MRS Field Cookies

Mrs. Fields Famous Brands is a franchisor in the snack food industry, with Mrs.
Fields
and TCBY as its core brands. Through its franchisees’ retail stores, it is one of the largest
retailers of freshly baked, on-premises specialty cookies and brownies in the US[1] and the
largest retailer of soft-serve frozen yogurt with live active cultures in the United States.[1]
In addition, it operates a gifts and a branded retail business and has entered into many
licensing arrangements. Its franchise systems includes over 1,200 franchised and licensed
locations throughout the US and in 22 other countries. The company is headquartered in
Cottonwood Heights, Utah.
HISTORY
History
Mrs. Fields Cookies was founded by Debbi Fields (b. 1956, Oakland, California) in the
late 1970s. She and her husband, Randall K Fields, opened their first of many stores in
1977 in Palo Alto, California, selling homemade-style cookies which quickly grew in
popularity. In the early 1990s, the company was sold to an investment firm.
During the 1990s, the company acquired several other brands, including Original Cookie
Company, Great American Cookies, Pretzel Time, Pretzelmaker, Hot Sam Pretzel Bakery
and TCBY.
In 2007, Mrs. Fields celebrated its 30th Anniversary with a national search for a new
cookie.
FINANCIAL STATUS
Since early 2006, Mrs. Fields has seen several rounds of layoffs as a result of
restructuring efforts. Loss of personnel was due, mostly in part, to the sale of three of the
company's brands. In August 2007, Nexcen Brands, Inc. purchased the Pretzel Time and
Pretzelmaker concepts from Mrs. Fields Famous Brands. Great American Cookies was
then sold to Nexcen in February 2008.[2]
June 5, 2008 - Mrs. Fields announced plans to begin efforts to restructure their debt by
offering a deal to current bondholders. The plan also included the option of filing a
prepackaged bankruptcy in the event enough noteholders didn't agree to the offer.[3]
July 10, 2008 - Stephen Russo resigns as CEO. On July 15, 2008, the Board of Managers
of the Company appointed Michael R. Ward and John Lauck as Interim Co-Chief
Executive Officers to fill the role vacated by Stephen Russo.
August 15, 2008 - Mrs. Fields Famous Brands announced plans to implement a
prepackaged Plan of Reorganization and file for Chapter 11 bankruptcy.
August 24, 2008 - Mrs. Fields Famous Brands officially files for Chapter 11 protection
August 26, 2008 - Mrs. Fields Famous Brands releases a statement]announcing that the
bankruptcy court has approved all first day motions. These motions grant approval to:
• Continue to pay employee salaries, wages, and benefit programs;

• Pay vendors in the normal course of business for goods and services provided to
the Company;
• Maintain uninterrupted delivery of products and services to the Company’s
franchisees and customers.
The statement also mentions that the company expects to emerge from Chapter 11 within
45 days.
October 27, 2008 - Mrs. Fields emerged from bankruptcy.[
INTRODUCTION
Mrs. Fields' Original Cookies, Inc. bakes and sells specialty cookies, brownies, pretzels,
and other baked goods. From one store started by Debbi and Randy Fields in 1977, the
firm has expanded to over 1,500 stores named Mrs. Fields' Original Cookies, the Great
American Cookie Company, the Original Cookie Company, Pretzel Time, Hot Sam, and
Pretzelmaker. This is a true success story of an American homemaker and her husband
who overcame numerous obstacles to create an international business. However, like
many companies that began as family businesses, it reorganized under outside leadership
and ownership. The firm's chocolate chip cookies were so popular that they became the
subject of a modern urban legend in the late 1980s and early 1990s.
Debbi Fields grew up in a Catholic working class family in Oakland, California. Her
father was a welder and her mother raised Debbi and her sisters to become good wives
and mothers. Growing up, Debbi held a burning desire to be special. Although she was a
mediocre student, she learned to work hard and sought a way to fulfill her dreams. Debbi
graduated from high school, then worked at various jobs before marrying Randy Fields, a
Stanford University-trained economist, in 1976.
For about a year as a new wife, Mrs. Fields tried to fit into her husband's world as a
dutiful spouse by hosting visitors and making polite conversation. However, a painful
incident in which she tried to pretend she was a sophisticated person made her decide to
do something else with her life. In the book One Smart Cookie, she said, "at last I
understood that I had to do something that was mine.... I gave up, in that moment, the
desire to succeed in other people's eyes and realized that first I had to succeed for myself."
She elaborated, "I couldn't be Randy's shadow any more, his tagalong.... Somehow I
would have to change, to become an independent, self-respecting individual able to stand
on my two feet."
Debbi Fields decided to start a business based on a skill she had acquired as a girl. From
age 13 she had baked delicious chocolate chip cookies for her family and friends. She
gradually improved the basic recipe pioneered in the 1930s by Toll House.
Her husband's business acquaintances loved her cookies, so she asked them what they
thought about starting a cookie business. "Bad idea," they said with their mouths stuffed
full of cookies. "Never work," they said, "Forget it." Debbi's mother, her in-laws, and her
friends and fellow students at Los Altos Junior College also said she would fail.
Her husband went along with the idea, but deep down he did not really believe his wife
could succeed in the business world. For one thing, market studies showed that
consumers strongly preferred crispy cookies. Debbi's cookies were soft and larger than
normal and would have to be sold at much higher prices than regular bakery cookies.
