Hyperone is the first fully Egyptian, combined hypermarket-department store in the country, covering 40,000 square meters in the Sheikh Zayed District, a suburb of Cairo. Established in 2005, the chain’s success speaks for itself; it employs more than 1,600 people and has an average of 45,000 visitors a day. Hypermarkets use economies of scale to keep prices low. Their business model is based on low overheads, a result of expansive stores located on the outskirts of cities (where property prices are lower) coupled with sales of large volumes of goods at low profit margins. The savings are passed along to the consumer. As Hyperone continues to move into big retail prominence, the IT structure of the organization played a major role in this success story.
Egypt is a big market experiencing significant growth in retail industry in recent years and a very attractive place to be in. But at the same time the entry and exit levels are high and it is getting mature quickly and have low profit margins. New entrants are always possible, but to seriously compete with Hyperone they will need enormous capital. The company is expanding rapidly leaving less room for new competitors. Hyperone national plans to open and or expand 120-130 units in existing markets becoming a phenomenon. With sales increasing at 12.3% in 2008, potential competitors to this market will have to act quickly and have a highly effective business model to enter the Hyperone dominated market. As the retail industry sells products of daily common use, there are no direct substitutes; the only substitute products that can be threat are the products from gray market, which can harm the sales of branded products. Department and discount stores also faces stiff competition from specialized retail shops such as garments, electronics etc.
Because of the diverse product range that is distributed by retailers there are many different suppliers. Suppliers include both domestic
and international manufacturers and as the products are more or less standardized in nature, retailers and wholesalers have low switching costs. Hyperone, being a dominating customer to its suppliers, uses this as an advantage for them. The company is the largest customer to companies such as Kraft Foods, Gillette, and P&G. In order to maintain and satisfy Hyperone as a customer, suppliers are willing to provide favorable payment terms, discounts, and priority delivery dates. These mutual business relations are evident throughout Hyperone increasing success.
The consumers are now more sophisticated and mature. As said by Hyperone, they want it now and they want it with the best service and the best quality. Consumers enjoy increasing choice of products and increased price competition, and they demand better and wider choices. They also exert pressure on manufacturers and retailers to give more relevant product information. Contrary to belief, customers of Hyperone have bargaining power since Hyperone strives to satisfy its customers by matching the prices of any of its competitors.
Major Business Objectives
Hyperone’s management has adopted a strategic plan for information systems. Three key people, the CEO, the Information Systems Consultant, and the Information Systems Manager worked hard on achieving the seven major objectives of the plan. The objectives were:
o Support daily operations: Create an effective, accurate, integrated and error free automated system to support the complex and dynamic daily operations
o Support customer satisfaction: Hyperone is keen to provide better quality products at low costs and a high standard of service through the analysis of sales and the understanding of the client’s data after recording it in databases.
o Support decision making: Raise the productivity of the institution through the support of decision-making by means of reliance on standard indicators called performance indicators or ballot results.
o Reinforce the direct and electronic relationship with suppliers: One of the characteristics of the retail trade is the huge number of suppliers. This incited a lot of senior retail stores to focus on those suppliers and improve their relationship with them.
o Reduce risk of operations: The use of information systems in different sectors of the store, and its functions and departments, made it very important to achieve a high degree of reliability so that it can perform smoothly. Accordingly, a unit was created within the information systems department to achieve this goal.
o Attract and retain distinguished employees: Because the human element is a major factor of success, Hyperone took the necessary steps to maintain these elements by providing training, paying competitive salaries, and also providing an adequate work environment.
Having an attractive and informative website has become a major need for many companies, especially those targeting the national market instead of working in a region. Hyperone is no different, which is the reason why the company has developed a website. The website helps many functional departments including marketing, HR, sales, purchasing, shipping and customer services.
Reliance on advanced technology: The competition amongst retailers in recent years is for the acquisition of advanced technology and to activate it in the service of the store, its customers and suppliers. Therefore, it became one of the strategic objectives at Hyperone.
In response: Hyperone started investing in technology in highest impact line of business which is marketing. Marketing for the Hyperone has been typically traditional over the years with heavy emphasis on print. The effectiveness of print advertising has been on the decline lately and people are starting to use more digital channels. Hyperone started to think How to be relevant in the digital sphere as a hypermarket? Hyperone found the solution in two methods, first was the SMS advertising and the other one was submitting to Foodie.fm, which is available as free app on iPhones, Android and Nokia applications, as well as via the Web and Facebook,
Hyperone will keep on lead as long it can keep on date track of market and technology, and as much it can make use of IT to support Business strategies.
Q1: What are cross-functional business processes? Provide and explain two examples of typical business processes found in retailers like Hyperone. Explain whether the business processes you have identified are cross-functional or not?
Q2: What are disruptive technologies? Name one of the disruptive technologies in the case, and explain your answer?
Q3: Describe how a Supply Chain Management System works. If you were consulted by Hyperone, which Supply Chain Management (SCM) system will you recommend? Will you advise a pull-based or a push-based SCM system? State your reasons.
Hyperone Case Study
Cross-functional business processes refers to the situation whereby the different units within a business works together to achieve common business objectives. Examples of the functional business processes include the sales process and customer services processes. These sales and customer service processes are cross functional because they involve diverse departments.
Disruptive technologies refer to an innovation, which forms a new market and later disrupts the existing market. An example is Foodie.fm, a free application available on Android, Nokia, and iPhones among other sites. The app will create an online market for the business challenging the physical stores market.
Supply chain management system works through the flow of products from the suppliers to the clients. I would adverse Hyperone to implement the pull-based SCM system rather than the push-based SCM system because it allows for internal operations and quick filling of orders and products immediately after stockouts.