Pret a Manger: Management Information System a Competitive Advantage Essay Example

and firework of Eastern scientist, the information and technology have shaped better quality of life and have brought prosperity and sustainability to humans. However the industrial revolution in the UK brought new challenges to the management of information and development of complex systems.

The challenges of human evolution developed new necessities. The Industrial Revolution in the late 17th, 18th and 19th centuries made companies start to use information and technology to develop business and fulfil people needs. But not until 20th century the complexity of markets, the trading between countries and the growing population demanded for Information Technology (IT) in a faster and efficient way as it is nowadays. The principle was started with calculators; machines used to do basic operations. But the changing world, markets, economy 4

JANUARY 2012 MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS and technology were thirsty for speed, efficacy and efficiency on their management of information. That is why around 1950? s and 1960? s computing systems units were developed mainly in North America and Europe in order to comply the needs of companies to manage information. Since then, according to Metcalfe? s and Moore? s Laws, the development of management information and communication systems has growth exponentially to form the big network and the complex machines that we use every day.

This view has been supported in the work of Schaller (1996). b. Benefits Systems Gallier and Leidner (2003) state that the major task for many Information Systems (IS) departments in the early 1980? s was making information available. The most important result of using computer technology, however, was the growing realization that the technology itself cannot solve problems and that the introduction of

technology results in change. The impact of technological change depends on why and how technology is used.

For many companies IS have been difficult to implement and more important, know how to use information. Technology is useless by itself. The increasing growing of business, markets, economies and all new forms of doing business brought new challenges to management because every second there was more information to be processed and the human capability had reached its limit, and if more people were hired the costs would be astronomic making the company uncompetitive. The 5 of Management

Information and Communication JANUARY 2012 MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS necessity to process information within a company in a fast and efficient way opened the way to computers in order to take that information and be showed in a better way making management be able to make decisions. (Laudon and Laudon, 2006) The Information Systems were the solution to the information processing problem. The benefits of IS bring productivity and optimisation to business process.

Companies which have implemented IS have seen amazing increasing of revenues due to the rapidness of operations: Sale - Customer order – Production order – Delivery order – Invoice – Payment; all these operations need information to be executed and if the faster information is processed the faster the revenues increase because more sales can be processed in less time, more clients are served and products or services are delivered faster meeting customer satisfaction. Therefore is possible to say that IS contains benefits that can be tangible and intangible.

Robson (1997) says “One of the greatest problems in judging information value is to recognize the distinction between tangible and intangible

benefits”. The tangible benefits are often measured as a return of investment and monetary value of the IS, but intangible benefits are far difficult to assess due to the subjectivity of those: Improved customer service, gaining competitive advantage, more timely managing information, supporting core business information, just to mention a few.

Although the tangible benefits can be assessed by the increment of revenues and increasing of productivity, those benefits most be combined with the effort made by management to use the information properly. 6 JANUARY 2012 MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS Without taking into account intangible benefits, it is possible that IS projects that should be undertaken are not done because the financial analysis focused only in tangible benefits may not show a high enough return.

Even when there is no reduction in costs, significant benefits can be realized in projects that enhance customer loyalty, open up business opportunities, or increase productivity. (Curley, 2007) c. Development of the work and Case Study This work is mainly addressed to fulfil requirements of Management Information and Communication Systems and provide a new source of knowledge to future researchers interested in the value of Information Systems at Pret a Manger Ltda. This work is compound by three-fold.

The first part is directed to explain basics about Information Systems, definitions and terms to comprehend how it works and set a framework to develop the case study. The second part is focused of the case study: Pret a Manger Ltd. To critically analyse the internal and external forces that caused the change, together with the value and competitive advantage that the system and information that it holds has added. And the third part

treats some conclusions, recommendations and new developments to increase their performance on operations.

At the end of the work some conclusions will give a summarized ideas and why IS where implemented in companies in order to add value and gain competitive advantage. 7 JANUARY 2012 MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS 2. Main content a. Information Systems basic terms and definitions It is well know nowadays massive quantity of terms and definitions for a growing science as it is Management Information and Communication Systems. There is no matter for this work to analyse the accurate one of all of those definitions, but is important to provide a standard framework to work ahead.