She went ahead anyway but needed financial backing from a bank. She and Randy
approached the Bank of America, their home mortgage lender. Their banker Ed Sullivan
trusted the young couple to pay back a business loan, even though he expected the cookie
business would fail. Debbi said in her book that the bank "trusted us, not cookies.... As
things turned out, Ed Sullivan and his bank built Mrs. Fields' Cookies."
So at age 20 Debbi Fields started her first cookie store at Liddicoat's Market in Palo Alto.
She signed the lease under the name Mrs. Fields' Chocolate Chippery. On August 18,
1977, she opened her store at 9 a.m., but by noon nobody had bought even one cookie.
Frustrated and afraid to fail, she took samples to people on the streets. They liked the
samples so returned to actually buy cookies. Providing free samples to potential
customers remained a cornerstone of her business in the years to come.
Debbi Fields initially was content with her one store. Then Warren Simmons, the builder
of the Pier 39 shopping area in San Francisco, told her he loved the cookies and invited
her to open a store in Pier 39. She at first turned him down, then a year later changed her
mind. Pier 39 had reserved a prime space for Mrs. Fields' Cookies. Employees at her first
store kept asking for opportunities to grow. Since her employees were like family, Debbi
Fields felt a responsibility to them. With additional loans, the second store was opened in
1979. The Pier 39 store was so successful with its long customer lines that it caused
problems for nearby businesses. The pressure was on to open more outlets.
An early crisis illustrated how the young company operated. Mrs. Fields refused to
replace higher cost raisins with less costly but also less tasty dates. Debbi Fields
explained that, "The point wasn't to make money, the point was to bake great cookies,
and we sacrificed for that principle. From the very first, I set up a policy that we still
follow today. Our cookies had to be warm and fresh and when they were two hours out of
the oven, what hadn't been sold was donated to the Red Cross to be given to blood
donors, or to other deserving charities, and we baked a new batch. We guaranteed
everything we sold."
By 1979 the company had three stores but had reached a turning point. Working 16 hours
a day to oversee everything, Debbi Fields said, "The cookie business had become a
monster, demanding and demanding." She was so busy she had to schedule times to see
her husband. She and Randy offered the rights to the company outside of California to
Foremost McKesson, a large ice-cream maker, for $150,000, but the firm turned them
down. They were crushed, but just kept on, wearily trying to handle the burdens of
expansion. With the help of some key employees, they managed to survive. Eventually
they received but turned down better offers for their firm, for they were learning how to
handle a growing business.
Not all Mrs. Fields' stores however succeeded so easily. In 1980 the company opened its
new store in the Ala Moana Shopping Center in Honolulu, but initially it failed
miserably. Debbi Fields then had a kahuna or priest of the native Hawaiian culture bless
her store. "The day after the ceremony, crowds of cookie buyers appeared; since that day,
the Ala Moana location has been one of our most successful and profitable stores."
A few months later the firm reached a major milestone when it opened its first Utah
store--in the Crossroads Mall in Salt Lake City. Debbi previously had been to Utah to ski,
but the store was the idea of Michael Murphy, one of her company officers.
By the spring of 1981 the company operated 14 stores. At a training session, Debbi Fields
was impressed with the fact that each store manager knew which cookies he had baked
even when they were mixed up with those baked by the other managers. That experience
assured her that the company training was successful.
In 1982 Mrs. Fields' Cookies recorded sales of about $30 million. By early 1983 the
company had moved to Park City, Utah, and operated 70 stores from Honolulu to
Chicago, and then it decided to open its first store in New York City.
When the firm began in the late 1970s, about 100 independent stores sold gourmet or
specialty cookies. By 1983, according to Forbes, competition in this niche industry had
resulted in just a few main companies. Mrs. Fields' Cookies competed against the Famous
Amos Chocolate Chip Cookie Corporation, started in 1975 by Wally (Famous) Amos. By
1983 Famous Amos began a program to franchise 100 stores within two years. David
Liederman began David's Cookies with a store in Manhattan and soon dominated the
New York City market for specialty cookies. Other key firms included The Famous
Chocolate Chip Cookie Company headed by President Frank Bonanno, the Original
Cookie Company owned by Cole National Corporation, and Original Great American led
by President Arthur Karp.
Although combined revenues from these firms were just $150 million in 1983, profit
margins ran higher than in other industries, partly because of inexpensive materials. For
example, batter for five pounds of cookies cost only $1.50, and cookies were relatively
easy to produce. Frank Bonanno in the Forbes article estimated that "Pretax profits run
anywhere between 10% and 20%."
For several years Debbi Fields rejected the idea of franchising her stores. She realized the
cookies and other products could be duplicated but not the atmosphere of "love and
caring" that was so important to the business. She also said in her book that she did not
"want anyone else to get his hands on it." Although in 1987 she intended to retain
"complete control and complete responsibility," economic necessity changed that
approach in just a few years.
By 1987 Debbi Fields had created 14 different kinds of cookies: Pecan Whites; Milk
Chocolate with and without walnuts; Semisweet Chocolate with and without walnuts;
Semisweet Chocolate with and without macadamia nuts; Coco-Mac with coconut and
macadamia nuts; Oatmeal Raisin Nut, called Debra's Special; Peanut Butter Dreams;
Triple Chocolate that combined white and dark chocolate; Raisin Spice; White Chunk
with macadamia nuts; and Royal Pecan. Her stores also sold five kinds of brownies, her
own ice cream, candy, and muffins.
