Description
It Explains the Case analysis of Taco Bell Corp.
Case Study – Taco Bell Corp
1. Background of the case
John Martin joined Taco Bell in 1983 as president and CEO, having previous executive level experience with other fast food chains. Pepsi Co. had acquired Taco Bell in 1978. The business model was based mainly on franchising with 60% of the 1489 outlets franchised. When John Martin took the reins of Taco Bell in 1983, he found a company in crisis. Same-store sales had been declining for three straight years. He discovered that the company business (fast-food business or Mexican-food business) and customer base was not clearly defined. At the same time Martin believed that the entire QSR business had become too focused on process and had moved away from its core strengths. What had driven this industry from its birth were the reasonable food quality, the speedy, casual service, and low prices. The company tried to reinforce the same factors in their business. They developed this philosophy around the acronym FACT. Customers define quality as food served fast, orders delivered accurately, restaurants that are clean, and food served at the right temperature. They had to add more value to their product. The company developed a solution to attain this around the FACT objectives. The various steps taken include ? ? ? ? ? Resizing the kitchen and upgrading technologically to improve speed of service, Introduction of a MIS project to create an empowered workforce Restructuring the workforce to improve efficiency and achieve greater levels of decentralization Training and development Developing a better controlling mechanism
While refining the systemic restructurings that have made the "new Taco Bell" one of the industry's fastest-growing and most talked-about foodservice organizations, Taco Bell president John E. Martin and his colleagues are taking unprecedented actions aimed at expanding their operation to 10,000 units with some $20 billion in sales by 2001.
2. Objectives of the company
The main objectives of the company include:
1. To achieve its vision of growing to $25 billion in sales and 200,000 Points of Access (POAs) by the year 2000 2. To have 1000 Restaurant General Managers who reported directly to the CEO 3. Enhance sales and maximize profits by exploring alternate channels of distribution 4. Maintaining and enhancing Taco Bell’s position 5. Creating maximum value for the customer
3. Problems/Challenges faced
1. What is the best way for Taco Bell to capture a greater share of the one billion eating opportunities that exist in the United States every day? 2. Will increasing the number of employees and creating a flatter structure work? 3. Will usage of POD as a distribution channel succeed? 4. How to effectively manage the ‘Taco Bell’ brand? 5. What else could be done to achieve the dream targets? 6. Should the company continue with the current plan of action?
4. Solutions
Capturing Greater share of the market: Capturing a greater share of the market demands better availability and visibility of the product. For this the company should increase the number of stores and hence the number of employees. The company needs to target newer segments of the customers while maintaining the old customer base. This leads the company to exploring alternative distribution channels. Increasing the number of employees: Increasing the number of employees and increasing efficiency translates to higher growth rates. This would mean increase in the number of distribution points. John Martin's vision is to have 10,000 RGM's. Each restaurant is to have one RGM and if one POD is going to be attached to each restaurant, then 10,000 RGM means 10,000 restaurants and 10,000 POD's. Total 20,000 Points of distribution. Taco Bell's executives believed that a marketing manager can control 30 restaurants and if one POD can be added to each restaurant, then the total POD's under each marketing manager can be pushed to 60. John Martin wants to make the organization as flat as possible. But without sufficient training increasing span of control can be detrimental and can take a toll on the quality. Recruiting managers from outside the company and letting go or demoting the existing managers can be demotivating for the existing employees. Choice of Distribution Channel: Taco Bell used franchises as the primary channel of distribution. 60% of Taco Bell outlets were franchises. The rationale behind this approach was: reaching maximum people with minimum investment. The differentiating factors in using this distribution channel are: ? ? ? The investment required from the parent company is minimum, compared to setting up its own shops. Franchising model enables faster growth in terms of number of outlets and better reach to customer. Difficulty in maintaining the same standards throughout all franchisee outlets, If standards are not met, it will affect the parent companies brand image
?
Ownership engenders a greater sense of responsibility. The franchise owners naturally tend to generate maximum profits by following best practices. They are more motivated.
Introduction of PODs would give better visibility to the brand and thus can increase the customer base. Also POD targets a different segment of customers. People how want faster service and are satisfied with limited menu will be attracted to PODs. Sale at the restaurant will have a minimum impact as the POD also focuses on the FAST delivery as part of its USP. Even if PODs were not introduced, these customers wouldn’t have visited the restaurant as it doesn’t satisfy their needs. In sync with the current strategy Taco Bell should introduce a POD which allows ownership for the entrepreneur. ? ? Sardine store being a Taco Bell owned entity does not fit. Nine foot cart and Nine- foot stand alone cart represent one type of business opportunity, where the POD is mobile. This type of POD can be carried to the different locations of sale as and when needed. The cost benefit analysis suggests that Nine-Foot cart represents a better business proposition for a prospective entrepreneur. ? Custom facade represents another type of business opportunity, where the POD is fixed at one location. This type is better suited at locations like malls where customers want fast service and the location need not be changed.
