ASSIGNMENT DRIVE SUMMER 2014

PROGRAM MBADS (SEM 3/SEM 5) MBAFLEX/ MBA (SEM 3) PGDROMN (SEM 1)

SUBJECT CODE & NAME - ML0013-Retail IT Management
BK ID B1764 CREDIT & MARKS 4 Credits, 60 marks

Q.No1 Explain the factors affecting the use of IT applications in Retail industry.
Explanation 10
Answer:
In practice, various factors affecting the use of IT applications in retail industry are as follows:
1. The nature and type of business
The main factor that affects the need and application of technology is the nature and type of
industry. For example, a retailer who is in the fashion industry would like to update himself with
the latest trends and changes in buying patterns at a much faster rate as compared to a retailer
who is into consumer durable industry. It is incorrect to assume that a retailer of the consumer
durable industry does not require any IT benefits. Both require technology, and the demand
patterns are more prone to changes in the fashion industry. By analysing consumer sales record,
changes in buying patterns can be understood and accordingly policies may be revised or
modified. Required changes may be made at the production level by informing the manufacturer
at the proper time. Similarly, increase in sudden demand for certain categories of goods can also
be tracked and production level can be increased before the stock out position occurs.
2. The availability of manpower
Implementing IT tools and applications requires people to build and employ technology
solutions. The IT Company, responsible for implementing technology solutions, must
understand the complexities of the industry that a retailer operates in and at the same time, the
kind of technology that will best suit the retailer and his business line. The task is not only
limited to implementing the technology but also the people who will be using the technology
must be properly trained about their operations and various applications; otherwise the entire

purpose of implementing IT applications will be defeated. This is the reason that information
technology is usually known as the backbone of the retailing industry.
3. Unique needs of technology in retail
The retail industry is one of the foremost industries that have been an early adopter of
information technology. This is one of the industries which requires accurate and prompt
information not only within the store, but sends it to manufacturers, suppliers, distributors, and
agents as soon as it has been collected. The reason behind making information available is the
need to manage the small shelf life of goods and the need to manage the costs of inventory.
4. The scale and scope of operations
The size and scope of operations is also very important to decide the use of technology and type
of systems in the business. If a retailer has small scale operations the significance of technology
is much lower as compared to a large chain retailer who has pan India or international presence.
In addition to it, the financial resource available to the company for the purpose of investing in
technology is one of the crucial differentiating factors. The retailers who have to compete with
mature market retailers require more funds to invest in technology than their Indian
counterparts. In India, it has been found that investment in technology depends upon size of
operations and the estimated payback.
5. Trends in consumer spending
The implementation of information technology in retail includes a wide spectrum of
technologies covering database communication, software, hardware, and wire-line. All are
subject to huge investments. No businessman would like to spend money on infrastructure until
he is not sure about the positive outcome or increase in sales. Recent economic slowdown, rise
in inflation, increase in fuel prices, strict credit policies, and overall market uncertainty, all have
led to a general slowdown of consumer driven economic growth. Moreover, consumer spending
is the driving force of the Indian economy and subsequently of the retail industry. Consequently,
how much spending should be on information technology applications and devices is directly
dependent upon consumer spending.
6. External pressure from competitors, suppliers, and buyers
Sometimes, a retailer is neither interested in implementing information technology in his retail
store nor is there such a requirement. If your competitors or nearby retailers have a technology

enabled store, you will be left with no option except to implement it. Otherwise, your
competitors can hurt you in the long run. This is a fact that most of the retailers are selling the
same sort of merchandising in a particular area. Therefore, it is not the product but the
customer service that will give you the profit. Further, in addition to it if your suppliers and
buyers are online, you cannot keep yourself aloof. In short, retailers sometimes have pressure
from externals such as rivals, suppliers, and buyers.
7. Perceived cost savings and income generation benefits
A company is said to be in the growth stage if it grows faster than the economy as a whole and
that comparatively returns more income to the business. (Merriam Webster, 2010). Investment
in information technology is generally confined to buying and services. Companies often invest
in information technology in activities such as accounting, supply chain management, payroll
and host of other activities. While smaller firms have been more reluctant to invest heavily in
I.T., larger firms have found it almost imperative and profitable. In a nutshell, most of the
researchers opine that investments in information technology should be an ongoing activity
which is not only must for their survival but if implemented properly can transform a retailers
business and bring him back on the success path.
8. Organization preparedness
Information technology in retailing is different from IT investments in other firms because most
of the retail stores in India are small and have decision-making responsibility, standard
procedures, short term planning, and more dependence on external IT experts in SMEs.
Nevertheless, IT applications may enable the long term survival of companies in several ways.
They give access to external knowledge and financial resources, build trust and authenticity
through extensive information diffusion, and generate more social network ties. But if the
organization that has to implement technological changes is not ready to adopt any changes in
its infrastructure or is not clear (ready) about how to go about it, will not serve any purpose.
Therefore, it is suggested that before implementing any infrastructural changes, all the
concerned employees and stakeholders should be thoroughly consulted. A general consensus
should be made before the management hires IT professionals to implement IT systems.
9. Location of the store
The location of the store also determines the requirements for implementing IT enabled devices.
In case of a chain store, retail outlets will generally have IT enabled devices because of their wide
presence as a policy matter. But in case of small size retailers and departmental stores, location