In 1987 Mrs. Fields' Cookies did well financially. It earned a profit of 18.5 percent on
sales of $87 million, up from $72.6 million in 1986. The company in 1987 purchased La
Petite Boulangerie, a chain of 119 French bakery/sandwich stores, from PepsiCo for $15
million. In just four weeks Randy Fields used specially developed software to help him
and his wife reduce La Petite Boulangerie's administrative staff from 53 to just three
individuals.
Several articles in business and computer magazines in the late 1980s praised Mrs. Fields'
Cookies' innovative use of computer software to run its expanding cookie operations. The
firm equipped each of its stores with inexpensive IBM-compatible computers that were
linked by modems to the company's larger system in Park City. Computerization allowed
the firm's retail stores to plan daily production schedules, monitor stocks and order
materials automatically, communicate with headquarters using electronic mail, improve
employee training, and handle payroll and other accounting tasks. Store managers spent
about five minutes an hour and 20 minutes before and after work using their computers to
help run their outlets. Headquarters staff in 1988 remained low at about 130 persons.
Although Mrs. Fields' Cookies management structure on paper included levels of middle
management, Tom Richman in an October 1987 Inc. article wrote: "Randy Fields has
created something entirely new--a shape if not the shape, of business organizations to
come. It gives top management a dimension of personal control over dispersed operations
that small companies otherwise find impossible to achieve. It projects a founder's vision
into parts of a company that have long ago outgrown his or her ability to reach in
person." Richman continued: "In the structure that Fields is building, computers don't just
speed up old administrative management processes. They alter the process.
Management ... becomes less administration and more inspiration. The management
hierarchy of the company feels almost flat."
After Randy Fields computerized Mrs. Fields' Cookies, he began selling his artificial
intelligence/store management software through a subsidiary, Fields Software Group.
Burger King Corporation in 1990 became one of the software customers.
In the meantime, Debbi and Randy Fields received numerous honors. In 1988 the Utah
Chapter of the National Conference of Christians and Jews honored the couple with its
Brotherhood/Sisterhood Award for their many community contributions in business and
philanthropy. Debbi Fields served on the boards of the Cystic Fibrosis Research
Foundation, the Park City Educational Foundation, and Salt Lake City's LDS Hospital.
She and her husband founded Mrs. Fields' Children's Health Foundation and donated
millions to study children's diseases. Randy Fields was president of Riverview Financial
Corporation, the Fields Investment Group, and the Fields Consulting Group. As the
president of a firm with over 700 outlets worldwide, Mrs. Fields told the National
Conference attendees that, "We are very proud to receive this award, but you must
remember that each time you've enjoyed Mrs. Fields' Cookies, you're the one who's
allowing us to give."
Her company, however, had a bad year in 1988 when it lost $19 million and closed 85 of
its 500 stores, mostly in the eastern and southeastern United States. Some argued that
these problems began in 1986 with Mrs. Fields' Cookies' initial public offering on
London's Unlisted Securities Market. British investors purchased only 16 percent of the
30 million shares offered at $2.46 per share. After the company said it had set up a $15
million reserve to pay for store closings, its stock price decreased to just 44 cents per
share.
The company also closed its Park City candy factory in order to concentrate on building
its La Petite Boulangerie bakery business in Carson, California. To integrate the new
subsidiary, Mrs. Fields' Cookies changed from having just cookie stores to full-service
bakeries. Randy Fields admitted this was a difficult transition. In the February 13, 1989
issue of Fortune, he said, "We've been very ineffective at telling the British what we're
trying to do." Some British food industry analysts said investors felt deceived after they
were told it was a cookie company and then it changed directions.
In spite of these challenges, Randy and Debbi Fields continued to play a major role in
developing the rapidly growing community of Park City, where more celebrities and
about 300 Fortune 500 executives decided to move or build condominiums in the 1980s.
For example, the couple developed the Summit County Industrial Park, anchored by
tenant Lucas Western's $40 million aerospace manufacturing plant.
They also owned Park City's Main Street Mall, home of their corporate headquarters, the
Egyptian Theatre, and other properties. In 1988 they closed their ice cream parlor so they
could use the former Dudler Building for Mrs. Fields' Cookie College.
Gregg Goodwin, head of Park City Area Chamber of Commerce economic development,
cited Randy and Debbi Fields as an example of corporate leaders who had moved their
family and company to Park City to enjoy the area's high education levels, strong work
ethic, low rates of alcohol use, and other lifestyle advantages.
In 1989 the company rebounded from a poor performance the year before. Revenues for
the parent company, Mrs. Fields' Inc., increased eight percent from $120.4 million in
1988 to $129.7 million in 1989, while the firm recorded a 1989 net income of $1.5
million, a major improvement from 1988's loss of $19 million.
Also in 1989, Mrs. Fields' Cookies began making frozen cookie dough at its Carson,
California plant and then shipping it to selected stores in Utah. Previously it had been the
only major cookie maker that did not use frozen dough. In December 1989 the company
began the process of selling its Carson plant to Van den Bergh Foods, a Unilever Group
subsidiary. However, Mrs. Fields' Cookies kept the part of the plant that made its
cookies.
