Case Study Description of Frito-Lay, Inc.: A Strategic Transition (C)
In 1989, Frito-Lay designed an information technology infrastructure to support time-based competition and organizational restructuring. The company planned to provide timely flexible information to all major decision makers at all levels. This case describes the information support architecture and its anticipated effects.
Authors :: Lynda M. Applegate, Nicole Wishart
Topics :: Technology & Operations
Tags :: Competitive strategy, International business, IT, Organizational structure, Time management, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis
Swot Analysis of "Frito-Lay, Inc.: A Strategic Transition (C)" written by Lynda M. Applegate, Nicole Wishart includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Frito Lay facing as an external strategic factors. Some of the topics covered in Frito-Lay, Inc.: A Strategic Transition (C) case study are - Strategic Management Strategies, Competitive strategy, International business, IT, Organizational structure, Time management and Technology & Operations.
Some of the macro environment factors that can be used to understand the Frito-Lay, Inc.: A Strategic Transition (C) casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, technology disruption,
digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Frito-Lay, Inc.: A Strategic Transition (C)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Frito-Lay, Inc.: A Strategic Transition (C) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Frito Lay, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Frito Lay operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Frito-Lay, Inc.: A Strategic Transition (C) can be done for the following purposes –
1. Strategic planning using facts provided in Frito-Lay, Inc.: A Strategic Transition (C) case study
2. Improving business portfolio management of Frito Lay
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Frito Lay
Strengths Frito-Lay, Inc.: A Strategic Transition (C) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Frito Lay in Frito-Lay, Inc.: A Strategic Transition (C) Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Frito Lay in the sector have low bargaining power. Frito-Lay, Inc.: A Strategic Transition (C) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Frito Lay to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the Frito-Lay, Inc.: A Strategic Transition (C) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Analytics focus
– Frito Lay is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Lynda M. Applegate, Nicole Wishart can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Organizational Resilience of Frito Lay
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Frito Lay does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Technology & Operations industry
– Frito-Lay, Inc.: A Strategic Transition (C) firm has clearly differentiated products in the market place. This has enabled Frito Lay to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Frito Lay to invest into research and development (R&D) and innovation.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Frito Lay digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Frito Lay has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Innovation driven organization
– Frito Lay is one of the most innovative firm in sector. Manager in Frito-Lay, Inc.: A Strategic Transition (C) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Effective Research and Development (R&D)
– Frito Lay has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Frito-Lay, Inc.: A Strategic Transition (C) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Frito Lay has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Frito Lay to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Frito Lay is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Frito Lay has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Highly skilled collaborators
– Frito Lay has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Frito-Lay, Inc.: A Strategic Transition (C) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Frito-Lay, Inc.: A Strategic Transition (C) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Frito-Lay, Inc.: A Strategic Transition (C) are -
Capital Spending Reduction
– Even during the low interest decade, Frito Lay has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Frito-Lay, Inc.: A Strategic Transition (C) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Frito Lay has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Frito Lay, firm in the HBR case study Frito-Lay, Inc.: A Strategic Transition (C) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Frito-Lay, Inc.: A Strategic Transition (C) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Frito Lay 's lucrative customers.
Interest costs
– Compare to the competition, Frito Lay has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High bargaining power of channel partners
– Because of the regulatory requirements, Lynda M. Applegate, Nicole Wishart suggests that, Frito Lay is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Lack of clear differentiation of Frito Lay products
– To increase the profitability and margins on the products, Frito Lay needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Frito Lay has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Frito-Lay, Inc.: A Strategic Transition (C), it seems that company is thinking about the frontier risks that can impact Technology & Operations strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Frito-Lay, Inc.: A Strategic Transition (C), is just above the industry average. Frito Lay needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Frito-Lay, Inc.: A Strategic Transition (C), it seems that the employees of Frito Lay don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Opportunities Frito-Lay, Inc.: A Strategic Transition (C) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Frito-Lay, Inc.: A Strategic Transition (C) are -
Using analytics as competitive advantage
– Frito Lay has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Frito-Lay, Inc.: A Strategic Transition (C) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Frito Lay to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Frito Lay can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Developing new processes and practices
– Frito Lay can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Frito Lay to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Frito Lay can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Frito Lay can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Frito Lay can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Frito Lay can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Frito-Lay, Inc.: A Strategic Transition (C), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Frito Lay can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Technology & Operations segment.
Loyalty marketing
– Frito Lay has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Better consumer reach
– The expansion of the 5G network will help Frito Lay to increase its market reach. Frito Lay will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Learning at scale
– Online learning technologies has now opened space for Frito Lay to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Frito Lay is facing challenges because of the dominance of functional experts in the organization. Frito-Lay, Inc.: A Strategic Transition (C) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Frito-Lay, Inc.: A Strategic Transition (C) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Frito-Lay, Inc.: A Strategic Transition (C) are -
Shortening product life cycle
– it is one of the major threat that Frito Lay is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Frito Lay in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing wage structure of Frito Lay
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Frito Lay.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Frito Lay in the Technology & Operations sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Frito Lay with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Frito Lay business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Frito Lay can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Frito-Lay, Inc.: A Strategic Transition (C), Frito Lay may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Frito Lay will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Frito Lay can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Frito Lay has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Frito Lay needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Frito Lay needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Frito-Lay, Inc.: A Strategic Transition (C) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Frito-Lay, Inc.: A Strategic Transition (C) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Frito-Lay, Inc.: A Strategic Transition (C) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Frito-Lay, Inc.: A Strategic Transition (C) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Frito-Lay, Inc.: A Strategic Transition (C) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Frito Lay needs to make to build a sustainable competitive advantage.