Analyzing Innovation at Tesco Plc: A Business Development Report

This report provides a comprehensive analysis of innovation at Tesco Plc, a leading company in the retail industry. It begins with an executive summary and an introduction highlighting the importance of innovation for business success. The main body delves into Tesco's innovation history, showcasing its pioneering approaches and key milestones, such as the introduction of self-service supermarkets, the Clubcard, and online shopping. The report utilizes the PESTLE model to assess how political, economic, social, technological, legal, and environmental factors have influenced Tesco's innovation drivers. It further examines Tesco's innovation performance and capabilities, including future projects like interactive screens and micro home delivery, and employs a SWOT analysis to evaluate its strengths, weaknesses, opportunities, and threats. Finally, the report discusses the retail industry and concludes with a summary of findings, emphasizing Tesco's commitment to innovation and its potential for future growth.

Managing Innovation in
Business

EXECUTIVE SUMMARY
The following report summarises innovation as the key to business success. Tesco Plc is
selected as the base of ascertaining importance of innovation in a business organisation.
Overview of company along with its innovation history is discussed in this project report using
the model of PESTLE analysis by which it is evaluated that these factors acted as a driver for
motivation in Tesco. Main aim of this project report is to build an understanding about
innovation of the selected company. It is found that Tesco has immense capacities to come up
with more innovative ideas in future. The innovation history of selected organisation shows that
it is the most innovative company and despite of all the issues the improvements made by Tesco
can help them to grow and develop their operations. In this project report, innovation history and
overview of Tesco is discussed along with their innovation performance and capabilities. Retail
industry has also been discussed in detail.

Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Overview of organisation and its innovation history...................................................................1
Innovation performance and capabilities of Tesco Plc................................................................2
The Industry.................................................................................................................................5
CONCLSUION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Tesco Plc is a large scale company which operates in retail industry and is considered as one
of the most innovative companies (Most innovative companies, 2018). Innovation is a practice of
producing new and unique ideas, in order to develop and maintain strong position in the market
(Dewick and Foster, 2018). It is important for business organisations to manage innovation in
their operations. Main aim of this project report is to develop an understanding about the concept
of innovation and its management. To fulfil purpose of this report, Tesco Plc. is selected which
operates in retail supermarket industry. In this project report, an overview about the organisation
is provided along with the innovation history of this entity. Models such as SWOT, PESTLE and
porter five forces are used to analyse innovation performance and capabilities of Tesco Plc.
Along with company analysis, industry evaluation is also conducted in this project to ascertain
innovation divers.
MAIN BODY
Overview of organisation and its innovation history
Tesco Plc. is a multinational public limited company which operates in various countries of
the world and has headquarters in Welwyn Garden City, Hertfordshire, England, United
Kingdom. This organisation has approximately 3400 stores and around 300000 people as their
workforce. Tesco is considered as one of the most innovative companies of all the times. By
reviewing history of this organisation, it can be analysed that this company is known for its
innovative approaches (Most innovative companies, 2018). There are two basic innovation divers
of Tesco Plc which are customer needs and future forces (Tesco Plc, 2018). Tesco plc has always
considered innovation as their tool of attaining growth and development due to which innovation
timeline of this company has ample of examples of their new ideas. This company is considered
as a game changer as they has been acquired major market share from their new ideas.
Tesco Plc was founded as a grocery store in London in the year of 1919 and from the year
of 1956 they started applying various innovations in their operations and management. An
innovation timeline is developed below including year and idea of uniqueness:
1956 Tesco established a self-service supermarket by which they saved expenses of
huge staff and service costs.
1995 Tesco launched an innovative scheme of Tesco Clubcard customer reward.
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With the help of this innovation, sales of this company increased and they
earned high revenue in this year.
2000 Tesco set various milestones for their competitors as they launched Tesco.com
This organisation entered in digital market and launched their own website by
which they enable their consumers to order online for their products.