Mrs. Fields' Inc. in 1989 reorganized by delegating certain management roles. A new
executive committee included Chairman Randy Fields, President Debbi Fields, Larry
Holman, Paul Baird, and Tim Pierce. Holman, an attorney, had joined the company as a
senior vice-president in October 1989 to manage corporate development and real estate.
Director of Operations Baird took over much of the responsibility of managing the firm's
cookie stores, thus allowing Debbi Fields to emphasize development and marketing.
Pierce was a CPA and company vice-president of finance. Even more significant changes
would occur in the years to come, but in the meantime the company had to deal with
damaging rumors or stories going around the nation.
Professor Jan Brunvand at the University of Utah and other scholars have shown that
tales or stories about modern companies are sometimes told so often they become urban
legends. Often not historically true, they were told by a friend of a friend in a chain of
communication.
For example, beginning in the 1950s, a story called 'Red Velvet Cake' was told about a
customer who paid New York City's Waldorf-Astoria Hotel a large sum of money for a
red cake recipe. Starting in 1983, the story had mutated so that Mrs. Fields' Cookies was
the culprit. In this version, 'someone had called the Mrs. Fields' company and asked for
their recipe. When told that it was available for 'two-fifty,' the caller supposedly told the
phone representative to send the recipe and charge it to her credit card, learning later that
the price was $250 rather than the expected $2.50.'
Then, according to this tale disseminated by photocopies, the corporation's victim became
upset and thus sent many bitter letters with the supposed secret recipe, and encouraged
others to send out even more copies.
By 1987 Debbi Fields said in her book that, 'The rumor has really hurt the company.' She
responded to this persistent account by placing notices in all her stores denying that the
company had sold its recipe. Since average people (the folk) started and spread such
legends and other forms of folklore, denunciations from the top usually had little impact.
That happened with this story, which continued into the early 1990s and was also told
about other firms such as Chicago's Marshall Fields, New York City's Macy's, St. Louis'
Union Station, and Neiman Marcus stores in various cities.
One recipient of the photocopied urban legend tried the supposed secret recipe only to
realize the resulting cookies tasted nothing like the real thing. But then Todd Wilbur
spent five years trying to replicate Mrs. Fields' chocolate chip cookies and other fast-food
products. He even published two cookbooks in the late 1980s and early 1990s with
recipes that the Deseret News food editor called 'clones,' an unusual consequence of a
modern whopper. Why would anyone believe such stories of a corporation selling its vital
secret recipes?
Dr. Brunvand, the nation's leading expert on urban legends, wrote about this story in his
fourth book, Curses! Broiled Again. He said in his 1991 newspaper column that this story
about Mrs. Fields' Cookies and other companies was a 'classic recipe-scam story that
refuses to die, no matter how often I debunk it or how vigorously companies deny it....
[It] illustrates two things: that many people love stories about corporate ripoffs, and that
few can resist chocolate chip cookies.'
The popularity of Mrs. Fields' Cookies, the basis for the urban legend, was also seen in
Congress in the late 1980s and early 1990s. Utah's congressmen about twice a year
distributed free cookies, baked at local Mrs. Fields' stores in the Washington, D.C., area,
to the hundreds of other representatives.
In 1990 Mrs. Fields' Cookies announced an agreement with the Marriott Corporation
which allowed Marriott to own at least 60 stores to bake and sell the popular bakery
products. Marriott gained the exclusive right to build Mrs. Fields' Cookies stores in
airports, hotels, and highway travel plazas and pay the cookie company approximately
five percent of its gross sales.
Mrs. Fields' in 1990 operated 45 international stores in Canada, Australia, Japan, Hong
Kong, and the United Kingdom, and it planned to expand worldwide using various joint
ventures or licensing contracts which promised profits without significant investment. By
1992 the firm had added stores in Thailand, and its seventh overseas market started in
Mexico City with a licensing agreement with Pasteleria El Molino S.A.
In 1990 the company began remodeling some stores to allow more display space for new
packaging products, cookie jars, and tins. To stimulate gift buying as well as cookie
purchases, teddy bear maker Gund was commissioned to make little bears like those on
the cookie tins. With new designs and decor, Debbi Fields intended to create boutiques or
European-style cafés that were more colorful and exciting.
In 1993 Mrs. Fields' Cookies' stock was removed from the London Stock Exchange, and
new owners reorganized the company. Four lenders, mainly the Prudential group,
acquired almost 80 percent of the firm in exchange for writing off $94 million in
company debt, while Debbi Fields retained a minority interest, remained board chairman,
and accepted a salary cut of $150,000 to $450,000. Thomas Fey, formerly with Godiva
and Pepperidge Farm, replaced Debbi Fields as president and CEO. The refinancing
allowed the company to plan a major expansion of 100 new company-owned and
franchised stores within the next year. Started in August 1991, the company's franchise
option was praised by at least three publications: Success, Entrepreneur, and Self
Magazine.
Although the company survived and retained the name of its founder, many wondered
why Debbi and Randy Fields lost control. As Max Knudson, the business editor of Salt
Lake City's Deseret News said in 1998, the couple 'seemed to have it all: beauty, brains,
ambition, family values, a business growing exponentially--people couldn't get enough of
them.'
