Innovation is a practice of producing new and unique ideas, in order to develop and maintain strong position in the market. It is important for business organisations to manage innovation in their operations (Dewick and Foster, 2018). 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.
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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. There are two basic innovation divers of Tesco Plc which are customer needs and future forces (Tesco Plc, 2018).
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:
Tesco established a self-service supermarket by which they saved expenses of huge staff and service costs.
Tesco launched an innovative scheme of Tesco Clubcard customer reward. With the help of this innovation, sales of this company increased and they earned high revenue in this year.
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.
Tesco cut down production and distribution of their various products. This innovative idea has the aim to simplify shopping experience of consumers.
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.
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. 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 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:
Tesco Plc is awarded as the most innovative organisation due to which they gain trust of their consumers. This company is operating in multiple countries by which they also attain benefit of globalisation. Innovative projects such as 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.
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).
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.
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.
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 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.
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.
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.
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.
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).
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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