A Strategic Transition, 19871992 Abridged

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• A Strategic Transition, 1987-1992 (Abridged)

PRESENTED BY Mary Nellenbach, Kevin Morgans
Yutaka Nakamura June 6, 2001
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Frito-Lay Product Line

• Market dominator in the salty snack industry
• These are the brands currently marketed by the
  company

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January 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

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Three Lessons Learned

• Vision of change must be shared company-wide
• Decentralization lead to loss in efficiency and
  control
• Necessity for organizational restructuring

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Jordans 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

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Functional Redesign
(1/2)

• Company-wide quality improvement program
• Poorest performers targeted for improvement
• Focus on contribution to profit, not just cost
  control

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Functional 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

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Building 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

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Building 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)

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Building 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

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Redesigning 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

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Redesigning 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

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Redesigning 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

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Tuning 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

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Tuning 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

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The 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

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In 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.

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Competitive 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
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Overall goal of IT/MIS implementation
AUTOMATE
ROLES OF INFO SYSTEMS
INNOVATE
INFORMATE
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Creating 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

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In 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

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Future 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

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Possible 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 ()

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Future 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

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Future 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

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Final 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.

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Thank you for your time and attention!

• --Mary, Kevin Yutaka