TITLE TESCO

MODULE TITLE MANAGING INNOVATION

MODULE CODE BU7030

MODULE LEADER ROBERT WALFORD

SEMINAR TUTOR SUE OLLERHEAD

NUMBER OF WORDS 2629

STUDENT ASSESSMENT NUMBER 1822126

INTRODUCTION

Innovation is a significant element which would elevate the growth of any firm and help it remain more competitive. Risk becomes an indispensable key for any firm to explore new and successful possibilities.(“Entrepreneurs Answer the Question: ‘Why Is Innovation Important'”, 2019).[1]. Strengthening the response towards customer requirements and expectations, adapting the latest technologies available will not only help a firm grow but will help it to outstand its competitors and survive in any situation.

Innovation can be the execution of existing activities in a different approach or can also be introducing new developments. Engaging in a wide range of activities, expanding the target market, reaching a new level of customer base, global expansion etc will provide firms an edge leading to higher effectivity and productivity. Thus innovation is a crucial factor for any company to intensify its market share.

(Sorescu, Frambach, Singh, Rangaswamy & Bridges, 2011).[2].

TESCO

Tesco is a multinational grocery store and merchandise retailer which was founded in 1919 and has its headquarters in Hertfordshire,England. It started with groceries in UK and now has expanded globally in 12 countries marking itself the 3rd highest hypermarket group. Diversification is a constructive element which would help any company become a market leader; Tesco gradually expanded into various areas such as books, petrol, electronics, financial services, toys etc. Tesco express, Tesco extra, Tesco metro etc are few among the various different types of available Tesco stores.

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(2019).[3].

SWOT Analysis of Tesco

Strength

Customer Base and Preference – As mentioned above Tesco serves various other areas apart from grocery which directly talks about the various segments they can excel and this attracts them to a wider customer base. Customer satisfaction is given more importance.

Market Presence – Tesco is the retail market leader of UK and holds 28.3% market share. It prevails a good portfolio and a remarkable reputation in the industry since many years.

Weakness

Financial downfall – Tesco has witnessed downfall in US and Japan few years back which shows its low potential of overseas performance. Tesco was fined for inflating profits by Serious fraud Office in the UK in 2014 resulting in the negative impact on the brand image. (2019).[4].

Opportunities

Research and Development – Tesco should invest its time predominantly in developing new technologies.

Alliances – Tesco already has few acquisitions and should continue tie up with more small firms in the future increasing its revenue. (Bhasin, 2019).[5].

Digitalization – Tesco has already implemented digitalization in store. They have wide range of opportunities ahead in the online shopping industry.

Threats

Intense Competition – Asda, Morrison’s, Sainsbury’s are Tesco’s major competitors which has and would possess serious threats to Tesco’s profits.

Risks – Fluctuations in the customers demand, would lead to the company’s downfall. Also, since it has entered into various areas it is necessary be good in all the aspects.

Tesco is flourishing in the retail industry by establishing commendable relationship with their customers thereby actively responding to their demands. They have been showing persistent innovation starting from the launch of Clubcard till the recent robot usage. Tesco witnessed a 28% rise in its profit in the year 2018 and has also joined hands with the wholesaler Booker reaching out to small independent shops. Consistent performance has encouraged it to remain the market leader.(Butler,2018).[6].

Innovations of Tesco

1)Scan while you Shop

This is a customer friendly service introduced by Tesco which would help customers to have a quick and an effortless shopping experience. Customers who possess the Clubcard (loyalty card of Tesco) are required to scan it at the pick-up point allowing them to choose a scanner device. All the products should be scanned as an when purchased and can be packed immediately making it a hassle free experience. The device also keeps a track of the amount spent helping the customer plan their shopping accordingly. The payment can be done in the end without the help of a supermarket assistant. This favours the buyers by providing a brisk checkout free shopping encounter. (Quinn, 2019).[7].

SWOT Analysis

Strength

Saves the time of buyers by providing a convenient method of shopping.

Enables the customers to plan their shopping efficiently. (article, 2019).

Weakness

Possibility of technical glitches while scanning. Also, there is a chance for

bar code going missing on certain products which would cause inconvenience to the customers.

Certain people would still prefer the traditional shopping.

(“Scan as you Shop – The Latest Way to Shop- MGT Design”, 2019).[8].

Opportunities

Customer convenience and satisfaction would definitely be a prominent factor of any business model and with scan as you shop, Tesco would surely attract a larger customer base with necessary precautions taken.

Threat

No technology comes without drawbacks and one of the major threat is the fraud and malpractices which can be done easily.

Misuse of the service provided by not scanning the products leading to theft of items.

