Mrs. Fields Case Description - Assignment Example

Introduction Entrepreneurship is almost always tricky, difficult and risky. People who venture into business have some idea that they hope they can translate into profits through leadership skills and management expertise by creating a new market niche or segment previously not served. In essence, entrepreneurial management is concerned with obtaining good results working under certain constraints. The characteristics of a good entrepreneur include a healthy attitude towards risk taking, innovative, creative, efficient and most of all, being customer-oriented (de Leon, 222). Another key personal trait of most successful entrepreneurs is their almost universal belief that they are not yet successful although by most measures, they had achieved already beyond their expectations. So it all becomes a matter of perception. However, entrepreneurs also have some undesirable qualities which they often are not aware of. Foremost among these personal qualities is their obsession with control. They are the people who sometimes simply cannot let go and are described as control freaks. They are always demanding new information and data; they want to know everything that is happening down to the smallest details. Many of them are reluctant to delegate discretionary authority to employees such that these employees can be empowered to make good decisions. There are other good qualities too, primarily that to innovate while the negatives are dominance and coercion. A good entrepreneur is quick to spot opportunities before others do and quickly marshals the resources to produce an innovation. With this in mind, it is in this light that we will now examine the business case of Mrs. Fields’ Cookies and hopefully glean a few lessons from studying this case which are applicable to good management thinking. Discussion Mrs. Fields’ Holdings, Inc. acquired La Petite Boulangerie from Pepsi Cola Company as part of its international expansion plans started way back in 1982. This purchase in 1987 was the latest. La Petite Boulangerie (LPB) is a 119-store bakery chain that uses frozen dough to bake breads, croissants, other baked goods and also hot soups and sandwiches. LPB was acquired primarily because the owners of Mrs. Fields’ Cookies (Randy and Debbi) saw a very good opportunity in terms of strategic market fit. More importantly, they saw LPB as a logical extension for the bakery aspect of Mrs. Fields’ Cookies (Ostrofsky, HBS 1993, p. 9). However, the very first step they took when they acquired La Petite Boulangerie was to terminate the services of most LPB employees, retaining only three people from the newly acquired subsidiary’s previous administrative staff complement of 53 employees. Of these 3 retained LPB employees, one was in R & D and two were in operations. The reason owners of Mrs. Fields’ Cookies gave for this move was that there was redundancy since the present head office already performs most of these functions like accounting, finance, personnel, HRD and training. In other words, the management of Mrs. Fields’ Cookies had to let go of experienced people who could have helped in the transition. These former employees of LPB have a very valuable knowledge of the consumer market in their former areas of operation, for example. A more correct and prudent approach would have been to absorb these people into operations of Mrs. Fields’ Cookies and make them feel part of the newly-merged group. The Fields couple took this unprecedented step ostensibly to reduce their payroll costs while they are still coping with integration costs of the two companies’ management systems, styles, information systems and infrastructure. They closed stores that were not performing well or did not fit with their overall bakery store concept. For those LPB employees who were adversely affected, it seems to be the height of betrayal. Their previous loyalty to LPB did not count or matter much to the new owners and this certainly creates some resentment. My Reaction if I am an LPB Store Manager If I am an LPB store manager at the time of the acquisition, what happened to my former colleagues at the LPB administrative office is very demoralizing indeed. The fact that they were let go (even with separation pay) does not seem fair, especially to people who had devoted a good part of their lives working for LPB. In exchange for their loyalty, they got fired instead. It is very difficult to put people out of work and being loyal a employee makes this recent firings all the more painful. The correct move would have been to absorb people from LPB and farm them out to certain areas where their skills can be useful. Another step that could have been taken by the top management people of Mrs. Fields’ Cookies would have been to re-train these people with new skills and make them part of the new group. Still another step that would have lessened the impact of a termination would have been labor attrition. It means retaining people until they will reach the retirement age without replacing them anymore. This would make it more palatable and at the same time give people enough time to prepare for their eventual separation from the