Taco Bell Inc. 1983 1994-Video Lecture

Summary

From 1983 to 1994, John Martin, CEO of Taco Bell, revolutionized the brand by redefining its identity from a Mexican food chain to a fast-food contender. He modernized operations, introduced drive-throughs, and implemented electronic systems to enhance efficiency. Martin's strategic vision included value pricing and a focus on customer service, leading to significant growth and profitability. Taco Bell's innovative approach to management, technology, and culture set a foundation for future expansion into the convenience food market, aiming for a $25 billion retail giant by 2000.

Takeaways

• 😀 John Martin joined Taco Bell in 1983 as the president and CEO with a vision to revitalize the brand.
• 🏪 Taco Bell, a Mexican fast-food chain, was under Pepsi Corporation and had a significant identity crisis, not clearly understanding its market position.
• 📈 The fast-food industry was maturing with intense competition, and Taco Bell had a modest market share despite its presence in the Mexican fast-food segment.
• 💡 Martin initiated a series of organizational and operational changes to modernize Taco Bell and redefine its business strategy.
• 🛠️ Taco Bell underwent physical unit modernization, including remodeling, adding drive-throughs, and introducing new menu items to appeal to a broader customer base.
• 📊 The company implemented electronic point-of-sale systems and improved training to enhance efficiency and product consistency.
• 🔄 Taco Bell shifted from labor-intensive production to a more streamlined process with prepared, packaged food delivered to restaurants, reducing on-site cooking.
• 🚀 The introduction of the 'K-Kitchen' initiative and the 'Speed of Service' program significantly improved operational efficiency and customer service.
• 💼 Changes in management roles and structures, including the transformation of district managers into marketing managers, were part of a broader strategic overhaul.
• 💡 Taco Bell's management embraced a new compensation and reward system to motivate and retain skilled managers, fostering a sense of ownership and commitment.
• 🌐 The implementation of 'Taco Total Automation' provided a robust MIS system to support new management roles with data-driven decision-making tools.
• 📈 Despite industry recession, Taco Bell's strategic changes led to significant growth in sales and profits, and an increase in customer satisfaction.
• 🔮 John Martin envisioned Taco Bell as a leader in the convenience food business, aiming for a global distribution system with ambitious sales targets by 2000.
• 🌟 Empowering employees and fostering a culture of continuous learning and innovation were key components of Taco Bell's strategy for long-term success.

Q & A

What was the primary challenge facing Taco Bell when John Martin joined as CEO in 1983?

The primary challenge was that Taco Bell didn't have a clear understanding of its identity and target market. They thought they were in the Mexican food business, but in reality, they were in the fast-food business.

What was the state of the fast-food market when John Martin joined Taco Bell?

The fast-food market had grown substantially during the 1960s and 1970s but was showing signs of maturing by the early 1980s, with intense competition among industry participants.

How did Taco Bell's production process impact the quality and efficiency of their service in the early 1980s?

Taco Bell's production process was labor-intensive and used low levels of technology, leading to inconsistencies in food quality and service due to variations in preparation and cooking on site.

What changes did John Martin implement in Taco Bell's physical units to modernize the brand?

Martin modernized Taco Bell's physical units by remodeling the restaurants, increasing seating capacity, adding drive-through windows, installing new signs, and outfitting employees in more contemporary uniforms.

How did Taco Bell's expansion strategy between 1983 and 1988 contribute to its growth?

Taco Bell's expansion strategy involved opening an average of 249 new stores per year, which not only increased its geographic presence but also extended into new regions like the Midwest, Southeast, and Northeast.

What was the significance of the 'K-Kitchen' initiative in Taco Bell's transformation?

The 'K-Kitchen' initiative transformed Taco Bell's restaurant kitchens into heating and assembly units, with all food products arriving prepared and packaged. This change improved efficiency, quality control, and allowed for a reconfiguration of the restaurant space to better serve customers.

How did the introduction of electronic point-of-sale systems and drive-through windows impact Taco Bell's operations?

