Mrs Fields Cookies and LPB - Case Study Example

Introduction Mrs. Fields Cookies was started by Debbi and Randy Fields in the August of 1977 from a borrowed amount of $50,000. Today the single store venture has grown onto become a huge a company with a hundreds of stores, well established corporate structure and thousands of employees. The company’s operations span across 25 states in the US, five countries and four continents. The company’s growth was explosive and within a short span of 5 years the company was expanding its operations in international markets. The reason for the meteoric rise of the company is the way Debbi and Randy have been able to monitor and control the various activities of the company by incorporating information technology into the day to day to operations. Also the management philosophy of Fields’ was in unison with the ideals of the founders. Debbi and Randy Fields were in control of every store and did not believe in franchising their stores. Their main motto was customer satisfaction and the profits came later. Felids’ enjoyed great success in the first decade of business but their first big failure happened when they acquired the 119 store French bakery/sandwich chain. La Petite Boulangerie (LPB) from PepsiCo in the April 1987. The acquisition was the part of the company’s diversification and expansion plan. Until the acquisition, the main product of the Fields’ were cookies alone which came in 14 different varieties. But the acquisition of LPB added a whole new range of products. LPB dealt with bakery products, with products ranging from croissants, breads, and various other baked goods including hot soups and sandwiches. Hence, the acquisition added a whole new dimension to Fields’ its products now involved cookies as a well as a whole new range of bakery products. But there are various reasons for the failure of the financial downturn of Fields’ after the acquisition of LPB. This essay discusses the various actions taken by Fields’ after the acquisition, their view of the products and customers of LPB, their reason for the failure, incorporation of their information systems into the operations of LPB and the future of LPB and its workers from a LPB store manager’s point of view. Initial Actions after Acquisition In the month of May following the acquisition, Fields reduced the number of administrative staff at LPB from 53 to three. They only retained three employees, two in operations and one in research and development. The main reason given by Fields’ for this was that they had absorbed the various overhead functions of LPB into their existing system at Fields’. The various overhead functions that they were referring to were finance, accounting, human resource, personnel, training and development. Hence, it was justified as cost cutting initiative in order to make the acquisition a financial success. But this was not the sight strategy to be adopted as it has various negative implications. The first and the foremost is the fact that it made it extremely difficult for the Fields to run the operations at LPB. The size and scale of the acquisition was enormous and the management at the Fields’ was not well equipped to run the operations at various stores of LPB. This needed experienced individuals who had prior experience in the day to day operations of the LPB stores. Even though the Fields’ believed that the operations of both Fields’ and LPB are similar, they are not. This will be discussed in detail in the next section. Therefore the management at Fields’ was not well equipped with the day to day proceedings to manage the LPB stores effectively as soon as the acquisition. Hence, the strategy to reduce the administrative staff was a tactical mistake from the fields’. Also the firings of the employees send a negative signal to the various other employees of LPB. The LPB workforce was not confident of management at Fields’ and also did not feel secure anymore working for Fields’. This would give rise to a feeling among the workforce that they are next in the line. It also showed that the management at Fields’ did not treat the employees as their own and did not care about their future. The image of Fields’ management among the employees of LPB was not anymore of an employee oriented organization but that of a money minded corporate entity. The strategy of the firing the employees of LPB as cost cutting initiative backfired for the Fields’. Fields and LPB Businesses --- Similar? Debbi and Randy clearly saw the LPB business as being similar to their own in terms of products, customers, management challenges, and so on. But this is not the case. The products, customers, management challenges and all other operations of both the business are very different from each other. The product is no more a cookie of different varieties but involved a range of products which has to be prepared differently and needs different raw materials. The forecasting of the demand for a single product is easier and but to forecast the demand of multiple products is way difficult and needs local expertise. The production lines of LPB are way more than that at Fields’. And also the target customers of LPB are greater than that at Fields’. The various day to day operations at LPB and Fields’ are different from each other. The store design also contrasted each other. Fields’ stores were designed and the operations and services were limited only to pack and deliver the product to the customers. But LPB model was a dine-in model and involved numerous other services associated with dine-in store models. Also the staff required was more and also LPB stores demanded a more diverse workforce than that at the Fields’. The organizational goals and strategies of both were different from each other. Fields’ had