What Were Fields Initial Actions upon Acquiring LPB - Assignment Example

Topic: Fields write-up --What were Field’s initial actions upon acquiring LPB? Introduction The Fields acquired La Petite Boulangerie in 1987. It was acquired from PepsiCo a 119 store, a French bakery/sandwich chain. As soon as the acquisition materialized, strength of the administrative staff of the acquired company was reduced from 53 to just 3 with the explanation that the Fields’ has absorbed “many of the overhead functions into our existing organization including accounting, finance, personnel, human resources, training, and development…”, leaving just 2 people in operations and 1 in R & D. Why did they take these actions? According to Randy, the company’s CFO, this acquisition was different from the previous acquisitions made by Mrs. Fields’. The size of the company was enormous. Their preparations’ styling was different of baking from frozen dough the croissants, bread, hot soups and sandwiches, which was taken as an extended business from Mrs. Fields’ cookies. Naturally the company wanted to get the leverage of its MIS system, which was not updated to absorb the different administrative functionaries of LPB, as it was customized to absorb the administration work of the famous Chocolate Chip Company in the MIS system of Mrs. Fields’ Cookies. It was taken for granted that without changing the design of the MIS system to accommodate the overhead functions related to accounting, finance personal, human resource, training, and development of the acquired company, Mrs. Fields’ Cookies would be able to leverage from the current MIS system successfully. Put yourself in the position of an LPB store manager at this time. What’s your view of this? Assuming and finding myself in the position of an LPB store manager, I should be a puzzled lot. The mechanism that I was accustomed to work in was suddenly snatched just like a sheet from under one’s feet. Finding none of the reported to staff at the senior level could be detrimental to the organization’s financial health and affect performance in all departments. As stated by Randy, the organization structure of LPB was traditional in comparison to robust IT applications employed by the IT department to organically control the empire of cookies stores expanded worldwide. Before removing the 50 overheads of the acquired company, whose store manager I am supposed to be, it would be like crippling the whole structure of the newly acquired company without replacing or changing the system wide practices. At least some technical training was needed to be imparted to the staff to become accustomed to the work processes of organization sub structures under mechanistic and organic structure heads. Store managers under Mrs. Fields’ Cookies organization structure were answerable directly to all senior levels and middle levels from top to bottom – to Store Controllers, District Sales Managers, V.P. Operations, Senior and Regional Directors and finally to Debbie and Randy Fields. With the know-how of working in a traditionally managed and organized company i.e. LPB; the job requirements needed a drastic change in the way of functioning. Reporting to the seniors for communication in Mrs. Fields’ organization, a store manager is supposed to be available for all information for a boundary-less structure featured with low horizontal and vertical differentiation and highly collaborative and vast communication network. Failures were bound to happen at some level of organizational hierarchy. 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? It was a wrong assumption that business of LPB was similar in nature to that of Mrs. Fields’ Cookies business in terms of products, customers, management challenges and other fields. Other than bakery products, LPB served hot soups and sandwiches, which cannot be taken as an extension of bakery products. LPB’s real estate had the feature of upscale, sit-down cafes. As remarked himself by Randy,”…This was not mere expansion; this was a new concept for Mrs. Fields’…” The two different concepts had to be designed and planned for the “new combination stores”, for which it was deemed fit that senior managers’ level company personnel get work exposure for a month or two to familiarize with the business functions of the new combination stores. There was another difference of size; LPB, as quoted by Randy was to generate revenue to the tune of $45 billion in 1987 because of its size. From customer point of view also, both companies catered to different customers. A niche area carved out by the cookies and bakery products of Mrs. Fields’ was surely different not only in preparation means but other aspects of difference in product category, as LPB was into upscale sit-down cafes serving other than bakery products hot soups and sandwiches. The company faced different management challenges than it used to face before the acquisition because of expansion domestically and internationally. It was facing management dilemmas, as pointed out by the financial press. Changes became due at the organization and financial level. Entering into the arena of combination stores required and compelled the company to fund its future growth necessitated by the acquisition of LPB through cash-flow and debt in stead of opting for public offerings. So it was a shift in financial management. By 1988, what Randy was expecting as setting a new record of revenue generation from the new combination stores turned out, as proclaimed by financial press to be record losses to the tune of 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 systems were very advanced and comprehensive to centrally and organically manage the stores expanded worldwide. Randy was ahead of the times when formulating the IT structure of the company. The information systems were quite sophisticated for mapping the financial health of Mrs. Fields’ stores. All store activities were scheduled from marketing to hourly sales projections to interviewing future employees. A sophisticated store management system and the MIS were run on menu-based applications. For example, one application covered the corporate office computer, entered daily transactions and accessed emails for the employees. The automated processes felicitated the job of store managers, who would start day’s work at the backside of the store entering all relevant information that enabled the formation of a mathematical model for making schedule calculations of baking cookies as per the estimated sales per hour for a particular day. Based on the number of customers visiting, the system would revise the estimated number of cookies and suggest changes as well. Orders were generated by the MIS system for supplies after getting clearance from the store managers. Applications of Field’s information systems ranging from Form Mail, Day Planner, Labor Scheduler, Skills Tests, Interviews, Time Clock, and Management Systems related to Personnel Records, Sales, Accounting, Property Management Systems and Systems Development were not developed to suit the needs of LPB. As stated by Randy, approach of LPB was more traditional in managing the business. Reengineering of the processes was necessitated to technologically update and make the applications interactive as per the requirements and functionalities of new combination stores. Regarding the portability of information systems, they were structured to control the stores and use the available information in better decision making. But there were cracks appearing in the systems with the losing control by Mrs. Fields’, as the MIS director stated that the information was not being used to the optimum level for control and better decision making. It was doubtful that the information system that served the purpose of expansion earlier by changing the system modules would work efficiently to accommodate the business processes necessitated y the acquisition of LPB’s upscale sit-down cafes. Randy himself seemed doubtful regarding the portability of the systems. What do you make of Randy’s explanation of the losses after the acquisition? First of all, Randy was overly optimistic about the success of the project’s combination store approach. He depended too much on the demographic factor based on the popularity of Mrs. Field’s high quality bakery products. He thought profit generated from the new project would help in opening new such stores. Actually, his strategy of rationalizing the real estate portfolio by consolidation and closing of unprofitable stores and others not adding any value in the bakery store concept misfired. A write-down of the value of $19.9 million was transferred to the R & D expenditure on the new combination stores. Randy’s explanation that under the long term strategy of management, losses would be recovered seems to be a realistic approach the success of which cannot be foretold. 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 adaptability skills of the new IT environment. As has been Mrs. Fields’ approach to centralize the management system by making optimum use of technology, it is expected that most of the staff will lose their jobs. Why do you think so? Nothing can be said for sure about the future of LPB, as the process of materializing the marriage between the management structure and information technologies is time-consuming. Bibliography Harvard Business School., Mrs. Fields’ Cookies, copyright 1989, revised September 14, 1993. Read More