Tesco Innovation Report: Strategies, Analysis, and Future Trends

This report provides a comprehensive analysis of Tesco's innovation strategies within the evolving retail industry. It begins with an executive summary and an introduction outlining the report's purpose, followed by a brief background of Tesco, its business size, operations, and market base. The report delves into the future of the industry, analyzing innovative trends and employing a PESTLE analysis to assess industry factors. It examines Tesco's innovation requirements, the relationship between value chain and innovation, and the influence of design, economic realities, and organizational culture on the innovation process. Factors for success and failure of innovative ideas, leadership's role in knowledge development, and the application of knowledge management tools are also discussed. Furthermore, the report explores building future innovation capabilities, the link between innovation and market orientation, the significance of upstream and downstream supply chains, and methods to improve supply chain agility and sustainability. The conclusion summarizes the key findings and insights, offering a valuable resource for understanding Tesco's approach to innovation and its implications for the future.

INNOVATION

Executive summary
Innovation is considered one of the pillars of success in any industry and the growth of a
company or any business organization depends on innovation to a great extent. Innovation has
become extremely important in order to survive in an extremely competitive global market. The
retail industry is developing itself with the use of advanced technologies and innovative ideas
and the services is becoming more customer oriented. The use of artificial intelligence and the
use of robots have gained popularity where robots are used for complex tasks and they make the
whole process easy. Political parties often cooperate in developing new projects by providing
financial assistance.
Page 1 of 17

Table of Contents
Introduction, purpose of the report..................................................................................................4
Brief background of the organization..........................................................................................4
Business size, operations and market base with annual revenue.................................................4
Purpose of the report....................................................................................................................4
The future of the industry 2020 and beyond....................................................................................4
Analysis of the industry in 2020 and beyond with a critical review of the innovative trends that
are prevailing................................................................................................................................4
PESTLE analysis to assess the industry trends............................................................................5
Tesco’s innovation requirements 2020 and beyond........................................................................6
Relationship between value chain and innovation.......................................................................6
The ways in which innovation design and economic realities and organization culture issues
affect the innovative process........................................................................................................6
Factors for success and failure of innovative ideas within Tesco................................................7
Leadership and its role in knowledge development, knowledge transfer and innovative culture
development.................................................................................................................................7
Application of knowledge management matrix and knowledge transfer framework..................8
Building the future innovation capabilities for Tesco...................................................................10
Link between Tesco’s innovative capabilities, innovation strategy, technological orientation
and market orientation...............................................................................................................10
Significance of upstream and downstream supply chain of Tesco............................................10
Traditional supply chain, supply chain risk evaluation, green supply chain and theory of
constraints..................................................................................................................................10
Methods to improve the supply chain agility and sustainability to meet future requirements. .11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13
Page 2 of 17

Appendices....................................................................................................................................15
Appendix 1.................................................................................................................................15
Appendix 2.................................................................................................................................16
Page 3 of 17

Introduction, purpose of the report
The impacts of innovation are numerous and it is one of the pillars on which the success of a
company depends in the modern world. The aim of this report is to throw light on the various
aspects of innovation and its impact on a company or business organization for sustainable
development and maintaining a brand image in the industry.
Brief background of the organization
Tesco is one of the most famous leading commercial retailers in the UK and is also one of the
global leaders in the industry. Tesco deals with offering groceries (food and non-food), general
merchandise and services (Tesco. 2021). The company also sells its products online.
Business size, operations and market base with annual revenue
Tesco employs over 423,092 employees worldwide and its annual revenue measured £64.760
billion in 2020. Its total assets are worth £12.879 billion in 2020. The company owns over 27%
of market share in the UK which clearly indicates that the company has a good foothold in the
food retail industry (Tesco. 2021).
Purpose of the report
The purpose of the report is to find out the ways in which Tesco may develop its innovation
process which will help the company to offer better service to the customers and maintain a
proper brand image and brand worth of the company.
The future of the industry 2020 and beyond
Analysis of the industry in 2020 and beyond with a critical review of the
innovative trends that are prevailing
The retail grocery industry is expanding with a great speed and Tesco is the third largest retailer
in the world. Innovations are a continuous process related to life and business in order to reduce
Page 4 of 17

