MBA 617

Prof. Pesch
Zhi Eh Lor
March 18, 2015

Taco Bell Inc. (1983-1994)

Discuss the measures taken by CEO John Martin to build Taco Bell's competitive advantages in such
areas as facilities, layout, human resources (workers and managers), technology, supply chain
management, quality assurance, etc. to transform Taco Bell from a "sleepy Mexican food restaurant" into
a major player in the fast food industry.

Phase I: 1983-1988
When John Martin took over the Taco Bell as the CEO, he first remodels the restaurants
physical units from a regional Mexican restaurant to a fast-food restaurant. Therefore, restaurant
modernization includes by increasing seating capacity, adding drive-through windows, installing
new signs, and provides contemporary employee uniforms. Variety menu were also added to
serve more diverse customer. This result the accelerate growth in unit from 100 to 249 stores a
year; net profit growth from $43 million to $76 million.
To understand what customers want from a fast-food industry, Martin conducted a
customer value research in 1987 and 1989, to improve Taco Bell holistic business strategy. The
result indicated that FACT was the customer needs in the industry. FACT representing a fastfood order should be fast, accurate, clean and served in appropriate temperature. This research
allowed Taco Bell in 1988, to adopted value pricing strategy instead of viewing quality and price
as incompatible tradeoffs.
Phase II: 1988-1991
FACT studies had provided Martin information to focus on customer value as key
principle. K-minus was then introduced for the purpose of reducing the kitchen surface in the
restaurant. Chopping, cooking, and associated cleanup was transferred to corporate headquarters
while the kitchen in the restaurant only functioned as heating and assembly unit. In addition, the
SOS program also developed where recipes were reformulated within a new heated holding
areas. By 1990, Taco Bell restaurants are able to meet customers demand for speed and quality.
Martin decided to transform the role of district manager and restaurant manager. A
restaurant manager recast as restaurant general manager (RGM). RGM will have responsibility
in decision-making, developing staff, managing P&L and account for their restaurant. In
addition, the role of marketing manager (previously titled as district manager) was change from

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policeman to coach and managing from 6 restaurants to 20 restaurants. However, some of the
marketing manager left their position when the new form of management turn their traditional
role as policeman down. Martin therefore decided to recruit Fortune 500 company experience
sales and product managers and also top MBA graduates.
Martin also transforms and improves the Taco Bell incentive system such as
compensation and non-monetary reward systems. The average base salary and the target
incentive bonus of the manager raised along with the incensement of their skill levels and
responsibilities,
Non-monetary compensation such as career advancement also redesigned to measure
success. These career advancements include promotion, assuming an international market
manager position, joining Taco Bells operation management team, etc. These tactics were able
to create challenges for the employee and thus attract and secure potential and current highly
skilled individuals.
To improve and maintain its operation management quality, Taco Bell continuously seek
for opportunity. Several safe nets strategies were created to determine each restaurant
performance. Safe nets strategy such as building customer relationship by providing a toll-free
number to gain consumer sights of its services; mystery shopper evaluate a certain restaurant and
marketing surveys were conducted impromptu to communicate with the restaurant visitors. All
reports gaining by these safe nets strategy were used to analyze the restaurant current
performance and reserved as a useful data for potential operation improvement opportunities.
Despite the human resources and customer service improvement, Martin also developed
TACO to improve the restaurant information and communication system. PC was first provided
in every store linked to local POS system in order to connect marketing manager to the corporate
headquarters. TACO was able to reduced paperwork loads while support the management roles.
TACO also provides the marketing manager and the corporation to tracked and analyzed sales
trend based on certain period and geographical area. Communication quality between RGMs and
marketing manager also improved.
Phase III: 1991-1994

MBA 617
Prof. Pesch
Zhi Eh Lor
March 18, 2015

Recession in fast-food industry during this period and Taco Bell market share falls as
competitors respond. The company then created an empowered learning organization to
continuously improve and extend the PepsiCo brand through acquisitions and retail. Shared
resources strategy developed to gather managers view of Taco Bells existing business
infrastructure capitalize the strengths to maximize the PepsiCo infrastructure and vise versa.
Martin also plans on several initiatives to create and support new learning culture by pushing
down decision making to the employee and encourage the learning throughout the enterprise at
anytime, from anyone.
Taco Bell then expanding the information access across the restaurant to provide crew
members with the information they needed to make decisions and take action. This TACO II was
essential for supporting an empowered organization. This shared information and
communications system allowed Taco Bell employee to disseminate information perform their
jobs better. Through the use of TACO II, senior management was able to use the network to
maintain a sense of community within the burgeoning organization and to help retain the
companys verbal culture.
Taco Bell ongoing innovation is still happening today. For example, the company
developed an R&D to test several innovations in order to create a restaurant of the future. For
example, an Automated Taco Assembler that able to produce 900 tacos an hour without human
assistance was expected to reduce waste, increase consistency and quality, and reduce kitchen
labor by 16 hours per day. In addition, touch screen ordering kiosk was innovate to improve
customer self-service and roving sales crew to take orders outside the walls of the physical
restaurant.