Case Study

Contents
• Aims
• Company Profile
• Problem Definition
• Underlying
Assumptions
• Reengineered
Solution
• Conclusion
• Appendix
 Aims

This brief presentation will attempt to shed light on the following

aspects
•Review performance of Taco Bell
•Examine reasons for reduced productivity
•Review overall effects after reengineering
 Company Profile

The franchise, Taco Bell, is an eatery that

needs no introduction. It specializes in
Mexican style food, including various
types of tacos, salads, burritos etc.
•The first Taco Bell restaurant was
opened in 1962 in Downey, California
•It had grown to 1000 units by the time it
was taken over by PepsiCo in 1978
•By year-end 1996, there were more than
6,800 Taco Bell units in 17 countries and
territories, with system-wide sales of $4.7
billion
 Company Profile…cont’d

Taco Bell in itself, is a subsidiary of Yum Brands, a Fortune 500

company, which boasts other renowned franchises like Pizza Hut, KFC
etc. Yum! Brands' global system sales totaled more than $22 billion in
the year 2001.
 Problem Definition

In 1983, analysis showed that the Taco Bell’s total cumulative growth since 1978
was a shocking negative 16% compared to a positive 6% of the total industry.
This prompted the management to pinpoint immediately what was going wrong
and where. This led them to identify the following factors;
•Lack of business vision for the company
•Reliance on obsolete management and operational practices, which focused
more upon the processes themselves instead of customers
•Top-down structure, with multiple levels of management
•Following traditional approaches, which assumed what customers wanted
without even asking them
All the above factors were resulting in slower and costlier service.
 Problem Definition…cont’d

Having identified some of the key areas that needed improvement, Taco Bell
started reengineering itself out of troubled waters. It started to concentrate
more upon its customers and what they wanted.

The more they listened, the more they found out that what the customers
wanted was really very simple…good food, served fast and hot, in a clean
environment and at a price they could afford!!!!!
 Underlying Assumptions
The older system of operations at Taco Bell was based upon traditional
operational practices, which were grossly insufficient for the economic and
business climate of the 21st century. The entire setup was based upon
certain assumptions, which include the following;
•Assuming that the restaurant knew what the customers wanted without even
asking them. This led them to falsely believe that customers wanted fancier
décor, broader menus, outdoor playgrounds etc, instead of quality food at an
affordable price
•Investing in large kitchen areas, which in some instances, covered 70% of
the total area in the mistaken belief that it would improve customer
satisfaction.
•Operating the restaurant along the lines of a manufacturing company
instead of a retail outlet. Doing away with this concept led to the development
of novel ideas like K-Minus and TACO.
 Underlying Assumptions…cont’d

•Believing that the only segment they could target was the one within the
restaurant’s premises. This translated into $78 million, whereas outside the
restaurant, the total market came to about $600 billion in USA alone.
•Limiting themselves to the goal of becoming the value leader in the quick-
service restaurant industry instead of value leader for all foods for all meal
occasions.
 Reengineered Solution

Reengineering the setup at Taco Bell involved several steps, including;

•Complete reorganization of human resources
•Dramatic redesign of operational systems
•Doing away with entire levels of management
•Creation of jobs like “market manager”
•Replacing area supervisors with market managers and reduce their numbers.
• Eliminating district managers and promoting restaurant managers.

Taco Bell followed only one rule during re-engineering…

“Enhance those things that bring value to the customer and change or
eliminate those that don’t”
 Reengineered Solution…cont’d
They also changed their restaurant structure by:
•Limiting the kitchen area by from 70% to 30%
•Increasing the customer area from 30% to 70%
•Doubling the seating capacity in the area available
Additionally, re-engineering led Taco Bell to introduced two new
methodologies, namely K-Minus and TACO (Total Automation of Company
Operation)
Reengineering
Process

K-Minus TACO
 Reengineered Solution…cont’d

K-Minus:-
K-Minus means kitchen less restaurant, based on nature of the company. All of
their food was cooked outside the restaurant at central locations. This stemmed
from the concept that food should be retailed instead of being manufactured.
TACO (Total Automation of Company Operations):-
It provides each restaurant with an MIS facility and empowered the employees
with computer know-how. It eliminated paper work and allowed more time to be
spent on the customers.
Such programs serve as agents of change for more innovative ideas like new and
varied points of distribution (like street corners, concession stands etc)
 Conclusion
This case study brings forth the following conclusions:
•Reengineering businesses is very much a reality and is not limited to the confines
of textbooks. If done properly, it can virtually turn around any business; be it
consumer goods (Kodak), restaurants (Taco Bell) or financial institutions (IBM
Credit)
•Customer must be the starting point for everything in reengineering
•Resistance to change should be anticipated and appropriate steps should be
taken to deal with it.
•Every company that seeks to be reengineered should seek a phrase that makes
its corporate vision clear like “we want to be number one in the share of stomach”
(Taco Bell)
 Appendix

The following web sites were referred to while making this presentation:
•www.yum.com
•www.tacobell.com
Apart from online resources, the following text was consulted as well:
•Reengineering the corporation - Hammer & Champy