Frito-Lay (some takeaways)
General:
This case represents a company in the midst of a major strategic reorientation.
Objective is to return the company to double-digit levels of growth in profitability in spite of a maturing industry.
The use of hand-held computers (HHC) by the sales force emerges as a critical element in the execution of the strategy.
Remember HHC is enabling technology, micomarketing is not part of the package and more investment will be necessary to achieve any benefits here.
"The focus of the business is on execution and marketing control" - Korn
Economic Analysis:
Costs: Approximately $40 million
Benefits: ??????
(Note: We did this in class. Remember the huge benefit if keypunch salaries are included due to scanner failure. Also, remember that period revenues must be reduced by period operating costs, e.g. telecom)
Risk Factors (CSFs to be Managed):
Project Size (10,000 sales persons, trucks, mini’s, telecom)
300,000 accounts visited, say twice a week, means 100,000 transactions a day. End of day transmission (say 4 hr window) means 25,000 transactions/hr or 450/min. This is for 200 products and 400 are expected by 1990. (Ex 3) Development staff 45/100 involved.
Limit Scope (HHC, not all of micromarketing too)
New Technology (HHC vendor)
Leadership (Executive, Sales Area, Project (Feld))
Employee Acceptance (need?)
Strategic Analysis:
Mature industry, slow growth
New product introductions have not paid off to the expected level
New entrants (P & G-Pringles, Anheuser-Busch-Eagle snacks)
New bargaining power on part of customers (grocery chains, scanner data)
Sales Force (At time of HHC introduction, are these happy campers??)
Two product tickets now with 200 items and more to come
Reorganized, make less money
Heavy paperwork burden
Cost Analysis
Data center investment $1.2 million
Handheld computer cost ($300/salesperson x 10,000) $3 million
Cost of machinery/truck ($3000/truck x 10,000) $30 million
IT Staff (45 x $70,000) $3 million
Mini’s for distribution centers (say 150) $5-$10 M
Training for 10,000 sales people ????
Say, for rough purposes: $40-$50M
Benefits (e.g):
2.5 hrs/week savings = 6.25% increase in sales force-which could generate additional sales or-
efficiency = 625 less people ....................................................... $18M
Better product scheduling................................................................ ???
Stales reductions...................................... (Figures I have indicate $40 M)
Avoid hiring 1,200 keypunchers....................................................... $32M
(1200 x $25K)