The copyright of this thesis rests with the author. No quotation from it should be published without his prior written consent and information derived from it should be acknowledged. THE EFFECT OF ORGANIZATIONAL PROCESSES ON THE STRATEGY TO INTRODUCE NEW TECHNOLOGY INTO RETAILING Submitted By CATHERINE J. CROMBLEHOLME in fulfilment of the requirement for the Doctor of Philosophy DURHAM UNIVERSITY BUSINESS SCHOOL JULY 1988 The copyright of this thesis rests with the author. No quotation from it should be published without her prior written consent and information derived from it should be acknowledged. .- 6 JUL 1989 ABSTRACT THE EFFECT OF ORGANIZATIONAL PROCESSES ON THE STRATEGY TO INTRODUCE NEW TECHNOLOGY INTO RETAILING Despite the widespread changes that are taking place in retail technology, it is an area which 'has been subjected to relatively little research. In particular, there has been a neglect of the process of introducing new technology. Based on a comparative study of two supermarket chains, this thesis examines the way in which technology is introduced into retail companies and the problems they encounter. The technology in question consisted of the computerisation of all head office and warehouse systems and the introduction of Electronic Point of Sale (EPOS) and Portable Data Capture Units (PDCs) into the branches. Research methods included participant observation, interviews and analysis of documents. The study found that the introduction of new technology was not the result of a rational, pre-determined strategy, but that it evolved from a series of ad hoc decisions. Organizational processes played an important part in forming this emerging strategy and also influenced its successful implementation. In particular, power, politics, conflict, communication and commitment were identified as key processes. Further research into these issues showed that they could be attributed to four major factors: the decline of the organization; ownership of the company; an uncertain environment and the organization structure. The research provided valuable empirical evidence to support or refute ideas developed in previous works on new technology. The major contribution of the thesis lies in the insights it gives into the complex interaction of strategy formation, organizational processes and the underlying factors. The thesis demonstrates how the four major factors, in particular organization structure, gave rise to the processes which subsequently influenced the emerging new technology strategy and affected the companies' ability to sucessfully exploit the benefits. CATHERINE J CROMBLEHOLME JULY 1988 ACKNOWLEDGEMENTS I am most grateful to the many people who have helped with the research and production of this thesis. First and foremost I would like to thank Professor W G McClelland, not only for allowing access to Laws Stores but also for sharing his views and experience of retailing. Thanks should also go to all members of Laws Stores and Wm Low, in particular Chris Hughes and Doug Pearson, who were most generous with their time, often in difficult circumstances. I am greatly indebted to my supervisors, Terry Webb, Greg Bamber and John Machin, for their constructive criticism and eternal optimism. I also wish to thank my fellow research students at DUBS who made the experience less lonely and infinitely more enjoyable. Finally, special thanks should go to my parents, for their help and support, and my husband, Ken, for his patience and endurance. CONTENTS PAGE ABSTRACT (ii) ACKNOWLEDGEMENTS (iii) LIST OF APPENDICES (viii) LIST OF TABLES (ix) LIST OF FIGURES (x) CHAPTER 1. INTRODUCTION 1 Collaborative Research 1 The Retail Trades 3 New Technology 5 The Research Process 6 Literature Review 8 Presentation of the Findings 10 Structure of the Thesis 11 CHAPTER 2. BACKGROUND TO THE CASE STUDY 13 The Grocery Retailing Industry 14 Trade Structure 16 Mergers and Acquisitions 24 Marketing Trends 27 Centralised Control 28 Retail Technology 31 Portable Data Capture Units 32 Data Capture and Product Marking 34 Electronic Point of Sale 36 Laser Scanning Systems 38 Costs and Benefits of Laser Scanning 43 Summary 48 CHAPTER 3. ORGANIZATION OF A SUPERMARKET CHAIN 49 The Evolution of Grocery Chains 49 Family Ownership and Control 52 Centralisation and Decentralisation 56 Applications of Centralisation and Decentralisation 61 Specialisation 64 Functional Differentiation, Information Requirements and Data Processing 74 Summary 77 (iv) CHAPTER 4. LAWS STORES LTD 79 History 79 Recent Changes 82 Technological Changes 86 Summary 90 CHAPTER 5. RESEARCH METHODOLOGY 92 Research in the Real World 92 Triangulation 93 Participant Observation 94 Problems of Participant Observation 103 Documentary Analysis 105 Interviews 109 Wm Low & Co 112 Summary 115 CHAPTER 6. THEORETICAL CONSIDERATIONS 116 New Technology Literature 116 Organizational Structure and Environment 123 Organizational Structure and New Technology 126 Strategic Choice 132 Strategy and Structure 134 Politics, Power and Influence 138 Summary 146 