Though the return on investment suggests Nine foot cart as the most viable option, a mix of Nine-Foot carts and Custom facades should be introduced as they target different consumers.
Managing the Brand: For a fast food chain like Taco Bell, brand perception will depend mainly on quality of food and service and on value for money. The product sold is not a premium product nor is it sold for a niche customer base. It’s a common man's product. Taco Bell focuses on higher volumes by increasing customer base and hence the company’s focus is to maximize market penetration. This can be done only by extensive distribution. The introduction of PODs will not dilute the brand image of Taco Bell.
Other steps that can be taken to achieve the dream targets: ?
As we move towards 2000, Taco Bell needs to think bigger than the fast food business, and start thinking about Taco Bell the brand. Partnerships with other successful brands can increase the visibility of the Taco Bell name. Sponsorships of sporting events and other public contests can also give Taco Bell needed exposure to grow the brand.
?
It is necessary for the company to continue to deliver new and interesting products that the consumers will enjoy. For this the company should continue innovation of new products. In addition to test marketing new products in specific areas, it is recommended that Taco Bell creates and markets regionally and culturally specific products.
?
Taco Bell must continue to strive to be a truly global company. By expanding the restaurant base, this will also open the door to expand the supermarket retail sector in these countries. The goal should not be defined as being an American company, but a global company.
Existing Plan of action: John Martin has taken and implemented several path breaking decisions. The major decisions include
? K minus plan for resizing kitchen: This increased efficiency and standardized the service to a large extent ? Restructuring organization: The roles were not well defined and most of the managerial work was inefficient. Restructuring increased the efficiency to a large extent. But no specific steps were taken for reducing turnover of the ground level staff. Increasing the span of control at such a great pace can pose problems. ? Training & development: The restructuring is accompanied by training, which is necessary. Again there is no specific mention of training for the non managerial staff. As the managerial workforce is shrinking, it would be beneficial if the non managerial workforce is trained in quality at source etc. ? New production techniques: This increases the production efficiency ? New products in menu: Continuous innovation increases the sales but this can make the production process cumbersome. ? FACT rather than "news": FACT helped create more value for the customer.
? TACO: Helped create a much more informed workforce and increased planning efficiency and effectiveness to a great extent.
doc_511869129.docx
It Explains the Case analysis of Taco Bell Corp.
Case Study – Taco Bell Corp
1. Background of the case
John Martin joined Taco Bell in 1983 as president and CEO, having previous executive level experience with other fast food chains. Pepsi Co. had acquired Taco Bell in 1978. The business model was based mainly on franchising with 60% of the 1489 outlets franchised. When John Martin took the reins of Taco Bell in 1983, he found a company in crisis. Same-store sales had been declining for three straight years. He discovered that the company business (fast-food business or Mexican-food business) and customer base was not clearly defined. At the same time Martin believed that the entire QSR business had become too focused on process and had moved away from its core strengths. What had driven this industry from its birth were the reasonable food quality, the speedy, casual service, and low prices. The company tried to reinforce the same factors in their business. They developed this philosophy around the acronym FACT. Customers define quality as food served fast, orders delivered accurately, restaurants that are clean, and food served at the right temperature. They had to add more value to their product. The company developed a solution to attain this around the FACT objectives. The various steps taken include ? ? ? ? ? Resizing the kitchen and upgrading technologically to improve speed of service, Introduction of a MIS project to create an empowered workforce Restructuring the workforce to improve efficiency and achieve greater levels of decentralization Training and development Developing a better controlling mechanism
While refining the systemic restructurings that have made the "new Taco Bell" one of the industry's fastest-growing and most talked-about foodservice organizations, Taco Bell president John E. Martin and his colleagues are taking unprecedented actions aimed at expanding their operation to 10,000 units with some $20 billion in sales by 2001.
2. Objectives of the company
The main objectives of the company include:
1. To achieve its vision of growing to $25 billion in sales and 200,000 Points of Access (POAs) by the year 2000 2. To have 1000 Restaurant General Managers who reported directly to the CEO 3. Enhance sales and maximize profits by exploring alternate channels of distribution 4. Maintaining and enhancing Taco Bell’s position 5. Creating maximum value for the customer
3. Problems/Challenges faced
1. What is the best way for Taco Bell to capture a greater share of the one billion eating opportunities that exist in the United States every day? 2. Will increasing the number of employees and creating a flatter structure work? 3. Will usage of POD as a distribution channel succeed? 4. How to effectively manage the ‘Taco Bell’ brand? 5. What else could be done to achieve the dream targets? 6. Should the company continue with the current plan of action?
