Tesco vs. Webvan: Grocery Companies Leveraging the Internet

1178 Words May 16th, 2008 5 Pages
1.0 Introduction

The grocery industry is a huge, fragmented and enormously competitive environment and there are currently several examples of grocery companies that are making effective use of the internet as a link with customers (Delaney-Klinger, 2003). In particular, Tesco currently have internet channels for selling groceries that are profitable (Hall, 2001; Koller, 2001).

During the late 1990’s many new companies were set up to utilise the perceived advantages from using the internet in business, however, with their rapid rise and fall they soon created a phenomenon known as the ‘dot.com’ era (Lovelock, 2001). Questions were then raised about the added value that the internet brought to business and how these technologies
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Their ‘clicks-and-clicks’ strategy included setting up state of the art warehouses where Webvan employees picked and distributed orders to consumers within a twentieth of the time of that of an average consumer.

“Webvan made huge bets on the internets ability to change shopper’s behaviour, Tesco made tiny ones.” (Knowledge @ Wharton, 2001 p.1).

It is believed that Webvan’s failure was due to the violation of several fundamental strategic principles (Delaney-Klinger, 2003). It is important to note that strategy should be considered with regards to the capabilities the organisation has, where strengths match opportunities. One of the key challenges in implementing effective strategy involves accomplishing fit or consensus within the organisation. With this in mind, Webvan failed to adequately match its marketing, finance, operations and logistics strategies (Delaney-Klinger, 2003). 4.0 Success and Failure Factors

Table 1.1: Tesco and Webvan comparison
Company Success Factors Failure Factors
Tesco • Online was offered as a substitute to stores
• Capitalised on their brand name
• Made use of existing assets
• Utilised their club card database to advertise their new venture (Emerald, 2008)
• Teaming up with Microsoft (Humby et al, 2003)
• Partnership with Safeway, U.S. – Grocery Works (Knowledge @ Wharton, 2001) • Potential customer dissatisfaction – substitution of products if their was limited stock
• Problems with delivery times

Webvan •

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