2015 Tesco cut down production and distribution of their various products. This
innovative idea has the aim to simplify shopping experience of consumers.
2017 This year was the most innovative year for Tesco Plc as they made their first
delivery by Robot. In this year they also updated their various systems such as
bar code scanner and voice control (Nenonen and Storbacka, 2018)
There are various internal and external sources which influence working of Tesco and its
innovation. In order to analyse their impact on these factors PESTLE model is used below:
Political factors – Tesco Plc has their headquarter in United Kingdom due to which their
various operations are based and limited to UK only. Due to the BREXIT effect on UK, there are
several issues which has to be faced by UK’s economy and its business organisations such as
high cost on procurement of inventory from European Union and many more. This factor
triggered as the innovation driver for company and in order to create jobs, as a part of
encouragement from government, Tesco has started hiring diversified workforce.
Economic factors – It is considered that economy of United Kingdom is stable which
benefits the operations of Tesco. But it has also been observed that there is high risk of recession
in UK which can impact future innovations of Tesco. Poor economic growth and bad decisions
taken by CEO of company motivated them to adopt a creative approach for improving their
business performance. They started a new campaign ''Every Little Helps'' for improving image of
the organisation (How Tesco Is Fighting Back By Making “Every Little Helps” For A New Era,
2015).
Social factors – In current scenario, society is quite adaptive due to which all innovations
by Tesco are welcomed by their customers which leads the company towards their innovation
diver and enables them to produce unique products. When Tesco entered in South Korea, they
launched Virtual stores by analysing the lifestyle of the people who are living in this country
(Shop on the Go, 2015). This innovation provided them an edge over their competitors and
assured smooth entry in new nation.
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Technological factors – World is observed to be continuously changing when it comes to
technology. The continuous advancements in technology force Tesco to bring innovations and
impact them in a positive manner. Virtual stores in South Korea played crucial role announcing
their presence in South Korian market (Shop on the Go, 2015).
Legal factors – Tesco Plc works in multiple countries which has variety of laws and to
control all these laws is a critical task to perform. This factor triggers this organisation to develop
innovative ideas which can enable them to manage all their stores in one go. Policy of UK
government on monopoly control enhanced competition in British market. In order to cope up
with this legal barrier, Tesco adopted an innovative scheme where customer will get fuel at
reduced price according to the purchase they have made in Tesco stores (INDUSTRY ANALYSIS:
PESTEL FRAMEWORK, 2018).
Environmental factors – According to current environmental issues such as pollution and
natural disasters it is observed that Tesco should use processes which can reduce negative impact
on environment. This factor triggers their innovation diver and enables them to create processes
by which environment can be protected (Zouaghi, Sánchez and Martínez, 2018). Tesco
understand that the food item which are selling comes from natural resources. They developed a
sustainable and innovative approach i.e. improve, transform and advocate (Environment, 2018).
Innovation performance and capabilities of Tesco Plc.
Innovation is an important factor which enables an organisation to hold their position in
the market and even develop their operations by enhancing productivity and profitability. Tesco
Plc operates in retail industry and has numerous supermarket in various parts of the world. It is
considered that this organisation is the most innovative company. Tesco Plc has phenomenal
current capabilities of innovations by which they are executing ideas such as e-market, robot
salesperson and may more. To identify innovation performance and capabilities of this company
it is important to ascertain their future plans for innovation. According to Mike McNamara, who
is the chief information officer of Tesco stated that all the future innovations are majorly based
on technology. As current World scenario, is influenced by technological advancements and the
most important innovation diver of this company is consumer requirement. The most innovative
awaited future projects of Tesco Plc are interactive screens, photo shopping lists and micro home
delivery. Mike McNamara further added that the main aim behind these future innovative
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projects is to make shopping trip of customers easier, quicker and more enjoyable (Taylor,
2018).
