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FritoFrito-Lay, Inc.

A Strategic Transition (1980 - 1986)

‡ The case provides a comprehensive. Dr. people. and intensely competitive environment. Chen. longitudinal view of changes in context. processes. systems. and information infrastructure and evolutionary process by which they were implemented.1986) TM -2 . faster-paced.Why the Frito-Lay Case? ‡ Learning the company¶s efforts between 1978 and 1992 to transform to meet the challenges of operating in a more complex. structure. strategy. Frito-Lay Case (1980 .

Organizational change. 1980-1986 Dr. Consumer products. The case ends with the abrupt departure of the CEO as profits plunge. ‡ Subjects Covered: Food. Fortune 500. Strategy implementation. Information technology. Students have an opportunity to explore what went wrong and to define an action plan that addresses both the short-term and long-term challenges faced by the incoming CEO.Case Summary ‡ Description: Describes the environmental. Frito-Lay Case (1980 . organizational. Chen. Information systems. ‡ Setting: United States. and information technology context in the late 1970s that led to the development of the initial vision for change and the actions taken to implement that vision.1986) TM -3 . $3 billion revenues.

Chen. Dr. 1980-1986 details the competitive challenges that faced the company in the early 1980s and company president Willard Korn's vision for transforming the organization. Students have an opportunity to explore what went wrong and to define an action plan that addresses both the short. in the form of a handheld computer (HHC). Information technology.and long-term challenges faced by the incoming CEO. Frito-Lay Case (1980 . ‡ Central to that action plan is the development of the information infrastructure that will be needed to support organization change initiatives in the future.1986) TM -4 . ‡ The case ends with Korn's abrupt departure as profits plummet. was a key element of his vision.Case Scenario ‡ A Strategic Transition.

well planned.Analysis of Environment and Strategy ‡ Frito-Lay was highly profitable in the 1960s and 1970s (50%) ‡ Growth rate of 15-20% per year ± geographic expansion and product/market initiatives ± promotions. Frito-Lay Case (1980 .1986) TM -5 . its growth began to evaporate ‡ Change is inevitable ‡ Micromarketing strategy Dr. and product mix ‡ Late 1970s. Chen.

Growth Market Share increase Revenue Increase 1.Balance of Triangle Business Strategy 1.1986) TM -6 . Investment on IT Infrastructure Mobile Device (HHC) Data processing EIS Organization Strategy IT Strategy Dr. 4. 2. Frito-Lay Case (1980 . 5. Chen. Idea sales organization Decentralized org. 4. 3. 3. 2. Segmentation Streamline the process Reengineering 1. 2. 3.

1986) TM -7 . Frito-Lay Case (1980 .Value Management Framework Frito Lay IT Enablers Hand-held computer Network EIS Business Processes Product pricing and mix for route sales Business outcome Market share increase Dr. Chen.

Frito-Lay Case (1980 . Chen.Implications for Organization ‡ People ± skills ± expertise ± knowledge ± 80/20 rule  create a new position. the key account manager  limit the micromarketing strategy to key accounts ± Segmentation  route and supermarket (sales and merchandising activities) Dr.1986) TM -8 .

Dr. and core values and beliefs. structure. processes. radically altering strategy. Frito-Lay Case (1980 . human resource requirements. Chen. ‡ With the overall change initiative resulted in radical change.1986) TM -9 .What is Organization Transformation? ‡ Organization transformation is a comprehensive organization-wide change initiative that results in change in the ³deep structure´ of the firm. systems. the implementation process proceeded through overlapping episodes of incremental and radical change consistent with the change process.

A Framework for Organization Design: Assessing Organization Effectiveness Defining Direction and building infrastructure Environmental Context and Resources Executing and Adapting Creating and Sustaining Value Partner loyalty Society and government loyalty Authority Purpose Core Values. and leadership Shareholder loyalty Figure A-1 Dr. & Core Competencies Decisions & Actions Employee loyalty Value Creation Customer loyalty Strategy Control Information and communication infrastructure Values and Behavior Organizational capabilities. Frito-Lay Case (1980 .1986) TM -10 . resources. Chen.

Chen. groupings Incentives Authority Formal and informal power Coordinating mechanisms Creating and Sustaining Value Partner loyalty Society and government loyalty Purpose. Frito-Lay Case (1980 . resources. processes Control People Values and Work Behavior Decisions & Actions Employee loyalty Value Creation Customer loyalty Organizational capabilities. & Core Competencies Strategy Boundary systems Operating. and leadership Management Technology processes Information and Communication Infrastructure Shareholder loyalty Figure A-1 (b) Dr. Core Values.A Framework for Organization Design: Assessing Organization Effectiveness Defining Direction and building infrastructure Environmental Context and Resources Executing and Adapting Units.1986) TM -11 .

Frito-Lay Case (1980 . Chen.1986) TM -12 .A Framework for Analyzing Organization Design Defining Direction Environmental Context and Resources Executing and Adapting Units. processes Control People Values and Behavior Work Information Policy Management Technology processes Information and Communication Infrastructure Benchmarks ‡Best of class ‡Best of bread ‡Reputation Other lSustainability Exhibit TN-2 Dr. & Core Strategy Competencies Boundary systems operation. groupings Incentives Authority Formal and informal power Coordinating mechanisms Sustaining Value Process Performance ‡Time ‡Quality ‡Cost ‡Flexibility ‡Innovation Potential Stakeholder Satisfaction lEmployee/Partners ‡Customers ‡Shareholders ‡Society Purpose Core Values.

Strategy Ideal Sales Organization .Vision vs. Chen.6% sales growth . Frito-Lay Case (1980 .1986) Infrastructure ‡People ‡Capital ‡Physical ‡Information ‡Systems TM -13 .double-digit profit growth Vision Micromarketing Strategy Implication of Organization Design ‡Core Operating Processes ‡People ‡Structure (changes) ‡Systems Dr.

Management Processes: Set of activities through which an organization manages the design production. markets.Streamlining the Business Cycle 1. M G M T Exhibit TN-9 Dr. delivery. The business cycle is composed of two types of related processes: Core Operating Processes: The primary activities through which an organization designs. and support of its products or services .1986) PROCESS CORE OPERATING P R O C E S S TM -14 . marketing. Chen. produces. Frito-Lay Case (1980 . and supports its products or services. delivers.

1986) TM -15 . Many companies attempts to streamline the business cycle by streamlining operating processes without a corresponding streamlining of management processes M G M T PROCESS CORE OPERATING P R O C E S S Organizational Dysfunction Exhibit TN-9 Dr.Streamlining the Business Cycle 2. Chen. Frito-Lay Case (1980 .

Frito-Lay Case (1980 . integrate and ³time synchronize´ both operating and management processes.Streamlining the Business Cycle 3. Chen. PROCESS CORE OPERATING P R O C E S S M G M T Exhibit TN-9 Dr.1986) TM -16 . The key is to streamline.