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Frito-Lay

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Frito-Lay, Inc 1987-1992 Background: In December of 1986, Willard Korn, former CEO of Frito-Lay, Inc. resigns due to profit plummets. Korn had led Frito-Lay down a road to disaster. His micromarketing idea was good at theory but unable to support the needs of the ever growing company. His resignation proved to be a turning point for the company and all of its employees.

A new beginning: A new beginning for the salty snack giant comes from the leadership of Michael Jordan. The CEO of Pepsi Worldwide Co. steps in to reestablish the market share of Frito-Lay Inc.

Jordan as a CEO was attempting to establish a greater market share for profitability, and reorganize the company to streamline operations and decision making. He began his campaign by the abandoning the micromarketing strategy, and moving to transfer control back to corporate headquarters.

It is difficult to say what I would have done differently, since I only know what I have read about the company. I share much of the same feelings that Jordan does, in that the full potential of the HHC strategy is not fully unlocked. I might have looked deeper into what all this raw data was doing for my company. It is beginning to show towards the end of the case that this data overflow is costing the company more than it is providing it. If Jordan and his colleagues had taken a deeper look into what exactly they were going to do with all the data, they might have had a little glimpse of the future.

The HHC project was prototyped in Los Angeles, for one main reason, they had won the 1986 best run sales organization. This project was set into motion by Jordan to help aid the sales force with decision making. Many accounting and distribution problems had been plaguing the company for years, and had begun to show major profit declines. With this in mind the senior managers went on a quest to solve this problem and found the HHC. These HHC solved the problems of the accounting by doing the numbers for the sales force, and solved the problem of distribution by allowing the sales people to effectively and accurately check inventory from their trucks. After the grand idea to implement these marvels of technology, Jordan and his counterparts realized that there must be some kind of information infrastructure to support these devices. So they embarked on partnership with MIS, to develop and jointly manage this information infrastructure. This partnership showed how well aligned the two departments were. There was only one minor detail to look at, the worth of this project would only be as valuable as the sales force.

Jordan and the other senior management decided to overhaul the company from 91-92. These actions were designed to help introduce the micromarketing strategy. They divided the North America into segments run by ABT?s (area business teams). Each of these ABT?s was managed by an Area General Manager, which operated on the same profit objectives as the ABT?s. Each AGM, was given the authority to define how they were going to manage their own area. These major changes seemed to come at a crucial point in time for Frito-Lay. After the implementation of these groups they needed to find a way to review the progress of the teams. The concept of the Period Review Process was introduced. This gave the ABT?s a chance to manage operations and meet planning targets. The true functionality of the planning process to implement micromarketing was beginning to shine through. All these processes were working to create a more streamline company, and giving each ABT a better idea of the information and a more focused outlook on what needed to be done. This was beginning to accomplish their overall goal to be a market leader in the salty snack market.

By 1991, the management began to see their dreams of a utopian company crumbling, all this information and now way to sort the relevant from the irrelevant. The only was to possibly make any sense of this massive information was to be skilled in computer languages. Restructuring was the only way to pick themselves back up from their fall. January 1991, Enrico takes over for Jordan, and hires a firm to study and make recommendations for improvements. After all this reorganization and restructuring the company must once again step back and look at the grim outcome of their attempt to streamline procedures. Job cuts and reorganization was the only way to complete the task of micromarketing. Senior management saccomplishments from 90 ? 91, were too little to late. After all the reorganization and restructuring that went on since the early 80?s, they find themselves out of jobs due to cut backs. These cut backs are a direct effect of all the time and resources used to implement a strategy that was not fully understood. If the company had made attempt so use smaller more precise iterations, in my eyes they would have had a better chance at success.

Frito-Lay strategy has made major changes over the years. Evolving from a paper driven style of management, to a high tech, hand held computer strategy. Their overall strategy is to become the market leader in the salty snack business.

Jordan?s first strategic move for Frito-Lay was to abandon the micromarketing strategy. What Korn had promised to save the company was the very thing that condemned it to failure. In theory the micromarketing strategy was good, but like many things theory and practicality can prove to be two very different things. The control base of the company was shifted back to the original target of the company headquarters. Control was a crucial part of what made Frito-Lay such a player in its market.