risk (Krasyuk et al., 2019). Every company aims to develop itself in order to perform better and
attract more customers and Tesco is no exception to it (Tesco. 2021). Due to the increasing
customer consumption habit, the retail industry is growing rapidly (Wang and Xu, 2021).
Effective innovation gives a competitive edge to the companies in the industry (Channa et al.,
2020). Use of the internet and smart computers has increased in the industry where storage of
essential data has become an easy task. Use of technologies is considered one of the key features
for entrepreneurial development (Bailey, 2020).
PESTLE analysis to assess the industry trends
Political
Political factors have always served as an important factor in the growth and development of a
company or a business organization and Tesco is not different to it. Political factors play a
crucial role in the development of new technologies as governments may help the companies to
develop new technologies and ideas (Tesco. 2021).
Economic
Economic factor is another major factor which plays a crucial role in the development of new
technologies with the application of new innovative ideas. Economic assistance is required for
the development of new technologies and turning innovative ideas into reality. Design-driven
innovation has become popular in order to gain competitive advantage (Pinto et al., 2017).
Social
Social factors also play a crucial role in the development of new technologies and bringing new
innovative ideas into reality. In the industry, a trend has been observed where various talented
individuals are hired by companies in order to develop the best technologies. Sustainable
business models are developed with the help of innovation driven changes (Olofsson et al.,
2018).
Technology
Technological advancement and innovation are closely linked where new techniques are applied
for better outcomes. It may be added that companies are investing huge financial resources for
the development of new technologies which will help the growth of the industry. Technology has
made it possible to make apps which people may use easily to order products online. Companies
Page 5 of 17

are launching apps and constantly improving them in order to provide better service to the
customers.
Environment
Environmental norms need to be maintained for sustainable development plans and companies
have become well aware of this fact. All innovative ideas and development of new technologies
are done without affecting the environment and without disturbing the ecological balance.
Legal
The legal factors are the regulating factors which keep a check on the entire innovation process
and help the companies to maintain a proper guideline while innovating new technologies.
Companies and business organizations face strict legal actions if they violate any rule. Modern
innovation processes abide by all the rules and regulations.
Tesco’s innovation requirements 2020 and beyond
Relationship between value chain and innovation
An effective value chain consists of several steps which include inbound logistics, operations,
outbound logistics, marketing and sales and other services. The innovation process aims to
develop the value chain as it plays a crucial role in the development of business. Retail
innovation is associated with retail branding and developing brand driven systematically accurate
projects (Botschen and Wegerer, 2017).
The ways in which innovation design and economic realities and organization
culture issues affect the innovative process
In order to carry out the process of a successful innovation, the economic requirements need to
be clearly stated so that no issues regarding shortage of funds or any other hindrance may not
affect the project. Innovation in the retail industry is under-investigated and is relevant as the
retail landscape is enlarging (Olsson et al., 2019). Organizational culture affects the entire
innovation process to a great extent where a healthy work environment gives an added advantage
for nurturing new innovative ideas and transforming them into reality. Tesco has implemented a
policy of taking ideas from common people where solutions to several issues and new innovative
Page 6 of 17

ideas are sought (Tesco. 2021). The company values the opinion of people and wants to
implement them in its innovation process (Refer to Appendix 1).
Factors for success and failure of innovative ideas within Tesco
Several factors including a strong workforce and availability of financial resources helps the
innovation process and boosts the entire performance of the company. On the other hand, lack of
communication among the employees may become a threat in the entire process of innovation
where flow of information is hindered. Having a framework helps to develop an international
business and enhances the image of the company in the international market (Cao et al., 2018). A
talented and skillful workforce along with a healthy work environment of Tesco helps in
developing innovative ideas which will help the company in the long run.
Leadership and its role in knowledge development, knowledge transfer and
innovative culture development
The innovative culture of the company is also due to the efforts of transformational and ethical
leaders who actively participate in engaging the employees to come up with interesting ideas.
The leaders are quite responsible for developing an innovative culture in the company which
enhances the performance of the company. Development of the internet and new technologies
has transformed the retail industry where new business models are developed (LI and KU, 2017).
Page 7 of 17