The introduction of electronic point-of-sale systems and drive-through windows improved product flow, increased capacity, and made serving easier, which in turn increased peak hour transaction capacity and reduced customer waiting times.

What changes did Taco Bell make to its management structure and roles to support its new strategy?

Taco Bell changed the position of restaurant manager to restaurant general manager, giving them more decision-making responsibility and accountability. The district manager role was changed to marketing manager with an increased span of control, shifting from a policing role to a coaching one.

How did Taco Bell address the issue of high turnover and the need for better training and development?

Taco Bell improved training and development by providing leadership and operational management training to its employees. They also changed compensation and management styles to increase commitment and a sense of ownership among managers.

What was the role of the 'Taco Total' automation system in supporting Taco Bell's new management roles?

The 'Taco Total' system provided a personal computer in every store, linked to a local area network for marketing managers and corporate headquarters. It reduced operational paperwork, provided reports on various operational aspects, and facilitated communication between managers and crew members.

What was John Martin's vision for Taco Bell's future beyond being a fast-food chain?

John Martin envisioned Taco Bell as a twenty-five billion dollar food retailer with a worldwide distribution system, expanding beyond fast foods to create and dominate the convenience food business, and providing value, convenience, and accessibility to customers.

Outlines

00:00

😀 Introduction to Taco Bell's Transformation

The video script introduces the case study of Taco Bell from 1983 to 1994, focusing on John Martin's leadership as the CEO. It highlights the challenges Taco Bell faced, such as its identity crisis and intense competition in the fast-food industry. The script also outlines the company's financial status, operational inefficiencies, and the manual systems that contributed to errors and lack of data for management analysis. The narrative sets the stage for the transformative journey that Martin would lead Taco Bell through.

05:02

🛠️ Modernization and Expansion of Taco Bell

John Martin initiated a series of changes to modernize Taco Bell's physical units, including remodeling restaurants, adding drive-through windows, and introducing new menu items. The company also expanded its presence into new geographic regions, averaging 249 new stores per year from 1983 to 1988. Operational improvements included the introduction of electronic point-of-sale systems and a double assembly line to increase efficiency and capacity. Additionally, Taco Bell focused on improving training and development for its managers.

10:03

📈 Strategic Shifts and Value Pricing

Taco Bell underwent a strategic shift to focus on customer value, leading to the adoption of value pricing in 1988. The company realized that to lower prices while preserving quality, it needed to significantly reduce costs. This led to the radical redefinition of Taco Bell's business model, including the implementation of the 'K-Kitchen' initiative, which centralized food preparation and streamlined operations. The changes resulted in improved efficiency, quality control, and customer service, as well as reduced real estate and labor costs.

15:04

🏢 Managerial Transformation and New Roles

The script details the transformation of Taco Bell's managerial roles, with restaurant managers becoming restaurant general managers (RGMs) and district managers turning into marketing managers. The new roles emphasized decision-making responsibility and accountability. Taco Bell also focused on training and developing its employees, changing compensation structures to incentivize performance, and implementing new management systems that allowed for greater autonomy and efficiency.

20:06

🌐 Technological Advancements and Communication Systems

Taco Bell invested in technological advancements like the 'Taco Total' automation system, which provided infrastructure and analytical tools to support new management roles. The system reduced operational paperwork, provided reports on various operational metrics, and facilitated labor scheduling and service operations planning. Additionally, Taco Bell implemented safety nets such as toll-free customer feedback lines, mystery shopping, and marketing surveys to ensure adherence to company policies and maintain quality standards.

25:09

🚀 Growth Strategy and Future Vision

Despite the fast-food industry's recession, Taco Bell achieved significant growth and increased customer satisfaction through its strategic and organizational changes. By 1994, the company had expanded its brand through acquisitions and new retail concepts. Martin envisioned Taco Bell as a leader in the convenience food business, aiming for a $25 billion food retailer with a worldwide distribution system. The company focused on shared resources, learning organizations, and a culture of innovation and empowerment to achieve its ambitious goals.

