Case Presentation: Taco Bell Pat Lauscher and Jesse Paprocki

BUS 754: Information Systems Mgmt Spring 2003

HISTORY (EVENTS)

Company Focus:

John Martin joined Taco Bell in 1983 as president and CEO, having previous executive level experience with other fast food chains. He discovered that the company didn’t know what business it was in, so he quickly focused Taco Bell on the fast food industry.

Process Improvements:

1983-1988: Strong growth in the 60s and 70s came to a halt in the early 1980s as the fast food industry began showing signs of maturity. To deal with the potential threat of a maturing business, Taco Bell began a series of process improvement initiatives that really changed the way it did business. These improvements included increased restaurant capacity by modernizing its restaurants to include drive through windows, increased seating capacity, electronic point of sales systems (to replace plastic order boards), and reconfigured food production areas. Taco Bell also added some new menu items during this time.

1988-1991: Continuing to feel the effects of an industry margin squeeze, Martin commissioned two studies that tuned the company in to what the customers really valued, FACT (Fast, Accurate, Clean, and Temperature). In response, the organization stopped viewing quality and price as incompatible tradeoffs.

• The K-minus program transformed the kitchen into a heating and assembly unit and centralized cooking and chopping, to make more room available for drive through and dine-in customers.
• The Speed of Service (SOS) initiative further increased restaurant capacity by allowing for the advanced preparation of Taco Bell’s most popular menu items.

The Role of Management:

Role changes: Martin changed the role of the restaurant manager to that of a general manager, giving them more decision-making authority and more accountability for restaurant performance. Additionally, the role of the district manager was changed to that of a marketing manager. The increased span of control for this position, virtually forced marketing managers to manage by exception and change their approach from policeman to that of a coach.

Compensation: Both types of managers received changes in their compensation that provided for greater earnings potential through performance incentives. Many restaurant managers and district managers did not succeed in their new roles. Fortunately the new compensation plans were designed to attract and retain highly skilled individuals.

Safety nets: As layers of management were removed, three primary safety nets were installed to ensure control and adherence to company policies and values:

• The installation of a toll free customer comment line that was answered by an independent vendor
• Mystery shoppers visited restaurants and provided feedback that was factored into managers’ bonus calculations.
• Random marketing surveys were taken to provide customer feedback that was also used in calculating manager bonuses.

Information systems:

TACO: An information and communication system was needed to support Taco Bell managers in their new roles. As a result, Taco Bell implemented the TACO system that linked each POS system with the marketing managers and corporate headquarters. TACO provided all levels of management with better information and improved communications within the company. This system reduced paperwork, provided reports on costs, provided sales estimates, and gave them email.

TACO II: In the early 90s, a more user-friendly computer system was introduced to support local crew members by allowing them to share information with each other to improve job performance.

Learning Organization:

Shared resources: In the early 1990s Martin again reformulated the company’s strategy, setting out to create and dominate the convenience food business. In support of the new strategy, Taco Bell developed a concept called shared resources, adding new lines of business that could leverage many of the resources that were already in place within Taco Bell and PepsiCo.

Team Managed Units: As competition increased in a maturing market, Martin pushed for Taco Bell to become a learning organization. Success depended upon capturing information and taking action faster than the competition. General managers focused on training and coaching team managed units (TMUs) to become more self-sufficient, thus allowing managers to increase their span of responsibility. The success of this structure was heavily dependent on the information provided by the TACO II system.

ISSUES

1. How should Taco Bell position itself to achieve its vision of growing to $25 billion in sales and 200,000 Points of Access (POAs) by the year 2000?

2. Taco Bell must protect the market share of its core business, fast food. How can information technology be used to help Taco Bell stay ahead of the competition in this increasingly competitive industry?

3. 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 everyday?

RECOMMENDATIONS

1. a) As we move towards 2000, Taco Bell needs to think bigger than the fast food business, and start thinking about Taco Bell the brand. Taco Bell needs to think about capturing more than the consumer’s fast food dollar. While Chevy’s restaurant is providing Taco Bell with a piece of the consumer’s full service restaurant dollar, and Taco Bell brands are showing up in supermarkets, much more can be done. 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.

b) Over the past 10 years, Taco Bell has continued to innovate the products it offers to its customers. In order to reach its sales targets, it is necessary for the company to continue to deliver new and interesting products that the consumers will enjoy. This is necessary in both Taco Bell’s restaurants and supermarket retail sector. In addition to test marketing new products in specific areas, it is recommended that Taco Bell creates and markets regionally and culturally specific products.

c) Finally, Taco Bell must continue to strive to be a truly global company. One hundred POAs in 21 countries is not enough to drive $25 billion in sales. 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.

2. a) To protect its market share in the fast food industry, Taco Bell must continue to focus on providing the customer with the best value. Utilizing modern information technology to capture customer feedback is one way to do this. Taco Bell could dramatically increase its connection to customer attitudes about new products, prices, service, and quality by installing an in-store quality feedback terminal in each restaurant. The information lines connecting each store to the central system are already in place. This would give customers the chance to complete a short survey while the dining experience is still fresh in their mind. Customer surveys can also be made easily accessible via the Internet to provide drive through and carryout customers with an easy way to share comments about their dining experience. After taking the time to complete either type of survey, the customer should receive a coupon for use in a future visit to Taco Bell.

b) Taco Bell can also use information technology to make additional improvements in operating efficiency and expenses. Because of the consistency in production methods from store to store, improvements made in one location are likely to benefit other Taco Bell locations. For this reason, efficiency improvement efforts that produce positive results should be logged into the TACO II system and stored in a central database. The system should be designed to scan actual results, identify opportunities for improvement, and automatically forward potential solutions to the appropriate stores. This would provide stores with a much more comprehensive and timely list of ideas than the current system of communication.

3. a) The supermarket retail sector of the business provides Taco Bell with the greatest opportunity for growth in the near future. To achieve this goal, it will be necessary to set up a distribution network ensuring that all supermarkets carrying the Taco Bell brand can have the latest product, and that their shelves remain stocked.

b) Receiving and interpreting relevant information will be critical to the success of Taco Bell’s new strategy of moving beyond convenience food. Since the company is relatively new to the retail industry, they should consider partnering with a well-established retailer. Partnering with a large national supermarket chain that is currently using a sophisticated data collection system, will allow Taco Bell to quickly achieve economies of scope. With a system in place to receive timely feedback about the pricing and movement of retail products, Taco Bell would be positioned (now and in the future) to run regional trials and quickly learn which products are likely to succeed in a national rollout.