Strategic Innovation Management and Capabilities at Tesco Plc

This report provides a detailed analysis of innovation management at Tesco, a multinational supermarket chain, examining its historical and current strategies. It highlights key innovations such as self-service, the Clubcard, online operations, and the use of robots for delivery. The report uses the 4 P's model (Product, Process, Paradigm, Position) to understand Tesco's approach to innovation, focusing on how these strategies have improved efficiency, profitability, and customer satisfaction. It also assesses Tesco's internal capabilities, including influencing customer behavior, using digital channels, targeting potential markets, and managing uncertain situations. The analysis includes the use of SWOT to understand the strengths of the company. The report concludes by identifying trends in the retail sector, such as personalization and technology, and their impact on Tesco's operations. Desklib provides this report and many other resources for students.

Managing Innovation in Business

Executive Summary
The report helps in summarizing that innovation is a crucial part of every organisation. It
leads an organisation towards success. Managing innovation in business enables them to improve
profitability, efficiency and productivity as well. The following report is carried upon Tesco and
it is necessary to successfully evaluate the history of innovations that the company has gone
through in order to meet all the requirements of the report. Tesco is a giant multinational
supermarket chain. It’s headquarter is located in Welwyn Garden City, Hertfordshire, England,
United Kingdom. In 1919 it began as a group of various stalls in the market. Basic drivers which
lead Tesco towards the development of innovative ideas are different market forces and
customer's satisfaction. They have expanded their business since then and are now successfully
operating in a number of different countries in the European and Asian region. Due to
innovations brought in by company they are successfully dealing with all their competitors and
changing external environment. In order to meet their entire customer’s requirement, it was
necessary for Tesco to continuously focus upon training and development of their employees as
well. Tesco is a leading organisation in the retail sector which is working in a number of
different countries throughout the world. There are also some marketing tools such as SWOT
analysis used to understand these factors effectively. SWOT analysis critically analyses various
strengths of the company such as its customer base, market share and reach. These are various
benefits which enable Tesco to attain opportunities available for them in the retail sector. The
report concludes ways in which retail sector trends are changing operations of Tesco.
Personalisation for consumers and enhance in technology are two major changes in the retail
sector that are changing the shape of Tesco.

Exceutive Summary
Make use of the feedback given earlier. In addition to the definition, it should contain the
purpose the report, the key findings of each section of the report and the models used. Other
issues relating to the company such as the issues relating to its industry. Then it should end with
the structure of the report. You need to be specific about the company. Research your company
and avoid general statements

Introduction
Innovation refers to a practice in which organisations develop the creative idea so that
organisations can improve consumer’s experience. It helps in meeting the unidentified or hidden
needs of customers for firms and enforces them to modify their operations to meet the same.
There are a number of ways in which organisations bring in innovation (Stubbs, 2019). The
following report consists of detail on how businesses are managing innovation. Tesco is taken
into consideration to study past, present and future of innovation. There are discussions made on
how Tesco has effectively used innovation in past and developed capabilities from it. Ways in
which innovation is used by Tesco in present are also discussed.
The Organisation and Industry Overview
Tesco and its innovation history
Tesco is a giant multinational supermarket chain. It is headquartered is located in
Welwyn Garden City, Hertfordshire, England, United Kingdom. In 1919 it began as a group of
various stalls in the market. Tesco has expanded their business since then and is now
successfully operating in a number of different countries in the European and Asian region.
Tesco is successfully adopting innovation in a number of their operations so that they can fulfil
all the needs and requirements of their customer and make them happy. Tesco has a diversified
range of products which includes clothing, books, electronics, toys, telecom services and so on.
Tesco has over 3700 stores and 340,000 colleagues along with its online business. Basic drivers
which lead Tesco towards the development of innovative ideas are different market forces and
customer's satisfaction (Tesco Plc, 2020).
When looking back at the history of Tesco there is a number of innovations developed by
the company (Keiningham and et. al., 2019). From the time it came into existence it has been
developing various innovations some of which are discussed below:
 In 1956, Tesco was the first supermarket which allowed its customers to self-pick their
requirements from the stores as per their needs. This helped the organisation to
effectively reduce the cost spent on employees required in the supermarket.