company. Perhaps a last option is optional retirement or voluntary resignations. This means giving former LPB employees a choice whether to go or stay and adapt to the new corporate culture and management style. So instead of inspiring former LPB employees to work harder for their new owners, the terminations only served as a painful reminder how the previous owners and management of La Petite Boulangerie had abandoned them. The previous top people at LPB could have done a better job during the merger talks by negotiating for favorable terms under which old employees will be absorbed into the new combined operations. As such, they were left at the mercy of the new owners even though most of them definitely would have liked to continue working for Mrs. Fields’ Cookies. It was a big letdown and is considered bad for employee morale and for productivity also. Restructuring, downsizing or the more politically-correct term of right-sizing results in less employee commitment to the job (Manson, 3). Strategic Fit and Merger Synergy Most business organizations grow in either of two ways: organically and acquisitions. In the first instance, this means profits and internal cash flows are used to fund the expansion. In the second case, companies can instead opt to acquire other firms in a similar industry to grow much faster without bothering with building infrastructure from the ground up. It is a ready-made expansion in that the acquired company already exists. When this route is taken, there always arises the question of a strategic fit. This means the acquirer and the acquired must somehow mesh together beautifully and perfectly to produce the expected synergies such as greater efficiency, cost savings or a bigger sales market. The main attraction of the merger route is enhanced shareholder value through the economies of scale brought about by a larger-sized company. There is also the chance of acquiring new technologies although in this case, it is not the main reason since Mrs. Fields is adamant on using her own formulas. The primary reasons for the acquisition of LPB by the Mrs. Fields’ Cookies are perhaps the envisioned improved market reach into the international arena and greater industry visibility since they already had built up their franchise or brand. Strictly speaking, although mergers and acquisitions are often used interchangeably to mean almost the same thing, La Petite Boulangerie was acquired by Mrs. Fields’ Cookies and not merged with it. This is due to the fact that only Mrs. Field’s Cookies is the surviving entity and LPB operations absorbed by the surviving firm. This is validated by the termination of most LPB employees, mostly from its administrative staff. From a strategic viewpoint, this acquisition was made by a company for another company that is in direct competition to it or what is called a horizontal acquisition. Additionally, the acquisition of LPB can be considered as a combination of market-extension and product-extension. La Petite Boulangerie served the French market so this was a market-extension move on the part of Mrs. Fields and a product-extension in the sense it will implement the new vision of Mrs. Fields’ expanded bakery idea. The more obvious fit is in the companies’ products seen as complementary by both spouses and ties in nicely with their avowed longer-term bakery strategy. Both Debbie and Randy believe their long years of operational experience and extensive consumer research will greatly aid their plans of dominating their market segment. Secondly, another reason for acquiring LPB is to create barriers to entry for possible new competitors by raising the bar. It is a bold move towards some form of diversification through their use of combination stores. By becoming bigger, Mrs. Fields’ Cookies intend to dominate their sector which is the sweet snacks industry that included the packaged snacks segment. The company had just recently introduced new products like muffins, brownies, candies and ice cream. The acquisition of LPB which is into hot soups and sandwiches is another step in this direction of combination stores strategy. Or to be more specific, an attempt to become a hybrid specialty store which is clearly a different sub-segment altogether in the sweet snack food industry. Overall, it is quite a good fit for both companies to be merged in a grand strategic scheme viewpoint. However, there is one aspect of operations in which the two companies are markedly very different. This is where LPB uses frozen mixed dough in baking its products while Mrs. Fields' Cookies mixes its dough only in anticipation of when it is needed. It mixes the exact amount of dough good for only up to certain hours during a particular day and it discards the excess as it is considered to be no longer up to their standards (Ostrofsky, HBS 1993, p. 8). It is mostly a matter of operational procedure in preparing the bakery products although in terms of product category, LPB concentrated mostly on croissants, breads and other baked products supplemented by hot soups and sandwiches. On the other hand, Mrs. Fields' Cookies is more into cookies, brownies and muffins supplemented by candies and ice cream, otherwise mostly sweets