2)Robot Delivery

Tesco is successfully delivering items using a 6 wheeled robot within a distance of 3miles in Milton Kenyes. This was initiated with the help of Starship Technologies and the robot can carry up to 10kg of groceries and can deliver within 15mins. Each robot has internet connectivity and is fitted with cameras and speakers to avoid any complications. (article, 2019).[9].

SWOT Analysis

Strength

Time Saving Feature – Robots decrease the delivery time which benefits the company as well as the customers to a greater extent.

Robots tend to be much more effective at work.

Weakness

Cost and Maintenance – The developing and maintenance cost of the robots is considerably high.

It is also required to have a constant maintenance on the technologies invested on robots.

Opportunities

The world is moving towards digitalization and automations and delivering with robots has a great future in terms of speed, consistency, perfection and productivity.

Threats

Obstacles such as delivery failures, breakdown of power, programming of robots.

Robot delivery definitely possess a threat against human employment.

3)Clubcard

Clubcard is a unique loyalty card given to customers of Tesco allowing them to have an effortless online and offline shopping experience. Tesco uses big data analytics and algorithms to store the purchase data of every customer in the Clubcard which gives the company a knowledge about the individuals preference. This information has led to mass customization increasing customer satisfaction and has also helped the company plan its supply well without much inventory. Personalized offers are awarded to customers encouraging them to shop more. The stored data also gives the company a forecasted demand in particular considering all the factors.(Humby, Hunt, & Phillips,2007).[10].

SWOT Analysis

Strength

Demand Forecast can be done easily resulting in better productivity.

Personalization and mass customization increases the customers lifetime value.

Weakness

Everyone would not be interested in the loyalty card and earning points would take longer time.

Opportunities

Since the supply and inventory can be managed efficiently with the product purchase data, Supply chain management of Tesco can be improvised well in the future.

Threats

Tesco’s two major competitors, Sainsbury’s and Morrison’s also have a loyalty card. Tesco should come up with more offers for the customers in order to attract them.

Role of Project Management

Time, Cost and Quality are the important elements of any project undertaken and project management constitutes the techniques used to organize and control effectively keeping in consideration the above three factors. Innovations require the company to engage in activities apart from the daily operations and that is when project management techniques come into use. It controls a project by describing the work, allocating the resources, controlling the complete process and meeting the desired result within the deadline. Thus a successful project management with required commitment and adequate resources would help in the development of an innovation.(Munns & Bjeirmi,1996).[12].

Porters Five Force Model of Tesco

Threat of New Entrants : Low

Tesco being a market leader, it is not easy for a new brand to create the brand image and gain the market share immediately. Massive investments, time and appropriate resources are a must in order to enter the market.

Bargaining Power of Buyers : High

Customers these days compare the prices of the products and can easily switch to another brand. The switching cost is very low.

Bargaining Power of Suppliers : Low

The negotiation power of suppliers are low as Tesco is the leading retailer of UK and the loss of contract with them would adversely affect the suppliers profits. There are various suppliers available and Tesco can easily switch to other suppliers.

Threat of Substitutes : Medium

The threat of substitutes for food items in Tesco are low since the brand image and market share is high and also the good quality they provide. Customers usually would not keep switching with respect to food items. The threat of non-food items are high as customers would shift to other stores for clothing, electronics, books etc considering the convenience, benefits and quality.

Rivalry of Competitors : High

As mentioned above Tesco has intense competition from retailers such as Asda, Morrison’s, Sainsbury’s. Tesco has to constantly scale its innovations and provide better customer satisfaction to stay high in the race.

The porter’s five forces clearly states about the high risk of strong competitors, therefore it is essential for Tesco to influence the customers better through the above mentioned innovations. Sainsbury’s and Morrison’s also have loyalty card but they don’t provide features, Tesco does and the robot delivery has a great future favouring Tesco. Innovations have to be implemented effectively due to the low switching cost of customers.

PESTEL Analysis of Tesco

Political Factors

Political factors influence the operation of any company in aspects such as trade regulations, taxation, corruption, wage allocation etc. The government imposes these factors. At present the VAT rate in UK is 20% which was increased from 11.5 % to 20% in 2011 but has remained constant since then. Since Tesco has expanded globally in 12 countries the regulations, barriers and economics of those countries also affect the operations and sales of Tesco. China’s inclusion in the WTO has promoted the ease of foreign trades. Also, the UK government is not very strict in enforcing laws. Many countries are a part of European Union (EU) which strengthens the retail sales of Tesco. (“PESTEL Analysis of Tesco”, 2019).[13].