🤔 Reflections on Taco Bell's Strategic Actions

The final paragraph poses several reflective questions about Taco Bell's strategic actions between 1983 and 1994. It invites viewers to critically analyze the company's approach, consider the reasons behind its successful management of rapid change, and contemplate why competitors did not replicate Taco Bell's strategy. Additionally, it prompts a discussion on whether Taco Bell is positioned to achieve its goals and what advice could have been given to John Martin in 1994.

Keywords

💡John Martin

John Martin was the president and CEO of Taco Bell during the period discussed in the video. His leadership was pivotal in transforming the company's strategy and operations. He is defined by his belief in the potential of Taco Bell to excel beyond its identity as just a fast-food chain, aiming to 'wake the man under the sombrero,' which symbolizes unlocking the brand's true potential.

💡Fast-food industry

The fast-food industry is the backdrop of the video, illustrating the competitive landscape in which Taco Bell operates. Defined by quick service and standardized menu offerings, it is highlighted as having matured by the 1980s with intense competition among industry players. Taco Bell's strategy had to adapt to this environment to maintain relevance and growth.

💡Market share

Market share refers to the portion of the market a company controls in its sector. In the video, Taco Bell's initial negligible market share in the total fast-food industry is contrasted with its 40% hold on the Mexican fast-food market. The company's goal under John Martin's leadership was to expand its market share through strategic changes.

💡Labor-intensive

Labor-intensive describes a production process that relies heavily on manual labor rather than automation. Taco Bell's initial operations were labor-intensive, with low levels of technology, leading to inefficiencies and inconsistencies in food preparation. This keyword is central to understanding the company's need for operational transformation.

💡Value pricing

Value pricing is a strategy where products are priced competitively while maintaining quality to offer customers the best value for their money. Taco Bell adopted this strategy in 1988, aiming to reduce costs dramatically without compromising quality, which was a key shift in their approach to competing in the fast-food market.

💡K-Kitchen

The K-Kitchen initiative was a significant change at Taco Bell, where the traditional kitchen was transformed into a heating and assembly unit. This redefinition of the kitchen process centralized cooking and preparation at corporate headquarters, allowing restaurants to focus more on customer service and efficiency, exemplifying a major operational shift in the company's strategy.

💡Restaurant general manager

The role of the restaurant general manager evolved under Taco Bell's new strategy. They were given greater decision-making responsibility and accountability for their restaurants, including staff development and profit and loss management. This change reflects Taco Bell's move towards empowering its managers to operate more autonomously while still maintaining company standards.

💡Marketing manager

With the shift in strategy, the district manager role was redefined as the marketing manager, reflecting a broader focus on market development and brand growth. The increased span of control and the shift from a policing role to a coaching one signifies a cultural change within the company's management approach.

💡Taco Total Automation (TACO)

TACO was an MIS project initiated to provide infrastructure, information, and analytical tools to support new management roles. It reduced operational paperwork and provided managers with valuable data on operations, inventory, and costs. This system exemplifies Taco Bell's move towards leveraging technology for operational efficiency and data-driven decision-making.

💡Convenience food business

The convenience food business is a strategic expansion direction for Taco Bell, aiming to reach customers anytime and anywhere they are hungry. This concept extends beyond traditional fast-food services and represents a broader vision for the company's future, as expressed by John Martin's goal to evolve Taco Bell into a significant food retailer.

💡Learning organization

A learning organization is one that facilitates the continuous acquisition, sharing, and application of knowledge to adapt and innovate quickly. Taco Bell's push towards becoming a learning organization is highlighted by its initiatives to increase individual and collective IQ, enhance flexibility and response speed, and foster self-sufficiency and innovation among its employees, which is crucial for the company's long-term success and adaptability.

Highlights

John Martin joined Taco Bell in 1983 with a vision to transform the brand.

Taco Bell was initially confused about its identity, being in the fast-food business rather than strictly Mexican food.

The fast-food market was maturing with intense competition by the early 1980s.

In 1982, Taco Bell had a revenue of $700 million with 1489 restaurants, 60% of which were franchised.

Taco Bell's production process was labor-intensive with low technology use and inconsistent quality.

