FritoLay Case A Strategic Transition, 19801986

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Frito-Lay Case A Strategic Transition, 1980-1986

• Brian Belsby
• Fred Houck
• Osamu Tanizaki
• Jigang Zhu

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Introduction

• Frito-Lay Business Background
• Strategic Applications
• Analysis in Framework of Assessing Organization
  Effectiveness
• Solution

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Frito-Lays Business Background

• Their Business
• Largest supplier of salty snack foods in U.S.
• Started in 1932 by Herman Lay
• Combined with Elmer Doolin in 1961 to become
  Frito-Lay
• Subsidiary of PepsiCo in 1965
• 46 plants and gt150 distribution centers

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Background and Business Cont.

• In 1986 had 40 of market share in 6 billion
  snack industry
• In 1970 company sales blanketed nation sold
  products in over 300,000 retail outlets.
• Sales growth slowed from nearly 20 to 4 in
  early 1980s
• 10,000 person direct sales force

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Strategic Applications

• Before 1968
• A decentralized business comprised of many small
  regional chip companies
• 1968 to mid 1980s
• A centralized foundational structure
• Organized geographic centers or zones

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Strategic Applications, cont.

• Late 1970s, a new strategy
• A micromarketing approach (started in the sales
  organization)
• ISO (Ideal Sales Organization)
• HHC and MIS approach
• 1974 began using optical scanners hand held
  computers (HHC)

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Strategic Applications, cont.

• HHC saved 2.5 hours per week for delivery person
• MIS managers hired to fix problems were not
  effective
• 1978-1981 MIS budget grew from 4 million to 18
  million, and no benefits identified

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Strategic Applications, cont.

• Segmentation
• 1985 began segmentation
• A major restructuring
• Sales force divided into 2 groups, Group and
  Supermarket

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Analysis in Framework of Assessing Organization
Effectiveness
Defining Direction and building infrastructure
Executing and Adapting
Creating and Sustaining Value
Value creation
Environmental Context and Resources
Units, groupings
Society and government loyalty
Partnter loyalty
Incentives
Coordinating mechanisms
Authority
Formal and informal power

Decisions and actions
Customer loyalty
Employee loyalty
Purpose Core Values, Core Competencies
Boundary systems
Strategy
People
Values and Behavior
operation, processes
Control
Work
Management processes
Organizational capabilities, resources, and
leadership
Technology
Shareholder loyalty
Information and communication infrastructure
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Model Defining Direction

• Environmental Context and Resources
• A leader in Salty Chip market
• 300,000 retail outlets
• 10,000 sales people
• 46 plants
• 150 retail centers

Defining Direction and building infrastructure
Environmental Context and Resources

Purpose Core Values, Core Competencies
Organizational capabilities, resources, and
leadership
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Model Defining Direction

• Organizational capabilities, resources,
  leadership
• Economies of scale
• Excellence in execution
• Strengths in distribution sales
• Consistency

Defining Direction and building infrastructure
Environmental Context and Resources

Purpose Core Values, Core Competencies
Organizational capabilities, resources, and
leadership
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Model Defining Direction

• Purpose Core Values
• Service to Sales
• Supplier Network
• Introduce new products fast
• 35 day shelf life

Defining Direction and building infrastructure
Environmental Context and Resources

Purpose Core Values, Core Competencies
Organizational capabilities, resources, and
leadership
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Model Executing Adapting

• Operation, processes
• -100 products to 400 products in fast
  introduction to market
• Boundary systems
• -

Executing and Adapting
Units, groupings
Incentives
Coordinating mechanisms
Authority
Formal and informal power
Decisions and actions
Boundary systems
People
Values and Behavior
operation, processes
Control
Work
Management processes
Technology
Information and communication infrastructure
14
Model Executing Adapting

• Authority
• Unit Groupings
• -Route and Supermarket
• Coordination Mechanisms
• -(KAM) Key Account Manager for managing
  supermarket accounts

Executing and Adapting
Units, groupings
Incentives
Coordinating mechanisms
Authority
Formal and informal power
Decisions and actions
Boundary systems
People
Values and Behavior
operation, processes
Control
Work
Management processes
Technology
Information and communication infrastructure
15
Model Executing Adapting

• Authority
• Formal Informal Power
• -Centralized senior management team
• Incentives
• -Sales commissions for sales people

Executing and Adapting
Units, groupings
Incentives
Coordinating mechanisms
Authority
Formal and informal power
Decisions and actions
Boundary systems
People
Values and Behavior
operation, processes
Control
Work
Management processes
Technology
Information and communication infrastructure
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Model Executing Adapting

• Values and Behavior
• People
• -Management Sales people
• Technology
• -HHC
• Work
• -Salty Snack food manufacturing sales

Executing and Adapting
Units, groupings
Incentives
Coordinating mechanisms
Authority
Formal and informal power
Decisions and actions
Boundary systems
People
Values and Behavior
operation, processes
Control
Work
Management processes
Technology
Information and communication infrastructure
17
Model Executing Adapting

• Control
• Management Process
• -Centralized managers on one floor of office
  buliding
• -Incentives for sales staff
• -Exhibit 5

Executing and Adapting
Units, groupings
Incentives
Coordinating mechanisms
Authority
Formal and informal power
Decisions and actions
Boundary systems
People
Values and Behavior
operation, processes
Control
Work
Management processes
Technology
Information and communication infrastructure
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Model Creating Sustaining Value
Creating and Sustaining Value

• Value Creation
• Partner Loyalty -N/A
• Society Govt Loyalty -N/A
• Employee Loyalty
• -Lost some employees with new incentive plan
• Customer Loyalty
• -Lots of products to choose from freshness
• Shareholder Loyalty
• -Decreased with loss of 20 growth, and
  increased with introduction into foreign markets

Value creation
Society and government loyalty
Partnter loyalty
Customer loyalty
Employee loyalty
Shareholder loyalty
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Summary

• Conclusion of Case in next presentation
• Where should Frito-Lay go from here?