Innovation and Sustainability Strategies for Tesco PLC Report

This report provides a comprehensive analysis of innovation management within Tesco PLC, a major player in the retail industry. It explores Tesco's existing innovation performance, capabilities, and strategies, emphasizing the importance of innovation for attracting customers and gaining a competitive advantage. The report delves into various analytical models, including SWOT, VRIO, Porter's Five Forces, and value chain analysis, to assess Tesco's strengths, weaknesses, opportunities, and threats. It highlights the significance of sustainability and the use of recyclable materials in packaging, along with the effectiveness of the Red Door program in fostering innovative ideas. The analysis also covers Tesco's efforts to reduce carbon emissions and its future development plans, including leveraging technology and adapting to environmental factors. The report concludes by summarizing the key findings and offering insights into how Tesco can further enhance its innovation strategies and maintain its market position.

Managing Innovation in Business
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Executive Summary
A process of making products and services attractive and unique is known as innovation
and systematic approach of generating and evaluating new ideas plays an important role. Tesco
PLC can take several advantages by innovating their services and bringing effective ideas.
Innovation is known as the main key of success of organizations and retailers as it helps them out
in attracting customers and taking competitive advantages. This study shows effectiveness of
innovation and systematic process of innovation management that also makes companies differ
than others. In this modern era, companies are operating in fierce competitive and it is putting
pressure on them and that is why all companies are striving hard for being in the competition. It
shows some aspects that can make companies differ than other companies such as quality of
products, pricing and others. But one of the main key aspect is innovation and this study also
show effectiveness of sustainability and idea of using recyclable materials in packaging and
other functions.
This study also shows effectiveness of red door programme that attracts innovators for
bringing innovative ideas within organization and attracting customers. Ability to use recyclable
materials for business activities also make companies sustainable and customers also prefer to
buy products from companies that maintain sustainability. It becomes easier for companies to
make their products innovative with the help of advanced technology and it is having several
positive impacts on societies and environment as it reduces carbon emission. Lastly, it shows
some future development and opportunities that companies can take by innovating their products
and analysing all environmental factors by making use of SWOT, VRIO and other models.
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Table of Contents
Executive Summary.....................................................................................................................2
.........................................................................................................................................................3
INTRODUCTION...........................................................................................................................4
Organization & Industry Overview.............................................................................................4
Existing innovation performance and capabilities of organization..............................................5
Industry in 2016 ........................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13
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INTRODUCTION
Innovation management refers a process of handling of all activities that are required to
introduce something new (Nambisan et.al., 2017). This present study is going to show
requirement of innovation within Tesco PLC and their effectiveness. It will also discuss critical
analysis of business models such as VRIO, SWOT and others. Analysis of all these models helps
companies in making better decision regarding innovative ideas and others.
Organization & Industry Overview
This present study is based on Tesco Plc, operate in retail industry. One of the main reason
of selecting this retailer and sector is it is one of the main sector that is having several negative
impacts on the environment and societies. It is the one that increases waste as well as use natural
resources so, it is important for retailers to develop some innovative ideas and making their
business sustainable. Innovative ideas should be focused on improved quality o products and
services and some ideas that can benefit all aspects. In the regards to Tesco, it can be said that it
is a British multinational groceries and retailer, founded in the year of 1919 by Jack Cohen. It is
the 3rd largest retailer in the world in context to gross revenue. Competition is fierce in this sector
and all retailers like Sainsbury’s, ASDA, Woolworth and others are striving hard for gaining
market share and taking competitive advantages. Pricing and quality is main 2 aspects on which
all retailers focus for making themselves differ than others and becoming the market leader. But
still competition is increasing so, Tesco thought to develop innovative ideas that can help it out
in attracting customers and showing its potential to others.
In regard to innovation and attractive ideas it is found that its team helped it out in taking
competitive advantages. It developed great loyalty scheme with good offers to customers.
Automating online shopping, mobile payment, cashless stores, Upside of Robot WI-FI are some
innovative ideas of this company.
For accomplishing goals it analyzed it’s all skills and weaknesses. On the basis of self
analysis I found that sustainability is one of the main aspect or key of success because nowadays
people have become health and environmental conscious. They prefer to buy products from
those companies who focus on sustainability and also respect values of all cultures. Tesco
retailer was one of the main retailers that were counted in the list of high emission generator. In
the year of 2016-2017 it was the highest carbon emission producer so, it announced that up to
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2020 it will reduce its net carbon intensity per square ft of retail by 6% compared with last year
and 15% since 2015-16 (Tesco Cuts Carbon Emission 13% in a Year, 2018). So, for that it is
focusing on packaging and food waste challenges and for more innovation it has launched “Red
door program”. Its annual report included an update that it wants to make all packaging fully
recyclable or compostable by the year of 2025. It is one of the best innovative ideas that are
beneficial for societies companies, environmental and all living things.