 In 1995, Tesco came up with a club card customer reward scheme. It was launched by the
organisation as an innovation which helped in engaging customers within the
supermarket. This effectively brought more revenues and profits for the organisation.
 From the year 2000, this company has started operating through the online medium as
well. It was a necessary move due to an increase in competition in the market place. It
made it convenient and easy for consumers to make purchases online without having to
visit the stores physically (Yang and Han, 2019).
 In the year 2015, the company used various methods of market research in order to
identify the products and services which do not have much demand in the market and
stopped their production. This effectively decreased the overall cost of the company.
 In 2017, this company effectively worked upon technologies to develop robots who could
deliver the products to the required location. They made a number of changes in the
organisation in order to make it possible such as the adoption of voice control, code
scanner, online and digital payments and so on.
In order to successfully plan and prepare for innovation, management of Tesco has used 4 P's
model of innovation that helps in understanding ways to create changes within the organisation.
These changes can either be radical or incremental, as discussed below:
Product: This is the direct innovation done with the help of a new product or service
developed by the organisation. Self-service in supermarkets achieved innovation for Tesco. It has
successfully helped the company to attain differentiation as well as an increase in revenues. It
was a radical innovation as Tesco was the first ever organisation to think of something like this
(Destination innovation, 2020).
Process: Using this factor, management of Tesco basically concerned on identifying
various ways to make innovation in operations, in terms of offerings services to its customer in a
unique way. Tesco started effectively using online platforms so that their customers can
conveniently shop. This was again a kind of incremental innovation. It helped them to increase
their sales and eventually resulted in increased profit.
Paradigm: Paradigm refers to the underlying modes that are further enabling the
organisation to determine new can be done by them. The management of Tesco effectively
realised that they require to go hand in hand with the changing technological environment. First,
they introduced robots and after it to support this innovation they brought in various new

innovations including scanners, digital payments and so on (Gurca and et. al., 2020). It was
necessary to bring in these supportive changes in order to apply robots for delivery successfully.
This shifted the paradigm of Tesco towards incremental innovation.
Position: In the following factor, the company are focusing on bringing such innovations
that will help them to specifically target the segmented market. When taking Tesco into
consideration company decrease production of goods which are less in demand. This shifted the
focus of customers towards the goods and services which are specifically required by customers
only. Tesco is also opening in store yogurt bars to focus on consumers who are interested in
healthy products.
Performance of existing Capabilities and Innovation of Organisation
An organisation can effectively take help from innovation in order to achieve a
competitive advantage. They are improving their efficiency, profitability and productivity with
its help. Tesco is a leading organisation in the retail sector and operating its business in a number
of countries across the UK. Therefore, to drive sustainable performance, it mainly concerns on
offering services in a unique manner, by developing innovation, that aid in dealing with changing
requirements of customers throughout the world. There are a number of different successful
projects of Tesco through which it has brought in new innovations. It has generated interactive
screens to fill the gap between the online and offline platform of selling (Zhang and et. al.,
2020This innovation is helping the company to interact with their customers and also develop
effective feedbacks which will help it in coming future to deal with problems arising. They also
often act as a base for new innovations in business.
Another new innovation developed by Tesco in present is the photoshopping list. This is
a great innovation through which customers can effectively upload the picture of their shopping
list on the company's website. The list will then be forwarded to store manager who will be
responsible to get the things delivered at the correct address. It is a great way which will
effectively make shopping convenient for customers. It will help Tesco in attaining more
customers and also generating more loyal customers.

One more innovation recently developed by Tesco to attain major market share is micro-
home delivery. This is a delivery of small and products of a very minimal amount. There are a
number of such small things which are required by customers and the minimum cart value of
shopping sites are high. Tesco is providing delivery of such small services to their customers.
This will help to generate the value of the company and also generate more revenues for the
business.
Tesco is required to gain knowledge about all the internal capabilities which will help to
form strategies that will further help businesses in making strategies to bring in innovation and
achieve their goals. Capabilities of the organisation can be effectively-known using revising their
marketing strategies.
In the U.K. The retailing industry has been at rising at a rapid scale, & it many entry
coming into business at medium, large and small businesses. In the viewpoint of the chosen
firm, they have been fairly adapted the market trends with the time period. It is their one of the
biggest far reached capability which they are using for their global expansion of the business.
Without analysing capabilities, it is not possible for the entity to achieve their vision & mission.
So, other than this there various capabilities which are briefly described below-
 Ability to influence customer's mind- It is one of their existing capability which they
currently use for marketing heir brand & products at a larger scale. The manager of the
company uses effective marketing strategies through which it is easier for them to
influence customer's mind towards the brand. In this, their performance is at a higher
scale & is increasing because of providing good quality to consume.
 Use of appropriate digital channel- It is another capability of Tesco in which they use
the digital channel for promotion & advertising. The marketing manager has multi-skills
which they use in the workplace. By using of this capability, the company is able to use
technological resources in the most effective manner.
 Capability to target potential market- In this, the chosen corporation has the ability to
target potential market as well as audience which helps them in using their other

