The Acquisition of LPB - Case Study Example

Case Mrs. Fields Cookies Eric J. Thompson Upon acquiring LPB in 1987 from PepsiCo, a French bakery/sandwich chain, the Fields applieda scissor on the count of administrative staff of the acquired company abridging its strength from 54 to 3. The reason behind as quoted by the Fields was assimilating “many of the overhead functions into our existing organization including accounting, finance, personnel, human resources, training, and development…” The staff not relinquished included 2 in operations and 1 in R&D. Reasons behind These Actions The acquisition of LPB was distinct in many respects unlike the previous acquisitions. LPB was a large company; their formulations of baking from the frozen dough the croissants, bread, hot soups and sandwiches, taken from Fields extended cookies business, had a different style. Technological processes at Fields were not changed to make adjustment with the working of LPB. Fields wanted to get the benefit of their in-practice MIS system, which was not customized to assimilate the management functions of LPB like Fields had done when it acquired Chocolate Chip Company, and made changes in the MIS system. Fields assumed that that it would be able to benefit from its current MIS system for adapting different overhead functions of PBS. My Views as an LPB Store Manager Working in a totally different management hierarchy would not have been easy particularly when no job orientation was given. Things could have gone haphazard without any staff reporting to the senior level, affecting performance in all segments of the organization. As per Randy’s statement, the organizational structure at LPB was not similar to the functioning at Fields who has been using IT to manage business functions across the globe efficiently. The impact of discharging 50 human resources from their duties of the acquired company and without providing the training of the work processes of the new organization structure, I would have felt crippled as a manager. Reporting of store managers at Fields was straight to all senior and middle level managers culminating in final reporting to Debbie and Randy. The change for the store manager’s rank was sudden from a traditional way of functioning to remaining available for seamless exchange of information horizontally and vertically on the vast communication network. Chances of failure had been more than success as store manager. My Perspective on Similarities between the LPB Business and Fields In my opinion, it would be wrong to say that business at LPB was same in kind as it was at Fields in different aspects like products, customers, and business challenges. Although bakery was the major business at LPB but it offered other varieties like hot soups and sandwiches, which were not on the menu of Fields. In no way, they can be acclaimed as bakery products. An up scale characteristic of business in the form of sit-down cafe existed at LPB properties, which as per Randy, “…This was not mere expansion; this was a new concept for Mrs. Fields’…” For opening “new combination stores”, the two different ideas had to be made and synthesized. It was necessary to provide to some senior functionary of the company exposure of the business tactics so that the concept of combination stores could be more comfortable in managing. Size of LPB was another difference as LPB had earmarked an earning of $45 billion in 1987 only on its sheer size. Both companies catered to different customers. The cookies and bakery items of Fields were made differently; the other difference was of product category. Fields did not serve their eatables in upscale sit-down cafes while LPB served both, the bakery products and hot soups & sandwiches through cafes. After the acquisition of LPB there occurred a shift in management challenges, as business expanded in domestic market and globally also. Financial Press also reported on the issues faced by Fields after the acquisition. Transformation in processes at organization and financial level was waiting to materialize. The concept of combination stores required funds for growth, which were acquired from cash-flow and debt, rejecting the choice of public offerings. All this became essential after the acquisition of LPB only. A change in financial management happened but by 1988, things changed for the worst in losses incurring from the new combination stores. Financial press reported the net loss of $18,503 million while Randy was expecting the opposite – a new record in earnings. How "Portable" were Fields’ Information Systems to be Used at LPB The information systems at Fields were made to manage the stores and use the information for taking right decisions. Cracks appeared in the IS structure of Fields because the information was not used to take better decisions in the interest of the company; control over the systems started lacking, as remarked by the MIS director that information usage was not of optimum level. Earlier, system modules used to be changed to manage business expansion but after the acquisition of LPB, there was no unanimous opinion about the efficiency of the business processes over LPB’s upscale sit-down cafes. Randy was also not sure about the portability of the systems. As stated earlier, the information systems used by Fields were quite sophisticated and all-inclusive to manage the stores expanded over the globe centrally and organically. Randy was way ahead in planning and implementing advanced technology. It was easy to measure the financial picture of all stores with the information systems installed. All store functions were marked from marketing to hourly sales projections to interviewing future employees. A latest store management system and the MIS were on the lists of menu-based applications. Functions were divided among different applications, for example one application was used for the corporate office computer, recorded daily transactions and gathered emails for the employees. The automated processes made the job of store managers easy who would work back office, registering all related information that helped the making of a mathematical model for computations of baking cookies as per the running sales per hour for a specific day. Customers were counted each hour to enter in the system to revise the number of cookies and recommend changes as well. The MIS system generated orders to be supplied after getting Okayed from the store managers. Applications at Fields’ information systems ranged 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. They were not customized to the needs of LPB. Randy also remarked that LPB practiced a traditional approach towards managing the business functions. It needed reengineering of the processes to technologically make them interactive according to the requirements of the new combination stores. Randy’s explanation of the losses after the acquisition Randy was over-confident of the working of the combination stores. He thought that the goodwill and brand value of Fields’ distinct bakery products would attract customers. He had plans of opening such more stores through the profits earned from the combination stores. His planning of closing unprofitable stores and streamlining the property portfolio did not work. Only the R&D spending on opening the combination stores reached $19.9 million. Randy had a long term strategy of turning the losses into profit. The approach seemed realistic but was focused towards future, standing no guarantee of implementing the planning. Future of LPB Employees in the Marriage of Management Structure and Information Technologies The LPB employees including its store managers need to learn the new skills related to information systems employed at Fields. Approach at Fields from the beginning has been to manage all business functions centrally through the optimum use of technology. Considering this, there is probability of LPB employees not to be retained by their new bosses. Reason behind We cannot say anything with guarantee about the future of LPB and its employees, as technological processes are long and take time to complete and synthesize. Again, it depends on the learning potential of the LPB employees; if they acquire technological capabilities and adjust themselves in the new company’s environment, management could think of retaining them for future expansion. Read More