of the store determines what sort of technological devices should be used for day to day
operations. For example, a retailer has two retail stores, one in Metro city and another in Tier III
city. Now this is a fact that most of the people in a metro use plastic cards for buying and
payment. Further, they are more technology savvy and have shortage of time. Therefore, for
them videos kiosks, electronic cash counters, database-enabled computers are imperative to
perform day to day store activities. This not only reduces floor staff burden but time saved can
be used effectively in other aspects of customer service. On the other hand, a retail store in small
city may perform better with limited or no technological investments.

2 Explain the advantages and disadvantages of Online retailing

Explanation of advantages
Explanation of Disadvantages 5+5=10
Answer:
Advantages of Online Retailing
1. No physical limitations: In online retailing, a customer does not have to visit a physical
store; he can simply visit the companys website and purchase the desired item.
2. Low operating cost: One of the foremost advantages of online retailing is the low
operating cost. The retailer is not bound by the physical location to set up his store. With the
deployment of IT, the retailer can easily manage inventory, billing, automation and many other
functions. In this manner, the use of manpower is also less.
3. Saving time: To purchase an item online, a customer does not have to visit a physical store,
instead he can visit and browse through the desired website and purchase the item at the click of
a mouse, thus saving precious time.
4. Remain open all the time: Unlike a physical store which is time bound, an e-retail store
remains open 24X7 throughout the year. From the retailers perspective, the number of orders
will increase and from the customers perspective, there is no time limitation he can make a
purchase at any time as per his convenience.
5. Creates markets for niche products: Online, it becomes easier for buyers customer
wants to sell a second hand car, he can easily locate the seller via the Internet.
Disadvantages of Online Retailing:

1. Lack of personal touch: One of the biggest demerits of online retailing is the lack of
personal touch, which a customer feels while making a purchase at a physical store. For
example, if a customer visits a retail store to purchase clothes, he can try some of them and then
select the best one for himself.
2. Security issues: When making an online purchase, a customer has to provide at least his
credit card information and the delivery address. At times, websites are able to extract even
further information than that provided by the customer himself. This could lead to credit card
fraud, or identity theft.
3. Possibility of tampering by courier or delivery agencies: There could be instances,
when an online product purchased by a customer is not delivered in intact condition. For
example, a glass item could be broken in the process of delivery to the customer.
4. Cannot experience the products before making a purchase: For instance, if a
customer wants to buy a new book, he can neither read the preface nor have a look at the table of
contents before selecting the book. If a customer is purchasing a music system he cannot play it
online to check if it is functioning properly.

3 Explain Porters Model of Competitive Forces in detail.

Explanation 10
Answer: need to understand the challenges that competition poses. In this field, Dr. Michael E.
Porter (1985), Professor of Business Administration, Harvard Business
School, has shared his ideas in two books: Competitive Strategy: Techniques for Analyzing
Industries and Competitors, and Competitive Advantage. These books offer a structure to firms
to practically generate and carry on with a competitive advantage in their industry, in terms of
either expenditure or demarcation. Porters philosophies on competitive advantage are not
limited to information systems, but are used by others to involve information systems
technologies.
Michael Porters classic model of competitive strategy advocates the following five competitive
forces:
The five forces are:
1. Supplier power. An assessment of how easy it is for suppliers to drive up prices. This is
driven by the: number of suppliers of each essential input; uniqueness of their product or

service; relative size and strength of the supplier; and cost of switching from one supplier to
another.
2. Buyer power. An assessment of how easy it is for buyers to drive prices down. This is driven
by the: number of buyers in the market; importance of each individual buyer to the
organisation; and cost to the buyer of switching from one supplier to another. If a business has
just a few powerful buyers, they are often able to dictate terms.
3. Competitive rivalry. The main driver is the number and capability of competitors in the
market. Many competitors, offering undifferentiated products and services, will reduce market
attractiveness.
4. Threat of substitution. Where close substitute products exist in a market, it increases the
likelihood of customers switching to alternatives in response to price increases. This reduces
both the power of suppliers and the attractiveness of the market.
5. Threat of new entry. Profitable markets attract new entrants, which erodes profitability.
Unless incumbents have strong and durable barriers to entry, for example, patents, economies
of scale, capital requirements or government policies, then profitability will decline to a
competitive rate.

