Information Technology in Taco Bell
Taco Bell is a fast food chain that sells Mexican food. This company has become the worlds largest of its kind. This paper will study and analyse the impact and implementations of information technology to Taco Bell a bit closer. Firstly it will cover the period ’83 – ’94, but will later talk about the newer technology and how that can be used.
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Early in the 1980’s taco Bell signed a new CEO, John Martin. Martin was able to turn the company into a very competitive player in the industry. He realized that they could simply borrow the information from other industries. In an interview Martin gave an example of such use: “When I think about cutting labour in the kitchen, there is some really neat stuff in the pharmaceutical industry that could be adapted”. (Martin, 1994)
Porter’s model shows the competitive forces that are faced by a company. Below is an overview to more easily see how information technology was adapted by Taco Bell, and how it used this technology to compete against these forces.
Fig 1. Porter’s industry
Bargaining power of suppliers:
To gain more hand in the relationship with suppliers, Taco Bell has through the years adapted a better and better inventory control. That is, they don’t have to store vast amounts of unused food or decrease service when stock ran out. It all started in Martin’s first year, 1983, with a point of sale (POS) system that helped track sales. A bigger system called TACO was built that used the POS and made the information more useful. A regional manager could predict future sales and view stock based on all POS in his/her area. Taking decision-making down to a lower level with TACO II perked up the just-in-time inventory system even more.
Potential new Entrants:
Taco Bell has not directly taken any action to prevent new similar companies blooming. But indirectly, some technology has given them desired information. By letting customers express their feelings and ideas through a toll free number service they gained learning experience that newcomers don’t have. TACO collected information to marketing which lead to brand identity. With TACO II came an expert system that improved real estate contracting. Bargaining power of buyers:
Information technology has far from played the only role in this aspect. However, quality and performance was improved by POS because customers would receive the right change and food ordered in faster manner. In some of the same sense the toll free number would lead to service in a customer influenced fashion. But determinants such as enlarged product variety were not IT related.
Threat of Substitutes:
Not much strategic planning has been directed this way with IT. Taco Bell owns some of the substitutes themselves, like Chevys Mexican restaurant. And in 1994 they successfully entered the Mexican food section in supermarkets, heavily depending on their strong brand identity. Industry Competitors:
Why is it that Taco Bell has been able to be the price leader in the fast food industry, and still expand taco kiosks to schools and airports etc? The answer is continuously thinking IT to decrease costs and improve customer satisfaction. Again the toll free number system seems useful to improve restaurants, food and service. Greatly expanding the communication structure with TACO and especially TACO II meant that Taco Bell could continue its rapid growth without more bureaucracy. These systems also reduced accounting costs. Toward the end of the period Taco Bell started using a labour management system (LMS), which minimises the labour to service ratio and therefore optimises the payroll. (Winter Simulation Conference Proceedings. 1994, pp.1067-73) .In addition, QSRS software is used to optimise parking lots by considering all traffic parameters. (Winter Simulation Conference Proceedings. 1994, pp.1061-6.)
Looking at the above structure gives us a nice overview of how Taco Bell used IT. You may wonder, could it have been done better? When trying to answer this one must keep in mind that the era covered was a time, and it still it, when technology changes very rapidly. “By the time somebody calls with a technology need, you're late. You're even later when you try to deliver it.” (Cramm, 1994). Taco Bell’s ability to foresee what was needed could not have been done much better. At the same time continuos innovation enhanced the original goal seeking products. Many firms tend to become complacent, but Martin recognized this threat in Taco Bell.
Also read: Scientific Management Examples McDonalds
Matching Organization Goals
Taco Bell has got a simple goal strategy: value pricing without sacrificing customer satisfaction. To be able to make food cheaper the firm had to slash other expenses. “There's 29 cents worth of labour in a $1 taco. I can't taste labour. Can you?” (Martin, 1994). This is where all the information technology comes in. The IT may seem all categorized in Porter’s model above, but reality is that Taco Bell has made all that IT collaborate in a manner such as to achieve their goal.
