Report on Innovation Management and Tesco's Strategic Capabilities

This report provides an analysis of innovation management within Tesco plc, a leading multinational supermarket retailer. It explores Tesco's innovation history, strategic capabilities, and current innovation performance. The report uses PESTLE and SWOT analyses to evaluate the external and inte...Read More

Managing Innovation in
businesses

Executive summary
The purpose of this report is to develop understanding on the concept of innovation
within an organisation in order to ensure success and expansion of the company. This report
conduct analysis to understand the process of managing innovations and how it leads to growth
and development of an organisation. The report discuss innovations in context to Tesco along
with the evaluation of its strategic capabilities through performing pestle and swot analysis. This
report reflects upon various innovations that was launched by the company which helped the
company in gaining competitive edge in the market. The internal and external factors of the
company defined its position in the market and leads to devising constructive strategies.

Table of Contents
Executive summary .........................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Organisation and its innovation history..................................................................................1
Organisations existing innovation performance along with capabilities ...............................4
Strategic capabilities...............................................................................................................5
Industry in 2021......................................................................................................................6
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
In the contemporary business organisations innovation and management of innovation
has become necessities and also there are the means to gain sustainable competitive advantage
and economic development (Mousavi, 2018). For the business organisations to serve to their
customers well and also to maintain their competitiveness in the market companies are more
focusing on use of innovation by employees. Managing innovation is the practice of handling the
tasks related to the successful implementation of the innovation that could help a business to
generate the revenue. The present report is based on the Tesco plc – a British multinational
supermarket chain. In order to understand the techniques and capabilities of the company in
managing innovation the report will outline company's overview and its innovation history.
Further, the report will highlight the current innovation performance and capabilities and the
industry innovation in 2021.
MAIN BODY
Organisation and its innovation history
Company's overview
Tesco plc is the leading multinational supermarket retailer all across the world. The
company has been practising as the supermarket and retail chain in UK retail industry and other
countries from 1919. As the leading multinational retailer the Tesco plc has been working in
retail industry with almost 360,000 colleagues. The company has clear aim of serving customers
on daily basis with healthy and sustainable food at affordable price in order to support them to
enjoy the quality of life and easier way of living. The key facts in terms of financial growth of
the company the company has sales of £ 53.4bn and retail cash flow of £ 1,187m. The company
offer diversified products such as Clothing, software, books, toys, electronics, internet services
and financial services (Mason, 2019). The company has been into the large size innovation
history by transforming products, business models, payment models and much more. The
manager of the company put relevant investment into the innovation strategies of the business.
In Tesco plc, managers and its employees work on the effective product innovation strategy in
order to develop innovative product that will help the company to gain competitive advantage
that seems attractive to target market and also that has potential of addressing the needs of the
customers.
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Innovation history of Tesco plc
Tesco plc was founded in 1991 at the Hackney, UK. The company by 1939, has expanded
rapidly into the market with multiple stores and has expansion of approximately 100 stores all
across the world. Later with growing years in 1982 the company come up with the innovation of
Checkout 82 under which the prices of the products of company were cut by 3% and 23% on
almost 1500 food products. Then in year 1990s, the company went into the phase of
internationalisation through which company started its operations in nearly 11 countries of the
world. The company later through innovation diversified itself from food products to other
products like Books, petrol, telecom services, financial services, electronics and much more. The
company also launched its own brand that has a mission of producing healthy eating range in
order to serve the new customer trend of healthy eating range at the low pricing strategy. In the
year 2001, Tesco plc brought Florence & Fred which was a huge innovation in the clothing
collection of the company and also it was highly liked by the customers as well (Bilińska-
Reformat and et.al., 2018). The innovation of the Tesco plc are always more emphasized on the
key areas that entail offering healthier and affordable services to the customers. Also the
innovation history of the company has more focus on the quality, innovative and attractive
packaging in order to make the new products identifiable in the shelves of the stores of the
Tesco plc. In recent years in September 2020 the company has launched Tesco Red Door which
is new approach of the company for the disruptive innovation. Also, in the recruitment strategy
of the company the Tesco plc is more inviting the innovators with new ideas, talent of
technology for causing disruption in future (Almenar, 2020).
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In global business environment, there are many factors that has huge influence on the
innovation of the business. PEST analysis is applied in context of Tesco to identify the influence
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Source: Clothing sales at Tesco grow 52.1% in Q1, 2021
Source: Tesco Red Door launches as retailer announces innovation push, 2022

