lay inc. (a) case

8/9/2019 lay Inc. (a) Case

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Frito-Lay, Inc. (A)

A Strategic Transition


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Overview of Case

CEO and President Bill Korn is underpressure to return company to double digitsales growth

Ambitious program centered on the HHC Case deals with the background and the

development and implementation of HHC

Role of top management and top ITe3xecutive in bringing about the HHC Deals too with management of change

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Points of Discussion

Strategic importance of HHC Justifying the HHC Investment

Managing Risk Implementation Issues


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Strategic Importance of HHC

F-L Competitive Environment in early 80s

Very service-oriented company

6 of F-Ls potato and corn chip brands among the top 50selling dry grocery brands

Geographical expansion had no where to go F-Ls attempts at new product introductions were onlymarginally successful

Lower inflation in 81 provided for less pricing freedom

National competitors, e.g., P&G, Borden, began to makeinroads in F-Ls territory

Single digit sales growth


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Strategic Importance of HHC

Michael Porter in action: Threat of new entrants

P&G, Borden, Anheuser-Busch

Bargaining power of buyers Supermarket consolidation, dependence onFL due to scanner data, store gets info w/o FL Bargaining power of suppliers Market saturation in traditional markets


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Korns Strategy to Respond

Product Increase from 100 at time of (A) case to400+ by 1990 Increased dependence on smaller share($20-30 million brands, local brands versus

$100 million national brands)

Shortened product lifecycle


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Market Segmentation of sales force to increaseshare in supermarkets and UADTS

accts

UADTS represents 25% of F-L profits but 80%of accounts

F/L lacked information on this market segment

Micromarketing v. broad, national market. Local versus national promotions


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Customers Provide customers with product profitabilityinfo to encourage favorable assignment of

shelf space and neutralize increasingcustomer power

In general, new competitiveenvironment and new strategicinitiatives required


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Frito-Lay Strategic ManagementBrand Mgmt-1985 Profit Planning-1990

Environment Stable; less complex;weak competition; mature

products

Dynamic; complex; strongcompetition; short product

lifecycle

Org. Structure Brand oriented;centralized decisions;national P&L

Product orientation;decentralized decisions;local P&L

Top mgmt goals Market share in nationalbrands; low cost producer;geographic scope

micromarketing

Strategic Uncertainties Market share Product profitability

Control system Price, promotion,packaging; sales volumeis key

Product profitability is key

Time horizon Long planning cycles Short planning cycles


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Agree With Korns Strategy?

Can they implement this strategy withits current business and managementprocesses?

No, change is needed!


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Is HHC Critical to Achieve

Strategic Objectives?

HHC is important first step As it stands at end of (A) case, HHC is best

thought of as a productivity tool for sales

force Potential is there to use the HHC information.

Potential is unrealized without the design ofan extensive information infrastructure, alsocalled an information architecture.


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Current Paper-Based System

HHC would replace manually-written salestickets and manually-prepared reports Time consuming and error prone

Errors

inaccurate reporting of salesactivities influences the accuracy of dataused to develop production, pricing &promotion strategies and sales forcecommissions

Problems expected to increase; old scanner

technology no longer supported by IBM


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Justifying the HHC Investment

Companies often have difficulties in justifyingtechnologies to increase individualproductivity and effectiveness

How much to implement this project? R&D ??? Machinery per truck ($3k*10000) 30 mill. Data center upgrades 1.2 mil. Experienced professionals ($70k*45) 3 mil. Minicomputers for dist. Centers 15 mill

$50 million +++


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Expected Benefits Salespersons save 2 hours per week.

F-L believes this could be used to drive $20 million in

additional sales Can F-L guarantee this figure?

Geographic saturation

Better understanding of markets (UADTS accounts andmicromarketing)

Sales force must be committed to driving new sales orto lower costs

Working with stores for better shelf space Control accounting with sales force

Correct ordering, especially with UADTS accts.

Replace existing dated system

Improved sales force attitude


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Managing Risk- IS HHC A

High Risk Project???

Size Relative to other F-L projects, this is huge Structure

Pilot tests help to increase project structure But how to obtain business benefits unclear

Impact of HHC on mgmt control systems, org.

structure, roles, other functions is not clear These tend toward a moderately structured project


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Managing Risk- IS HHC A

High Risk Project???

Experience with technology HHC is relatively new technology at thetime HHC is VERY NEW technology to F-L


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How To Manage These Risks

Size Formal project management techniques

Modularizing project

Tracking project

Scheduling Structure

Involvement and leadership of sales force

Technical expertise

Strong IT leadership needed, given their lack ofexperience

Examine other HHC-types of uses/companies


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Implementation

Speed of implementation

Evolution or revolution?

Probably phased is better but do not drag

2 year completion

start slow and pick up speed

Where to start?

Worst performing group?

Small, out of the way group to minimize risk?

Some representative

group of employees, customers, etc.?

Best and brightest

to see how to achieve business

benefits?

Well respected persons to train others

Understand the HHC vision & be committed to it


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Implementation

Leadership Business leadership is needed, given theissues addressed already Technology leadership is needed, giventhe issues addressed already Need for organizational redesign andchange leadership needed


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Implementation

Training Turn loose and sink or swim

Sales force still recovering from the

unpopular segmentation policy

F-L used the train the trainer approach F-L focused on driving organizationalchange from the middle


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Summary

Obtain sales force commitment Off-site training

Use of videos

Use of training manuals Video stresses Saving time Error reduction

Info critical to F-L as a company


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Summary

Management of the HHC project size F-L brought in someone whose experienceincluded managing plant construction

projects Los Angeles chosen as best of best tobegin HHC MIS and sales VP led the HHC project

Training done by training the trainer

lay inc. (a) case

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