The introduction of drive-through windows and electronic point-of-sale systems improved Taco Bell's service and efficiency.

John Martin modernized Taco Bell's physical units and expanded the chain's geographic presence.

Taco Bell introduced new menu items and adopted a value pricing strategy to attract customers.

The 'K-Kitchen' initiative centralized food preparation, leading to efficiency improvements and quality consistency.

Taco Bell's Speed of Service (SOS) program increased transaction capacity and reduced customer waiting times.

Managerial roles were redefined with more decision-making responsibility and accountability for restaurant performance.

Taco Bell implemented a new management information system called 'Taco Total Automation' to support managerial roles.

The company introduced safety nets such as toll-free feedback lines, mystery shopping, and customer intercept programs.

Taco Bell's strategy during the recession focused on organizational changes for growth and profit.

John Martin aimed to evolve Taco Bell into a $25 billion food retailer with a worldwide distribution system.

Taco Bell expanded through acquisitions and new retail concepts, leveraging shared resources within Pepsi Corporation.

The company developed a learning culture, embracing continuous change and increased individual and team productivity.

Taco Bell introduced team-managed units and new technology systems to empower crew members and managers.

An intellectual network was created for internal communication and knowledge transfer across the organization.

Taco Bell established a 'Restaurant of the Future' testing site for innovation and operational improvements.

John Martin's vision for Taco Bell included extraordinary convenience, accessibility, and customer satisfaction.