According to Robson (1997) in his work says that Awad (1988) stated that Management Information Systems (MIS) is an integrated, computer based, user-machine system that provides information for supporting operations and decision making functions. The Management Information System is the instrumentation of an organisation. They are sophisticated machines interconnected throughout the organisation that allow management to read off from it in order to know the state of the company at certain point. The main purpose of the MIS or IS is to track and record all information generated from the company? operation; from the arriving of raw material, resources allocating to staff payroll, financial statements or issue an invoice. The general model of MIS is represented by the graphic 1. (Robson, 1997) Graphic 1 8 JANUARY 2012 MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS Information passes between individuals and groups in a given social environment. In terms of the subject of this book, the social environment will constitute all or part of a business organisation. Information within an

organisation may therefore be seen as the „superset? hich information systems and information technology are used to support. (Clarke, 2006) The MIS is a tool used by different levels of the company structure, as it holds different type of information that serves to different people in the hierarchy of an organisation. As the IS manage and records all the information of the company? s operation there is a broad range of data to be analysed, and serves from operational planning and control in the short-term decisions to management control and tactical planning and strategic planning in the long-term decision.

The strategic use of the IS is oriented to use the information provided by the system the best way possible to take decision promptly and let operations flow steady. The competitive advantage is given by a proper use and understanding of the information and deliver an adequate strategy that match organisation goals using less resources and in the shortest time possible. b. Case Study: Pret a Manger Ltd. Pret a Manger, hand-made and today? s fresh food; that is the compromise the company assure to its customers. Pret a Manger is a large chain of fresh prepared food based in London since 1986 when opened their first store in Victoria Station. JANUARY 2012 MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS At its very beginning of operations the business was different as it is today, it was more like a Delicatessen store, but its demand was getting bigger and they realized that the service model had to change, but still offering fresh, hand-made food. After opening other stores around The City the service model changed from On-demand production to pre-packed

items showed on cooled shelves in order to provide a fast services and quick customer rotation, but there was not as easy as they thought. This was an internal force that made them engage the change to IS.

The combination of fresh ingredients, customer satisfaction and profitability was a risky bet to success in business. The differentiation of Pret over other food services was the freshness of the products, but this would increase dramatically the price of the products turning them uncompetitive to the food market. It is very expensive to assure fresh products every day due to the vulnerability of ingredients and Health & Food Regulations. Besides, the competition on food industry was becoming fiercer and customers became demanding about healthy and safe products. These were the external forces that encouraged Pret to switch to IS.

According to the Head of Operations, (who prefers to stay anonymous) on that precise moment they realized the necessity of an Information System to interconnect operations from suppliers through production to the final customer. The first Pret a Manger? s IS was rudimentary and had lot of bugs. Starting to manage production chain through an IS was something new for store managers used to paper sheet and hand out to operations manager to order from suppliers, this way took so many time and produced lot of mistakes that meant food waste and high cost to the company. The IS brought to Pret changes and challenges as 10

JANUARY 2012 MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS well. The new system created a network between stores and suppliers, where the main idea was to each store be able to planning their needed ingredients and

place orders according to the daily demand, but the next problem was the delivery service because this way of operations demanded for Just-in-Time delivery of ingredients and that would mean high transportation cost as well. The change was massive and the efficiency and efficacy of operations started to shine besides planning and placing orders was easy, fast and reliable.

Although the delivery challenge was a big concern for the food-chain company; meanwhile more and more stores were opened around the city increasing the delivery problem. The solution was to consolidate areas in London that creates groups of stores in order to combine supplier orders and optimise transportation costs among those groups. Right after almost 1 year of IS implementation the operations were running smoothly, the food waste decreased, customer satisfaction increased turning them into loyal clients and Pret? s products lovers. But the changes didn? t stop there.

The benefits brought by the IS increased so much profitability that allowed a fast expansion around the UK and the world, created a strong network which it was efficient and cost effective. After that they implemented “My Pret”, a sophisticated system designed to control all department? s operations and consolidated one whole IS: fast, efficient and reliable. Nowadays everything at Pret is managed through that system: payroll, production preparation, supply orders, waste management, health, food and environmental issues, communications between stores, personnel timetable, news and many other minor subjects.

This system allowed Pret to control labour and waste costs, 11 JANUARY 2012 MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS efficient less time consuming payroll and accountability, fast and reliable communications and regulation compliance. The competitive advantage of Pret a Manger Ltda is

given by providing fresh, same-day prepared food (not that three days gas station sandwich) at competitive food market prices. According to Bocij, et. al. (2008) where states “ Michael Porter? s work (Porter, 1980) includes the concept of a value chain: a series of connected activities that add value to an organisation? products or services.... to understand value chain analysis we need also to considerate an organisation? s supply chain. Supply Chain Management (SCM) is the coordination of all supply activities of an organisation from its suppliers through to production of goods and services and their delivery to its customers. The value chain is a related concept that describes the different value-adding activities that connect a company? s supply side with its demand side. ” Pret a Manger magnificently follows Porter? s value chain on its operations. Matching what Pret? s Head of Operations says and Porter? statement, is easy to identify the competitive advantage that the company has created throughout its value chain. The IS implemented at Pret a Manger provide them a highway of connectivity between its departments and they take advantage of it making operations efficient, light, sustainable and profitable. Pret differentiation key points are the freshness, taste and natural products (no additives or nasties), but this would be extremely difficult or at high cost to sustain if they wouldn? t use an Information System. That is the contribution of the IS to their competitive strategy. 12

