LSC

London School of Commerce

REPORT AND INNOVATION OF TESCO

MBA SEMESTER 1

GROUP-D

Submitted by: Submitted to:

Parminder Bindra Uma Mohan

Student ID: 0679 GGMH 0609 (Lecturer)

 Table of Contents

Executive Summary

Introduction of Tesco as an organisation

Emphasis on innovation and what it means to Tesco

Tesco’s Impact

Examples of Innovation and comparisons

Conclusion

References

Bibliography
Executive Summary

This summary looks into how Tesco indulged into Change Management Process
with persisting problems/opportunities and addressing them through adaptive
Change Strategy. The summary also impart knowledge of how organisation acted
upon unexpected difficulties, resistance whilst implementing change, which later
made them gain sufficient financial gains.

The antennary will track down the entire process involving debates of various
authors highlighting the relationship of the change management process mentioned
in initial parts of this report. Also, the report will entail the discussion on adoption of
Smart Lane Queue Management System which helps in predicting required level of
staff at various times, its distinctive functions have brought significant improvement
towards the performance of the organisation with respect to objective of this system.
Lastly, report will encompass a picture of findings in the form of conclusion.
Introduction

Organisation and Industry Background

TESCO PLC COMPANY PROFILE: Tesco is the largest food retailer in UK,
operating around 2,318 stores worldwide. Tesco operates around 1,878 stores
throughout the UK, and also operates stores in the rest of Europe and Asia. Tesco is
Britain's leading food retailer employing nearly 160 000 people. It has forged itself
into a truly international brand by employing a further 140 000 people throughout 214
stores in nine markets worldwide. The increasing scale and internationalization of
Tesco’s sales and purchasing operations contributes to a significant increase in
efficiency and profitability.

The supermarket sector has always been considered as a highly competitive market.
With an enormous 27% of the market share, it has devised its monopoly on an
unprecedented level. Tesco is under much increased competition for market share
and sales with the rise of ASDA which part of the US giant Wal-Mart group,
Sainsbury and the takeover of Safeway by Morrison’s.

Tesco's high market share can be justified their policy of cheaper prices, offering
better choice and value for money for their customers. Tesco lays strong emphasis
on meeting changing consumer needs through service and innovation, while
maintaining its commitment to value and quality. The third largest supermarket was
created in June 2003. This came about by the takeover of Safeway by Morrison’s. As
per BBC news, a deal worth £2.9bn was agreed by the two supermarket chains. The
combined firm, with 598 stores, a turnover of £12.6bn and a market share of 16%,
aims to compete with Tesco, Sainsbury’s and ASDA the giants of the U K
supermarket sector.

Tesco showed a great interest in the takeover but their bid was blocked by the
competition commission. The office of fair trading decided to block Tesco’s bid
stating that it would give Tesco increased buying power over manufacturers and
suppliers resulting in a push up of prices. Financial Information in April 2003 Tesco
announced a 14.7% rise in annual profits. This rise in profits has been drafted down
to emphasis on non-food products and its expanding overseas operations. Tesco
had announced pre-tax profits of 1.4bn for the year to February 22nd. These profits
exceeded more than 1.3bn. Six years ago Tesco decided to focus on expansion into
higher margin non-food products such as healthcare, clothing and retail services
such as banking as well as expanding overseas. Tesco’s International sales rose
31.2% to £5.2bn in the year to February 22nd. Meanwhile in the U K sales grew
7.9% to £23.4bn. SWOT analysis of Tesco Strengths * Leading supermarket retailer
in the U K with a market share of 27%.
Emphasis on innovation and what it means to Tesco
Innovation can be linked to technology oriented industries such as
telecommunications and pharmaceuticals where perhaps some of the greatest
technological breakthroughs this century have taken place.

There is no denying that fact that those developments for example the internet and
cures for many terrible diseases would not have come about were it not for an
innovation solution to a problem being sought by somebody. In other words,
necessity is the mother of innovation in our case but innovation has also changed
our day to day lives and its requirements. Some are less glamorous ways that we
now take for granted. Let’s take an example about cleaner fuels for our cars or
tickets-less travel making our holidays as simpler as possible. Retail this is in the
vicinity of our houses. Products and services that started as a good idea are now
multimillion pound business producing significant profits, creating new jobs and
serving customers well.