Transcripts

hello and welcome to our discussion of

the case study Taco Bell incorporated

1983 to 1994 John Martin is the

president and CEO of Taco Bell he joined

in 1983 Taco Bell is a chain of Mexican

fast food restaurants with an

appropriate logo a man sleeping under a

sombrero John Martin had made a made a

career in the fast food industry

he was ex-president of La Petite

Belanger a Hardee's food systems and

Burger Chef

Martin believed he could wake the man

under the sombrero that is bring the

true potential of Taco Bell Pepsi

Corporation was the parent company of

Taco Bell the question remained whether

Martin would be able to make Taco Bell

such a company that Pepsi corporation

wanted the biggest problem of Taco Bell

was that we Taco Bell didn't know what

they were they thought maybe they were

in the Mexican food business but in

reality they were in the fast-food

business by not understanding who they

were

who their potential customer was Taco

Bell was unable to achieve the results

they wanted the fast-food market had

grown substantially during the 1960's

and 1970's

the fast-food market was showing signs

of maturing by the early 1980s

competition had become more intense as

industry participants fought

aggressively for every point of market

share in 1982 Taco Bell revenue was 700

million dollars Taco Bell was a fast

food chain and had 1489 restaurants 60%

of which were franchised units the

company had 40% of the Mexican fast food

market but a negligible market share of

total fast food in the early 1980s

production at Taco Bell was

labor-intensive and used low levels of

technology suppliers delivered fresh raw

food to each restaurant several times a

week managers and crew members use their

time before opening and during breaks to

clean and prepare ingredients from

new items assembly occurred when

customers ordered because corporate

headquarters stressed food control and

customer demand was difficult to predict

there were often shortages of prepared

raw ingredients which resulted in

significant delays for customers cooking

was also done on site variations in who

is cooking and the sometimes frenetic

pace often led to inconsistent slicing

and stirring as a result taste and food

quality could vary dramatically even

within an individual restaurant area is

dedicated to food preparation and

cooking took up about 70% of the floor

plan in a typical Taco Bell restaurant

50% of some competitors sales were

delivered out of drive-through windows

by early 1980s Taco Bell had no

drive-through windows the food assembly

line in the kitchen was parallel to and

directly behind the customer service

area customers waiting place their

orders and receive their food could see

the backsides of crew members assembling

customer orders cashiers took orders and

wrote them manually on a plastic board

after the production grew read and

filled the orders cashiers erased

existing orders and moved to the next

customer this system resulted in

frequent fulfillment errors within the

restaurants restaurant managers called

our Em's assistant restaurant managers

called arms and shift supervisors were

directly involved in Taco Bell

day-to-day operations all the staff

members participated in the following

daily activities one receiving fresh

food shipments each week two overseeing

food preparation throughout the day

three ensuring customer service for

overseeing cleanup five

and when necessary particularly during

Meal Time Rush Hour's restaurant

managers also face the time-consuming

task of manually developing work crew

schedules it was a difficult task

considering the annual turnover rate at

Taco Bell was 220 percent Taco Bell's

manual systems were also used for

placing orders and performing other

administrative tasks these manual

systems led to significant oversights

and errors provided no data for

management analysis and forced employees

to spend a great deal of time in

repetitive paper intensive

non-value-added tasks restaurant

managers reported directly to district

managers called DMS district managers

often played the role of policemen they

pointed out problems in restaurants and

ensured that corporate standards were

maintained they regularly performed

white-glove inspections of the physical

restaurants and audits of the financial

books district managers spent almost no

time coaching or developing their

restaurant managers the actions of

district managers often resulted in

hostile relationships with their

restaurant managers starting in 1983

John Martin began a series of changes in

the Taco Bell organization these changes

were designed to change the company's

mindset and enhance organizational

capabilities for pursuing a strategy to

compete with the major fast-food chains

the first thing Martin did was to

modernize Taco Bell's physical units

these changes in physical units included

one remodeling the restaurants to

increasing seating capacity 3 adding

drive-through windows for installing new

signs 5 and outfitting employees in more

contemporary uniforms Taco Bell also

added new menu items including nachos

taco salad Mexican pizza double beef

burrito supreme seafood salad and

softshell tacos

in addition Martin accelerated the

company's growth averaging 249 new

stores per year from 1983 to 1988 this

expansion also extended Taco Bell's

geographic presence into the Midwest

south east and northeast regions of the

country

Taco Bell replaced its old 1,600 square

foot mission style restaurants with more

modern 2,000 square foot restaurants

during the same period the parallel food

assembly line was replaced by a double

assembly line perpendicular to the

customer service area

Taco Bell also started installing

drive-through windows this change

improved product flow increased capacity

and made serving easier in the

drive-through windows Taco Bell started

using electronic point-of-sale systems

for taking orders these electronic

point-of-sale systems linked to

television monitors over the food

assembly line these monitors indicated

what had been ordered the new electronic