On the other hand, Taco Bell’s objective is probably similar to other fast food franchises, so why are their information systems better than it’s competitors? According to Taco Bell’s IT vice president the key difference between Taco Bell’s information sources and their competitors, has to do with the level of acceptance and widespread usage within the culture. Creation of that culture starts already when recruiting new employees, from the store all the way up. (Cramm, 1994).
Taco Bell’s communication technology has proved more efficient than one major competitor, McDonalds. During the early 90’s, customers wanted healthier fast food. At McDonalds, new menu decisions were requiring to pass through headquarters, a slow process that delayed any action. Taco Bell, with its TACO system was much faster to respond and was capitalizing on the shift in taste by launching new menu items. (Why good companies go bad, 1999).
Since Taco Bell has invested so much in IT, they find themselves more vulnerable to IT failure. Even a small glitch can cause severe operational consequences. This may be a week joint in the company. Contingency planning should not come without considering dependence on IT and some disaster plan with steps to prevent and/or recover. Martin took Taco Bell to the turnaround square in fig 2. However, the firm is moving closer to the strategic section. Most other fast food companies find themselves either in the support phase, and really need to catch up, or in the turnaround phase because they have seen the way Taco Bell operates.
Fig2. Dependency and impact of IT grid
Continuing the Growth
Taco Bell has been a successful organization since Martin joined in ‘83. Some people state however, that it is the big, established and good organizations that often fail to respond effectively to changes in their environment. (Why good companies go bad, 1999). The source explains that the reason is the tendency to follow established patterns of behaviour, even in response to dramatic environmental shifts. What further use of information technology would prevent this from happening?
Considering the new technology available after 1994, a lot of the technology described above has been improved. New things have also entered the marked.
Moves by Rivals
When mentioning rivals, most people think immediately of McDonald’s. Let’s look closer at this threat. McDonald’s started seriously realizing the need for IT in ’98 to help them against competition such as Taco Bell. This huge company has a low-technology culture and faces many issues that slow down the upgrading. Examples of such problems include high employee turnover and the fact that 85% of McDonald’s are run by franchisees and are reluctant to change. The firm did not get its first E-mail system until 1996, and there is no nationwide network connecting McDonald's outlets. (ComputerWorld, 1998).
Maybe Taco Bell should rather look out for new fresh up-and-coming companies.
One such company is Del Taco, a 240 store quick-service Mexican restaurant chain. This corporation has bought a new decision support system in the form of an OLAP. The OLAP is linked to a data warehouse. The system was rather easy to integrate, training is easy and it provides many key factors for the business. (Nation's Restaurant News; 1999).
Other Ideas That Might Prove Useful
Following are a few ideas that, using information technology, can help Taco Bell get competitive advantage through various means. Drive-through where human order takers are replaced with touch-sensitive menu screens. The advantage is lower employee cost and more reliable orders. Disadvantage is that some people might find it hard to order this way. Another technology is the credit card. No fast food chain can currently offer this method of payment. More and more people are using plastic card instead of notes these days, so why can’t you use it at Taco Bell? To improve inventory control a direct link between stock limit and suppliers could order food automatically. This is not that hard to implement since all the food processing is done at centralized places. Many other industries have what is frequently known as fly-by point. This idea awards the customer for purchasing from a specific company. Taco Bell could, for example, give one free taco for every 10 bought. The advantage behind this is to increase switching cost. I would also put a lot more emphasis on the power of e commerce. Looking at Taco Bell’s homepage (www.tacobell.com), it doesn’t do very much. It should be divided into regional sites, eg one for Minnesota and one for Australia, to increase the potential for any use of the site.
This paper comments on the role related to information technology in Taco Bell. This organization is a very successful company. The reason why, much relies on the fact that they have been looking ahead in time in search for potential use of IT and hence gained competitive advantage over their competitors.
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