Based on some the above ideas, Tesco made its presence felt with the home
delivery service Tesco.com. It took birth out of an idea to try and make it easier for
people to shop who find it hard to get to a supermarket. Tesco.com now generates
sales of more than £700 million and profits of more than £35 million. The service
reaches 96 per cent of the UK population and handles more than 170,000 orders a
week. Not bad for an idea that many said would never catch on! Now that’s
innovation.

Secondly another innovation concept started by Tesco in order to emphasis loyalty

towards its regular customer was the club card. Tesco’s membership scheme allows
its customer to save their money on shopping by offering them money off vouchers.
The idea behind club card was to get a point on every pound they spend by
shopping at any stores of Tesco group of companies as well as at stores of their
partner companies. To elaborate, once a customer accumulates 150 points, they are
then converted into club card vouchers which allow the customer to save further on
their shopping. A simple but a highly efficient idea, other supermarkets have tried to
introduce such concepts as well but it is quite peculiar that most of the loyalty
schemes and relationship marketing exercises quite parallel to club card have often
resulted to failure for other companies. Tesco club card has proved to be highly
effective and successful. ASDA also started a similar loyalty scheme in its stores but
for some reasons it did not work safe way on the other hand tried the loyalty scheme
by introducing its ABC card but the concept was dropped to its ineffectiveness in
about four years. To mention another heavyweight in the industry i.e. Sainsbury
introduced the nectar card loyalty scheme but has not been able to compete with the
club card.

To obtain a Tesco club card, customer needs to register by completing a form and
posting it or they can also register for the same online as well as over the phone.
This relates to be a very useful tool that club card also acts as a vital link in
accumulating crucial marketing data related to the purchasing trends of individual
customers. Therefore concerns have been raised on issues such as infiltration of
privacy and dispensing of information relating to the customers to third parties or
other companies for marketing purposes. Tesco has promised that such information
is to be used only by the Tesco and its sister companies to help them design better
services, increase efficiency and products for the customers.

Another example of the same, Tesco’s flower growers has forged a technology that
predicts within a couple of hours when stems are the correct length to fulfil our
forecast demand for Mothers' Day. This in turns improves productivity and less
undesired wastage of resources as they are perishable goods, the supplier can
better plan when he needs to plant and pick, reduces waste and, of course, it means
mum gets her flowers on time. Further to the above examples, Tesco took probably
the most crucial step counter attack its carbon footprints as a business. This concept
further concretes Tesco’s insatiable desire for constant innovation.

Tesco is the first UK’s retailer to display carbon foot print on milk and aims to
footprint further 500 products within a year itself is a daunting task but a vital step to
overcome global warming. This change came alongside with new research which
suggested that 50% of customers surveyed now understood the correct meaning of
the term “carbon footprint” compared with only 32% of people surveyed in 2008. The
research also concluded that customers increasingly want to be green. Over half
suggested that they would seek lower carbon footprint products as part of their
weekly shop, compared with only 35% last year. Tesco took this onboard and has
pledged to introduce carbon footprint as a norm in the UK retail market.

In January 2007, Tesco announced that it would collect and publish their total direct
carbon footprint as part of Tesco’s commitment in order to tackle climate change. Its
core aim was to establish a clear benchmark from which to track progress in
reducing our emissions, and enable them to identify those areas of business where
prioritization was crucial. Tesco commissioned environmental resources
management limited (ERM) to map the total direct carbon footprint of the business
across all the countries in which they operated.
Tesco Impact
The direct carbon footprint for the Tesco group during the financial year to February
2007 was 4.13m tonnes of carbon dioxide ebullient (CO2e). On the other hand UK
business emitted 2.25m tonnes of co2e or 55% of the total direct emission. The UK
food retail sector is estimated to emit 9.2m tonnes co2e annually plus the associated
distribution emission of approximately 2.4m tonnes co2e.tesco’s emission therefore
equate to roughly a fifth of the footprint retail, in line with their market share.

Considering the above findings, Tesco has made changes from the root level in its
business as a whole to keep carbon emission to a minimum and under the
government guidelines.

The above example gives an insight on Tesco’s attempts in promoting a business

where innovation is an indispensible element.