Three reasons accounted for the huge debt and loss of control to outsiders. First, the
company expanded too fast, and many stores could not afford their expensive rents. In
many cases, the company had purchased property for its mall stores. Second, the nation's
economic downturn in the early 1990s hurt Mrs. Fields' Cookies. Many customers no
longer could afford her expensive cookies (about $1 per cookie) and the value of her real
estate declined.
Last but not least, Debbi Fields's insistence on hands-on personal management and
reluctance to franchise did not work. Francorp's Don Boroian, a Chicago franchising
consultant, in the July 1993 Working Woman said he told Mrs. Fields' Cookies to
franchise when it was still a young firm. 'When you're trying to expand as they did, with
units in malls, you can't provide close enough supervision. By the time they decided to
franchise, the concept wasn't strong enough because of increased competition, fewer
customers, higher rents and a downturn in the economy. They needed to add more
products, and they're finally doing that now.' By 1993 the company had added yogurt,
coffee, and diversified with other products. It also had closed most of its mall stores by
1993.
Chairwoman Debbi Fields in early 1995 announced that the company planned to add 100
new stores overseas. At that time, five percent of the firm's 617 stores were located
outside the United States. Fields said the company had franchise agreements in Indonesia,
Australia, the Philippines, Canada, and the Middle East and also was targeting European
and South American markets. Fields said the firm's long-term goal was to franchise all
overseas operations.
Like many other firms, Mrs. Fields' Cookies in the 1990s used the Internet to stimulate
sales. The company was one of over 100 businesses included on the Utah-based virtual
mall called iShopper started in July 1996.
In the 1990s the company moved its headquarters from Park City to offices on Bearcat
Drive in Salt Lake City. In the summer of 1998 it moved again, this time to a new
30,000-square-foot complex in Salt Lake City's Cottonwood Corporate Center. However,
it kept its facilities on Bearcat Drive and Lawndale Drive for about 40 employees. Its
mail-order operation remained on Bearcat Drive.
Meanwhile, the family that started the business ended in divorce. Debbi Fields married
Michael Rose, the retired chairman of Harrah's Entertainment, on November 29, 1997,
and moved from Park City to live with her husband in Memphis, Tennessee. Debbi Fields
Rose served as a consultant to the firm she founded and also participated in a public
television show called Great American Desserts. Randy Fields continued to live in Park
City and work in the software industry. Thus the firm persisted even as what Deseret
News business writer Max B. Knudson called the 'media darlings' broke up, after years of
conflict and tension.
The company continued to expand in 1998 under the ownership of Capricorn Investors
and the leadership of Chairman Herbert S. Winokur, Jr., and President/CEO Larry A.
Hodges. Effective November 23, 1998, Mrs. Fields' Original Cookies purchased Denver-
based Pretzelmaker for an undisclosed amount. This acquisition added 229 pretzel stores
to the firm's already existing 1,324 cookie and pretzel stores.
Further Reading
Company History:
Mrs. Fields' Original Cookies, Inc. bakes and sells specialty cookies, brownies, pretzels,
and other baked goods. From one store started by Debbi and Randy Fields in 1977, the
firm has expanded to over 1,500 stores named Mrs. Fields' Original Cookies, the Great
American Cookie Company, the Original Cookie Company, Pretzel Time, Hot Sam, and
Pretzelmaker. This is a true success story of an American homemaker and her husband
who overcame numerous obstacles to create an international business. However, like
many companies that began as family businesses, it reorganized under outside
leadership and ownership. The firm's chocolate chip cookies were so popular that they
became the subject of a modern urban legend in the late 1980s and early 1990s.
Everybody Said She Would Fail

Debbi Fields grew up in a Catholic working class family in Oakland, California. Her
father was a welder and her mother raised Debbi and her sisters to become good wives
and mothers. Growing up, Debbi held a burning desire to be special. Although she was
a mediocre student, she learned to work hard and sought a way to fulfill her dreams.
Debbi graduated from high school, then worked at various jobs before marrying Randy
Fields, a Stanford University-trained economist, in 1976.
For about a year as a new wife, Mrs. Fields tried to fit into her husband's world as a
dutiful spouse by hosting visitors and making polite conversation. However, a painful
incident in which she tried to pretend she was a sophisticated person made her decide
to do something else with her life. In the book One Smart Cookie, she said, "at last I
understood that I had to do something that was mine.... I gave up, in that moment,
the desire to succeed in other people's eyes and realized that first I had to succeed for
myself." She elaborated, "I couldn't be Randy's shadow any more, his tagalong....
Somehow I would have to change, to become an independent, self-respecting
individual able to stand on my two feet."
Debbi Fields decided to start a business based on a skill she had acquired as a girl.
From age 13 she had baked delicious chocolate chip cookies for her family and friends.
She gradually improved the basic recipe pioneered in the 1930s by Toll House.
Her husband's business acquaintances loved her cookies, so she asked them what they
thought about starting a cookie business. "Bad idea," they said with their mouths
stuffed full of cookies. "Never work," they said, "Forget it." Debbi's mother, her in-
laws, and her friends and fellow students at Los Altos Junior College also said she
would fail.
Her husband went along with the idea, but deep down he did not really believe his
wife could succeed in the business world. For one thing, market studies showed that
consumers strongly preferred crispy cookies. Debbi's cookies were soft and larger than
normal and would have to be sold at much higher prices than regular bakery cookies.
