Analysis of Woolworths' Strategic Information Systems and IT Decisions

This report analyzes Woolworths' strategic information systems and IT decisions, focusing on the $1 billion Mercury 2 project and subsequent changes. It examines the challenges faced by Woolworths, including a lack of a clear IT/IS strategy and a customer-led culture. The report uses Porter's Five Forces Model to assess the external environment's impact on Woolworths' profitability. It discusses the short-term and long-term consequences of IT strategic decisions, the role of IT in Woolworths, and the author's disagreement with the decision to reduce IT investment. The report includes recommendations for the CIO, suggests major information systems, and explores the impact of slashed-down projects on IT/IS. Stakeholders and functional requirements for the new IT system, including CRM, inventory management, and supply chain management, are also detailed. References used in the report are also provided.

Running head: STRATEGIC INFORMATION SYSTEMS Student Name ad ID
Strategic Information Systems
Name
Institutional Affiliation
8/26/2017
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STRATEGIC INFORMATION SYSTEMS Student Name Student ID
Strategic Information Systems
Woolworths’ Decision
In the context of IT/IS, Woolworths made a big decision in 2014 that involved
a $1 billion Mercury 2 project focused on achieving advanced data analytics and
merchandising systems to help the firm learn more about the clients and improve the
supply chain. The project was a 50% investment in Quantium data firm and
acquisition of EziBuy business to gain skills in direct selling and data analysis.
Unfortunately, after a new CE was hired, he felt that the existing IT/IS strategy was
not lean and needed to be replaced with company-wide solutions that improve
internal processes. The firm took drastic decisions that included ditching 500 support
posts and writing down millions of assets in the IT sector. Furthermore, 1000 workers
will be added to the business from the group office (Coyne, 2016).
Major Challenges Woolworth Faces
Previously, Woolworths has been facing major challenges caused by lack of a
clear IT/IS strategy. As a result, Grant O’Brien, the former CEO, initiated a costly
project that had not been assessed thoroughly to determine its value to the firm.
Further, the previous management approach was not focused in stores. In other
words, the firm lacked store and customer-led culture.
Factors the led to Such Decisions
The firm took the strategic decision after poor performance and the incoming
CEO believed that a restructured operating model was mandatory to make a positive
improvement. The firm needed to adopt turnaround measures to achieve more
productivity and reduce unnecessary costs (Jacques, 2016).
Porter’s Five Forces Model for Woolworths
It is critical for the company to examine the impact of the external
environment on its profitability and business strategies including the IT/IS one.
Woolworths has a low dependency on the many suppliers that deal with the firm,
therefore, reducing their supplying power. The system adopted by the firms should
help manage suppliers and inventory to ensure that there is a constant supply of
commodities. The company serves mostly individual customers who enjoy a strong
bargaining power. As such, the firm should focus on strategies that include delivering
low priced commodities. Further, the IT/IS strategy should be customer centric and
focused on improving way services are offered at the store. On the other hand, the
threat of new retailers is insignificant since new entrants require huge capital to set up
and to supply quality products similar to the ones sold at Woolworths. The threat of
substitutes is relatively high since other competitors offer similar products. According
to Preez (2016), competition in the retail market is tough, and Woolworths decided to
bring new leadership, cut jobs, and develop consumer-centric strategies. As such, the
IT/IS strategy should also focus on this are through creating innovative and
competitive approaches to attract more customers and achieve competitive advantage.
Finally, the market is affected by the presence of many competitors in the area of
operation.