system allowed the company to track

sales product mix and inventory much

more closely training and development

were also improved in the mid-1980s

training for district managers however

was not significantly changed Taco Bell

made sure each manager had memorized how

to make every product and the

appropriate weights for every product

the Mexican segment of upscale

restaurants fast food and supermarket

food sales grew substantially during the

1980s there was an ongoing battle for

market share in the maturing fast food

industry in such scenario Taco Bell and

its competitors began to introduce new

products to attract customers some

incremental business was generated by

this strategy however the new products

also had a negative effect on kitchen

efficiency which influenced both costs

and quality of service the introduction

of Vegeta's for example required new

grilles and exhaust systems costing Taco

Bell 30 million dollars

Martin did not want Taco Bell to compete

head-on with the big players who had

well-established entrenched brands

rattler Martin wanted Taco Bell to

change its business in his point of view

Taco Bell was not in the business of

making food but in the business of

feeding people recognizing the

industry's margins squeeze Martin

developed a new more holistic business

strategy focused on customer value in

1987 Taco Bell was in a process of

determining how to define value martin

commissioned a study to better

understand what Taco Bell's best

customers wanted from a fast-food

restaurant this was followed by another

study in early 1989 the result of these

two studies confirm that customers

wanted fact fast food fast fast food

orders accurate fast food served in a

restaurant that was clean and fast food

at the appropriate temperature it was

now clear to the Taco Bell that a

commitment to customer value would

require a fundamental change in

management thinking now

Taco Bell would have to view quality and

price as compatible trade-offs based on

this new information in early 1988 Taco

Bell adopted a strategy of value pricing

see exhibit three Taco Bell fully

recognized that too in order to

dramatically lower prices while

preserving quality it would also have to

dramatically reduce costs to achieve

these seemingly incompatible goals

martin realized that a radical

redefinition of the business was needed

at Taco Bell

one of the most far-reaching changes

implemented at Taco Bell during the late

1980s was an initiative called K - with

K - standing for kitchen - the

restaurant kitchen became a heating and

assembly unit virtually all shopping

cooking and associated cleanup was

transferred to corporate headquarters

all food products arrived at the

restaurant prepared packaged and ready

for use in assembling menu items

with this bold move Taco Bell inverted

the space configuration of their typical

restaurant the 70% kitchen 30% customer

service ratio was changed to 30% kitchen

70% customer service this came -

initiative resulted in dramatic

improvements in efficiency much tighter

control of the quality and consistency

of food greatly expanded seating

capacity within the restaurants and

provided space to expand drive through

real estate expenses in proportion to

sales were reduced and aggregate labor

costs were also ridden to meet customers

demand for speed and quality Taco Bell

also instituted its speed of service SOS

program the speed of service initiative

redesigned processes further and

developed specific measures of

performance recipes were reformulated

and heated holding areas were developed

by 1990 Taco Bell restaurants were able

to pre assemble and hold 60% of their

most popular menu items ready for

immediate sale for up to 10 minutes

these additional changes increased peak

hour transaction capacity by 54% and

reduced customer waiting times by 71%

the reconfiguring operations helped cut

costs and increase speed of delivery

Taco Bell also transformed the roles of

its managers the position of restaurant

manager was changed to restaurant

general manager our GM restaurant

general managers were given

decision-making responsibility and

accountability for their restaurant

developing staff and managing profit and

loss

Taco Bell though that its restaurants

could operate by themselves because

there's no rocket science in a fast-food

restaurant

however the difficult thing was that

there were 1,500 things going on at the

same time the typical top-down command

and control structure of the restaurant

was not able to deal with those things

under any circumstances

Taco Bell knew they needed a whole new

people system where people will have to

do new things to develop this new system

Taco Bell will have to give training to

its employees change compensation and

change the way they manage people during

a two to three year time period

Taco Bell analyzed the caliber of their

original restaurant general managers

Taco Bell estimated that 2/3 of their

existing restaurant general managers

would be able to do what Taco Bell was

trying to do at the restaurant level to

fill the newer GM role Taco Bell began

looking for people the skills and

potential required for the role of

restaurant general manager was different

than the old restaurant managers role

selected employees were given training

on leadership operating management

operational policies and procedures

coaching managing conflict restaurant

communication systems creative

problem-solving undecillion making and

implementing change the district

managers role at Taco Bell also changed

under the new strategy the title of

district manager was changed to

marketing manager there spans of control

increased from six restaurants to twelve

by 1991 the span of control for

marketing managers was expanded to 20

restaurants with such large span of

control the marketing managers were

virtually forced to begin managing by

exception and to change from policeman

to coach many of the former district

managers could not make the transition

to fill the vacancies of marketing

manager Taco Bell started looking for

