What were Fields initial actions upon acquiring LPB - Case Study Example

Case Mrs. Fields Cookies Eric J. Thompson Fields write-up --What were Field’s initial actions upon acquiring LPB? Introduction It wasin April 1987 when Mrs. Fields’ Holdings Inc., seeking diversification made a move to acquire La Petite Boulangerie. After finalizing the acquisition from PepsiCo, a French bakery/sandwich chain, the very next month Randy curtailed the staff strength of the acquired company from 53 to three, stating, “We absorbed many of the overhead functions into our existing organization including accounting, finance, personnel, human resources, training, and development…”, reinstating two people in operations and one in R & D. Why did they take these actions? Randy, the CFO of Mrs. Fields’ had a different opinion on the acquisition of La Petite Boulangerie. The company was quite big in size adding $45 billion in revenue in 1987 in comparison to previous acquisitions wherein changes to MIS were necessitated as in the case of retail cookie chain, the Chocolate Chip Company in 1984 but LPB baked and served products, according to Randy were, “a logical extension for the bakery aspect of Mrs. Fields’ cookies.” The same rule was applied to the company’s technological processes also so that leverage could be made from the already operational MIS system without tailoring it to the needs of management functions of LPB. Management at Mrs. Fields was of the opinion that different department heads functional at LPB like accounting, finance, human resource, and training could be assimilated in their MIS system positively. Put yourself in the position of an LPB store manager at this time. What’s your view of this? Imagining me in the position of an LPB store manager could be like waiting my turn to be declared incapacitated to work in the new environment. The system I had been habitual to work got vanished. All those reporting to me their job duties remaining absent from work and in stead finding solace in the generated MIS reports and taking action on the basis of new work flows I had not been a part of, could have put me easily in an awkward position. Without any orientation and training of the new IT structure, I could have been a disaster and liability for the company. The reporting structure at Mrs. Fields was such that all senior level and middle level managers besides the company bosses had to be informed of all jobs performed. Was I such a soft nut to crack? Certainly not! The other side of the scenario could be some initial jerks but with the passing of time, assimilation in the new environment would have happened, enabling me to work in my comfort zone. Considering me an IT-freak, actually, it would have been a good opportunity to learn the IT-enabled processes and perform under the new work structure. At LPB, organization structure was not IT-friendly. Managing a global enterprise would have been difficult in future. I would have welcomed and appreciated the timely change in my portfolio of a store manager. Irrespective of the initial hiccups I would have been all praise for the far-sighted views of Randy and Debbie on running their business their way. Debbi and Randy clearly see the LPB business as being similar to their own in terms of products, customers, management challenges, and so on. How do you see this? In some aspects, the LPB business was similar to the business of Mrs. Fields and in others it was different. So far as bakery business is concerned, in the matter of customers and products we can say it is similar. Both the companies were into bakery business, so their products were similar. Mrs. Fields introduced brownies and muffins in 1988 with further expansion into candies and ice cream. On the other hand, business at LPB was not limited to just extensions of Fields. They served their customers hot soups and sandwiches in upscale, sit-down cafes other than selling bakery products. Certainly one cannot agree with Randy that LPB business was an extension of what was offered at Mrs. Fields. Hot soups and sandwiches at sit-down cafes refresh the restaurant environment wherein we enjoy each and every sip of hot soup with a chunk of sandwich. The size of LPB was also not similar to Fields, as Randy was expecting revenue earnings worth $45 billion in 1987 because of its sheer size. Randy himself seemed positive when he stated, “…This was not mere expansion; this was a new concept for Mrs. Fields’…” The two different ideas were assimilated for the “new combination stores” by adding the “feel good” element of Mrs. Fields. From customer perspective also both companies served somewhat different customers. A special segment of cookies and bakery items was created by Mrs. Fields’, which was definitely a unique method of baking not only in its baking process but in product category. Same was true of LPB, which was in the business of sophisticated sit-down cafes offering hot soups and sandwiches other than bakery products. The company faced diverse management dilemmas totally different from what it was used to before the acquisition. Changes in management challenges occurred because of domestic and global expansion. The financial press also published such news items. The organization and financial level changes became predominant. Making the concept of new combination stores a reality forced the company to generate funds to fuel its future growth caused by the acquisition of LPB through cash-flow and debt; the option of making public offerings was outright ignored. A change in management perspective occurred in planning finance for the project of combination stores. Randy seemed to be over-confident over the success of the project, hoping that by 1988 it would create a new record of earnings from the new combination stores. What happened was the opposite of what was a planned, record net loss of $18,503 million. How do you see the Fields information systems being used at LPB? How "portable" are these systems? Fields information system could not be used at LPB, as their business functions were traditional and not IT-enabled. They depended heavily on their workforce in stead of automated process used at Mrs. Fields. Applications of Fields information systems covered all jobs from mail, daily planning, work schedules, skill testing, interviews, and time management systems related to all departments and systems. Systems at LPB were not developed to suit the business functions of new combination stores. Randy had also described the style of LPB more traditional. It required total reengineering of the processes to make them sophisticated and add to the interactive element in applications’ usage to fulfill the needs and business functions of new combination stores. Coming back to Fields’ information systems, they were quite superior and integrated as per management preferences to centrally and organically look after the stores around the globe. Randy had an eye on the future IT requirements when planning the IT structure of the company. The information systems were the latest for measuring the financial capabilities of Mrs. Fields’ stores. Information systems were capable to process all store functions from scheduling to marketing to hourly sales predictions to interviewing prospective candidates for job openings. There existed an updated store management system and the MIS were operated on menu-based applications. Each function was assigned an application like one for the corporate office computer, another for recording routine transactions and another for providing access to the employees to read their emails. The automated workflows made the job of store managers easy beginning their day’s job from behind the store recording all necessary information that helped in creating a mathematical model for calculating the number of baked cookies according to the planned sales each hour for a specific day. The system was customized to do guess work on the number of cookies to be made each hour as the customers visited, and recommended changes accordingly. It generated orders via the MIS system for replenishments after Okayed by the store managers. Portability of Mrs. Fields IT systems was doubtful as certain weak areas appeared that let the central hold on all stores loosen up. The MIS director also pointed out that information was not strategically and optimally used. Randy himself was not sure about the portability of the systems. What do you make of Randy’s explanation of the losses after the acquisition? Randy was over confident on the concept of combination stores. He laid too much focus on the demographic factor, assuming that top quality products of Mrs. Fields would herald the success of the new concept. It seems that Randy misunderstood this concept for the chicken laying golden eggs, the profit line to be used for starting such projects. His planning of closing loss-generating stores in stead of working on them misfired. There was a lot of spending made on R&D. Although his strategy was not unrealistic yet it did not work somehow. What do you think is going to be the future of LPB and its employees, including store managers, when Fields begins bringing in its marriage of management structure and information technologies? Future of LPB employees including the store managers depends on their learning capabilities of the new IT-enabled functionalities. The organization management at Mrs. Fields has been of controlling the functions at the center, so there is little scope for LPB staff being retained at Mrs. Fields. Why do you think so? This has been happening worldwide that employees are retrenched with the introduction of automated processes. Employees’ job profile also changes and only those employees are reinstated who change themselves according to new work demands. Automation means quality not quantity. Read More