rather than being pure bakery products in the usual sense. There are other operational differences as well, such as an almost hourly monitoring of sales and a host of other things. Mrs. Fields' MIS and its Portability Although it can be said that Mrs. Fields' Cookies has a tremendously good MIS on its hand, I view its management information system more sanguinely in the sense that it is very detailed. In this regard, having too much information can result into information overload and this seems to be what is happening at Mrs. Fields' Cookies even by their own admission. If we can recall, it is Mr. Paul Quinn himself, the MIS director, who quipped that this company has more information than we can act upon (ibid. p. 7). These tons of data results in information overload because not all of that data is needed although it is easy to retrieve vital information just by massaging and formatting those existing data into readable form and print this out. A more logical move would be to use something similar to today's business analytics which is a very powerful management tool for enterprises (Meier, Sinzig & Mertens , 67). In short, Mrs. Fields' Cookies can reorganize its vast amounts of data into something more useful such as customer data over a span of several years which will then aid in the decision-making process. An example of this is called period analysis that can evaluate and analyze a client's buying habits over a certain period and used to design a marketing or advertising program. It is a reflection of Mrs. Debbi Fields' obsessive personality type to always have some direct control over all the stores that they had refused to franchise their operations and this is also what we see in their information system. There is simply too much information which are sometimes not really necessary in my view such as hourly sales projections and interviewing. For example, a store controller working at their head office is assigned between 35-75 stores and has to read all those daily computer reports summarizing everything such as sales, trends, cash shortages and overages, monitored unusual conditions that include even the weather. Or take another case, which is that of district sales managers who manages under him or her six stores on average and then reads a 50-page report each day (Ostrofsky, p. 6). It is simply too much to be reviewing all these reports and still manage their store and personnel under him. I would expect some degree of resistance from LPB store managers when the MIS of Mrs. Fields' Cookies is implemented in their stores. This MIS is too detailed and cumbersome, when LPB store managers are used to running their stores with a high level of autonomy as it was a more traditional organization before being purchased. This would become a classic case of implementing organizational change by using some type of paradigm shift to be successful. It would be easier to integrate the computer hardware and software programs of both firms but the greater challenge will be in training LPB people on how to use the MIS properly. Rationale and Explanation for the Losses Randy had justified the losses from the store closings as a necessary part of their firm's overall strategic realignment initiatives. These losses stemmed primarily from the write-offs from certain leasehold improvements and maybe some unexpired lease deposits. Overall, this was anticipated by the Fields's themselves in their adoption of a new strategic direction for the company by going for the “expanded store” concept through a combination store approach. It intends to sell both sweets (cookies, brownies, muffins, ice cream, candies, etc.) and bakery products in the same store locations. In sum, the losses are to be expected when any company will rationalize its real estate portfolio by closing under-performing stores (ibid. p. 10). Future of LPB Employees When Mrs. Fields' Cookies finish integrating the computer and MIS operations of both firms, I expect many LPB employees to be terminated or forced to resign in view of being considered as redundant personnel as what happened with the previous administrative staff. It is the policy of Mrs. Debbi Fields “to promote from within” to encourage loyalty among its employees considering it has an above industry average for labor turnovers. This means that present employees of Mrs. Fields' Cookies will have first crack at promotions and the chance to be store managers in former LPB stores (ibid. p. 6). Another reason for impending layoffs of LPB people is the company intends to leverage its MIS by hiring less staff (ibid. p. 7). Works Cited Johnston, Van R. Entrepreneurial Management and Public Policy. “Chapter 12: Ethics and Entrepreneurship.” De Leon, Linda. Hauppauge, NY: Nova Publishers, 2000. pp. 221-236 Print. Manson, Bonita J. Downsizing Issues: The Impact on Employee Morale and Productivity. New York, NY: Taylor & Francis, 2000. Print. Meier, Marco, Sinzig, Werner, & Mertens, Peter. Enterprise Management with SAP SEM/Business Analytics. New York, NY: Springer, 2005. Print. Ostrofsky, Keri. “Mrs. Fields’ Cookies.” Harvard Business Case No. 9-189-056 (Revised September 14, 1993). Boston, MA: Harvard Business School. Read More