talent outside the fast-food industry

Taco Bell was convinced they could teach

these new general managers about the

industry therefore Taco Bell sought

candidates with leadership and

management skills who could coach and

develop restaurant general managers

while also building the business in

their area

Taco Bell knew that changing

compensation and non-monetary reward

systems was critical to transform middle

management roles at Taco Bell

the existing compensation at Taco Bell

was standard in the fast-food industry

as such unhappy Taco Bell managers had

no commitment or sense of ownership to

the company Taco Bell increased the

average base salary target incentive

bonus and non-monetary compensation for

the new restaurant general managers

their careers paths were redesigned for

example the restaurant general manager

was no longer limited to managing a

single restaurant they were able to

expand their job and increase their pay

by opening new points of distribution

and building business through new

channels market manager compensation was

also redesigned to attract more highly

skilled individuals and to create

incentives that would keep them

challenged there were two potential

career moves for market managers one

expanding their current job by growing

the Taco Bell business in their area two

assuming a new position within the

expanding Taco Bell business to support

the job expansion career approached Taco

Bell created a very broad salary range

for marketing managers Taco Bell was in

a position where it could achieve

significant profit and growth if things

ran smoothly at the same time the

situation could be a disaster if company

standards were not maintained Taco Bell

had removed layers of management and

increased frequency of supervision of

restaurants Taco Bell also implemented

new controls or safety nets to ensure

adherence to the company policies and

value systems there were three primary

safety nets one a toll-free telephone

number was installed for customers to

comment on Taco Bell's restaurants food

and service calls were answered by an

external vendor that recorded comments

and forwarded them to the relevant

operations area to mystery shopping was

a second safety net a mystery shopping

service regularly sent individuals to

rate restaurants on specific quality

issues and these reports were used in

calculating bonuses for restaurant

managers three marketing surveys also

known as the customer intercept program

were conducted by teams of Taco Bell

employees who would arrive unannounced

at a restaurant and spend the day asking

customers to fill out brief

questionnaires about their Taco Bell

experience the data was used in

determining the market managers bonus

and to better understand how the chain

was viewed in a particular geographic

market Taco Bell's managers needed an

information and communication system

that would make it possible to perform

in their new roles in 1988 a Mis project

was initiated that would provide a

personal computer in every store linked

to a local pasta system to the marketing

managers and to corporate headquarters

this Mis system was called taco total

automation of company operations taco

provided the infrastructure information

and analytical tools needed to support

new management roles taco reduced

operational paperwork for restaurant

general managers by at least 10 hours a

week taco provided restaurant general

managers with reports on food costs

labor costs inventory perishable items

and period to date costs all with

variances taco also had functions that

helped restaurant general managers with

labor scheduling and service operations

planning the restaurant general managers

now had more information than ever the

new system really empowered restaurant

general managers by providing tools to

take care of problems without someone

saying you've got a problem the

information needs of marketing managers

were also supported by the system the

new system provided marketing managers

with daily weekly and monthly reports on

store operations in their district taco

also tracked sales for senior management

by downloading the information from

store registers to a central computer

this eliminated several accounting

positions at corporate headquarters

finally taco had a communications

function

that was critical for coordinating

interactions between marketing managers

and store managers previously marketing

managers either had to mail information

visit or call store managers taco gave

marketing managers an electronic mail

system that provided another way to

communicate with restaurant general

managers from 1988 to 1994 the fast-food

industry was stuck in a recession and

achieved only single-digit growth Taco

Bell with its new strategy and

organizational changes Taco Bell had

more than doubled its sales and tripled

its profits customer satisfaction had

also increased for Martin this was still

not enough by late 1991 Martin had

reformulated the firm's future strategy

under this new strategy

Taco Bell would create and dominate the

convenience food business the

convenience food business reached out to

customers any time and any place they

were hungry John Martin's goal for Taco

Bell was to evolve into a twenty five

billion dollars food retailer with a

worldwide distribution system of over

200,000 posed by the year 2000 to reach

this aggressive goal

Taco Bell would have to expand beyond

fast foods to support this new strategy

Taco Bell began a string of acquisitions

by 1994 Taco Bell had acquired three

restaurant brands Taco Bell hot and now

and Chevis Mexican restaurants in

addition Taco Bell expanded its

signature brand of retail products

through Taco Bell new concepts Taco Bell

supermarket retail and Taco Bell

international see Appendix A for a

summary of the Taco Bell brand in 1994

keeping in view the expansion of the

business Martin used lessons learned in

came- to enable efficient management

across multiple brands channels and

markets Taco Bell did not have multiple

layers of infrastructure rather the

