Tesco Innovation in the Supermarket Retail Space
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Published: Mon, 5 Dec 2016
In this report we chose an organization named Tesco, which is the biggest retail company in UK. Tesco start their business as a grocery super market. Now they operating electronic, insurance, bank, finance, mobile, land phone, textile many other thing. Our main focus in this report is tesco`s Innovation. The definition of innovation is some thing new idea, new creativity, and new technology act. According to business writer (Ken Cottrill) companies need to establish a seamless innovation process an enterprise wide exchange of ideas that will ensure that the information and expertise required creating new market and service breakthrough products is available and accessible to those who need it. Innovation an idea must be replicable at an economical cost and must satisfy a specific need. Innovation involves deliberate application of information, imagination, and initiative in deriving greater or different value from resources and encompasses all processes by which new ideas are generated and converted into useful products.
Tesco now using many innovations in their business which is very effective in their organization. In 1990 tesco started new pioneer innovation. Here the innovation we focus is based on technology and information system. We apply the service and operational innovation in this report. Tesco`s have many innovation but one important innovation is replenishment application system which control tescos inventory Management system. Beside this innovation tesco has some auxiliary innovation like oracle retail warehouse management system, club card act. All the innovations are depends on information system and technology. Through replenishment application system is a major innovation but oracle retail warehouse management system, club card are related to main innovation.
The largest retail & manufacturing company
Introduction and profile
Tesco is the giant retail supermarket company in UK. Tesco is United kingdoms leading hypermarket. They started out by operating in the food industry, but as the business grew they now operate within food, non food, electronic, telecommunication, insurance etc.Tesco is now producing their own brand product .Tesco is one of the top three retailers shop in the world. Tesco has 3,700 stores in globally and their total stuff is 4, 40,000. Life is changing every day, tesco team responding to those changes. In 1919 Jack cohen was the founded of tesco. Tesco name first appeared in Edgware in 1929. In 1960 tesco is available in most of the high street in UK. Tesco different types of store such as tesco metro, tesco express, tesco extra act. Tesco is a join venture with the royal bank of Scotland.Since in that time tesco is developing their business, responding customer’s demands and pioneering in many innovations. In 1990 tesco faced strong competition in retail market. In this decade chief executive Terry leahy find out that we need to ask the customers what they doing wrong? After that they started loyalty scheme club card and online shopping tesco.com. As a gaint retail company tesco has own brand product. Their product is very reasonable price than the other retail company and they maintain the product quality.
Information from variety of sources:-
Primary sources of information
Information is collected in two ways one primary and other secondary .The definition of primary information is the first hand or the original or the principal knowledge. There are many source of primary information these include survey, interview, meeting, observation of object, discussion etc. By using primary information tesco gather huge information in the field level. This is call row data. This row data is very important for organizational decision make. The first primary information helps the secondary information in the organization.
Secondary sources of information
The secondary information comes from electronic survey. When tesco sales any product it is automatically recorded in their system. So this is secondary sources of information. Some times tesco gather information from their own employees and direct customers. When customers buy any product they use the club curd, which is another system to gate the data. By using club curd tesco knows how many customers are visiting in the store and which item is sale most. If any customer uses this club card they get points and discount. So both parties are beneficial. Tesco use’s the online survey because they have online shopping. Employees are most important part of tesco because they works in shop flour and operation level. Employees know the customers demand which product is sales more. So management people ask employee to get batter information.
Tesco`s one effective innovation is replenishment application system. This system collects the sale data from the checkout point and this data transferred to the supply department.
Supply or warehouse department easily knows how much product need in the store by using the replenishment application system. This system helps tesco keep their cost low. The replenishment application system and information system help tesco to keep their price low and well stocked/quick shelve in the store. In every sale the replenishment application system send the data to their supply department. The barcode scanner also helps to collect the data and store it to their system. The head office IT department gets the data from the store, and they stored it in their system. Tesco`s supply department can easily access the inventory management system. Replenishment application system savings huge amount money of tesco`s, because this system control the inventory very smoothly. This system fulfils the customers demand and it replaces the product in the store very quickly.