resources in the most efficient way. It is their most beneficial capability which is used by
them in a proper manner.
 Dealing with uncertain situations- It is another capability which they use it in such
way that risks are managed by them inappropriate manner. Employees of the company
are able to provide the best solution to occurring problems. In business, uncertain
situations tend to occur, so it is Tesco's most increased capability which is used by them
with proper considerations.
Thus, after analysis of the above matter, it is examined that these discussed capabilities
have been increasing from time to time. So, these are used by them in their innovation process
which is beneficial for future growth as well as development. It is essential for an organisation
to be are about such capabilities so that appropriate decisions are made & objectives are achieved
properly. Furthermore, their performance can be increased more which results in accomplishing
set standard goals.
These are various internal capabilities of Tesco which can help Tesco to bring in
innovation or also restrict it from bringing new innovations. It is required by management to
specifically study the strengths and operate with it helps. It is required to reduce weaknesses and
beware of threats which will make it difficult for the organisation to bring in innovation. In these
ways, Tesco can make use of all its internal sources to keep innovating and satisfying its
customers. It will help the business to make strategies which will further allow them to achieve
all its aims and objectives in the stipulated time period.
Porter's five force model
There are five factors included in porter's five force model. Below mentioned are those
five forces in relation to innovation in Tesco:
Threats from new entrants for Tesco is not a big threat. There are a number of
innovations such as online marketing, personalisation for consumers, red door programme etc.
make it difficult for new competitors to enter the market.
Threats from substitute for Tesco is high. There are a number of substitute product for
grocery and apparels available. Tesco needs to bring in innovations in their products. In order to
do so Tesco is moving towards digital transformation which will help in enhancingtheir
consumer's experience.

Bargaining power of buyers is a threat for Tesco as the number of options available with
consumers are more. It is required by Tesco to bring in innovations that are specifically focusing
on its consumers like personalisation of products.
Bargaining power of suppliers for Tesco is a benefit for company as there are a number
of suppliers present in market. However, improving the supplier management system and
bringing in innovations in logistics and transportation will help Tesco to gain more power over
their competitors.
Rivalry among the Existing Competitors refers rivalry among the existing players in
an industry is intense then it will drive down prices and decrease the overall profitability of the
industry. Tesco Plc operates in a very competitive Retail industry. This competition does take
toll on the overall long term profitability of the organization. They are continuously investing on
technological advancement in order to compete in market.
Industry in 2020
Retail industry in every economy is highly contributing towards the gross domestic product.
The technological environment is continuously improving which requires organisations to bring
in these changes and adapt new technologies (Ottosson, 2019). Various such technological
advancement includes the introduction of robots and so on. All the major organisations in the
retail sector are successfully using artificial intelligence as well as information technology in
order to compete with each other and provide the best services to their customers. Below
mentioned are some future trends and innovations that can be adopted by organisations in the
retail sector:
 The organisations in the retail sector are effectively adopting a sustainable shift in
paradigm due to the changing external environment and demanding customers.
 The companies will be majorly focusing on re-inventing services because customers
these days are looking for more enhanced and unique service in online as well as offline
services. This has also become important because competition in the retail sector is
increasing and every company is required to make new offerings to retain their customers
in the business (Innovative retail trends, 2019).
 The increase in the digital era is forcing retailers to work upon various ways in which
they can bring in use of different models into their business. These models must be

commercial enough which bring in benefits for the organisation and also satisfy their
customers.
 Retailers are focusing on individual customers. It is important to understand that
organisation require to retain their customers and in order to do so, they need to
experiment with various shopping models in the coming future (Janjić and Rađenović,
2019). They can also personalise services as per the need and requirement of individual
customers which will help in retaining them for a longer period of time.
There are a number of trends in the retail industry which can be seen and are to be followed
by all the companies who are carrying on their business activities in this industry. This
includes eliminating delete gratification to make sure that online shoppers are believing that
it is reasonable to wait for weeks in order to arrive at their products. Retail industries can also
provide their consumers with a simplified experience by personalising and following people-
based marketing. A personalised approach in grocery shopping will help to make the process
of shopping simple for customers and improving their experience as well. Social integration
and visualised-based research is a great way which can be used by companies in the retail
sector in order to make their customers experience convenient.
Conclusion
The above report concludes that organisations in today's era require to bring in new
innovations so that they can effectively enhance their value and increase customer satisfaction. In
order to understand various needs of innovation for business they can successfully conduct
internal and external analysis. There are also models that help in understanding different
innovations and major motive of them. Adoption of innovation will keep company up to date
with external changes and make sure that they are satisfying their customers in changing
environment.

Online
“Tesco Plc”(2020)
[Online] Available through: <https://www.tescoplc.com/
“Destination innovation”(2020)
[Online] Available through: <https://www.destination-innovation.com/the-innovation-process-at-
tesco/>
“Innovative retail trends”(2019)
[Online] Available through: <https://tinuiti.com/blog/ecommerce/retail-trends/>