Introduction

Caet Co is a catalogue store chain with an annual turnover in excess of 500 million. Caet has just over
150 stores throughout the UK. Each store sells a variety of products including household furniture,
electrical goods, jewellery, sports and leisure items etc. Each store supplies several thousand item lines;
the item lines are standard throughout all stores. A company wide catalogue is produced twice a year
containing pictures, descriptions and prices for all products. These catalogues are available in each store
where customers can obtain free copies. Stores have a selection of items on display. There is a standard
procedure for customers purchasing items. The customer chooses which item(s) they wish to purchase.
They complete a simple order form, stating the item number and quantity required. The customer then
takes the completed order form to one of the many payment points within the store, where a sales
assistant enters the item number into the point of sales terminal; the item(s) are then displayed. A
validation check is conducted with the customer. The sales assistant confirms if the item is in stock and
checks with the customer, using the description to ensure that the order is correct. The customer then
pays for the item(s) using cash, cheque or credit card. Upon receipt of payment the customer is given a till
receipt and informed of the appropriate pick-up point within the store. After a few minutes the item(s) are
brought to the pick-up point where the till receipt is stamped and the customer receives the goods. Caet
offer a free delivery service for large items.

Problems with the current system

Several store managers have produced a joint report to the operations director, requesting a change in
the current store systems. The report recognises that customers often take their order forms to the
payment points and discover that an item may not be in stock. Upon making this discovery they decline to
make any other purchases on the order form. This also leads to complaints from the customers. This
happens frequently and is becoming a problem, affecting sales. The proposal is to develop an in-store
system that will permit customers to access information concerning stock availability. If this is feasible the
system could inform customers when an item is out of stock and suggest viable alternatives available
within the store. The operations director has had preliminary talks with the information technology (IT)
director, who initially supports the idea. He even suggested that there might be a case for expanding the
proposal and permitting the customers to complete their orders, including payment via credit card,
automatically within the store. This would give customers a choice between methods of placing an order.
The operations director believes such a system would be unique amongst Caets major competitors. They
have initially called the proposed system, Public Inventory Preview System (PIPS). The operations
director and the IT director are planning to put a formal PIPS project proposal to the full board of directors
at the next board meeting. The initial proposal will confine itself to allowing the public access to the
inventory system; it will not include purchasing facilities.

Company structure and strategy

Head office functions are centralised at a site in a large regional city. The IT centre operates from within
this site. Currently the centre houses two IBM mainframes, plus three AS/400 minicomputers. The
minicomputers provide the personnel, payroll, finance and distribution functions. One of the mainframes
supports the day-to-day business of the entire operation, while the second mainframe runs smaller
business functions and acts as a backup for the first mainframe, running many of the major functions in
parallel. Also, many networked PCs are used within head office. The retail stores have recently been
equipped with new NCR point of sale equipment, linked to the back-office server running an application
written in C++ on UNIX. The stores have their own local stock recording systems linked to the head office
mainframe. Therefore each store can process its own data locally and the head office has sight of the
stores information. Replenishment of stock is normally controlled by head office systems. When item
lines have fallen below re-order level the head office inventory system automatically informs the
appropriate distribution warehouse to deliver the required items to the store. The four geographically
dispersed distribution warehouses have their own inventory systems, linked to the head office main
inventory system. The head office system automatically organises the replenishment of stock from the
suppliers.
Caet has recently updated its overall business strategy. The new strategy document is nearing
completion. High priority is being given to the exploitation of information technology with regard to
improving customer service, customer satisfaction and meeting customer requirements. New proposals
for improvements in any of these areas are being encouraged throughout all functions and levels within
the organisation. This new initiative requires potential user groups or managers to prepare a business
case, to be considered by senior management. The strategy document is reinforcing the boards longterm
commitment to developing both business and information strategies that complement each other rather
than compete with each other.

During the last five years Caet has successfully implemented an intranet, which has enhanced
communication within the company. They have also implemented an extranet; this has been initially
successful and developments in this business to-business system are constantly being undertaken. Many
of Caets key suppliers now share access to the main inventory system and have the ability to
automatically supply goods as and when appropriate.

The in-store side of the business relies heavily on custom-written programs. The bulk of the head office
mainframe applications were also written in-house. Some generic packages have been bought in for the
mini-computer based functions, but all applications relating to stock and sales management remain
internally developed and maintained. There are over eighty IT staff permanently employed in the IT
centre, with just over half of them working on mainframe products while the remainder are supporting in-
store systems. When the new point of sales systems were being installed, Caet used external sourcing
for the first time; this was due to the size of the project. The outsourcing company installed the new
hardware and developed the required bridging software within the stores. Caets IT department
developed the corresponding new back office in-house. It was considered that Caets store operations are
unique to the extent that no package was suitable for their purpose.

The web site

Throughout the 1980s and most of the 1990s Caets business was flourishing and allowed them to expand
throughout the country. During the late 1990s Caet developed a basic web site on the internet. This site
advertises the companys products and services; the site does not permit on-line purchasing or allow for
two-way interaction. During the last three years Caets market share, and thus their profits, have been
steadily falling. They are in a very competitive market place. It is believed within the company that their
recent fall in profitability is due mainly to the emergence of competitors offering customers on-line
purchasing facilities. This is exacerbated by the dramatic increase in dot com companies in the same
business sector. Caet is now considering developing its existing web site system to include on-line home
purchasing facilities for its customers. A proposal for this enhancement, named Public On-line Purchasing
System (POPS), will be placed on the agenda for the next board of directors meeting. The proposal
states that POPS will supplement their existing operation. Currently there are no plans to downsize the
existing stores.
The board of directors generally agree that Caets major business strategy will continue to involve the
support and promotion of their high street stores. If the development of the on-line shopping system,
POPS, is given approval by the board of directors, the financial director, a strong supporter of POPS, has
already stated that adequate funds and resources will be available.
 Required:
a) Construct a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis with
reference to Caets proposal to develop the Public On-line Purchasing System (POPS).
10 Marks
b) The figure below represents four possible IS/IT strategies that can result from a SWOT analysis:

Strength Weakness

Attack
Opportunity go for it Beware Opportunity
dont do it

Situation
IT faces

Explore Protect
Threat if we have time watch yourself
Threat

Strength Weakness

Evaluation of IS capability

Required:
a) Briefly explain in general terms how the above grid can help a company determine the
most appropriate IS strategy to follow. 10 Marks

a) (c) Discuss the four strategies given in 1(b) above and how they might apply to the case
study. Of the four, identify which strategy in your opinion best applies to CAETs current
position with reference to the Public On-line Purchasing System (POPS) and why.
20 Marks