So replenishment application system maintains stock control and product availability in each store for the customer. Information system is working tesco`s every level of management. Tesco`s advance technology collect the data send it to their main data centre from around the globe. Tesco`s has regional head office in every state. Tesco`s has own server which help to send the data very quickly. For security reason and they use their own software and portal.
Oracle retail were house management system is also a very important system in tesco. This system is related to replenishment application system.Tesco`s use this system in every store to distribute centre in every state. Oracle retail warehouse management system helps tesco to maintain the chain management across their business in the world. By using this system tesco easily maintain their production, capacity, distribution. Oracle retail warehouse management system they use first time (Trial) in South Korea. This software is very effective in distribution level. After that tesco`s IT department develop this software and their system as well. Oracle retail warehouse management gave a best solution to distribution, this system not only use in domestically but also use in internationally.
By using this unique system tesco`s store management people knows how much product need for store in next delivery. The supplier also knows that how much product needs to distribute. In cheek out point tesco`s has millions of computer, this computer not only use for sale, it also collect the sales data. By analyzing the data the top management people find out which product is most demanding. This system also helps for price decision making, sales promotion, and new product line. Tesco`s IT department playing a very important rule, the sales data they delivered the top and middle management level. So in product department do not need to over production. So this system helps them save money.
Tescos management people adopt various kinds of system to managing their innovation. Innovation is not stop just in one place, tesco`s management people always try to find the new innovation. In the decade of 1990 they introduce the loyalty scheme card or club curd. When customers buy some thing the till person always ask about the club curd, each and every time customers get point when they use this club curd. The management people need more information and they get more information when customer uses the club card. Club card help to collect data how many customers are visit the store, which product they buying, which product is sold very quickly act. So tesco`s IT department gating more useful data when customer use the club curd. Tesco`s has million of till, each till contain barcode scanning machine, when any product come in the cheak out point barcode scan the product. This sale information automatically stored their main data warehouse. The IT department processing the data and delivering it to the head office. Head office then make an order in supply department for the store for next delivery.
Day by day tesco develop the Replenishment application system, Oracle retail warehouse management system and centralized process. Tesco always tried to keep consistence at each management level and they try to develop their management. Colin coboin the director of IT department said modern technology help us to meet our main goal. He also said the elements of our common operating model are already using and it benefiting our business. Tesco has target and they announced that they try to spread whole cosmic. Tesco now upgrading the micro focus which develops the replenishment application system in IBM P server, which operates AIX UNIX. The micro focus system is using in Cobal based CR application. This application helps tesco to maintain a single source for both the mainframe and UNIX version
Of the application.
Managing the innovation
The innovation which is using in tesco is very effective and important. The management people always try to get 100% out put from the innovation. But it is not easy to maintain and control, because this is a big organization. So the management people always monitoring, analysing and practicing the innovation. Through the innovation is big resource but the result depends on the operator. So those people are using the innovation they are very well qualified. Today’s business is very competitive, they have competitor in retail market. So tesco still trying to invent new innovation. Innovation depends on new technology and information system. The innovation is working tesco`s up to bottom management. It is not using only in the store, so innovation is working in each level. The managerial people and the IT department are the responsible to managing the innovation. Tescos IT specialist research new innovation to implement in their business.
Tesco`s IT department doing very important work in the organization. The IT department working with customer, production, sale, employee, payroll, invoice, accounting, management, marketing, finance act. The IT department is very well organized and the stuffs are very qualified and active that they processing the information to operate efficiently and accelerate the performance of the total organization. So information system playing very important role in tesco to manage all the data and information, it helps to make quick decision and the execution of their business process.
By developing the technology tesco also develop their information technology. An information system contains information about an organization and its surrounding environment. Information system effectively requires an understanding of the organization, management and information technology shaping the system. An information system creates value for the company or organization and management to take the challenge of the global competitive business environment. Information system has become integral, online, interactive tools deeply involved in the minute to minute operation and decision making of large organization like tesco.