She went ahead anyway but needed financial backing from a bank. She and Randy
approached the Bank of America, their home mortgage lender. Their banker Ed
Sullivan trusted the young couple to pay back a business loan, even though he
expected the cookie business would fail. Debbi said in her book that the bank "trusted
us, not cookies.... As things turned out, Ed Sullivan and his bank built Mrs. Fields'
Cookies."
So at age 20 Debbi Fields started her first cookie store at Liddicoat's Market in Palo
Alto. She signed the lease under the name Mrs. Fields' Chocolate Chippery. On August
18, 1977, she opened her store at 9 a.m., but by noon nobody had bought even one
cookie. Frustrated and afraid to fail, she took samples to people on the streets. They
liked the samples so returned to actually buy cookies. Providing free samples to
potential customers remained a cornerstone of her business in the years to come.
Early Expansion
Debbi Fields initially was content with her one store. Then Warren Simmons, the
builder of the Pier 39 shopping area in San Francisco, told her he loved the cookies
and invited her to open a store in Pier 39. She at first turned him down, then a year
later changed her mind. Pier 39 had reserved a prime space for Mrs. Fields' Cookies.
Employees at her first store kept asking for opportunities to grow. Since her
employees were like family, Debbi Fields felt a responsibility to them. With additional
loans, the second store was opened in 1979. The Pier 39 store was so successful with
its long customer lines that it caused problems for nearby businesses. The pressure
was on to open more outlets.
An early crisis illustrated how the young company operated. Mrs. Fields refused to
replace higher cost raisins with less costly but also less tasty dates. Debbi Fields
explained that, "The point wasn't to make money, the point was to bake great cookies,
and we sacrificed for that principle. From the very first, I set up a policy that we still
follow today. Our cookies had to be warm and fresh and when they were two hours out
of the oven, what hadn't been sold was donated to the Red Cross to be given to blood
donors, or to other deserving charities, and we baked a new batch. We guaranteed
everything we sold."
By 1979 the company had three stores but had reached a turning point. Working 16
hours a day to oversee everything, Debbi Fields said, "The cookie business had become
a monster, demanding and demanding." She was so busy she had to schedule times to
see her husband. She and Randy offered the rights to the company outside of
California to Foremost McKesson, a large ice-cream maker, for $150,000, but the firm
turned them down. They were crushed, but just kept on, wearily trying to handle the
burdens of expansion. With the help of some key employees, they managed to survive.
Eventually they received but turned down better offers for their firm, for they were
learning how to handle a growing business.
Not all Mrs. Fields' stores however succeeded so easily. In 1980 the company opened
its new store in the Ala Moana Shopping Center in Honolulu, but initially it failed
miserably. Debbi Fields then had a kahuna or priest of the native Hawaiian culture
bless her store. "The day after the ceremony, crowds of cookie buyers appeared; since
that day, the Ala Moana location has been one of our most successful and profitable
stores."
A few months later the firm reached a major milestone when it opened its first Utah
store--in the Crossroads Mall in Salt Lake City. Debbi previously had been to Utah to
ski, but the store was the idea of Michael Murphy, one of her company officers.
By the spring of 1981 the company operated 14 stores. At a training session, Debbi
Fields was impressed with the fact that each store manager knew which cookies he
had baked even when they were mixed up with those baked by the other managers.
That experience assured her that the company training was successful.
In 1982 Mrs. Fields' Cookies recorded sales of about $30 million. By early 1983 the
company had moved to Park City, Utah, and operated 70 stores from Honolulu to
Chicago, and then it decided to open its first store in New York City.
When the firm began in the late 1970s, about 100 independent stores sold gourmet or
specialty cookies. By 1983, according to Forbes, competition in this niche industry had
resulted in just a few main companies. Mrs. Fields' Cookies competed against the
Famous Amos Chocolate Chip Cookie Corporation, started in 1975 by Wally (Famous)
Amos. By 1983 Famous Amos began a program to franchise 100 stores within two years.
David Liederman began David's Cookies with a store in Manhattan and soon dominated
the New York City market for specialty cookies. Other key firms included The Famous
Chocolate Chip Cookie Company headed by President Frank Bonanno, the Original
Cookie Company owned by Cole National Corporation, and Original Great American led
by President Arthur Karp.
Although combined revenues from these firms were just $150 million in 1983, profit
margins ran higher than in other industries, partly because of inexpensive materials.
For example, batter for five pounds of cookies cost only $1.50, and cookies were
relatively easy to produce. Frank Bonanno in the Forbes article estimated that "Pretax
profits run anywhere between 10% and 20%."
For several years Debbi Fields rejected the idea of franchising her stores. She realized
the cookies and other products could be duplicated but not the atmosphere of "love
and caring" that was so important to the business. She also said in her book that she
did not "want anyone else to get his hands on it." Although in 1987 she intended to
retain "complete control and complete responsibility," economic necessity changed
that approach in just a few years.
By 1987 Debbi Fields had created 14 different kinds of cookies: Pecan Whites; Milk
Chocolate with and without walnuts; Semisweet Chocolate with and without walnuts;
Semisweet Chocolate with and without macadamia nuts; Coco-Mac with coconut and
macadamia nuts; Oatmeal Raisin Nut, called Debra's Special; Peanut Butter Dreams;
Triple Chocolate that combined white and dark chocolate; Raisin Spice; White Chunk
with macadamia nuts; and Royal Pecan. Her stores also sold five kinds of brownies, her
own ice cream, candy, and muffins.