As per its red door program it provides opportunities to innovators to come inside and
provide innovative ideas and its new group innovation team can help it out in the future in
accessing the most exciting innovators from across the globe (Tesco Open Red Door to
Innovators, 2020). It is also found that it implements diffusion of innovation and disruption
innovation theory for innovation for getting effective outcomes. Its red door program is also
disruptive innovation that can help it out in getting effective outcomes, taking competitive
advantages and regaining image in the eyes of customers.
Existing innovation performance and capabilities of organization
For implementing innovative ideas it is important to analyse all business environmental
factors. This analysis can help it out in knowing its own strengths and weaknesses and on this
basis it can perform in an effective manner.
SWOT analysis
Strengths
 One of the main strength of this company is it has an ability to ex[and business and adapt
changes and that it is why it is geographically diversified. Apart from Europe and North
America it has rose around 28% profit.
 Other main effectiveness of this retailer is it is the leading grocery retailer in the UK and
it is the reason it is growing every year.
 As compare to 2018, it has now around 7000 stores and it had 2751 stores and its revenue
also increases each year.
Weaknesses
 It is found that in the year of 2017, it was charged with fines due to fraud trials and
accounting scandals.
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 There are some specific markets where it does not have strong and effective operational
performance.
 Its business operations got failed in US and Japan that affected its image.
Opportunities
 Because of its effective position and image in the UK it is taking advantages of strategic
alliances with other brands (SWOT Analysis of Tesco, 2019).
 By upgrading its online shopping it can attract global customers to the great extent and
can also become the market leader.
 Opportunities of expansion of business in emerging markets.
Threats
 Increasing competition among existing players is one of the main threat.
Brexit referendum also affected its sales (Fatricia, 2017).
 Economic crisis affected its revenue and profit margin.
VRIO analysis
There are some resources of this company that are organized, imitable, valuable and rare. By
identifying all these resources it can take advantages of external opportunities.
Resources Valuable Imitable Rare Organization Competitive
advantage
Positive
market
regulations
Yes Yes Yes Yes It can give it
long term
competitive
advantage and
it is its main
effectiveness.
Leadership
team
Yes No Yes Yes It has string
leadership
team that can
also give it
competitive
advantage
(D'Arconso,
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2018).
Brand
awareness
Yes No Yes Yes It can give it
sustainable
competitive
advantage as
it is imitable.
Customers’
loyalty
Yes Yes Yes Yes It is the main
key of
competition
bur still other
retailers can
imitate by
providing
qualitative
products,
Skilled
workforce
Yes Yes No Yes It is one of the
main
important
resource but
have
imitability.
Porter’s 5 forces analysis
5 forces Intensity Description
Customers’
bargaining
power
low It is found that Tesco serves millions of customers every week
as there are several existing players in this sector but still
customers prefer buying products from Tesco. Tesco provides
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qualitative products since establishment and that is why
customers do not prefer to switch brand and it is beneficial for
Tesco (Porter’s Five Forces Analysis of Tesco, 2019). But
some analysts argue that this power is high because of wide
variety of options and it is true that there are several retailers
but from survey it is found that customers’ first preference in
regard to retailer is Tesco.
Suppliers’
bargaining
power
Low to
medium
As compare to retailers and grocery stores, there are number of
suppliers and it is also found that Tesco works with around
2500-2750 suppliers in the UK. According to this, suppliers do
not have bargaining power but still it is found that Tesco
negotiate very hard for increasing profit margin and that is why
it is accused from its suppliers for bullying them and it affected
its image.
Threats of
new
entrants
Low This power has low intensity because there is requirement of
heavy investment and advertisement for promotion. Due to
high investment amount and competition among existing
rivals, no one think about entering this sector that is beneficial
for Tesco.
Threats of
substitutes
Medium
to high
Products and services that are being offered by Tesco have
ability to imitate and there are several substitutes products that
can provide same features and satisfy needs (Jelassi and
Martínez-López, 2020).
Competition
among
players
High Tesco has number of rivals in this sector that also provides
qualitative products and also striving hard for attracting
customers and gaining market share. It is also found that Aldi
and Lidl have reduced their prices of products that are affecting
profit margin of Tesco.
Value chain analysis
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Inbound logistic: It is stated that Tesco has complex inbound logistic as it consists of
supply of hundreds of products categories. For increasing capacity of logistic it heavily invests.
On the other hand, it i also found that Tesco was accused from its suppliers because of bullying
them in regard to cut prices that affected its operational profit margins. But now it is focusing on
improving strong relation with suppliers.
Operation management
Retail: It has several shops in around 11 countries which increases its retail scope. It
operates its stores in different formats such as: metro that sells wide range of foods. Express: It
consists of the smallest size of stores, extra: in this it offers the greatest choice of products and in
superstores it offers good range of food.
Manufacturing: Under everyday value basic range products it sells it owns brand
products This own brand products is making it able to attract customers and also
competing against German discounters Aldi and Lidl with “farm” brands.
Outbound logistic: There are mainly 2 aspects under this that makes it able to become
valuable such as cost-effectiveness and flexibility. This supermarket chain offers home delivery
options that have been purchased from offline physical Tesco store (Fernandez-Stark and
Gereffi, 2019).
