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The Battle Of The Bags

Issue:

The struggle for control over the snack food industry began in the mid 1980's, when Frito –Lay began finding it difficult to keep up with smaller regional competitors. Michael Jordan, chairman of Frito-Lay at this time, realized that in order to remain the leader in the snack food industry, the focus had to change from broad area markets, to much more specific areas. This would prove to be difficult to achieve from the bureaucracy oriented management standpoint the company had at this time. In order for the specific markets to be recognized, the decisions had to be made closer to the customer.

Discussion:
In 1930, Herman Lay, the original founder of what is now Frito-Lay, had his hand on all steps of manufacturing, packaging, sales and delivery of his potato chips. He knew every detail of the business, and knew what people in the market wanted. As his market grew, and Mr. Lay took on partners, he began to lose touch with the individual regional markets as his customers became too numerous.
Mr. Michael Jordan, former chairman of Frito-Lay, understood that in order to stay in competition with smaller regional competition, decision making power and responsibility would have to be delegated further down within the organization. This would have to be achieved by changing the overall company from bureaucracy, to that resembling an entrepreneurship. A major obstacle with changing from this highly centralized organization was to make the newly empowered regions look at things from a broader perspective, and to take accountability for profits and losses in their perspective regions.
In 1989, the decision was made to decentralize and reorganize the decision making power of Frito-Lay along regional lines. In the following years, Frito-Lay began conducting extensive consumer testing in key markets to determine flavors and textures with the strongest appeal for independent regional markets. For example, in 2002, when the firm tested products in...