PART II CHAPTER 7. THE INTRODUCTION OF NEW TECHNOLOGY INTO LAWS STORES 149 Phase One: Head Office Systems 153 The Decision to Introduce 153 The Choice of Technology 154 Implementation 157 Initial Operation 160 Phase Two: In-Store Systems 163 The Decision to Introduce PDC Units 164 The Choice of PDC Units 165 Implementation of PDC Units 166 Initial Operation of PDCs 167 The Decision to Introduce Laser Scanning 169 (v) Choice of Laser Scanning Equipment 171 Implementation of Laser Scanning 173 Initial Operation of Laser Scanning 177 Summary 183 CHAPTER 8. NEW TECHNOLOGY STRATEGY AND THE INFLUENCE OF ORGANIZATIONAL PROCESSES 184 Technology 185 The Strategy to Introduce Head Office Systems 186 The Strategy to Introduce In-Store Systems 191 The Concept of Strategy 193 Organizational Processes 195 Communication 196 Commitment 199 Conflict 205 Power and Organizaional Politics 209 Summary 219 CHAPTER 9. FACTORS UNDERLYING THE NEW TECHNOLOGY STRATEGY AND ORGANIZATIONAL PROCESSES 220 Environment 220 Structure 223 Laws Stores as a Family Firm 227 Organizational Decline 231 Strategy, Process and Underlying Factors 234 Summary 236 CHAPTER 10. THE TAKEOVER AND WM LOW & COMPANY PLC 237 The Takeover 237 Technology in Laws Stores - The Effect of the Takeover 240 History of Wm Low & Company PLC 242 Organizational Structure 244 Technology in Wm Low - Head Office 247 In-Store Developments 250 Laser Scanning 252 Future Technological Developments at Wm Low 258 Summary 268 (vi) CHAPTER 11. LAWS STORES AND WM LOW: A COMPARATIVE ANALYSIS 270 Historical Developments 270 Technology 271 Strategy 277 Organizational Processes 283 Summary 290 CHAPTER 12. CONCLUSIONS 292 The Findings of Earlier Research 292 The Methodological Approach 295 Research Findings 296 Applicability of Findings to Other Organizations 305 Major Conclusions and Implications 308 REFERENCES 311 GLOSSARY 327 APPENDICES 330 LIST OF APPENDICES PAGE Appendix A Diary of Visits To Laws Stores: October 1983 - May 1985 330 Appendix B Memoranda 347 Appendix C Minutes of Meetings 351 Appendix D Miscellaneous Documents 353 Appendix E Sample Interview - Unstructured 355 Appendix F Sample Interview - Structured 362 Appendix G Summary of Visits to Wm Low, Dundee 377 Appendix H Interview Schedule - Wm Low 378 Appendix I Phase One: The Introduction of New Technology into Laws Stores Head Off fice and Warehouse 385 Appendix J Phase Two: The Introduction of In-Store Systems 386 Appendix K PDC Transmission Record Sheet 387 LIST OF TABLES PAGE Table 2.1 Comparative Size of Supermarket Chains 15 Table 2.2 Type of Site - New Multiple Superstores 1980-1986 22 Table 2.3 Size Profile of Co-Op Stores 1980-1987 22 Table 2.4 Major Acquisitions by Food Retailers 1980-1987 25 Table 2.5 Epos Systems: Suitability to Types of Retail Outlet 39 Table 3.1 The Origins of Supermarket Chains 50 Table 3.2 Possible Information Requirements of a Retail Grocery Chain 71 Table 11.1 Laws Stores and Wm Low: Summary Comparison 272 LIST OF FIGURES PAGE Figure 2.1 Market Share 1980-1986 17 Figure 2.2 Number of Grocery Retail Outlets 1977-1986 18 Figure 2.3 Store Size Profile of Multiple Stores 1980-1986 20 Figure 2.4 Average Sales Area of Multiple Stores 1977-1986 21 Figure 2.5 Graph Showing the Relationship Between Turnover and Profit Margin 29 Figure 2.6 Scanning Installations in Grocers 40 Figure 2.7 Cost of Scanning Systems: Micro-Driven and Terminal-Based 44 Figure 2.8 Cost of Scanning Systems: In-Store Controller Driven 45 Figure 3.1 Organizational Structure of a Retail Division, Safeway Stores Inc 62 Figure 3.2 The Mazur Plan 66 Figure 3.3 A Typical Retail Cycle 76 Figure 4.1 Laws Stores Ltd Organization Chart (September 1983) 83 Figure 4.2 Laws Stores Ltd Organization Chart (August 1984) 84 Figure 7.1 The Introduction of New Technology into Laws Stores Ltd: Phases One and Two 150 Figure 7.2 ADS 45/42 Master/Slave Configuration 174 Figure 8.1 Stages in the Formation of an Emergent Strategy 194 Figure 8.2 Marketing Approach 202 Figure 9.1 Explanatory Model to Show the Relationship Between Organizational Processes and the Strategy to Introduce New Technology 235 Figure 10.1 Wm Low & Co PLC - Senior Management Structure, March 1985 246 Figure 10.2 Computer Configuration 263 Figure 10.3 DP Department Structure 264 (x) 1. INTRODUCTION This introductory chapter sets the scene for the rest of the thesis. It explains how the research began and the principles on which it is based. It gives a brief overview of the key elements of the thesis and its relationship with existing literature. In addition, it describes how the thesis is structured and outlines the content of each chapter. COLLABORATIVE RESEARCH The research was funded by the Economic and Social Research Council (ESRC) under their Collaborative Award in the Social Sciences (CASS) scheme. The aim of the CASS scheme (according to the ESRC Studentship Handbook) is 'to foster closer links between social scientists and non-academic organizations'. The researcher is required to spend a minimum of three months with the collaborating body.