4. Solutions
Capturing Greater share of the market: Capturing a greater share of the market demands better availability and visibility of the product. For this the company should increase the number of stores and hence the number of employees. The company needs to target newer segments of the customers while maintaining the old customer base. This leads the company to exploring alternative distribution channels. Increasing the number of employees: Increasing the number of employees and increasing efficiency translates to higher growth rates. This would mean increase in the number of distribution points. John Martin's vision is to have 10,000 RGM's. Each restaurant is to have one RGM and if one POD is going to be attached to each restaurant, then 10,000 RGM means 10,000 restaurants and 10,000 POD's. Total 20,000 Points of distribution. Taco Bell's executives believed that a marketing manager can control 30 restaurants and if one POD can be added to each restaurant, then the total POD's under each marketing manager can be pushed to 60. John Martin wants to make the organization as flat as possible. But without sufficient training increasing span of control can be detrimental and can take a toll on the quality. Recruiting managers from outside the company and letting go or demoting the existing managers can be demotivating for the existing employees. Choice of Distribution Channel: Taco Bell used franchises as the primary channel of distribution. 60% of Taco Bell outlets were franchises. The rationale behind this approach was: reaching maximum people with minimum investment. The differentiating factors in using this distribution channel are: ? ? ? The investment required from the parent company is minimum, compared to setting up its own shops. Franchising model enables faster growth in terms of number of outlets and better reach to customer. Difficulty in maintaining the same standards throughout all franchisee outlets, If standards are not met, it will affect the parent companies brand image
?
Ownership engenders a greater sense of responsibility. The franchise owners naturally tend to generate maximum profits by following best practices. They are more motivated.
Introduction of PODs would give better visibility to the brand and thus can increase the customer base. Also POD targets a different segment of customers. People how want faster service and are satisfied with limited menu will be attracted to PODs. Sale at the restaurant will have a minimum impact as the POD also focuses on the FAST delivery as part of its USP. Even if PODs were not introduced, these customers wouldn’t have visited the restaurant as it doesn’t satisfy their needs. In sync with the current strategy Taco Bell should introduce a POD which allows ownership for the entrepreneur. ? ? Sardine store being a Taco Bell owned entity does not fit. Nine foot cart and Nine- foot stand alone cart represent one type of business opportunity, where the POD is mobile. This type of POD can be carried to the different locations of sale as and when needed. The cost benefit analysis suggests that Nine-Foot cart represents a better business proposition for a prospective entrepreneur. ? Custom facade represents another type of business opportunity, where the POD is fixed at one location. This type is better suited at locations like malls where customers want fast service and the location need not be changed.
Though the return on investment suggests Nine foot cart as the most viable option, a mix of Nine-Foot carts and Custom facades should be introduced as they target different consumers.
Managing the Brand: For a fast food chain like Taco Bell, brand perception will depend mainly on quality of food and service and on value for money. The product sold is not a premium product nor is it sold for a niche customer base. It’s a common man's product. Taco Bell focuses on higher volumes by increasing customer base and hence the company’s focus is to maximize market penetration. This can be done only by extensive distribution. The introduction of PODs will not dilute the brand image of Taco Bell.
Other steps that can be taken to achieve the dream targets: ?
As we move towards 2000, Taco Bell needs to think bigger than the fast food business, and start thinking about Taco Bell the brand. Partnerships with other successful brands can increase the visibility of the Taco Bell name. Sponsorships of sporting events and other public contests can also give Taco Bell needed exposure to grow the brand.
?
It is necessary for the company to continue to deliver new and interesting products that the consumers will enjoy. For this the company should continue innovation of new products. In addition to test marketing new products in specific areas, it is recommended that Taco Bell creates and markets regionally and culturally specific products.
?
Taco Bell must continue to strive to be a truly global company. By expanding the restaurant base, this will also open the door to expand the supermarket retail sector in these countries. The goal should not be defined as being an American company, but a global company.
Existing Plan of action: John Martin has taken and implemented several path breaking decisions. The major decisions include
? K minus plan for resizing kitchen: This increased efficiency and standardized the service to a large extent ? Restructuring organization: The roles were not well defined and most of the managerial work was inefficient. Restructuring increased the efficiency to a large extent. But no specific steps were taken for reducing turnover of the ground level staff. Increasing the span of control at such a great pace can pose problems. ? Training & development: The restructuring is accompanied by training, which is necessary. Again there is no specific mention of training for the non managerial staff. As the managerial workforce is shrinking, it would be beneficial if the non managerial workforce is trained in quality at source etc. ? New production techniques: This increases the production efficiency ? New products in menu: Continuous innovation increases the sales but this can make the production process cumbersome. ? FACT rather than "news": FACT helped create more value for the customer.
? TACO: Helped create a much more informed workforce and increased planning efficiency and effectiveness to a great extent.
doc_511869129.docx