outline

2. 2

3. 3 Impact of IT

4. 4 The “I” versus “T” in IT- Peter Drucker Pinpoints THE Issue

5. 5 The Frito-Lay CaseUse of IT to Sustain Competitive Advantage

6. 6 Value of the Direct Sales Model

7. 7 IT Target- SUSTAIN the Competitive Advantage

8. 8 The “T” Had to be Developed

9. 9

10. 10 Impact of Hand-Held Computers

11. 11 “What’s In It for Me?”- Reduces Tedious Arithmetic at End of the Day

12. 12 Management Process Had to be Changed to Capitalize on New Information Availability of timely information at the SKU level for each store enabled weekly one-on-one meetings between first-line district sales managers and their salespeople

13. 13 The New “I” Enables Micromarketing

14. 14 How to Get Payoff from the IT Investment Hardware investment - $40 million Software investment - $100 million during 1984 - 88

15. 15 Decentralization FacilitatedBy Frito-lay System Timely, accurate information for top management - NOT massaged & sanitized information

16. 16 An Invaluable Benefit "Management by Walking Around“ is Feasible Frito-Lay CEO can make a "computer tour" of operations “Can view the performance of each of our managers and salespeople around the country“ Can fire off an electronic-mail memo if the view is not good or contact manager to congratulate on the good view

17. 17 The Frito-Lay System- An Integrated Everyone’s Information System

18. 18 Major Payoffs from The Frito-Lay Enterprise System Able to tie manufacturing to consumer purchases from the stores Reduced “stales” by 50% Micromarketing optimizes margin Able to target local demand patterns with just the right sales promotion Domestic revenues: $3B in 1986 $4.2B in 1989

19. 19 Some Lessons

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21. 21

22. 22 The Federal Express Case- IT Drives Innovative Business Model

23. 23 Federal Express Error Index

24. 24 Weights for the Error Index

25. 25

26. 26 FedEx Gets IT!

27. 27 FedEx Used IT to Expand its Core CompetenceFrom Moving Boxes to Bytes

28. 28 A Win-Win Tie-up with National Semi-Conductor

29. 29 The Value-Add for Nat Semi

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36. 36

37. 37 The McKesson Case- IT was Key to Company’s Growth

38. 38 Next: Used IT to Link with Customers

39. 39 Real Strategic Use of IT came...

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44. 44

45. 45

46. 46 Wal-Mart : A Simple Business Model

47. 47 Wal-Mart after 40 years …….Lord of the Things Annual 2001 sales: $220 billion …..More than all other general-merchandise retailers combined #1 Food Retailer in the U.S.: $56 billion in 2001 ….. Opened since 1985 over 1000 massive dept./grocery supercenters, at 200,000 sq. ft. bigger than 4 football fields # of employees worldwide: 1.28 million ….. More than the US Postal service ; # in China : 4,000 # of Suppliers : 30,000 ….. In every continent but Antarctica Value of 100 shares bought in 1970 @ $16.50 per share: $11.5 million Wal-Mart’s % of P&G's $40 billion in annual sales : 15% Terabytes of data in data warehouse in Bentonville: 500- Terabytes in the data warehouse of the U.S. Internal Revenue Service: 40 Typical starting hourly wage: $6.50 Source: Business 2.0, March 2002

48. 48 IT is Critical for Wal-Mart’s “Everyday Low Price” Strategy

49. 49 Wal-Mart’s Data Warehouse Current Level of Storage Capacity Second only to the U.S. Government’s Several times the level of Sears BUT ALL THAT DATA IS USELESS UNLESS IT IS USED Information is shared with its own buyers AND suppliers – 100,000 queries a week on purchase patterns or checking on a product

50. 50 Wal-Mart’s Buyers Help to time merchandise deliveries so that its shelves stay stocked, but NOT overstocked Keep inventory levels leaner and turning faster – a MUST for retailers of perishable products and predictable fashion Suppliers Vast and detailed data on sales, profit margins and inventory exceeds what many manufacturers know about their own products Wal-Mart opened its data vault in January 1999 to its suppliers – Cements Wal-Mart’s power over them Value of the Data Warehouse

51. 51 All That Data Is Mined!- Doing it since 1990

52. 52 Micromerchandising Pays Off

53. 53 Wal-Mart Stays Ahead of Competition!

54. 54 Wal-Mart Changed Retailing Economics Company (Latest 12 months in 1994-95) Wal-Mart Circuit City K-Mart* Caldor* Bradlees* Federated Dept. Stores Selling, General & Admin. Costs As a % of Sales 15.8% (19.4% in 1984) 19.0% 22.2% 24.4% 29.4% 33.3%

55. 55

56. 56 Wal-Mart’s Management ProcessKey Features

57. 57 Wal-Mart’s Management ProcessKey Features

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60. 60 41 Years of Nonstop Growth

61. 61 “Sense & Respond” Management Process of Wal-Mart : Why They are Unbeatable Disappointing sales on Friday, Nov 26, 2004 (the day after Thanksgiving),

62. 62 How did Wal-Mart Management respond to it? Within a couple of hours, Michael Duke, the president of Wal-Mart, had gotten messages on his Blackberry that sales were off at stores around the country. He brainstormed with execs and store managers about which products to mark down. A team met over the weekend to finalize the list and contact suppliers. On Tuesday, stores nationwide offered the new prices. Source: www.fastcompany.com

63. 63 How did Wal-Mart Management respond to it? On Thursday, Wal-Mart broadcast a video for its stores suggesting new displays. The next day, the displays were up, and a new ad campaign was underway. 7. On Saturday, the company conducted a meeting with 500 employees asking for more ideas -- and acted on 21 of their recommendations. The result? The retailer expects December sales to be up three percent. Although it's not the holiday season it had initially hoped for, it represents a heck of a comeback. Source: www.fastcompany.com

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