The first innovative project of Tesco Plc is interactive screens which will plan to bridge
the gap between online and offline shopping. Research and development department of Tesco
Plc is researching for installation of interactive screens in their stores which will enable their
offline customer to order those products as well which are only available online or on their
website. From this innovation, it can be said that Research and development department of Tesco
is well capable to develop technological innovations which can help them in setting milestones.
From this project, it has been determined that innovation performance of this company is quite
high as they are able to develop ideas which has not been introduced by any other organisation in
the same industry.
Another innovative project which is planned by Tesco Plc is photo shopping lists which
enables a customer to upload their shopping lists at the website of Tesco and all the products will
be delivered to them in no time. This project states that this innovative idea will help consumers
to gain convenience in shopping. This plan reflects high capabilities of Tesco plc as they will
gain immense satisfaction from their consumers by only creating a small change in their website.
This project shows that performance of this organisation is relatively higher than other
competitors as they create great difference from small projects.
Micro home delivery is the another innovative approach of Tesco by which they have
planned to deliver orders to micro value. They have plan to remove any minimum limit of
monetary value on delivery orders. Main aim behind this innovative idea is to provide their
consumers a benefit of convenience. From this innovative project it can be said that Tesco is
capable to delivering micro orders to their customers in future. This shows that innovative
performance of Tesco Plc is high.
In order to better understanding innovative performance and capabilities of Tesco Plc,
SWOT analysis model is used. This model enables to ascertain strengths, weaknesses,
opportunities and threats of Tesco which is conducted below:
Strengths:
Tesco Plc is awarded as the most innovative organisation due to which they gain trust of
their consumers (Most innovative companies, 2018). This company is operating in multiple
countries by which they also attain benefit of globalisation. Innovative projects such as
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interactive screens and micro delivery increase the share price of this company by which
satisfaction of shareholders is also been acquired. Supermarkets of Tesco Plc has maximum
market share due to which they are capable to take a chance by launching products based on
innovation. Product range and diversification is the most important strengths of this company
which helps them to gain high profitability and productivity by which they can acquire funds for
research and development.
Weaknesses:
Tesco is a multinational company but has relied their most of the operations on UK’s
economy. Currently economy of United Kingdom is facing various issues due to BREXIT effect
by which their transportation and procurement cost has been increased. This increase in cost cuts
the budget for research and development department which is engaged in developing innovative
techniques and procedures for Tesco. Innovation is the most important strength of Tesco but the
cost involved in this activities results in high cost products which sometimes also result in low
sales revenue (Edgeman, 2019).
Opportunities:
Currently supermarkets of Tesco Plc are only dealing in general utility products but has a
huge opportunity to even deal in general utility services as well such as plumbing and many
more. Tesco is considered as the most innovative company and this image can be use by their
marketing team to enhance their market share and brand equity.
Threats:
Tesco has the maximum market share but with the recent news of merger of Sainsbury and
Asda there is a major threat to Tesco as it is considered that this merger will decrease the market
share of Tesco Plc.
The Industry
Retail industry of every nation contributes reasonable percentage to GDP. It is considered by
retail sector that continuous innovation is the key of their success. Due to which it has been
observed that in the list of world most innovative companies, most of them are related to retail
industry (Most innovative companies, 2018). By reviewing the retail industry, it has ascertained
that robots are the most trendy innovation which is adopted by this sector. Artificial intelligence
is used by research and development department of retail companies such as Tesco to develop
robots which can resolve the issues of their customers in the premises of supermarkets. Retail
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industry has their basic objective as customer satisfaction and for that they provide excellent
customer service to their clients by developing innovative ideas such as interactive screens,
technology friendly supermarket stores and many more. Retail industry is highly influenced by
increasing competition due to which companies involved in this industry are tend to use their IT
funds more wisely so that they can save their value and also can produce innovative processes
and products (Hänninen and Paavola, 2018).
