FritoLay, Inc'

1
Frito-Lay, Inc.

• A Strategic Transition
• (1980 - 1986)

2
Why the Frito-Lay Case?

• Learning the companys efforts between 1978 and
  1992 to transform to meet the challenges of
  operating in a more complex, faster-paced, and
  intensely competitive environment.
• The case provides a comprehensive, longitudinal
  view of changes in context, strategy, structure,
  systems, processes, people, and information
  infrastructure and evolutionary process by which
  they were implemented.

3
Case Summary

• Description Describes the environmental,
  organizational, and information technology
  context in the late 1970s that led to the
  development of the initial vision for change and
  the actions taken to implement that vision. The
  case ends with the abrupt departure of the CEO as
  profits plunge. Students have an opportunity to
  explore what went wrong and to define an action
  plan that addresses both the short-term and
  long-term challenges faced by the incoming CEO.
• Subjects Covered Food, Information systems,
  Information technology, Organizational change,
  Strategy implementation.
• Setting United States Consumer products
  Fortune 500 3 billion revenues 1980-1986

4
Case Scenario

• A Strategic Transition, 1980-1986 details the
  competitive challenges that faced the company in
  the early 1980s and company president Willard
  Korn's vision for transforming the organization.
  Information technology, in the form of a handheld
  computer (HHC), was a key element of his vision.
• The case ends with Korn's abrupt departure as
  profits plummet. Students have an opportunity to
  explore what went wrong and to define an action
  plan that addresses both the short- and long-term
  challenges faced by the incoming CEO.
• Central to that action plan is the development of
  the information infrastructure that will be
  needed to support organization change initiatives
  in the future.

5
Analysis of Environment and Strategy

• Frito-Lay was highly profitable in the 1960s and
  1970s (50)
• Growth rate of 15-20 per year
• geographic expansion and product/market
  initiatives
• promotions, well planned, and product mix
• Late 1970s, its growth began to evaporate
• Change is inevitable
• Micromarketing strategy

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Balance of Triangle

• Growth
• Market Share increase
• Revenue Increase

Business Strategy

• Idea sales organization
• Decentralized org.
• Segmentation
• Streamline the process
• Reengineering

• Investment on IT Infrastructure
• Mobile Device (HHC)
• Data processing
• EIS

Organization Strategy
IT Strategy
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Value Management Framework
Frito Lay
Business Processes
IT Enablers
Business outcome
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Implications for Organization

• People
• skills
• expertise
• knowledge
• 80/20 rule
• create a new position, the key account manager
• limit the micromarketing strategy to key
  accounts
• Segmentation
• route and supermarket (sales and merchandising
  activities)

9
What is Organization Transformation?

• Organization transformation is a comprehensive
  organization-wide change initiative that results
  in change in the deep structure of the firm,
  radically altering strategy, structure, systems,
  processes, human resource requirements, and core
  values and beliefs.
• With the overall change initiative resulted in
  radical change, the implementation process
  proceeded through overlapping episodes of
  incremental and radical change consistent with
  the change process.

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A Framework for Organization Design Assessing
Organization Effectiveness
Defining Direction and building infrastructure
Executing and Adapting
Creating and Sustaining Value
Value Creation
Environmental Context and Resources
Society and government loyalty
Partner loyalty
Authority

Decisions Actions
Customer loyalty
Employee loyalty
Purpose Core Values, Core Competencies
Strategy
Values and Behavior
Control
Information and communication infrastructure
Organizational capabilities, resources, and
leadership
Shareholder loyalty
Figure A-1
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A Framework for Organization Design 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
Partner loyalty
Incentives
Coordinating mechanisms
Authority
Formal and informal power

Decisions Actions
Customer loyalty
Employee loyalty
Purpose, Core Values, Core Competencies
Boundary systems
People
Strategy
Values and Behavior
Operating, processes
Control
Work
Management processes
Technology
Organizational capabilities, resources, and
leadership
Shareholder loyalty
Information and Communication Infrastructure
Figure A-1 (b)
12
A Framework for Analyzing Organization Design
Defining Direction
Environmental Context and Resources

Purpose Core Values, Core Competencies
Strategy
Information Policy
Information and Communication Infrastructure
Exhibit TN-2
13
Vision vs. Strategy
Ideal Sales Organization - 6 sales growth -
double-digit profit growth
Vision
Implication of Organization Design
Infrastructure
14
Streamlining the Business Cycle
1. The business cycle is composed of two types of
related processes
Core Operating Processes The primary activities
through which an organization designs, produces,
markets, delivers, and supports its products or
services.
Management Processes Set of activities through
which an organization manages the design
production, marketing, delivery, and support of
its products or services .
Exhibit TN-9
15
Streamlining the Business Cycle
2. Many companies attempts to streamline the
business cycle by streamlining operating
processes without a corresponding streamlining of
management processes
Organizational Dysfunction
Exhibit TN-9
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Streamlining the Business Cycle
3. The key is to streamline, integrate and time
synchronize both operating and management
processes.
Exhibit TN-9