Marketing and sales: For promoting products and services it develops marketing
message that is every little helps. It markets activities are associated with competitive prices,
wide selection of products and others. It uses both offline and online channels as per the
convenience of customers.
Services: In this regard it is found that average weekly customers spend has declined
because the course of 2015 and it is also affecting customers’ loyalty. Tesco’s commercial
income scandal is one of the main reason of this decline and for this it is focusing on cost
leadership strategy. But it would be difficult for It to provide the highest quality of products at
lower price but for regaining image it will require to do this.
On the basis of above discussion and analysis of all models it can clearly be said that Tesco
has several strengths and is well-known brand that can help it out in attracting customers. But
poor relation with suppliers and fine paid by thus company due to fraud accounting it requires
focusing on regaining image by maintaining relation.
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It has an ability to research and develop and this ability of marketing can make it able in
innovating products and attracting customers. From the above discussion and analysis it is also
found that company is effective in delivery and distribution of products or by providing home
delivery it can increase customers experience.
Industry in 2016
Main industry requirement: It is found that in the year of 2016 it was counted in the list
of carbon emission producer and it was on the top of the list. In the year of 2017 also, it was
fined because of fraud accounting. In 2018, it was accused by suppliers, and they put allegations
that it has bullied them for reducing prices. So, it can be said that all these actions and behaviours
affected its image in a negative manner. It was required to regain image and it can only be done
if it improves relation with suppliers, provide qualitative products at lower price and mainly
focus on sustainability. So, focusing on sustainability was one of the main requirements for this
company.
Retail industry is striving hard for attracting customers because of increasing rate of
retailers. Bargaining power of customers is high in this industry so, it is important for this
industry to develop some effective strategies and policies.
Challenges
It is found that from 2015-2018, Tesco faced several problems as it became fail in US,
Japan, was accused by suppliers, came under the list of carbon emission producers. It decreased
its sales and profit margin and had to bear losses. All these affected it to the great extent but it
did not lose hope and with the help of skilled workforce and its own capabilities it tried to solve
all problems. For regaining image, Tesco announced to reduce carbon emission and becoming
sustainable.
Developments
Recent development at Tesco is also helping out this retailer in making effective position
in the market and attracting global customers. It is found that Tesco open up red door disruption
program as innovation (Tesco Launches the Tesco Red Door Invites Innovators to Share Ideas,
2020). According to this program it is providing opportunities to organizations to come up with
new products, ideas and emerging technologies like automation, packaging. It is also found that
for becoming sustainable it is using recyclable materials for packaging.
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Opportunities
By making changes and developing red door program it can take advantage of competition
because there is no other player that has focused on all of these elements. So, overall it can be
said that it can become the market leader by doing so and becoming sustainable.
CONCLUSION
It has been summarized that innovation plays an important role for taking competitive
advantages. Innovation is one of the main key of success in this modern and digital era and it is
the main element that can attract customers. Further, it has analyse all main models such as
SWOT, Porter’s five force, VRIO and value chain for identifying strengths and weaknesses.
Lastly, it has discussed requirement of innovation and bringing innovative ideas within business.
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REFERENCES
Books and journals
D'Arconso, G., 2018. Big Data: Unleashing their economic value (Doctoral dissertation,
Politecnico di Torino).
Fatricia, R.S., 2017. STRATEGIC ANALYSIS OF TESCO SUPERMARKET. Jurnal
Manajemen Terapan dan Keuangan, 6(2), pp.69-86.
Fernandez-Stark, K. and Gereffi, G., 2019. Global value chain analysis: a primer. In Handbook
on Global Value Chains. Edward Elgar Publishing.
Jelassi, T. and Martínez-López, F.J., 2020. External Analysis: The Impact of the Internet on the
Macro-environment and on the Industry Structure of e-Business Companies. In Strategies
for e-Business (pp. 49-95). Springer, Cham.
Nambisan, S. and et.al., 2017. Digital Innovation Management: Reinventing innovation
management research in a digital world. Mis Quarterly, 41(1).
ONLINE
Tesco Cuts Carbon Emission 13% in a Year. 2018. Online Available through: <
https://www.edie.net/news/6/Tesco-cuts-its-carbon-emissions-by-13--in-a-year/
#:~:text=Tesco%20has%20revealed%20that%20it,carbon%2Dneutral%20business
%20by%202050.>
Tesco Open Red Door to Innovators. 2020. Online Available through: <
https://www.kamcity.com/namnews/uk-and-ireland/supermarkets/tesco-opens-red-door-
to-innovators/>
SWOT Analysis of Tesco. 2019. Online Available through: < https://bstrategyhub.com/tesco-
swot-analysis-2019swot-analysis-of-tesco/>
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Porter’s Five Forces Analysis of Tesco. 2019. Online Available through: <
https://howandwhat.net/porters-five-forces-analysis-tesco/>
Tesco Launches the Tesco Red Door Invites Innovators to Share Ideas. 2020. Online Available
through: < https://www.tescoplc.com/news/2020/tesco-launches-the-tesco-red-door-
invites-innovators-to-share-ideas/>
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