Information system works in three basic activities input, processing and output produce the information which is company or organization need. Now we see the result of the massive spending on information technology and system around us observing now people conduct business. E-mail (Direct marketing) online conferencing and international teleconferencing over the internet have all become essential tools of business. By developing the information technology tesco also developing their IT department. As a Giant supermarket tesco has own it department. This department works about information system and technology. Tesco`s up to bottom management depends on it department. Because they collect the row data and analysis it and stores it in their system. Tesco spend lots money for IT department. Tesco`s each and every section are related with IT department. Tesco use their own company software for security.
Implementation Mechanism and change management
New innovation depends on technology. Without technology it is not possible to create new invention. As Retail Company tesco use the Replenishment application system and other subsidiary innovation, the innovation depends on technology. So tesco`s IT people’s main concentrate in new technology. Information technology have become integral, online, interactive tools deeply involve in minute to minute operations and decision making of large organization like tesco. Over the last decade, information system have fundamentally altered the economics of organizations and greatly increased the possibilities for organizing work. Theories and concepts from economics and sociology help to understand the changes brought about by Information technology.
Tesco`s up to bottom management depends on information technology. Tesco`s each management top, middle, bottom they successfully use and implement their innovation. The innovation is working properly or not it depends on regular monitoring. So monitoring is very important to get 100% implementation. The innovation makes different their business or increases their economy. When theory and practice implement together then comes mechanisms. Tesco use their theory in their practice. Mechanistic implementation increase good customer service, developing the productivity, reduces their capital cost act.
Management Change is an alteration of an organization’s environment, structure, technology or people. If it weren’t for change the manager job would be easy. Planning would be simplified because tomorrow would be no different from today. The issue of organization design would be solved because the environment would be free from uncertainty and there would be no need to adapt. Management change is an organizational reality. Handling change is an integral part of every manager’s job, but now question is which facto create the change factor is structure, technology, and people.
Three categories of change:-
Authority relationship, Coordinating mechanisms
Span of control
According to kurt lewin, successful change requires unfreezing the status quo, changing to a new state, and freezing the new change to make it permanent. The status quo can be considered an equilibrium state. Unfreezing is necessary to move from this equilibrium. It can be achieved in one of three ways:-
The driving forces which direct behaviour away from the status quo, can be increased.
The restraining forces, which hinder movement from the existing equilibrium, can be decreased.
The two approaches can be combined.
Once unfreezing has been accomplished the change itself can be implemented. However the mere introduction of change does not ensure that it will take hold. The new situation, therefore, needs to be refrozen so that it can be sustained over time. Unless this last step is attended to, it is likely that the change will be short lived and employees will revert to the previous equilibrium state. The objective of refreezing the entire equilibrium state then is to stabilize the new situation by balancing the driving and restraining forces.
The benefits of the innovation
The replenishment application system and other subsidiary invention gives tesco big benefit. The innovation has huge impact in tesco.
Competitive advantage- Life is not stopped in one place, public demand is changing day by day, so tesco`s team reserch the customers demand and they analyse their changes. Tesco`s main strategy is quality product, good service, sustainable price. With this strategy they also are developing their technology. In 1990 tesco faced vary strong competition in retail market. Then they asked customer what they doing wrong, they find some solution. They started online shopping in the 1996. By developing the internet speed they also developed their online shopping system. Tesco`s online shopping is now very useful and popular. Each week their transaction is now 500,000. Tesco`s online shopping is very easy to get food and non food item. Each year they getting £2 billion + in internet shopping. There are some retail company in UK they already started same system but they are not successful as tesco. Because of reasonable price, good quality and service. Tesco always think profitability within their size and capability of the business. Tesco always do batter than other because of their advance technology. Tesco`s have competitive advantage than other: they either have access to special resources that other do not, they are able to use commonly available more efficiently- usually because of superior knowledge and information assets. Tesco do better in terms of revenue growth, profitability, or productivity growth all of which ultimately in long run translate into higher stock market valuation than their competitors.
The most widely used model for understanding competitive advantage is Michael porter’s competitive forces model. This model provides a general view of the firm, its competitors, and the firm’s environment.
Porter’s competitive forces model
In porter competitive forces model the strategic position of the firm and its strategies are determined not only by the competition with its traditional direct competitors but also by four forces in industry’s environment: new market entrants, substitute product, customers and suppliers.