Application of knowledge management matrix and knowledge transfer
framework
Figure 1: Matrix of knowledge management tools and techniques
(Source: Bertin and Schaeffer, 2020)
Knowledge management matrix serves as an indicator which keeps a check on the knowledge
management strategies and evaluates the whole process. Knowledge matrix involves four steps
which include asking questions to the employees, telling them the relevant information through
meetings and conferences, publishing the data and further searching for more information.
Socialization is the process of sharing tacit knowledge through observation, imitation and
practice. Externalization is the process of articulating tacit knowledge into explicit concepts.
Combination is the process of integrating concepts into a knowledge system. Externalization is
the process of embodying explicit knowledge into tacit knowledge. Digital innovation is
Page 8 of 17

essential in the post-pandemic time where digitization is taking place widely (Bertin and
Schaeffer, 2020).
Figure 2: Flowchart of Knowledge Transfer Framework
(Source: Mahmoud et al., 2020)
Knowledge transfer is a complex process where certain mechanisms are involved and outcomes
are based on the entire knowledge transfer process. Application of knowledge is an important
part which needs to be dealt with proper attention. Problems and antecedents are two parts of the
knowledge transfer process for identifying problems and solving them. Human knowledge,
organizational knowledge and technical knowledge is regarded as essential for the growth and
development of the company (Tesco. 2021). The competition in the retail industry has been
forcing companies to maintain transparency in their activities (Amelung, 2019).
Page 9 of 17

Building the future innovation capabilities for Tesco
Link between Tesco’s innovative capabilities, innovation strategy,
technological orientation and market orientation
Artificial intelligence has replaced human beings which affects the economy to a great extent
(Mahmoud et al., 2020). Innovative strategies are developed in such a way that the company may
fulfill the requirements and practical approach is maintained where goals may be achieved easily.
Innovation helps in creating exceptional opportunities for companies (Cinanni, 2019).
Technological orientation and market orientation are closely linked where development of new
methods and techniques such as development of a new application may help the growth of the
business. Tesco’s innovative capabilities are clear in its activities where the company has
developed an app which is useful for customers throughout the world (Tesco. 2021). Profitability
and revenue generation depends on effective innovation (Chironga et al., 2018).
Significance of upstream and downstream supply chain of Tesco
The upstream supply chain is a part of the whole supply chain where the company’s suppliers are
included and the processes of managing relationships with them is included. The downstream
supply chain includes all the steps where products are delivered to the customers. The use of
internet and use of some specific software’s namely Cloud has become significant (Majumdar et
al., 2018). The company has adopted the use of certain software’s which helps in tracking the
products accurately and precisely. Marketing innovation and technological innovation are closely
linked (Fuentes et al., 2017).
Traditional supply chain, supply chain risk evaluation, green supply chain
and theory of constraints
Traditional supply chain in today’s world holds less use as traditional supply chain is an
integrated process of collecting raw materials or semi manufactured goods to the manufacturer
and supply of the finished products to the customers. Green supply chain refers to an eco-
friendly supply chain model where green product development, green procurement, green
manufacturing and green operations are done in order to reduce pollution. Energy efficient
Page 10 of 17

technology is used and selection of suppliers is made correctly in order to reduce pollution.
Companies may take an initiative to distribute the excess food to the local poor people who are
underprivileged and this process will reduce the amount of waste food (Tseng et al., 2019).
Through the use of the FoodCloud app the members of several charitable societies get to know
about excess food and through local groups those foods are distributed to several charity houses
for providing food to the needy (Refer to Appendix 2). Tesco’s food surplus donation programs
have helped the local community members to a great extent. Local volunteers are termed as Food
Waste Heroes who go to Tesco stores and collect surplus food and the whole process works with
the help of an app named OLIO (Tesco. 2021).
Figure 3: Flowchart of Green Supply chain
(Source: Fuentes et al., 2017)
Methods to improve the supply chain agility and sustainability to meet future
requirements
Tesco focuses on maintaining a perfect upstream and downstream supply chain so that the
business activities may be carried without any difficulty. Tesco as an international company of
repute maintains a link between the different fields of innovation in order to keep going with a
Page 11 of 17

steady pace towards development. Constant monitoring of the supply chain needs to be done
with utter care and precision where a supply chain manager will look after all the aspects of the
system. Sustainable development is possible through a green supply chain management where
use of technology is to be implemented in order to detect the errors in the system. Developed
service may be achieved through extensive research and innovation of new ideas (Manohar and
Kapur, 2019).
Conclusion
From the above discussion it may be clearly concluded that the role of innovation in the growth
and development of a company plays an important role and it may never be neglected. On the
other hand, it may be added that Innovation trends in the industry are of varied nature and
numerous new techniques have helped the growth of the retail industry. The increasing use of
artificial intelligence is considered to be one of the turning points in the industry where complex
calculations and tasks are solved within fraction of seconds.
Page 12 of 17

