Title: A Strategic Transition, 19871992 Abridged
1- A Strategic Transition, 1987-1992 (Abridged)
PRESENTED BY Mary Nellenbach, Kevin Morgans
Yutaka Nakamura June 6, 2001
2Frito-Lay Product Line
- Market dominator in the salty snack industry
- These are the brands currently marketed by the
company
3January 1987
- Michael Jordan, CEO of PepsiCo Worldwide Foods,
took charge of Frito-Lay following Willard Korns
resignation - Abandoned the micromarketing strategy
(centralized decision making) - Reestablished consistency company-wide
- Maintained KAM positions salesforce segmentation
- Implemented the HHC technology
- Reaffirmed the strategic transition, but
refocused its execution
4Three Lessons Learned
- Vision of change must be shared company-wide
- Decentralization lead to loss in efficiency and
control - Necessity for organizational restructuring
5Jordans Initiatives (1987-1989)
- Focus on two interrelated efforts to redevelop
organizational and information infrastructure - Plan to eventually re-implement the
micromarketing strategy without loss of control
6Functional Redesign
(1/2)
- Company-wide quality improvement program
- Poorest performers targeted for improvement
- Focus on contribution to profit, not just cost
control
7Functional Redesign
(2/2)
- Implementation of the HHCs
- Prototype testing with team support
- Salesforce tasked with productivity target
achievement goals to help justify IT expense - HHC project a joint effort across functions
- Well received saved salesforce valuable time
8Building Info Infrastructure
(1/3)
- Realization of the need for information to
support the micromarketing strategy - Help streamline, integrate and time-synchronize
operating processes - Operation is only as strong as its weakest link
- Supporting IT found to contain varying levels of
effectiveness
9Building Info Infrastructure
(2/3)
- Redesign of management structures, systems and
decisions that provided operational control - Integrate corporate strategic perspective with
salesforces local market knowledge (establish a
link from top to bottom)
10Building Info Infrastructure
(3/3)
- Late 1989, IS implementation at corporate
headquarters - Executives armed with more timely information,
allowing better centralized business management
and control - Same info not yet being shared with field
management - Profitability increased however, market share
improvements not anticipated until implementation
of micromarketing strategy
11Redesigning the Organization
(1/3)
- Jordan reorganizes nationwide operationsfirst
effort to decentralize organizational structure - Each ABT given approach authority
- ABT managers encouraged to stop viewing
information as an outcome, and become responsive
12Redesigning the Organization
(2/3)
- Implementation of planning and control systems
- Timed to the business information cycle
reflective of the need for quicker decision
making - Increased frequency of operational planning and
performance reviewing - By 1991 production targets were established that
integrated cross-functional view of the business
13Redesigning the Organization
(3/3)
- ABT managers broaden focus from functions to
entire business - Significant reduction in product delivery times
- Finance function takes on new, non-traditional
role not simply reporting PL outcomes
14Tuning the Info Infrastructure
(1/2)
- 1990 ABT managers experience information
overload - Information not tailored to support business
decisions - Pre-formatted reporting systems made data
retrieval time consuming and complicated
15Tuning the Info Infrastructure
(2/2)
- Corporate headquarters responds to IS problems by
assigning regional MIS personnel - Helped decentralize MIS function
- Helped ABT analysts spend less time retrieving
data and more time analyzing - MIS personnel plays guiding role
16The 1991 Restructuring
- Roger Enrico named new CEO of Frito-Lay
- Management consultants immediately hired to
recommend the best organizational structure - MIS leader assigned to head restructuring
realizing MIS critical role in the process - Company-wide reorganization occurred, including
redesign of geographical divisions to maintain
consistency with parent company, PepsiCo
17In Summary...
- FRITO-LAYS USE OF IT
- A tool to assist in making strategic
- business decisions, and better
- determine the competitive forces that
- were causing change in the snack food
- industry.
18Competitive Forces in the Snack Food Industry
- Michael Porters Five Competitive Forces Model
New Market Entrants
Customers
Threats
Traditional Competitors
Organization
Bargaining Power
Substitute Products and Services
Suppliers
19Overall goal of IT/MIS implementation
AUTOMATE
ROLES OF INFO SYSTEMS
INNOVATE
INFORMATE
20Creating consistency with PepsiCo
- The 1991 organizational restructuring that
established 2 divisions and 22 ABTs was possible
because of the IT architecture finally in place. - IT was used as
- Communications platform
- Decision support system (DSS)
- Implementation tool
21In Retrospect...
- Michael Jordan, former CEO, learned that the
micromarketing strategys failure was due to
inadequate MIS - After years of organizational redesign, new IT
architecture and MIS were established which
better prepared the company for re-implementation
of the micromarketing strategy by the early 1990s
22Future Recommendations
- We suggest the following considerations when
assimilating future IT improvements at Frito-Lay - Identify new technologies and their required
investment - Identify factors in learning and adapting new
technology - Identify what level of management control is
applicable - Identify when widespread technology transfer has
been reached
23Possible Future IT Problems
- IT business models are difficult to find
- Continuously changing environment
- IT use related conflicts
- Technology problems/quirks
- Legal issues
- Security
- Connectivity
- Management control capabilities
- Hidden Costs ()
24Future Goals for Frito-Lay
- Reduce cycle times for all nationwide markets
(1-2 days delivery for ALL goods) - Increase penetration of global markets (only in
10 major markets internationally) reduce risks
associated with exposure to domestic competitive
pressures
25Future Benefits of IT
- Improve automation of information collection and
reporting systems - Reduction in bottlenecks
- Assist in process reengineering
- New IT Applications
- Global networks
- Enterprise networks
- Distributed computing
- Portable computing
- Accessibility
26Final Concluding Comment
- Senior management must continue to take an
active role in the development and use of IT in
their business strategy. They must broaden their
view of the organization, as a whole, rather than
individual functions. IT is a facilitating tool
that will aid in every aspect of successful
business decision-making efforts in the new
business environment.
27Thank you for your time and attention!