company developed a concept called

shared resources under this concept

managers identified the infrastructure

requirements for the new lines of

business the managers then met together

to identify how they could capitalize on

the strengths of Taco Bell's existing

infrastructure or infrastructure that

was available elsewhere in Pepsi

Corporation for example the frito-lay

marketing sales and distribution

infrastructure could be used to support

the Taco Bell line of retail products to

ensure future success

Taco Bell needed to move beyond changing

its structure roles and processes Taco

Bell also needed to change its culture

and embrace continuous yet intelligent

change survival and success of Taco Bell

in the future would depend upon learning

faster than the competition learning

organizations are able to capture share

and take action on information better

and faster than the competitor Taco Bell

believed the benefits of creating such

an organization would include one

increased individual awareness and

collective organizational IQ to greater

organizational flexibility and speed of

response 3 institutionalization of

employee self-sufficiency and innovation

4 and increased individual and team

productivity to adopt this

self-sufficient learning model

Taco Bell needed further refinement of

its organizational design Taco Bell

pursued a number of initiatives to

create and support this new learning

culture by 1993

Taco Bell had rapidly expanded through

its carts kiosks vans and Taco Bell

Express units to support such rapid

expansion Taco Bell continued to

increase its managers spans of

responsibilities an integral part of

increasing managers spans of

responsibilities was the development of

team managed units DM use team managed

units where teams of crew members

sufficiently trained to manage a store

without a full time on-site man

by the end of 1993 there were team

managed units in 90% of the company

owned restaurant locations stores team

managed units permitted general managers

GM's

to manage multiple point of access the

use of team managed units forced general

managers to become coaches and trainers

general managers worked with their crews

to help them broaden their jobs and

accept new levels of responsibility

implementing team managed units also

helped create a culture of

interdependence and information sharing

among crews and management this culture

would be essential to creating both

self-sufficient crew runs stores and a

learning organization Taco Bell

compensated crew members for assuming

additional responsibilities similarly

compensation system for general managers

was changed as well initial

implementation of the taco system had

provided restaurant managers with

information about store operations in

the new environment the focus was to

provide the same information to the crew

members actually running the stores to

make information useful to team managed

units Taco Bell introduced taco to taco

to was a new more user-friendly computer

system designed to provide crew members

with the information they needed to make

decisions and take action the team based

culture and the new technology system

were essential for supporting an

empowered organization crew members felt

more empowered new systems was much

better because crew members knew more

about what restaurant used daily

development of an intellectual network

was another critical initiative for Taco

Bell this network was intended to be an

online communication system this network

allowed every Taco Bell employee to

disseminate information ask questions

get answers and perform their jobs

better this network would use shared

databases to include best practices

information on a wide variety of

subjects the network would also use

expert systems such as the company

contract authoring system senior

management of Taco Bell used Taco two to

delegate greater Authority while still

maintaining necessary control in areas

of high risk in this way Taco 2 extended

the concept of safety nets from

measurement of customer satisfaction to

include control of operations

Taco Bell expected the intellectual

network to facilitate knowledge transfer

and communication without increasing

bureaucracy Taco Bell also extended its

email systems and installed voice mail

and computer conferencing Taco Bell

managers noted that voice mail quickly

became a key component of the

communication infrastructure to make

sure company would continue to innovate

in the future

Taco Bell also took few initiatives for

example the company developed a

restaurant of the future testing site

near its corporate headquarters on this

testing site new innovations could be

developed and tested in 1994 there were

several innovations being tested at this

site one example of such innovations was

an automated taco assembler capable of

making nine hundred tacos per hour

without human assistance martin believed

that one must not wait for something to

be broken in order to fix it John Martin

wanted Taco Bell to become an

organization that provides value

extraordinary convenience and

accessibility an unparalleled customer

satisfaction despite all achievements of

Taco Bell Martin believed that the best

still lies ahead his vision for Taco

Bell was broader than just a fast-food

restaurant

he believed that by empowering people to

take greater ownership Taco Bell can not

only deliver value to its customers but

we also provide greater value to its

employees is Taco Bell positioned to be

able to achieve its vision of growing to

twenty five billion dollars in sales and

200,000 posed were the actions to date

sufficient to take them there only time

would tell following are the assignment

questions of this case study

one critically analyze the actions taken

by Taco Bell between 1983 and 1994 -

given the speed and magnitude of change

why didn't talk o Bell go out of control

three and Taco Bell's major competitors

copy the Taco Bell strategy why or why

not four is Taco Bell positioned to

achieve its goals what advice would you

have given John Martin in 1994