4 There are certain threats which disturbs the internet system of working. Explain
the threats to information security encountered by businesses.
Explanation of security threats 10
Answer:
Information systems are prone to various threats, like theft of confidential records, intellectual
property leaks, personal identity thefts, espionage, privacy violations, etc. These threats have
caused losses of millions of rupees to businesses.
Most of the organizations worldwide have at some point of time been affected by information
security threats. E-businesses thrive on information technology, which consists of hardware,
software, networks, the Internet and the Web. With the emergence of the Internet and the Web,
the information system spread has assumed global dimensions. Thus, the information security

threats, too, have a global angle to it. We have seen that the attacks on popular sites such as
Yahoo!, Amazon and e-Bay, to name a few, have directed the focus on security of such
businesses. A major deterrent to e-commerce activity is the growing perception that Internet
transactions are inherently insecure.
There are instances where we come across news about personal and credit card information and
codes getting hacked from payment gateway sites, resulting in fraudulent use of credit card.
There are growing concerns about the use of credit cards in online transactions. If B2C
commerce is to succeed, online payment concerns need to be addressed.
Information security concerns are not just confined to the use of the Internet, but spread across
in the form of employee access abuse, unauthorized access by outsiders, virus attacks, theft or
destruction of computer resource and leak of proprietary information. Organizations
experienced breaches in information security and as a result, there were business operations
setbacks and loss of reputation or embarrassment for organizations, as illustrated in Table 10.1.
Table 10.1 Types of Threats to Information Security Encountered by Businesses
1 Viruses (78%)
2 Employee access abuse (52%)
3 Unauthorized access by outsiders (23%)
4 Theft/destruction of computing
resources (23%)
5 Leak of proprietary information (18%)
Types of Security Threats
Various types of threats, either internal or external, whether caused deliberately or
inadvertently, can be grouped under hacking, malicious software and internal threats.
Hacking
Hacking is an act done by a person or a group to use a computer system or a network without
having the authority to do so. The individual (or group of individuals) doing this is called a
hacker. The term hacking, when used to explain cracking into a computer system, has a criminal
connotation. Hackers break into computer systems by finding the weaknesses in security
systems, or cracking a password, or by taking advantage of various features of the Internet that
make it an open system.
Malicious software
Malicious software includes all types of viruses like Trojan horses, worms and spyware. The
word, malicious software, is used for programs that when executed, would cause undesired

results in the system. These programs are transmitted through the internal network, Internet, emails and during installation and transfer of other infected software. Users cannot detect them
until they come across some damage or inefficiency in the system. Viruses and worms are
selfreplicating programs which hide in legitimate software and spread across the network. These
malicious programs can cause data loss, system downtime and denial of service.
The most dreaded malicious software is worm, which is an independent program that copies
itself from one computer to another on the network. Worms and viruses also infect mobile
phones. These viruses are serious threats to enterprise information systems because many
wireless devices are now connected to the systems.
Internal threats
Information security threats are not only external. There are serious internal threats as well.
These threats are misuse of employees access to information and system crashes. Unauthorized
access into systems by employees is considered as hacking. Employees have access to privileged
information and the absence of sound security measures may lead to misuse of information. A
disgruntled employee may vandalize the system or leak the critical information to a rival
business house. The abuse of employee access to information systems is very high. It can cause
leak of key business information, revenue loss and embarrassment to the organization. It is one
problem which is difficult to resolve and is usually overlooked by the management.

