Frito-Lay, Inc.: Manufacturer of Corn Chips – Reorganization of Executive Structure

Frito-Lay, Inc., had recently undergone an extensive reorganization of marketing-related activities to provide more effective control in regional and district offices. Arch C. West, the vice-president of marketing, found it neces­sary to reevaluate his role and responsibilities under the new organizational structure, which had redefined his formal relationships with other executives.

Frito-Lay, Inc., with its home office in Dallas, Texas, was a national manufacturer of corn chips, potato chips, and related food products. Its sales accounted for about 75 percent of the national market for corn chips and a much smaller share for potato chips. It also produced a line of canned processed foods, the most important of which was chili and beans, under the Austex brand. Owing to the perishability of the corn and potato chips, the company had factories located throughout the United States close to major markets. Product perishability made it necessary to maintain a sales force that could sell and deliver direct to retailers. To serve retail food stores directly on a national basis, the sales force numbered in excess of 3,000 persons.

To provide communication with and control over its large sales force, Frito-Lay had developed a complex organizational structure, with three layers of geographical subdivisions of authority. The national market was divided into four zones, and these were subdivided into a total of fourteen divisions. The divisions were further divided into districts, each with a dis­trict sales manager and ten or twelve salespeople. The new organizational structure had placed the vice-president of sales under the line authority of the executive vice-president rather than under the vice-president of mar­keting. The position of vice-president of sales was a staff position, since the district and divisional sales managers were under the authority of their respective district and divisional managers. The relationships are shown in Exhibit 1.

Under the formal organizational structure, the vice-president of mar­keting was assigned a staff position with respect to the sales organiza­tion. In actual practice, he exercised considerable control over activities of the sales organization. For example, the subdivision of each district into individual sales territories, and reshaping of territories, was handled by West’s office. The availability of detailed computer-derived informa­tion about each territory made it possible to make such decisions at a distance.

Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.

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