Case analysis- Do you think that the IT deployment in Frito Lay was strategic?

by priyamshah (student)

1. Do you think that the IT deployment in Frito Lay was strategic? Justify your answer

Yes, in our opinion IT deployment in Frito Lay was strategic.

What was their micromarketing strategy?

Prior to IT deployment, Frito Lays lacked organization and management processes along with the necessary information systems. Also the old strategy for decision making was adopted. And the paper based technology was not enough to react to rapidly changing market conditions. A lack of timely information limited their ability to move to their strategic vision.

Lessons learnt

Frito Lays didn’t want to give up the benefits of their centralized structure while deploying a decentralized structure. They wanted to reap the benefits of both the structures to ease their decision making and achieve control over their operations.
Frito Lays decided to recast their vision so as to make it corporate-oriented rather than a sales oriented initiative. Deploying IT would help Frito Lays achieve their objective of a corporate oriented vision.
The integrated nature of their business and lack of inventory buffers, called for an inter-functional approach.

Functional Redesign

For the strategic plans to succeed, a substantial IT infrastructure would need to be put in place. The HHC concept was a solution to Frito Lay’s lack of good information that would make their micromarketing strategy feasible. Owing to the implementation of HHC the following benefits were attained that helped Frito Lays in achieving their strategic objectives:

Information collected from HHC helped to increase the effectiveness of micromarketing strategy along with improving efficiency of the sales operations
HHC synchronized the book inventory with the truck inventory to pinpoint mistakes if any. This lead to dramatic decrease in accounting errors
Non value added time was spent in serving customers

Building Information Infrastructure

To optimize their whole business rather than just singular functions, series of IT projects were undertaken to redesign the operating process.
MIS was implemented to enable Frito Lays to get a strategic perspective of the top management with respect to ...

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Information collected from HHC helped to increase the effectiveness of micromarketing strategy along with improving efficiency of the sales operations
HHC synchronized the book inventory with the truck inventory to pinpoint mistakes if any. This lead to dramatic decrease in accounting errors
Non value added time was spent in serving customers

Building Information Infrastructure

To optimize their whole business rather than just singular functions, series of IT projects were undertaken to redesign the operating process.
MIS was implemented to enable Frito Lays to get a strategic perspective of the top management with respect to market dynamics.
For rapid business decision making Frito Lays, wanted to implement a set of planning and control systems. This information was synced to their business development cycle.

Finance

IT helped Frito Lays to make conclusive financial decisions with the help of analytical tools. These tools provided comparative data

Thus, Frito Lay’s use of IT was assisting in making strategic business decisions and helped in better determination of the competitive forces of the snack industry.

Q2. Discuss the way the organizational capabilities had been built at Frito Lay to execute its business strategy effectively. Address the organizational capabilities under the following aspects:

Process

Initially Frito-Lay used to have a single approach of delivering the products which involved shipping from the plants to a warehouse and then to a distribution center, where the product was picked by the sales force. This process sometimes took seven days or more. This was far too much considering the fact that the shelf life of the product was 35 days.
But as a part of their new processes, they had two new approaches. First of them was Promotion Direct Delivery, which involved bypassing the warehouses and distribution centers to give enable the direct delivery of the product within one or two days from the manufacturing plants to supermarkets so as to support products on promotion. The second approach was Total Direct Delivery, which used the direct delivery process to enable key accounts to receive the product line within two days.
Thus, initially the processes adopted by Frito-Lay were very time consuming in terms of the delivery of the product. By adopting the two new approaches mentioned above, they made sure that the product reaches the market in time so that the promotion of the product in the target markets could be done in a better and efficient manner.

Infrastructure

In the mid eighties, Frito-Lay decided to implement handheld computers (HHC) into the 32 geographic areas that it operated in. It helped massively in productivity and effectiveness and defined the information and reports that could be used by the sales force supervisors.
The implementation of HHC made sure that there were no accounting errors in the inventory. Whenever there were some problems and shortages, there was no need to manually count the stock as the HHC made sure that the stock in the inventories was enough for the supply of the products.
HHC used to save three hours a week on an average on the sales end. Also, it reduced a lot of paper work as well.

Organization (Structure) and Culture

In 1990, Frito-Lay did a reorganization of North American operations into four regional headquarters offices known as Area Business Teams (ABTs). These ABTs were made up of director of marketing, vice president of zone sales, director of planning and control, vice president of manufacturing, vice president of logistics, and vice president of employee relations. All of these managers reported to an Area General Manager (AGM).The AGM reports to the senior vice president of field operations who in turn reported to the president.
In 1991 restructuring, the AGM position was elevated to division president which reported directly to the CEO. The ABTs were renamed divisions and the regions were renamed zones. Also, 22 new ABTs were created in order to improve the business processes and speed up the product delivery as well.

People and Partners:

The most important change came in when Michael Jordon took the control of Frito-Lay in January 1987.
For building the organizational capabilities it was required to execute strategy in a fast paced, uncertain business environment which required support of people and partners of Frito-Lay. For example, during the implementation of HHC both the headquarters and regional personnel accepted it.
The partners helped in the implementation of two delivery models of Frito-Lays, PDD and TDD.
Roger Enrico, the new CEO of Frito Lay brought in organization wide changes after the recommendations of Charlie Feld. Roger Enrico was responsible for elevating the positions, renaming of zones and elimination of positions.

Leadership and Governance:

Under the leadership of Michael Jordon the vision of Frito Lay was recast for change as a corporate wide initiative. He adopted an integrated nature of the business which required interfunctional approach. Jordon and senior management led the company in the implementation of micromarketing strategy without loss of control.
In the implementation of HHC, the joint leadership from the technology and business functions played an important role.
The senior management was also instrumental in setting up the information infrastructure at Frito-Lays.
Leo Keily with his leadership was able to change the perspective of the business area team managers from their own personal goals to business perspective which involved all parts of the business. Both Jordon and Keily took the initiative for rapid business decision making.
The headquarters at Frito Lay was also able to address the concerns of ABT about information access by instituting a new position, the area information manager (AIM).
Roger Enrico whose take on the leading Frito Lays was different than that of Michael Jordan, he was able to raise the net income and sales of Frito Lays (graphs).
In governance, AGMs instituted weekly mini-reviews called the Breakfast Club. This weekly reviews was to be in pace with the changes in the business.
Governance was also responsible in shifting the focus of the employees from their personal goals to the organization goals.