STRATEGIC INFORMATION SYSTEMS Student Name Student ID
Short Term and Long Term Pros and Cons IT Strategic Decisions
Investing in sophisticated systems at Woolworths has an effect on the
company profits in the short term. For instance, Mercury 2 project involved a 50%
investment in the initiative, which led to a decrease in company income. However, in
the long term, the system will offer data and insights that Woolworths can use in
effective decision making.
Role of IT in Woolworths
The role of IT in Woolworths is to provide a reliable supply chain and data
analytics that support the online sales channel. However, cutting down the resources
committed to IT/IS strategy can lead to a weak competitive advantage in future. Data
analytics and supply chain management are critical in understanding and serving the
ever-changing consumer behaviors.
Decision of the Management in Reducing IT Investment
I do not agree with the decision of Banducci to write down millions in IT IS
investment. Currently, technology is a key enabler to support team members and
ensure that clients receive a good shopping experience. Instead of cutting down
resources, the new management should define the digital and analytics goals that
should focus on bringing online offering to clients in real time. Woolworths can
become a lean and competitive retailer by identifying the challenges of the previous
system and solving them instead of making a complete overhaul. A good example can
be borrowed from the success of Amazon online store. The firm is able to offer low
priced products, more options, and convenient to clients, causing other competitors
with weak IT IS strategies to close. For instance, Aeropostale and JC Penney lacked
proper planning that resulted to their poor performance and employee layoffs.
Action as the CIO
As the CIO of Woolworths, I would create a report and do a presentation that
shows the future that can be achieved with Mercury II solution. In the short term, the
management might feel that the 50 per cent investment in the strategy is quite high
(Coyne, 2016). However, the solution will help cut the cost of transportation of
merchandise. Further, big data and supply chain will help understand the market
dynamics and consumer behavior. As such, decision-making process in the future will
be evidence-based according to data analyzed by the system. If the CEO rejects the
idea, I would ensure that I keep track of company performance in comparison with
competitors that have adopted better IT/IS strategies and compare on the two firms
for future reference.
Major Information Systems for Woolworths
Woolworths should develop an ERP solution with cloud computing
capabilities. The systems should be broken into modules for implementation to avoid
disruptions of main business operations. For instance, a centralized payroll system
can be developed independently before linking the module to a common system after
testing. Most importantly, the system should make maximum use of the big data
concept. For instance, the solution should capture crucial data on supplier

STRATEGIC INFORMATION SYSTEMS Student Name Student ID
management, inventory control, sales reports, and store reports. The ERP should be
designed in a way that is compatible with information collection methods. Wieder et
al. (2006) note that extending the ERP system with other solutions for supply chain
management has a positive impact on the performance of a company.
Impact of Slashed Down Projects on IT/IS
Slashed down IT projects at Woolworths will affect some parts of the
business. For instance, the distribution center, transport department, and inventory
system will be affected in the short-term. The firm will face some challenges in
maintaining a constant flow of commodities until they establish a reliable strategy for
the operations.
System Stakeholders and Functional Requirements
Some of the stakeholders for the IT system include the customers, suppliers,
employees, management, and shareholders. The new system will have various
modules, such as consumer relationship management, inventory management, and
reporting. The CRM should collect data, analyze it, and allow the firm to predict what
and when consumers will buy. The supply chain management system should use
advanced analytics and direct selling knowledge to drive the future of shopping. The
supply chain module should support the increasing sale channel. The supplier
management system should show information about a supplier, order details, delivery
method, and stock management at the store. In other words, the system should be
designed with an end to end supply management in mind.

STRATEGIC INFORMATION SYSTEMS Student Name Student ID
References
Coyne, A. (2016). Woolworths writes down millions in IT assets. IT News. Retrieved from
https://www.itnews.com.au/news/woolworths-ditches-500-support-jobs-writes-down-
it-assets-431300
Jacques, O. (2016). Woolworths to sack 500 staff, close at least 17 stores. The Queensland
Times. Retrieved from https://www.qt.com.au/news/woolworths-sack-hundreds-staff-
close-stores/3066787/
Preez, D. (2016). Australia’s Woolworths stabilizes IT systems after “worrisome time.”
Diginomica. Retrieved from http://diginomica.com/2016/08/29/australias-
woolworths-stabilises-it-systems-after-worrisome-time/
Wieder, B., et al. (2006). The impact of ERP systems on firm and business process
performance. Journal of Enterprise Information Management, 19(1), 13-29.