a more customer oriented strategy where in LPB was more a product oriented strategy. Also the information system used at LPB (Enterprise Resource Management (ERP)) is different from that used at Fields’. Hence the operations, day to day activities, products, customers of LPB and Fields’ are different from each other. Fields Information Systems and LPB Fields information system has played a major role in the Fields’ success. But using the same system at LPB will not be a wise move at the operations and requirements of both the businesses are different from each other as discusses above. The information systems of Fields are relatively portable in the top management of LPB but needs customization to meet the needs of LPB. Accounting, finances, reporting, communication, are the various processes that can use the same information systems at LPB but need to customized. But incorporating Fields’ information system would be very difficult as the systems are not portable when related to the day to day activities of LPB. The in-store requirements of LPB stores and Fields’ are different from each other. The day to day operations at LPB are diverse and greater in number and the systems designed for the cookie store can not be used for the combination stores (bakery and cookies). The forecasting system which is at the core of the day to day operations at Fields’ takes a beating when it is incorporated into the combination store. As the forecasting takes into consideration various factors into consideration in a combination store. Hence, the day planner system, labor scheduling systems that are a huge success at Fields’ may not be as effective in the combination store as they were in the Cookies store. Hence the information systems are partly portable and can be incorporated partially into the operations of the LPB but a complete incorporation of the information system will lead to a disaster. Randy’s Explanation of the Losses after the Acquisition The acquisition of LPB was a major failure for Fields’ and the company experienced huge losses. Randy explained the losses after the acquisition stating that this is a long term plan and it will take time for the venture to register profits. He also said that as part of the long term growth, they had to close down various stores that not fit into the strategy of a combination store for which they needed a real estate write-down of $19.9 million dollars. But as this was a long term strategy, he argued that the write-down has enhanced their potential of generating huge profits in the future. His primary explanation for the losses was that it would take time for the combination store to reach its full potential. But, this explanation by Randy does not completely explain for the losses after the acquisition. The main reason for the losses is the more planning and business strategy. The company tried to increase the number of products and in turn the customers in one shot. The scale at which the company was aiming to increase its products and customers was very large and the company failed to design a business plan to support such a venture. Another reason for the failure is the firing of the employees at LPB who were experienced in managing the LPB stores. They could have contributed through their knowledge of the local conditions and their expertise in running the stores in the past. This could have been the decisive step in the outcome of the acquisition. Also the strategy to combine both the cookies store and the bakery store into a combination store was a mistake. The combination store meant that Fields’ had to close existing stores which could not be converted into combination stores. This was a cut down in the revenue that these stores were generating for Fields’. Instead the company should have tried to balance and get familiarized with the operations of LPB by running the bakery store and cookies store independently for an initial trail period. Once, the management is familiarized with the operations at LPB and the information systems have been tried at LPB, then the strategy of the combination store must have been implemented. This would have made more business sense and helped Fields’ to make profits. Future of LPB and its employees The future of LPB and its employees does not look bright at the moment with the strategy that Fields’ are adopting. LPB as business is going to take a beating in the near future but in a long run it will turn out to be successful. This is because, with the incorporation of the information systems of Fields’ the service levels will drop due to incapability to meet the needs of the customers. The reason for this is that forecasting and in turn the labor scheduling will not be accurate. But with the progress in time the information systems will be redesigned and necessary actions will be taken to rectify the loopholes in the existing information systems. But there will be further firing of employees once the information systems will be completely incorporated. The firing will mainly be at managerial level. Also the existing manager will need training and will have to spend more time creating reports. The store employees will not be affected much by the incorporation of the information systems. Conclusion Fields’ has seen great success in the cookies business and their information systems and management policies have been revolutionary for a business with similar specifications. But Fields’ strategy of acquiring and running LPB failed due to company’s inability to modify their business strategy and plan to meet the needs of a more diverse business. The various reasons for the losses after the acquisition are the firing of the employees at LPB and the failure to design an effective business plan that could incorporate both the business. Read More