Economic Factors

Macroeconomic factors are not completely in the control of Tesco but factors such as inflation rate, unemployment ratio, consumer behaviour, labour cost largely affect the revenue of Tesco. An increase of 4.4% in labour wages was observed in 2018 in the UK which would directly impact Tesco sales.UK has shown improvement in its economic growth rate post the pre-crisis period (2014) which favours the retail industry productivity. Though, Tesco has expanded globally it still holds 28.3% market share of UK alone and thus it is required for Tesco to strike a balance between the varying economic conditions and its sales revenue. (Farooq, 2019).[14].

Social Factors

The culture, attitude, lifestyle, interests of the population constitute the social factors.UK population consists of more aged people compared to youths and the internet illiteracy rate is more for people above 65yrs of age. This is an obstacle for Tesco’s sales, nevertheless gradually aged people prefer online shopping due to their mobility issues. People are steadily inclining towards a healthy lifestyle giving a positive response to the organic foods of Tesco. Tesco already has various customer attraction schemes and should continue doing to ensure high customer satisfaction. The consumer acceptance largely influence the response towards any innovation.

Technological Factors

The rapid advancement in new technical developments would compliment the growth of a company. Tesco has recently introduced RFID technology, online shopping, scan as you shop, online payment etc. Tesco has to progressively invest more on technological development being up to date with the latest trends in order to remain in the top.

Environmental Factors

Taking care of the environmental concerns is essential to save mother nature. Tesco has declared to shift to renewable electricity by 2030 in the UK and Ireland. They have also collaborated with and environmental organisations for 4 years to encourage sustainable food and has assured to reduce the carbon footprint to 50% by 2020.This clearly shows the environmental concerns Tesco maintains. (Smithers,2018).[15].

Legal Factors

Organizations are required to follow legal obligations related to consumers safety ,environmental affects, import and export laws, labour laws etc. Tesco had addressed a case of fraud with respect to investors and ended up paying the fine. A strike was conducted by the workers for gender discrimination in 2017.Tesco has to overcome issues and maintain a healthy relationship with consumers, employers, suppliers and investors following the laws strictly for a smooth flow of operations and developments.

Contribution of Management

The management has a great impact on how a company performs. At Tesco, planning and controlling activities are handled very well with skilled workers. Tesco keeps a constant track of the sales, stocks and inventory with good marketing and IT management. The company wants to increase the efficiency of the workers which would thereby help in developing new technologies. Tesco has a good purchase process handling every step sequentially. They are employed with skilled operation managers keep a constant tract of quality and cost of the products. Tesco so far has a good management and should try improvising it constantly. Their technical department is effective which would help them to find out and rectify the faults found in robots used for delivery as well as the scanner devices. A good marketing team would help them attract the customer more with the offers given by Clubcard. (“Operations Management At The Tesco Supermarket Business Essay”, 2019)

Future Innovations

1)Tesco can implement the usage of drones inside the supermarket helping them in buying the products they want. This would make the customers life very easy and the shopping would not consume much time. This would help the management of Tesco to work better and quicker as well.

2)Biometrics can be used for the Clubcard as well as payments which will lead to a theft free shopping. It can also be used for the Scan while you shop innovation resulting in a secured shopping experience.

References

Entrepreneurs Answer the Question: ‘Why Is Innovation Important’. (2019). Retrieved from A., Frambach, R., Singh, J., Rangaswamy, A., & Bridges, C. (2011). Innovations in Retail Business Models. Journal Of Retailing, 87, S3-S16. doi: 10.1016/j.jretai.2011.04.005

(2019).Retrieved from Retrieved from

Bhasin, H. (2019). SWOT Analysis of Tesco Corporation – Tesco SWOT analysis. Retrieved from S. (2018, April 11). Tesco beats forecast with 28% rise in annual profits. Retrieved from I. (2019). Tesco’s Scan as you Shop service to go into 20 more stores. Retrieved from n. (2019). Tesco extends Scan as you Shop service. Retrieved from as you Shop – The Latest Way to Shop- MGT Design. (2019). Retrieved from N. (2019). Tesco uses robots to make food grocery deliveries. Retrieved from Hunt, T., & Phillips, T. Scoring Points: How Tesco Continues to Win Customer Loyalty. London, England: Kogan Page Publishers.

Munns, A., & Bjeirmi, B. (1996). The role of project management in achieving project success. International Journal of Project Management, 14(2), 81-87. doi:10.1016/0263-7863(95)00057-7

PESTEL Analysis of Tesco. (2019). Retrieved from U. (2019). PESTLE Analysis of Tesco | Marketing Tutor. Retrieved from (2018, November 16). Tesco and WWF bid to ‘halve environmental impact’ of UK groceries. Retrieved from Management At The Tesco Supermarket Business Essay. (2019). Retrieved from

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SAI tesco. (2019, Dec 06). Retrieved from http://paperap.com/sai-tesco-best-essay/

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