In 1987 Mrs. Fields' Cookies did well financially. It earned a profit of 18.5 percent on
sales of $87 million, up from $72.6 million in 1986. The company in 1987 purchased La
Petite Boulangerie, a chain of 119 French bakery/sandwich stores, from PepsiCo for
$15 million. In just four weeks Randy Fields used specially developed software to help
him and his wife reduce La Petite Boulangerie's administrative staff from 53 to just
three individuals.
Several articles in business and computer magazines in the late 1980s praised Mrs.
Fields' Cookies' innovative use of computer software to run its expanding cookie
operations. The firm equipped each of its stores with inexpensive IBM-compatible
computers that were linked by modems to the company's larger system in Park City.
Computerization allowed the firm's retail stores to plan daily production schedules,
monitor stocks and order materials automatically, communicate with headquarters
using electronic mail, improve employee training, and handle payroll and other
accounting tasks. Store managers spent about five minutes an hour and 20 minutes
before and after work using their computers to help run their outlets. Headquarters
staff in 1988 remained low at about 130 persons.
Although Mrs. Fields' Cookies management structure on paper included levels of middle
management, Tom Richman in an October 1987 Inc. article wrote: "Randy Fields has
created something entirely new--a shape if not the shape, of business organizations to
come. It gives top management a dimension of personal control over dispersed
operations that small companies otherwise find impossible to achieve. It projects a
founder's vision into parts of a company that have long ago outgrown his or her ability
to reach in person." Richman continued: "In the structure that Fields is building,
computers don't just speed up old administrative management processes. They alter
the process. Management ... becomes less administration and more inspiration. The
management hierarchy of the company feels almost flat."
After Randy Fields computerized Mrs. Fields' Cookies, he began selling his artificial
intelligence/store management software through a subsidiary, Fields Software Group.
Burger King Corporation in 1990 became one of the software customers.
In the meantime, Debbi and Randy Fields received numerous honors. In 1988 the Utah
Chapter of the National Conference of Christians and Jews honored the couple with its
Brotherhood/Sisterhood Award for their many community contributions in business and
philanthropy. Debbi Fields served on the boards of the Cystic Fibrosis Research
Foundation, the Park City Educational Foundation, and Salt Lake City's LDS Hospital.
She and her husband founded Mrs. Fields' Children's Health Foundation and donated
millions to study children's diseases. Randy Fields was president of Riverview Financial
Corporation, the Fields Investment Group, and the Fields Consulting Group. As the
president of a firm with over 700 outlets worldwide, Mrs. Fields told the National
Conference attendees that, "We are very proud to receive this award, but you must
remember that each time you've enjoyed Mrs. Fields' Cookies, you're the one who's
allowing us to give."
Her company, however, had a bad year in 1988 when it lost $19 million and closed 85
of its 500 stores, mostly in the eastern and southeastern United States. Some argued
that these problems began in 1986 with Mrs. Fields' Cookies' initial public offering on
London's Unlisted Securities Market. British investors purchased only 16 percent of the
30 million shares offered at $2.46 per share. After the company said it had set up a
$15 million reserve to pay for store closings, its stock price decreased to just 44 cents
per share.
The company also closed its Park City candy factory in order to concentrate on
building its La Petite Boulangerie bakery business in Carson, California. To integrate
the new subsidiary, Mrs. Fields' Cookies changed from having just cookie stores to full-
service bakeries. Randy Fields admitted this was a difficult transition. In the February
13, 1989 issue of Fortune, he said, "We've been very ineffective at telling the British
what we're trying to do." Some British food industry analysts said investors felt
deceived after they were told it was a cookie company and then it changed directions.
In spite of these challenges, Randy and Debbi Fields continued to play a major role in
developing the rapidly growing community of Park City, where more celebrities and
about 300 Fortune 500 executives decided to move or build condominiums in the
1980s. For example, the couple developed the Summit County Industrial Park,
anchored by tenant Lucas Western's $40 million aerospace manufacturing plant.
They also owned Park City's Main Street Mall, home of their corporate headquarters,
the Egyptian Theatre, and other properties. In 1988 they closed their ice cream parlor
so they could use the former Dudler Building for Mrs. Fields' Cookie College.
Gregg Goodwin, head of Park City Area Chamber of Commerce economic development,
cited Randy and Debbi Fields as an example of corporate leaders who had moved their
family and company to Park City to enjoy the area's high education levels, strong work
ethic, low rates of alcohol use, and other lifestyle advantages.
In 1989 the company rebounded from a poor performance the year before. Revenues
for the parent company, Mrs. Fields' Inc., increased eight percent from $120.4 million
in 1988 to $129.7 million in 1989, while the firm recorded a 1989 net income of $1.5
million, a major improvement from 1988's loss of $19 million.
Also in 1989, Mrs. Fields' Cookies began making frozen cookie dough at its Carson,
California plant and then shipping it to selected stores in Utah. Previously it had been
the only major cookie maker that did not use frozen dough. In December 1989 the
company began the process of selling its Carson plant to Van den Bergh Foods, a
Unilever Group subsidiary. However, Mrs. Fields' Cookies kept the part of the plant
that made its cookies.