In order to better analyse retail industry Porter five forces model is used in which five
market forces influencing retail industry are analysed below:
Threat of substitute products and services:
In case of retail market, it has been observed that threat of substitutes is considerably low in
food items and medium in non-food items. Tesco deals in retail business of food items and has
low substitute threat due to which they have acquired maximum market share (Edgeman, 2019).
Threat of entry of new competitors:
Retail industry is considered as a high profit making sector due to which this industry
usually faces high competition. But in the current scenario, due to digitalisation of retail markets,
competition in physical supermarket retail industry has decreased (Flanding, Grabman and Cox,
2018).
Intensity of competitive rivalry:
Competitive rivalry in retail industry is extremely high. Tesco has to face intense
competition from its rival companies such as Sainsbury’s, Waitrose and many more (Hamilton
and Webster,2018).
Bargaining powers of buyers:
Retail industry is involved in selling goods of low value and low volume due to which
bargaining in this sector by buyers is fairly high. Reason behind this high power of barraging is
less differentiation in product offering. For example: the products which are offered by Tesco Plc
are also offered by other supermarkets due to which bargaining powers of buyers increases
(Cheah, Ho and Li, 2018).
Bargaining power of suppliers:
In the case of retail industry, bargaining power of suppliers is fairly low. There are various
large scale supermarkets due to which number of suppliers is also high. Suppliers are not able to
bargain with these super markets as there are various other suppliers of same products present.
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By analysing situation of retail industry using Porter five forces it has been determined that this
sector is usually observed to be a profitable and growing sector but due to recent trend of
digitalisation, physical supermarkets also slowing losing their power in market (Flanding,
Grabman, and Cox, 2018).
CONCLSUION
From the above project report, it has been concluded that innovation is the key of success
and the organisations which follow this theory enables themselves to acquire maximum market
share. Tesco plc operates in retail industry which has observed as one of the most innovative
companies. By using the models of PESTLE and SWOT it has been concluded that there are
various forces which helps Tesco to ascertain their innovation divers which are determined in
this report as consumer needs and social future forces. By analysing all the models and overview
of the company, future innovations are also concluded which are based on technology and these
future innovations are interactive skills and rapid use of robots.
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REFERENCES
Books and Journals
Dewick, P. and Foster, C., 2018. Focal organisations and eco–innovation in consumption and
production systems. Ecological Economics. 143. pp.161-169.
Nenonen, S. and Storbacka, K., 2018. Smash: using market shaping to design new strategies for
innovation, value creation, and growth. Emerald Publishing Limited.
Zouaghi, F., Sánchez, M. and Martínez, M. G., 2018. Did the global financial crisis impact firms'
innovation performance? The role of internal and external knowledge capabilities in high
and low tech industries. Technological Forecasting and Social Change. 132. pp.92-104.
Taylor, T., 2018. Strategies to Improve Business Performance with Information from Social
Media.
Edgeman, R., 2019. Performance Management and Enterprise Excellence Through Sustainable
Business Models. In Sustainable Business Models (pp. 317-359). Palgrave Macmillan,
Cham.
Hänninen, M. and Paavola, L., 2018. Digital Platform Led Industry Transformation: A Case
Study from the UK Grocery Retail Industry. Academy of Management Global
Proceedings, (2018). p.115.
Cheah, S., Ho, Y .P. and Li, S., 2018. Business Model Innovation for Sustainable Performance in
Retail and Hospitality Industries. Sustainability, 10(11), p.3952.
Flanding, J .P., Grabman, G. M. and Cox, S. Q., 2018. The Technology Takers: Leading Change
in the Digital Era.
Edgeman, R., 2019. Performance Management and Enterprise Excellence Through Sustainable
Business Models. In Sustainable Business Models (pp. 317-359). Palgrave Macmillan,
Cham.
Flanding, J. P., Grabman, G. M. and Cox, S.Q., 2018. The Technology Takers: Leading Change
in the Digital Era.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Online
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How Tesco Is Fighting Back By Making “Every Little Helps” For A New Era. 2015. [Online].
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