daily common use, there are no direct substitutes; the only substitute products that can be threat are the products from gray market, which can harm the sales of branded products. Department and discount stores also faces stiff competition from specialized retail shops such as garments, electronics etc.
Because of the diverse product range that is distributed by retailers there are many different suppliers. Suppliers include both domestic
and international manufacturers and as the products are more or less standardized in nature, retailers and wholesalers have low switching costs. Hyperone, being a dominating customer to its suppliers, uses this as an advantage for them. The company is the largest customer to companies such as Kraft Foods, Gillette, and P&G. In order to maintain and satisfy Hyperone as a customer, suppliers are willing to provide favorable payment terms, discounts, and priority delivery dates. These mutual business relations are evident throughout Hyperone increasing success.
The consumers are now more sophisticated and mature. As said by Hyperone, they want it now and they want it with the best service and the best quality. Consumers enjoy increasing choice of products and increased price competition, and they demand better and wider choices. They also exert pressure on manufacturers and retailers to give more relevant product information. Contrary to belief, customers of Hyperone have bargaining power since Hyperone strives to satisfy its customers by matching the prices of any of its competitors.
Major Business Objectives
Hyperone's management has adopted a strategic plan for information systems. Three key people, the CEO, the Information Systems Consultant, and the Information Systems Manager worked hard on achieving the seven major objectives of the plan. The objectives were:
o Support daily operations: Create an effective, accurate, integrated and error free automated system to support the complex and dynamic daily operations
o Support customer satisfaction: Hyperone is keen to provide better quality products at low costs and a high standard of service through the analysis of sales and the understanding of the client's data after recording it in databases.
o Support decision making: Raise the productivity of the institution through the support of decision-making by means of reliance on standard indicators called performance indicators or ballot results.
o Reinforce the direct and electronic relationship with suppliers: One of the characteristics of the retail trade is the huge number of suppliers. This incited a lot of senior retail stores to focus on those suppliers and improve their relationship with them.
o Reduce risk of operations: The use of information systems in different sectors of the store, and its functions and departments, made it very important to achieve a high degree of reliability so that it can perform smoothly. Accordingly, a unit was created within the information systems department to achieve this goal.
o Attract and retain distinguished employees: Because the human element is a major factor of success, Hyperone took the necessary steps to maintain these elements by providing training, paying competitive salaries, and also providing an adequate work environment.
Having an attractive and informative website has become a major need for many companies, especially those targeting the national market instead of working in a region. Hyperone is no different, which is the reason why the company has developed a website. The website helps many functional departments including marketing, HR, sales, purchasing, shipping and customer services.
Reliance on advanced technology: The competition amongst retailers in recent years is for the acquisition of advanced technology and to activate it in the service of the store, its customers and suppliers. Therefore, it became one of the strategic objectives at Hyperone.
In response: Hyperone started investing in technology in highest impact line of business which is marketing. Marketing for the Hyperone has been typically traditional over the years with heavy emphasis on print. The effectiveness of print advertising has been on the decline lately and people are starting to use more digital channels. Hyperone started to think How to be relevant in the digital sphere as a hypermarket? Hyperone found the solution in two methods, first was the SMS advertising and the other one was submitting to Foodie.fm, which is available as free app on iPhones, Android and Nokia applications, as well as via the Web and Facebook,
Conclusion
Hyperone will keep on lead as long it can keep on date track of market and technology, and as much it can make use of IT to support Business strategies.
Questions:
Question 1: What are cross-functional business processes? Provide and explain two examples of typical business processes found in retailers like Hyperone. Explain whether the business processes you have identified are cross-functional or not.
Question 2: What are disruptive technologies? Name one of the disruptive technologies in the case, and explain your answer.
Question 3: Describe how a Supply Chain Management System works. If you were consulted by Hyperone, which Supply Chain Management (SCM) system will you recommend? Will you advise a pull-based or a push-based SCM system? State your reasons.
Explanation / Answer
1. A cross functional process is an activity done by teams which belong to different functions to achieve the same objective function. For retailers like HyperOne cross functional teams are very essential to complete the proactive work taken by the organization. One example of having cross functional team is the product promotion team which typically consists of marketing personnel, sales, finance and research teams. The research teams provide the customer insights and trends in the market. They shortlist opportunities for improvement in sales of products. The sales team along with finance team have to decide the sales strategy and the rates at which the product can be sold with aim of profit maximization. The marketing team will then have to identify and implement effective promotional campaigns to execute the promotion. Another example of cross functional team is development of apps and website. The same team as described above will be participants, only the end objective will be different. In this case it will be to develop an user friendly app and website for easier customer access.
2. Disruptive technologies are the ones which can create an entirely new approach to business problems and provide solutions that increase the market value of products and services. Few examples of such technologies are block chain technology, artificial intelligence, autonomous vehicles, advanced cognitive computing, cloud computing and data lakes etc. One such imitative taken by HyperOne is to push put the promotional offers to customer on Foodie.fm app. This is a proactive approach to selling products. Traditionally all the customers would come to shops and realize the benefits of offers and promotions. Gradually it was extended to the print media. But the disruption in advertising came through use of mobile apps. All the mobiles and social media sites are now targeted for consumer specific promotional ads. They help in providing suggestions to offers based on browsing history and order patterns. HyperOne is also extending this functionality across the platforms, they have tied up with Facebook and food apps to promote the products available at the store for ensuring larger footfalls and easier ordering process.
3. Supply chain can be explained as the logical and physical movement of goods and information. The consumers provide the requirement, shops or retailers provide them the goods as per the requirements. This is the front end of a B2C supply chain. But behind these actions, there are huge exchange of data, goods and logistics involved to make the product available at the shop. The entire connection or chain of creating the product from raw materials to ensuring the right product is available at the right place when demand is placed by the consumer is what supply chain is all about. All the data transactions and movements are managed by supply chain management systems. They help in ensuring proper data flow between all these components, increase transparency of data and help in taking informed decisions for better business execution. If I was consulted by HyperOne, I would recommend a cloud based ERP system which is enabled with IOT (internet of things) and backed by block chain technology. In terms of logistics and marketing of products, I would recommend a push system since HyperOne is running its business based on economies of scale. Push systems help in promoting the brands more by enabling more discounted prices and bulk offloading of materials. In terms of information flow to the system I would recommend a pull strategy where the data will be obtained based on customer preferences, movements, ordering pattern and research data.
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