of factors of macro environment have on innovation of company. The pestle analysis is
demonstrated below:
Political factors: in UK, the political environment is stable also due to Brexit the
company has been able to more contribute into the innovation of new products and marketing
strategies (Nikitina and Lapiņa, 2019). For instance, political regulations in UK support decision
making of Tesco to bring innovation in offerings as well as commercialise them globally.
Economic factor: In UK, production factors are available easily to company that aids in
product innovations. For example, HR manager of Tesco employ larger number of talents at
cheaper rates to bring innovation in processes and products.
Social factor: High level of social standards in UK results in better all-around situations
for organisations. For instance, taste and preferences of customers assist Tesco to analyse
demand for innovation and earning higher profits.
Technological factor: Technology is UK is expanding around 2.6 times faster than rest of
countries on globe. In Tesco, investment in technology is continuous for developing innovation
in Omni channel customer experience as well as maintaining competitive edge in enhanced
digitalised grocery landscape of UK.
Organisations existing innovation performance along with capabilities
Innovation performance in relation to the capabilities is the value of the organisation to
convert the input of innovation to the productive and successful outputs (Shaikh and Randhawa,
2022). In context of Tesco, the innovation performance along with the capabilities for the
successful commercialization of innovation in market is determined with the help of suitable
frameworks.
SWOT Analysis
The SWOT analysis is the suitable framework for the company to analyse its own capabilities as
strength and weaknesses and also to identify the future opportunities and threats. Within Tesco,
the SWOT analysis is also useful in recognising the success factors that help the company in
identifying its competitive edge in the retail industry. The Swot analysis f the Tesco is
demonstrated below:
Strengths:
The product portfolio of the Tesco is highly
Weaknesses:
The legal restrictions and legal complications
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diversified is considered to be the biggest
strength of company in tackling competition.
The company has all the legal patents and
patent license for all the innovations and
technology.
on some products of the Tesco is huge
disadvantage for the company’s brand image
(Tiwary and Unhelkar, 2018).
Due to the Covid-19 there is shortage of
resources due to which company has to cut
many of products from the shelves.
Opportunities:
With the advancements of technology
company has opportunity to use artificial
intelligence in its business operations to ease
the operational activities.
The company has huge opportunity to
innovate new product range for new customer
taste and preferences such as vegan, organic
food products (Vyavahare, 2019).
Threats:
Changes in global environment affect
innovation performance of Tesco adversely.
The fierce completion that Tesco is currently
facing in the retail industry as the competitors
are using highly competitive strategies to be
gain higher market share.
Strategic capabilities
Strategic competencies and abilities are recognised with the help of the valuable
resources that a business has that supports business and developing strategies (Chaveesuk,
Khalid and Chaiyasoonthorn, 2021). In order to identify strategies of the Tesco VRIO analysis is
done which is the consent that evaluate the business keep abilities in context of competitive
advantage. VRIO analysis of Tesco is demonstrated below:
Capabilities Valuable Rare Inimitable Organised
Human Resources ✓ × × ×
Technology ✓ ✓ ✓ ×
Financial resources ✓ ✓ ✓ ✓
Physical resources × ✓ × ×
Valuable: the valuable resources the organisations are used in implementing innovation
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strategies which enhance the productivity and profitability of Tesco. Human resource physical
resources technology and financial resources are the most valuable resources of the Tesco.
Financial resources are highly valuable for disco as it allows the company to invest into the
ample of innovation opportunities that are raised in the market and also the human resource of
highly valuable as the contribute there efforts in giving a product to outputs to the enterprise
there by technology at validity business operations there by seizing the digital opportunities and
defending the other possible threats (Albors-Garrigos, 2020).
Rare: the rare resources for the capabilities that a business contains an important for the
competitive as over the competitors. It is important for the businesses that are able to deploy the
capabilities ask for the execution of values that are not found in the competitors. In terms of
Tesco technology financial resources and physical resources are the rare capabilities of the
company as technology is the resource that is highly rare as companies able to derive innovative
solutions and Unique strategy for the market penetration through it and also the financial
resources of disco rare as the company as a huge market share in terms of revenue and sales that
are unbeatable by the other organisations (Wolf, Armellini and Gisin, 2021).
Inimitable: the inimitable capabilities expensive for the competitors are they cannot be
replicated or copy in context of the score the companies technology along with a financial
resources are under the category as it is identified that the financial resources of Tesco has
gained prolong the profit over the years which is competitive in retail industry also the
technology is one of the capability that cannot be copied by the other retailers as it is patented.
Organised: this applicable the reflex how companies organised structured in order to exploit
comparative advantage in terms of Tesco only the financial resources is one of the capability that
company has well organized for the purpose of capturing the values and the profitable
investment decisions (Bader, 2019).
Industry in 2021
The retail industry of UK is comprised of large number of different types of separate businesses.
This includes of different types of the practices involved into the retail industry that is from the
selling of goods and services directly to customers or from buyers to buyers etc. In the
supermarket and grocery retail industry there are giant players like Tesco, Morrisons, Sainsbury,
Unilever, Marks and Spencer etc. that are leading this industry effectively through its innovation.
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In the retail industry 2021 there are ample factors that influence their Innovation and business
