Innovation and Competition: Tesco, PLC (Case Study Sample)

INNOVATION AND COMPETITION: A CASE STUDY OF TESCO PLC
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Innovation and Competition: A Case Study of Tesco Plc
Introduction and Profile
Tesco plc (Tesco) is the largest retail supermarket in the United Kingdom. Founded in 1919 by Jack Cohen in London’s East End, Tesco started out in the food industry but has diversified into a wide range of market sectors including clothing, electronics, furniture, music downloads, DVD rentals, and books. The company has operations in the software, telecom, internet services, oil, and personal finance sectors (Heal, 2006). The fourth largest retailer in the world after Wal-Mart (United States), Carrefour (France), and Metro (Germany), Tesco has a presence in 14 countries including Hungary, China, Ireland, India, Thailand, South Korea Czech Republic, United States, Malaysia, Slovakia, Japan, and Poland. With headquarters in Welwyn Garden City, UK, the company is headed by the Group Chief Executive, John Lewis assisted by a ten-member Board of Directors chaired by John Allan. Due to the large size of the business, Tesco’s organizational structure is hierarchical with up to four layers of management in some of its large stores (Palmer, 2005). The Regional Manager oversees store operations in different localities. Each store has a Store Manager and three mid-level managers namely the Food Trading Manager, Non-Food Trading Manager, and a Personnel Manager.
Tesco claims an estimated 27.8% of the UK’s market share and has a presence in almost every single postcode area in the UK, except in Harrogate, North Yorkshire. It has five store formats which include Hypermarket, Superstores, Metro, Express, and Homeplus stores. The store formats are based on size with hypermarkets being large out of town stores and express stores being smaller one-stop stores. Homeplus stores are non-food stores. Tesco also owns 34 Dobbie’s Garden Centers and 722 one-stop convenience stores. For the financial year 2017/2018, Tesco operated over 6,800 stores and had 440,000 employees serving a total of 80 million customers every week. Total group sales amounted to £51.0 billion while operating profits before exceptional items amounted to £1,644 million (Tesco plc, 2018). Retail operating cash flows for the year were £2,773 million, and net debt was £2.6 billion. The diluted earnings per share before exceptional items and value measurements was 11.88p, and the company announced a dividend payout of 3.0p per share.
Global retailing has rapidly evolved over the last two decades. Fierce competition and the digital transformation of the retail industry has encouraged retailers to adopt multi-channel retail strategies. The global economic landscape has also forced many retailers to look for ways of reducing costs and increase operational efficiencies mainly through investments in IT infrastructure. In the UK, the retail industry is highly competitive. The sector has more than 319,000 retail businesses spanning fashion, health, beauty, technology, sport and leisure, and general merchandise. Although Tesco is the leading retail company, it faces a lot of competition from other industry players including Aldi, Asda, Lidl, Morrisons, Sainsbury, Waitrose, and Farmfoods. These mass retailers offer a similar product range, and the density of retail stores in the UK makes it easy for customers to switch (Heal, 2006). Moreover, consumers are constantly looking for “more, better, and cheaper.” Too compete effectively, serve customers better, and enhance profitability, innovation has been at the center of Tesco’s business. The company has continually innovated new ways of delivering goods and services to its customers. By offering convenience, choice, and price value, Tesco has been able to retain millions and attract thousands of customers every year.
Tesco’s Fields of Innovation
Tesco’s fields of innovation include retail digitization, store formats, in-store experience, product and process innovation, efficiencies in the supply chain, and marketing and organizational innovation.
Retail Digitization
The digitization of retail at Tesco is part of its multi-channel retail strategy aimed at creating convenient and versatile stores with a more relevant and narrower product portfolio. Tesco has recognized the rapid spread of mobile phone technology