P.E.S.T Analysis On Tesco

TITLE: INFORMATION SYSTEMS REPORT

EXECUTIVE SUMMARY

J P Morgan Chase is the second largest financial holding company in the United States with over $1.2 trillion in assets and $ 106 billion in stockholder's equity. With operations in more than 50 countries and many other banking subsidiaries, the firm has a staff of over 160,000.

In 2002 the management made a strategic decision to outsource a significant portion of their Information Technology infrastructure to IBM to gain a better position in various markets. This decision however did not workout as expected, the firm faced a decrease in productivity due to fall in employee moral caused by the shift and management faced difficulties in carrying out their day to day duties. After 21 months, the knowledge of the negative experiences lead management to decide to cancel its outsourcing deals with IBM. The decision to reverse its IT strategy "backward" then triggered a merger with Bank One. To identify whether this strategy of back sourcing was a wise choice an analysis will be conducted.

STRATIGIC ANALYSIS

By doing a strategic analysis, we will be able to identify whether the information system employed by JP Morgan Chase are meeting the overall objectives of the organisation.

An information system can be defined technically as a set of interrelated components that collect (or retrieve), process, store, and distribute information to support decision making and control in an organisation.

(Kenneth & Jane Laudon, Managing the digital firm, 8 edition)

We will be looking at three different analyses, the S.W.O.T analysis, the Five Model Theory and the Value Chain.

SWOT

The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations. The purpose of this analysis is to find out whether or not the decision of back sourcing IS was a wise choice. We will look at the organization's strengths and weakness before the merger and after the merger to identify if they are well off with their decision.

The table below shows a SWOT analysis of JP Morgan Chase decision to outsource to IBM and also the their decision to back source (We shall only look at the Strengths and Weakness aspect of the SWOT analysis)

Strength of outsourcing

* Creates significant value for clients, shareholders, and employees

* Creates capacity for efficient growth

* Can reduce cost in the long run

* Increase quality Weaknesses of outsourcing

* Fall in moral as a result of the reapplication process

* Staff retaliation due to salary reductions

* Drop in productivity caused by distractions of coordinating the outsourcing

* Extra work load for management and staff

* Additional expenses from investments in consultants.

Strength of back sourcing

* Consolidation

* Cost cutting

* Self sufficiency

* More Control

* New capabilities can give competitive advantages and accelerate innovation

* Long-term growth

* Can become more streamlined and efficient Weaknesses of back sourcing

* Difficult process

* Fall in productivity due to turmoil in the workforce.

* Decrease moral

* Can Loose important staff

From the S.W.O.T analysis we can agree that the decision to back source IT was not a bad one. Even thought JP Morgan Chase is facing challenges with the process we can see that the company will benefit a great deal in the long-run. We shall now get a better idea of how successful this decision is in relation to the business strategy of organisation by looking at another type of analysis.

FIVE FORCES MODEL

One of the main objectives of JP Morgan Chase is to position itself better in its various markets.

Competitive advantage can be achieved by enhancing the firm's ability to deal with customers, suppliers, substitute products and services, and new entrants to the market.

http://members.tripod.com/ivonng/Five_forces_model.htm

Porter's Five Forces model can be used to analyze the effects of IS/IT. It is also a widely used tool of competition analysis in business strategy formulation and it depends on a sophisticated understanding of the rules of competition. These rules of competition are embedded in five competitive forces which are entry of new competition, the threat of substitute products, the bargaining power of buyers, the bargaining power of suppliers, and the rivalry among existing competitors. If we look at Diagram 2 we can see a simple view of the Five Forces Model.

http://en.wikipedia.org/wiki/Five_forces

Threat of new entrant

As new firms enter to a market, they have the potential to extract the profit unless the demand grows faster than new entrants to a market, average profitability will decline. The threat of entry or entry barriers is to discourage other companies from entering a market as new competitors by establishing a level of service or value to the customer that will be expensive or difficult for the new entrant to replicate. IS/IT often require large investment in complex software. JP Morgan Chase invests millions of dollars into IS. In comparison with other banks, JP Morgan Chase would spend more than twice as much on technology per employee, approximately $28,000 compares to $13,000. Because of this it has become more difficult