Business must adapt to cultivate the creativity of their workforce and encourage staff
to come forward with ideas.

Both of these examples clearly illustrate the importance of innovation to customers

but also to the business. Innovation provides an advantage platform so business or
economies that stands still and do what they have always done will lose out to those
prepared to take the risk for advancement.

Innovators are all around us; innovation is after all just another word for an idea and
we can all possess those. Business must learn to harness the creativity of their
workforce and encourage staff to come forward with ideas. It’s not always as easy
and straight forward. Some good ideas will fail but companies have to be
comfortable with that if they are to avoid stiffing innovation which can be critical
detrimental for growth.

At Tesco some of their best ideas have come for the shop floor. Most of these ideas
are usually inspired by the customers tell or what the staff observes. Tesco’s
approach through simple system and lean management structures gives it the
cutting edge and makes sure that ideas are harvested and do not lost in a
suggestion box somewhere, which would mean missing out on a potentially money-
making idea and the person who thought of feels ignored and undervalued.
To help further this exchange and harvesting of such ideas Tesco also sends
thousands of their head office managers out to work in store for a week every year
so that they can experience the products and processes they develop and make
them better, cheaper or simpler.

So to conclude what innovation really stands for in the words of Sir Terry Leahy CEO
Tesco’s and also known as ROBERT MUGABE of the retail world.try things- Be
good in practice, not great in theory because customers don’t buy theories. Never be
complacent-keep listening at every level of the business and be prepared to learn
from anybody who takes the time to tell you something you didn’t know. Be prepared
to change and above all determined that no other business will achieve more for
customers than you do.

An ounce of action is equal to a ton of theory.

Sir Terry Leahy.

Conclusion

From the above, it can be concluded that what has made Club card and other
initiatives that Tesco has grasped work effortless for Tesco is its pro activeness
among other retailers, a constant approach to evolve and keeping the customer’s
requirements first. Tesco has successfully been able to fulfil requirements for various
customer segments of different age groups. Secondly, another important element is
its simplicity with which Tesco’s various marketing campaigns/schemes run that has
made it so productive and cordial among its ever growing customers.

“Retailers are looking to expand to the international marketplace, and are making
significant investments in Internet customer service. Both large and small store-
based and catalogue retailers are using the convenience of the Internet to better
serve their customers” - (Michael Levy, Retailing Management).

And to illustrate the above point, Tesco’s online marketing exercise has also been
very simple but effective. For example, information on its food products such as its
nutritional value, etc and services of all the groups companies are available on one
website presented in an simple and orderly manner ,again emphasising the point of
catering needs for all age groups. Customers can hop from the groceries section to
the Finance and Insurance page on the same web page which is quite unique to
most other retailer’s websites which open up a completely new website for the other
companies of the same sort of relevance. Also, Tesco has been able to utilize its
loyalty scheme very well to create mutual benefits and relationships with its
customers. Hence, the main reason behind the efficiency and success of Tesco’s
marketing schemes and loyalty campaign is down to keeping its business running
simple and customer oriented.
References

• OFT report: Competition in the Supply of petrol in the United Kingdom. May
1998. Back

• First Council Directive 89/104/EEC to approximate the laws of the Member

States relating to trade marks. Back

• CMA Book: How Tesco is winning Customer ...

the-cma.org

Customer loyalty programmes and clubs

• Stephan A. Butscher

The grocers: the rise and rise of the supermarket chains

• By Andrew Seth, Geoffrey Randall

• http://www.bbc.co.uk/

• Sir Terry Leahy is Chief Executive of Tesco. Source (esrc economic & social
research society) source
Bibliography

• OFT report: Competition in the Supply of petrol in the United Kingdom. May
1998. Back

• First Council Directive 89/104/EEC to approximate the laws of the Member

States relating to trade marks. Back

• CMA Book: How Tesco is winning Customer ...

the-cma.org

Customer loyalty programmes and clubs

• Stephan A. Butscher

The grocers: the rise and rise of the supermarket chains

• By Andrew Seth, Geoffrey Randall

• http://www.bbc.co.uk/

• Sir Terry Leahy is Chief Executive of Tesco. Source (esrc economic & social
research society) source