operation at domestic and international level. Investment into the Omni channel retail techniques
is considered as the future of retail industry (Bahl, Lahiri and Mukherjee, 2021). There is a
consultation for which average digital consumers owns around 2.64 million connected devices
together. In context of Tesco plc the company has a adoption of mobile shopping innovative
manner is essential as this will help to company to create a unique E-Commerce shopping
experience for their customers which must be seamless and frictionless in every aspect such as
language, affordability and much more. City help of this organisations and the retail industry 20
21 can provide a consistent shopping journey to they customers from exploration of their buying
alternators to making a comparison for the products and services they need to buy.
The retail industry in 2021 has come up with the new trend that is personalisation. The
consumers buying behaviour highly depends on their taste, location, previous purchases and
much more. In regard of these organisations like Tesco, Morrisons, Sainsbury are operating with
the personalisation that has its chance to impact decision making of customers in a positive
manner and also help to streamline the process of purchasing for the customers (Hoch and Brad,
2020). The year 2021 and the upcoming future has a chances for dynamic changes across the
retail industry which may result into the potential changes into the decision making of customers
for shopping also it is essential for the department heads and the other managers of the Tesco to
stay prepared for the continuous changes and for achieving and maintaining the competitive
advantage in future.
Retail Industry of UK contains different micro environment factors that have major impact on
the performance of business and its innovations. In terms of technology industry in 2021 has
experienced the major transformation into the business. E-Commerce has become the most
friendly POS system, cashier free, labour free and machine oriented business for the retail
industry. Also the retail industry has been suggested to make essential innovations in their
business operations of the supply chain marketing human resource with the help of highly
advanced technology that includes machine learning and artificial intelligence. Also Tesco is
suggested to grab innovation opportunities in order to stay competitive in the retail industry.
Also it is suggested to Tesco to focus on adopting innovation opportunities and managing
technology effectively in order to become the first mover the return industry to have a
competitive advantage for the future sustainability (Beulen and Ribbers, eds., 2020).
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CONCLUSION
It is concluded from the above report that for the business to gain sustainable competitive
advantage it is important manage their innovation strategies and operations. The innovation
history of organisations help in understanding how much effective business is in doing the
innovation. Through PEST company was able to analyse the influence the key factors on the
innovation of the company. The technological and human resource of the company are highly
valuable and also are performing effectively to provide the company with competitive advantage.
SWOT and VRIO framework are key to the analyse the innovation capabilities of the company.
Also in retail industry there are huge amount of innovation in 2021 among which the innovation
of social commerce as after the pandemic there is huge scope of online shopping among the
customers.
REFERENCES
Books and Journal
Mousavi, S., 2018. Managing Innovation for Sustainability: A dynamic capabilities approach.
Nikitina, T. and Lapiņa, I., 2019. Creating and managing knowledge towards managerial
competence development in contemporary business environment. Knowledge
Management Research & Practice, 17(1), pp.96-107.
Shaikh, I. and Randhawa, K., 2022. Managing the risks and motivations of technology managers
in open innovation: Bringing stakeholder-centric corporate governance into
focus. Technovation, 114, p.102437.
Tiwary, A. and Unhelkar, B., 2018. Establishing and Managing the Business Architecture
Practice. In Outcome-Driven Business Architecture (pp. 193-220). Auerbach
Publications.
Vyavahare, A.A., 2019. TLP Managing Technology Business 2014-2015.
Wolf, P., Armellini, F. and Gisin, L., 2021. Opening a black box: The moderating effect of
managing dualities on the relation between explorative and exploitative activities and
business performance in manufacturing firms. Creativity and Innovation
Management, 30(4), pp.897-919.
Bader, M.A., 2019. Managing Open Innovation and IP in AI based business models.
Bahl, M., Lahiri, S. and Mukherjee, D., 2021. Managing internationalization and innovation
tradeoffs in entrepreneurial firms: Evidence from transition economies. Journal of
World Business, 56(1), p.101150.
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Hoch, N. and Brad, S., 2020, October. Managing AI Technologies in Earthwork Construction: A
TRIZ-Based Innovation Approach. In International TRIZ Future Conference (pp. 3-14).
Springer, Cham.
Beulen, E. and Ribbers, P.M. eds., 2020. The Routledge Companion to Managing Digital
Outsourcing. Routledge.
Mason, R., 2019. Developing a profitable online grocery logistics business: Exploring
innovations in ordering, fulfilment, and distribution at ocado. In Contemporary
Operations and Logistics (pp. 365-383). Palgrave Macmillan, Cham.
Bilińska-Reformat, K. and et.al., 2018. Sustainable development concept and creation of
innovative business models by retail chains. International Journal of Retail & Distribution
Management.
Almenar, E., 2020. Innovations in packaging technologies for produce. In Controlled and
modified atmospheres for fresh and fresh-cut produce (pp. 211-264). Academic Press.
Chaveesuk, S., Khalid, B. and Chaiyasoonthorn, W., 2021. Digital payment system innovations:
A marketing perspective on intention and actual use in the retail sector. Innovative
Marketing, 17(3), p.109.
Albors-Garrigos, J., 2020. Barriers and enablers for innovation in the retail sector: Co-innovating
with the customer. A case study in grocery retailing. Journal of Retailing and Consumer
Services, 55, p.102077.
Online
Clothing sales at Tesco grow 52.1% in Q1, 2021. [Online]. Available through:
<https://www.theindustry.fashion/clothing-sales-at-tesco-grow-52-1-in-q1/>
Tesco Red Door launches as retailer announces innovation push, 2022. [Online]. Available
through: <https://retailtechinnovationhub.com/home/2020/9/9/tesco-red-door-launches-
as-retailer-announces-innovation-push>
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