5 A workflow management system is an automated application that administers

and defines an array of functions leading to a result. Comment
Explanation of retail workflow management 10
Answer:
A workflow is a collection of interconnected and interlinked steps that follow each other.
Workflow emphasizes that each step in it follows the preceding step without any delay or gap
and ends just before the subsequent step may begin. Workflow is a kind of abstract depiction of
real work.
A workflow management system is an automated application that administers and defines an
array of functions leading to a result. By using this system, a user can ascribe different
workflows for different types of jobs or processes. For example, at a retail point of sales, a bill
when completed is automatically routed to the next step of payment settlement and goods
delivery. Every step of the workflow holds one individual or group responsible for a particular

task. As soon as one task is done, the workflow software identifies the individual/individuals
responsible for the next task. As soon as the individual/ individuals are identified, they are
apprised about their task and given the data they require for executing their part of the process.
Besides controlling automation of processes, workflow management systems may even replace
paper work order. For example, in case of auto replenishment at a retail store, the systems at the
retail store send electronic information to the storehouse for dispatch of goods. This is in
addition to the paper-based requisition. A workflow management system replicates the
dependencies required to complete every function. Figure 11.2 shows a retail workflow chart
depicting each step in the process.
Purchase
Orders
Material
Receipt
Yes
Quality

OK

Inspection

Goods Receipt
at POS

Retail
Billing

Material
Issue

Payment

Warehouse
Inventory

Settlement

Replenishment
Request

No
Accounts
Purchase

Bill

Accounts

Returns

Passing

Payables

Receivables

Payments
Figure 11.2 Retail Workflow Chart

6 Write short notes on:

a) Barcode Technology
b) Challenges for online retailers
a) Explanation

b) Explanation 5+5=10
Answer:
a) Barcode technology
Barcode technology (Figure 12.4) is one of the widely used methods of automatic identification.
Automatic identification or Auto ID encompasses automatic recognition and recording of data.
This is common in printing and reading of information encoded in barcodes, thereby
eliminating the risk of human error.
This is an automatic identification technology. Barcode is a predefined format of dark bars and
white spaces. It represents data an optical machine-readable form, which is related to the object
to which it is attached. Initially, barcodes depicted data by parallel lines of different widths and
distances from each other. These were called linear or one-dimensional (1D). As time went by,
they were transformed into rectangles, dots, hexagons and other geometric two dimensional
(2D) patterns. Although 2D systems use many different types of symbols, barcode is the term
used generally for them too. A barcode is structured to contain a specific piece of information. It
allows real-time data to be collected accurately and rapidly. A combination of barcode
technology with computer and application software improves performance, productivity and
profitability. In the beginning, special optical scanners known as barcode readers were used to
read barcodes. However, later, devices like desktop printers and smartphones evolved with
software that could interpret barcodes.
b) Challenges for Online Retailers
(i) Getting visitors: The main challenge before todays retailers is that how to motivate people
to buy things online. Though retailers are spending enough money on search engine position,
pay-per-clicks arrangements, poster ads and other marketing strategies but still they are not
getting enough visitors. Everyone knows that buying things online is more beneficial for
customers.
(ii) Low conversion rates: Few retailers complain that they are happy with the number of
visitors to their respective websites but the visitors do not convert into customers. That is their
conversion rate is very less. They admit that sometimes they are successful in convincing
customers to visit their sites but fail to attract them for actual buying of items. Customers often
complain that websites are very confusing and difficult to navigate.
(iii) Increasing competition:

A website should be attractive enough to hold the customers and offer the best deal to them. The
website owners need to do everything possible to hold on to customers as there are lots of sellers
in the market.
(iv) Easy comparison of prices: Today customers are very smart. Before buying anything
online, they visit several sites, compare the prices and features of the goods and then decide the
online retailer. If you are offering the same price what is offered by your competitors, you will
have intense pressure to hold on to your customers. In case you are selling something selective,
then price-comparison should not be an obstacle until competition appears in the field.
(v) Shopping cart abandonment: Sometimes, a visitor is convinced with a retailers
offerings and decides to buy the goods. He puts/adds items in the shopping cart and before his
selection of items is complete, he leaves the website for unknown reasons. The number of
customers doing this is very alarming. According to Gartner Group, Inc more than sixty percent
of online shoppers give up their purchase orders before completing the credit card transaction.
Online retailers need to find out ways and means to prevent customers from abandoning
shopping carts. There are a number of customers who are into passing their time or simply
indulging in the online version of window-shopping. Such customers abandon the shopping
process in the middle of it, even after adding the products to their shopping carts. These
customers are not really interested in buying but are there simply to checkout if any new
product has been launched.
(vi) Manufacturer to end-user: Some large manufacturers are also entering into the retail
business and offering goods to customers through e-retail.
Besides, some large companies are already delivering goods directly to customers from
manufacturers or through various delivery centres to reduce storage costs. Therefore, both are
creating a big challenge for the existing retailers who are already facing intense competition with
domestic and outside companies.