Reduce resistance to change- Tesco always think their capacity and resource, their main aim is profit, so need to cost reduction. People now using the online shopping from which tesco get huge benefit. They do not need to increase more store and employee. Tesco now using latest technologe self service cheek out. It is very easy and faster to get quick transaction. By using this system tesco reduce the employee cost. In online shopping tesco need big warehouse, transport and delivery man. Customer gets good service quick response. Tesco also save huge money by using this system. Tesco have upgraded the transport management system to reduce their delivery cost. The IT people still trying to improved the transport management system software. This software will help tesco to reduce the number of delivery. This software also help to reduce emit co2 gas, delivery cost fuel cost. But system has bad effect of employee. They lose their job. Tesco`s business intelligence people try to finding alternative way. Their other strategy is reducing resistance to change in every department within the corporate structure and employee.
The innovation replenishment application system, Oracle retail warehouse management system and the club curd, help tesco to reduce their extra cost. Tesco get huge benefit from those systems. The replenishment application system helps tesco to inventory in the store. The Oracle retail warehouse management provide tesco good distribution, production and capacity. This system also helps supply chain management system. The club curd gather data from the customer. So all the innovations are related each other.
Role of manager in the innovation
Manager played very important role in tesco especially in the innovation process. Every manager in tesco is very sharp thinker. Manager is the team leader of every store. He has extra energetic power to maintain his team work. He is the developer and expertise in function. Innovation is the process of taking a createve idea and turning it into a useful product, service, or method of operation. The innovative organization is characterized by the ability to channel its creative juices into useful outcomes. When manager talk about changing an organization to make it more creative, they usually mean that they want to stimulate innovation. The manager of tesco doing planning, organizing, leading, monitoring and controlling. Technology has had a positive effect on the internal operations of organization, but it has also changed the manager’s role. Organization today has become integrative communication canters. By linking computer, telephone, fax machine, copiers, printers and the like manager can get complete information quickly. Tesco also use their own software in their system, so every manager are well trained about the operate. By using those innovation manager can better formulate plants, make faster decisions, more clearly define the jobs that workers need to perform and monitor activities. In essence, information technology has enhanced manager ability to more effectively and efficiently. In those innovation are working correctly or not manager are the responsible person to complete this. He is the responsible person to implement those innovations. Tesco`s managerial people have creativity, motivate and encourage employees, scanning the environment, decision maker, entrepreneur, fix any problem quickly, handle under pressures, and negotiator. Every manager is the leader of the company. Manager is not the creator of those innovations but his duty is the implement in operation and practice
Role of an organisation in innovation
Innovation is the main key in tesco for its customer and their business. Companies’ main focus is equally in product and the process of innovation. From the begening of the company they try to keep their price low. The company also try to keep the shopping experience as easy as possible.
Tesco`s main strategy is:-
* Tesco always tries to give good service, that’s why they give very easy and first shopping.
* Around the whole year they offer very reasonable price to help the customer spend little.
* They are offering every store across the world.
* In complexity market they bring simple shopping.
Tescos different type of store gives different service. Tesco express is leading food reatailer, people get food item very quickly in their nereast tescos express. Tescos online shopping is very popular now, more than 1,70,000 order comes in a week and profit more than £35 million GBP. Tesco`s aim is to improve service and value rather than the pricing. Tesco always try to keep their low price value level. The club curd provide tesco leading emerging tread, attract consumer and influence the behaviour of secondary customer to bring them into the fold. The majority customer want good quality product with reasonable price. Tesco provide both. In this sense tesco doing social responsibility with quality product, service and value.
Recommendation and conclusion
Tesco successfully useing the innovations. They implement the innovations in every level of business. Tesco has a mission and vision statement. Mission statement is short term target; vision statement is long term goal. Tesco`s It consultant people research the development in information technology and innovation. They think by developing the technology and the competitive market the innovation is not enough in near future. Now tesco is the leading super market in UK. In future it is not sure that they will lead the market. The innovation is using in tesco is working well in, but in future this innovation will not help anymore, because new technology will come. So it is not sure that they will manage their organization within the innovations. They should concentrate the new technology, new idea to create batter innovation.
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