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(PDF) Driving Forces of Innovation

   

Added on  2021-06-30

18 Pages7279 Words130 Views
Business DevelopmentFinanceLeadership Management
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4 Executive summary Section A of the report primarily focuses on theoretical background and driving forces of innovation. The whole retailer sector is not a stranger to the waves of innovation because digital economy is currently disrupting the retail industry. Debenhams Plc Share price plummeted when online retailers penetrated the market in 2008. The downward trend in the number of physical stores forces Debenhams to identify new online distribution channels in order to continue generating revenues. Section B analyses Debenhams internal factors. It is notable that both previous leaders Mr. Sharp and Mr. Templeman did not adopt the Debenhams existing business model to the new digital environment due to poor innovative climate within organisation and strong organisational foundations that were formed more than 200 years ago. In 2016, Sergio Bucher, used his knowledge, gained in Amazon, and announced new strategy with focus on online selling and better customer experience by introducing social shopping within physical stores. Debenhams, headed by Sergio Bucher started moving towards entrepreneurial culture and organic structure. Nonetheless, interviews conducted with employees in Debenhams Guildford department has showed that Debenhams did not introduce a fully organic structure. Section C analyses how Debenhams competitors adopted their business models to the new environment. For example, Marks & Spencer as well as John Lewis almost doubled their online sales, while Debenhams continued to focus on physical stores. Section D evaluates new Debenhams strategy with focus on online sales and better customer experience. However, in must be remembered that Debenhams introduced their new strategy only in 2016-2017, therefore it is too early to expect positive changes in profitability and share price index. The last section E of the report suggest recommendations for Debenhams. It is notable, that Debenhams is moving into the right direction. However, there are some internal issues that should be considered. For example, shared vision is not set among all employees. Furthermore, there is no direct communication channel between regular employees senior management. The following report suggests to implement the employee cross functional suggestion program to improve communication channels and align all employees in innovation process. Finally, Debenhams should better encourage career progression to make employees motivated.
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5 Table of Contents Executive Summary ....................................................................................... 4Part A Introduction ....................................................................................... 61.1 Introduction .......................................................................................................................... 6 1.2 Debenhams Profile .............................................................................................................. 7 1.3 Debenhams SWOT Analysis ............................................................................................... 8 Part B Debenhams Internal Factors ................................................................ 92.1 Debenhams Leadership and Structure ................................................................................. 9 2.2 Debenhams Culture ............................................................................................................ 10 Part C Debenhams External Factors ............................................................. 12 3.1 E-commerce Trends ........................................................................................................... 12 3.2 Debenhams Porter’s 5 Forces Analysis ............................................................................. 13 3.3 Debenhams Other External Factors ................................................................................... 14 Part D Debenhams Strategy ......................................................................... 15 Part E Recommendations for Debenhams ................................................... 16 List of Figures Figure 1.1 Organizational Architecture ..................................................................................... 6 Figure 1.2 Debenhams Plc Share Price ..................................................................................... 7 Figure 1.3 Debenhams Business Cycle ...................................................................................... 7 Figure 2.1 Debenhams Organizational Structure ....................................................................... 9 Figure 2.2 Three Levels of Culture ......................................................................................... 11 Figure 3.1 World E-commerce Growth .................................................................................. 12 List of Tables Table 1.1 Debenhams SWOT Analysis .................................................................................... 8 Table 3.2 Debenhams Porter’s 5 Forcers Analysis .............................................................13-14 List of References...................................................................................................17 Appendices.............................................................................................21
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6 Part A – Introduction 1.1 IntroductionIn businesses, innovation often results when companies want to further satisfy the needs and wants of their customers. When organizations set an innovation strategy, they face with a dilemma whether they should choose incremental or radical innovation path. Incremental innovation is a reduced risk approach that focuses on adding new features to the existing product or service to make it more competitive, while radical innovation is about absolutely new products that transform the market or even creates the new ones (Drucker; 2014). According to Schumpeter (1939) and Kizner (1976), every business is linked to the waves of innovation, because when a product changes positively, other organizations must seek innovations in order compete and continue making profits. In order to innovate successfully and quicker respond to external factors, organizational architecture should be created based on trust, openness and self-interest. Figure 1.1 shows that organizational architecture consists of both internal and external components. Figure 1.1 Organizational Architecture Source: Burns; 2013 Internal architecture primarily focuses on employees generating a strong sense of collectivism based on shared objectives and commonly accepted strategies. The leader is responsible for creating a structure and culture within organization. External environment effect culture constantly and the leader must be responsive to it and being able to adopt the strategy to the new environment. The whole retail sector is not a stranger to innovation. Digitalisation of economy and mobile shopping are currently disrupting the retail industry (Hendrikzs; 2018). Retail firms that operate online have much less operating expenses compared to firms with physical store. Therefore, online retailers could afford spend more funds on promotion. The downward trend in the number of physical stores forces existing retail firms to find innovative Internal Architecture External Architecture
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7 approaches towards reaching and selling products to customers (Rigby; 2017). Debenhams Plc is one of the UK’s retail firms that is currently looking for solutions in order to adopt the existing business model to the new environment. 1.2 Debenhams Profile Debenhams plc is a United Kingdom-based company, which is engaged in multi-channel business. Debenhams’s is operating in approximately 240 stores in 27 countries. There are two main segments: UK and International. The UK segment consists of both physical stores and online sales. Physical stores offer customers a great number of services such as restaurants and cafes, personal shopping assistance, hairdressing, beauty treatments and nail bars (Proactiveinvestors.com; 2018). The international segment consists mainly from franchise stores. Nonetheless, Debenham’s own stores in Denmark in the Republic of Ireland. Debenhams is currently promoting the online sales outside the UK, however due to high competition and online retailers such as Amazon, Debenhams is facing challenges (Reuters; 2018). Figure 1.1 shows the downward trend of the Debenhams share price from 2006 to 2018. Figure 1.1Debenhams Plc Share PriceSource: Google Finance; 2018 According to Figure 1.1, the share price dropped from 201 GBX in 2006 to 22.12 in 2018 and this proves that Debenhams Plc is experiencing significant challenges both internal and external. Debenhams was established in 1813 and according to the share prices dynamics, currently is at the very end of its life cycle and entered phase “Decline”. Figure 1.3 Debenhams Business Cycle
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