References
Amelung, T., 2019. Competition in the German Electricity Retail Business: Innovation and
Growth Strategies October 2019.
Bailey, M., 2020. Urban disruption, suburbanization and retail innovation: establishing shopping
centres in Australia. Urban History, 47(1), pp.152-169.
Bertin, C. and Schaeffer, V., 2020. Organizational impact of digital open innovation in retail
banks: Managing external and internal pressure. In Managing Digital Open Innovation (pp. 299-
324).
Botschen, G. and Wegerer, P.K., 2017. Brand-driven retail format innovation: a conceptual
framework. International Journal of Retail & Distribution Management.
Cao, L., Navare, J. and Jin, Z., 2018. Business model innovation: How the international retailers
rebuild their core business logic in a new host country. International Business Review, 27(3),
pp.543-562.
Channa, N.A., Bhutto, M.H., Bhutto, M., Bhutto, N.A. and Tariq, B., 2020. Capturing
customer’s store loyalty through relationship benefits: Moderating effect of retail innovation.
European Business Review.
Chironga, M., Cunha, L., De Grandis, H. and Kuyoro, M., 2018. Roaring to life: Growth and
innovation in African retail banking. McKinsey & Company.
Cinanni, A., 2019. Innovation in retail banking (Doctoral dissertation).
Fuentes-Blasco, M., Moliner-Velázquez, B., Servera-Francés, D. and Gil-Saura, I., 2017. Role of
marketing and technological innovation on store equity, satisfaction and word-of-mouth in
retailing. Journal of Product & Brand Management.
Krasyuk, I., Kirillova, T., Bakharev, V. and Lyamin, B., 2019, March. Life cycle management in
network retail enterprise based on introduction of innovations. In IOP Conference Series:
Materials Science and Engineering (Vol. 497, No. 1, p. 012125). IOP Publishing.
Page 13 of 17

LI, Z.J. and KU, J.Y., 2017. Theoretical Framework Research on Retail Business Model
Innovation in Internet Environment. DEStech Transactions on Environment, Energy and Earth
Sciences, (eesd).
Mahmoud, A.B., Tehseen, S. and Fuxman, L., 2020. The Dark Side of Artificial Intelligence in
Retail Innovation. In Retail Futures. Emerald Publishing Limited.
Majumdar, D., Banerji, P.K. and Chakrabarti, S., 2018. Disruptive technology and disruptive
innovation: ignore at your peril!. Technology Analysis & Strategic Management, 30(11),
pp.1247-1255.
Manohar, S. and Kapur, G., 2019. Measuring perceived service innovation typologies in retail
industry. Journal of Industrial Integration and Management, 4(02), p.1850019.
Olofsson, S., Hoveskog, M. and Halila, F., 2018. Journey and impact of business model
innovation: The case of a social enterprise in the Scandinavian electricity retail market. Journal
of cleaner production, 175, pp.70-81.
Olsson, A., B. Paredes, K.M., Johansson, U., Olander Roese, M. and Ritzén, S., 2019.
Organizational climate for innovation and creativity–a study in Swedish retail organizations. The
International Review of Retail, Distribution and Consumer Research, 29(3), pp.243-261.
Pinto, G.L., Dell’Era, C., Verganti, R. and Bellini, E., 2017. Innovation strategies in retail
services: solutions, experiences and meanings. European Journal of Innovation Management.
Tesco. 2021. [online] Available at: <https://www.tescoplc.com/> [Accessed 25 May 2021].
Tseng, M.L., Islam, M.S., Karia, N., Fauzi, F.A. and Afrin, S., 2019. A literature review on green
supply chain management: Trends and future challenges. Resources, Conservation and
Recycling, 141, pp.145-162.
Wang, Y. and Xu, D., 2021, March. Research on the Business Model Innovation of Sisyphe
Bookstore under background of New Retail. In 2021 2nd International Conference on E-
Commerce and Internet Technology (ECIT) (pp. 99-102). IEEE.
Page 14 of 17

Appendices
Appendix 1
Page 15 of 17

Appendix 2
Page 16 of 17