JANUARY 2012 MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS Moreover the IS provide them a strategic advantage over the 5 Porter? s competitive forces. Porter? s work can also be used to identify a number of ways in

which IS can be used to achieve competitive advantage: Improving operation efficiency; in a primary activity, such as production, an inventory control system might be used to manage stock levels, reducing storage and transportation cost. In addition, support activities, such as management and administration, might achieve higher levels of productivity through the introduction of office automation systems.

Barriers to entry; often, the systems employed are extremely complex and require ongoing maintenance and development. This means that newcomers to the industry must be prepared to make a large initial expenditure so that they can acquire the IS they need to be able to compete efficiently. This level of expenditure needed may be so high that a barrier entry is created that deters or prevents the new competitor from entering to the industry. The bargaining power of customers and suppliers is locked up. Linking and organisation? computer-bases Information System to those of its customers and suppliers can help to strengthen business relationships. However, it should be noted that achieving high levels of integration can also have some significant disadvantages. Some suppliers might take advantage of the reliance of the organisation on that relationship raising prices or decreasing quality. The IS often helps to stimulate business innovation. As IS is established is easy to draw new production process or new products, protecting from substitutes and innovating to attract demanding food customers that want to try something new.

In general, an organisation that has invested time, money and effort in development 13 JANUARY 2012 MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS of a IS will be reluctant to bear the switching cost of moving to a new system. When an organisation links its

information systems to those of its suppliers or customers, it will often ensure that switching costs are as high as possible. In this way, the supplier or customer is discouraged from switching to a competitior? s system and competitors are excluded from the business relationship. And finally.

The organisation may use its resources to gain competitive advantage through information leadership. Information leadership involves enhancing a product or service with an organisation? s specialized information or expertise. (Bocij, et. al. , 2008). With the stated above is easy to identify the success of the giant food-chain company. Their competitive advantage has provide them accomplishment on their mission and as Head of Operations says: “It is unthinkable to know how to operate without My Pret Information System. 3. Conclusions It can be said that Pret a Manger is highly beneficiated by its IS.

They use the IS so efficiently that sometimes it looks that their competitive strategy is taken directly from Michael Porter? s work. Nowadays is pretty much impossible to survive in business without an IS in the market, the quantity of information gathered every day operations is so massive that process it manually it would be a never end task. Companies have achieved competitive strategies based on their IS? s. Their systems work as a whole body, where there is no component more relevant than other, because without one of them the entire system would collapse. But still there 14

JANUARY 2012 MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS are recommendations that have to be taken into account. They reliance in a few suppliers for all range of products is a threat because some ingredients are coming from far locations,

not because they want to, because is the only place available, for instance: Avocado, tomato, prosciutto and other vegetables and rare ingredients. It is suggested to Pret a Manger to make an evaluation of their vulnerability to suppliers because some of them are big corporations that monopolize markets and try to pull the prices up letting Pret with no exits. 15

JANUARY 2012 MANAGEMENT INFORMATION AND COMMUNICATION SYSTEMS 4. References Bocij, P. Greasley, A. Hickie, S. 2008. Business Information Systems. Technology, development & management. 4th Edition. Essex, UK: Prentice Hall. Financial Times. Clarke, S. 2006. Systems Strategic Management. An integrated approach. 1st Edition. New York, USA: Francis & Taylor Publishers. Curley, M. Managing Information Technology for Business Value. 1st Edition. Hillsboro, USA: Intel Press. Galliers, R. , Leidner, D. 2003. Strategic Information Systems. 3th Edition. Oxford, UK: Butterworth-Heinemann Laudon, K. , Laudon, J. 006. Management Information Systems. 10th Edition. New Jersey, USA: Pearson Prentice Hall. Palgrave. 2006. Case Study: Pret a Manger. [Article] London, UK. Available at: http://www. palgrave. com/business/hill/docs/Hill_Case%2017_Pret_A_Manger. pdf [Accessed: January 2011] Robson, W. 1997. Strategic Management & Information Systems. 2nd Edition. Essex, England: Prentice Hall. Financial Times. Schaller, R. 1996. The origin, nature and implications of Moore? s Law. PUBP 801. Macro Policies. [Online via Microsoft Research] Available at: http://research. microsoft. com/en-us/um/people/gray/moore_law. html 16