After the shift in control base, Jordan made some other changes to attempt to simplify things. He maintained the key account managers, and segmented the sales force to focus on smaller customers. Jordan was a strong believer that the Hand Held Computers (HHC) served a bigger purpose than what met the eye, so he kept that strategy on board. Jordan?s decision to keep this segment of the strategy, allowed for the continuation of the building and implementation for the information systems to support the HHC. These systems were designed to support and help manage decision making and operations.

Frito-Lay core competence is one that is not unique to its market. Many companies share the same vision as Frito. Frito must use its resources to provide itself with the most up-to-date information about what products are selling and what products are going stale on the shelf. In the earlier case we saw that Frito?s strong point was not this aspect of the company, but overtime and new management, we begin to see a light at the end of the tunnel. With the implementation of the HHC, Frito is now at a better stand-point to make decisions dealing with operations and distribution. With the power of the HHC the sales force is able to make more accurate accounting decisions and distribution is now faster, leaving the products with a healthier more elongated self-life. As Kevin Cotty once said, This quotation is an excellent portrayal of the potential that the HHC provided.

Frito-Lay is in the business of distribution of salty foods. This market is one of few new entrants, which makes it a fairly attractive market to be in. The level of new entrants makes this the salty snack market attractive, but the pressures of existing competitors create a constant need for improvement to keep a competitive edge.

Frito-Lay supply chain is a direct component of how well their business functions. It is necessary for the products to be produced, packaged and distributed in a timely fashion. If any one of these procedures should be lagging it will directly affect the others, and in turn directly affect the profits of the company as a whole. Frito-Lay cut out the middle man, and are their own producers and suppliers of their product. This is a cost efficient way to function, but when failure occurs the blame falls nowhere but on them.

Questions 6, 7 & 8.

Frito-Lay is best identified in the differentiation focus sector of the strategic grid. The reasoning behind this lies with the marketing techniques of the firm. When dealing with salty snack foods, cost isn?t a huge driver, but product is. Supplying unique products to unique areas, allows the company to provide a product that is like no other. Having the power and resources to be area specific to attract customers gives Frito-Lay a competitive advantage.

This company is able to run without any unique technology, but being efficient when doing so is difficult. A paper driven sales force proved to be inefficient and costly. The technology of the HHC, is going to be the turning point for the company. With the power to collect and analyze area specific data, the sales force will be able to complete their tasks in a more timely and efficient manner. This can be shown by the continual revenue increase from 1987 thru 1992, when the HHC were implemented.

Frito-Lay falls into Era III, IT environment. With the advancement of the HHC, Frito has become more advanced in it way of conducting business, and will allow for a more productive work force. Evidence of this lies in the comments of the workforce itself saying, ??I would never go back to the old way. The HHC are great. ? The few times I have a shortage now, I can quickly pinpoint the problem by checking inventory in the truck against book inventory, which we print off the HHC every week. Frito-Lay has many strengths in it possession. The implementation of the HHC creates a new found strength for the company.

Jordan comments on the hidden qualities of the HHC. There full usability was not unlocked upon implementation, which left for growth. Their weaknesses caused a greater disturbance than expected. Once again the implementation of the HHC, showed profits for the company, but the information gained was becoming too plentiful. As one employee put it, ?Our biggest assets was our information, and one of our biggest liabilities was our information. With all this new information piling in, the sorting began to take its toll. The usability of the information was weak. The managers were not able to unlock the data, which required special computer knowledge, so the raw data became useless.

Frito-Lay corporate culture consists of is a mix of centralized and decentralized management. Centralization leans toward a more suit and tie culture, where everyone is responsible to the next level, and the decentralized culture is more unique to the individual. Each sales representative is given a sense of independence, which allows them to interact with their customers, but at the same time is responsible to headquarters via, their manager. The hybrid management defines the culture, allowing the company to look independent but at the same time be dependent on one another.

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