Mrs. Fields' Inc. in 1989 reorganized by delegating certain management roles. A new
executive committee included Chairman Randy Fields, President Debbi Fields, Larry
Holman, Paul Baird, and Tim Pierce. Holman, an attorney, had joined the company as
a senior vice-president in October 1989 to manage corporate development and real
estate. Director of Operations Baird took over much of the responsibility of managing
the firm's cookie stores, thus allowing Debbi Fields to emphasize development and
marketing. Pierce was a CPA and company vice-president of finance. Even more
significant changes would occur in the years to come, but in the meantime the
company had to deal with damaging rumors or stories going around the nation.
The Urban Legend
Professor Jan Brunvand at the University of Utah and other scholars have shown that
tales or stories about modern companies are sometimes told so often they become
urban legends. Often not historically true, they were told by a friend of a friend in a
chain of communication.
For example, beginning in the 1950s, a story called 'Red Velvet Cake' was told about a
customer who paid New York City's Waldorf-Astoria Hotel a large sum of money for a
red cake recipe. Starting in 1983, the story had mutated so that Mrs. Fields' Cookies
was the culprit. In this version, 'someone had called the Mrs. Fields' company and
asked for their recipe. When told that it was available for 'two-fifty,' the caller
supposedly told the phone representative to send the recipe and charge it to her
credit card, learning later that the price was $250 rather than the expected $2.50.'
Then, according to this tale disseminated by photocopies, the corporation's victim

became upset and thus sent many bitter letters with the supposed secret recipe, and
encouraged others to send out even more copies.
By 1987 Debbi Fields said in her book that, 'The rumor has really hurt the company.'
She responded to this persistent account by placing notices in all her stores denying
that the company had sold its recipe. Since average people (the folk) started and
spread such legends and other forms of folklore, denunciations from the top usually
had little impact. That happened with this story, which continued into the early 1990s
and was also told about other firms such as Chicago's Marshall Fields, New York City's
Macy's, St. Louis' Union Station, and Neiman Marcus stores in various cities.
One recipient of the photocopied urban legend tried the supposed secret recipe only
to realize the resulting cookies tasted nothing like the real thing. But then Todd
Wilbur spent five years trying to replicate Mrs. Fields' chocolate chip cookies and other
fast-food products. He even published two cookbooks in the late 1980s and early 1990s
with recipes that the Deseret News food editor called 'clones,' an unusual consequence
of a modern whopper. Why would anyone believe such stories of a corporation selling
its vital secret recipes?
Dr. Brunvand, the nation's leading expert on urban legends, wrote about this story in
his fourth book, Curses! Broiled Again. He said in his 1991 newspaper column that this
story about Mrs. Fields' Cookies and other companies was a 'classic recipe-scam story
that refuses to die, no matter how often I debunk it or how vigorously companies deny
it.... [It] illustrates two things: that many people love stories about corporate ripoffs,
and that few can resist chocolate chip cookies.'
The popularity of Mrs. Fields' Cookies, the basis for the urban legend, was also seen in
Congress in the late 1980s and early 1990s. Utah's congressmen about twice a year
distributed free cookies, baked at local Mrs. Fields' stores in the Washington, D.C.,
area, to the hundreds of other representatives.
The 1990s
In 1990 Mrs. Fields' Cookies announced an agreement with the Marriott Corporation
which allowed Marriott to own at least 60 stores to bake and sell the popular bakery
products. Marriott gained the exclusive right to build Mrs. Fields' Cookies stores in
airports, hotels, and highway travel plazas and pay the cookie company approximately
five percent of its gross sales.
Mrs. Fields' in 1990 operated 45 international stores in Canada, Australia, Japan, Hong
Kong, and the United Kingdom, and it planned to expand worldwide using various joint
ventures or licensing contracts which promised profits without significant investment.
By 1992 the firm had added stores in Thailand, and its seventh overseas market
started in Mexico City with a licensing agreement with Pasteleria El Molino S.A.
In 1990 the company began remodeling some stores to allow more display space for
new packaging products, cookie jars, and tins. To stimulate gift buying as well as
cookie purchases, teddy bear maker Gund was commissioned to make little bears like
those on the cookie tins. With new designs and decor, Debbi Fields intended to create
boutiques or European-style cafés that were more colorful and exciting.
In 1993 Mrs. Fields' Cookies' stock was removed from the London Stock Exchange, and
new owners reorganized the company. Four lenders, mainly the Prudential group,
acquired almost 80 percent of the firm in exchange for writing off $94 million in
company debt, while Debbi Fields retained a minority interest, remained board
chairman, and accepted a salary cut of $150,000 to $450,000. Thomas Fey, formerly
with Godiva and Pepperidge Farm, replaced Debbi Fields as president and CEO. The
refinancing allowed the company to plan a major expansion of 100 new company-
owned and franchised stores within the next year. Started in August 1991, the
company's franchise option was praised by at least three publications: Success,
Entrepreneur, and Self Magazine.
Although the company survived and retained the name of its founder, many wondered
why Debbi and Randy Fields lost control. As Max Knudson, the business editor of Salt
Lake City's Deseret News said in 1998, the couple 'seemed to have it all: beauty,
brains, ambition, family values, a business growing exponentially--people couldn't get
enough of them.'
Three reasons accounted for the huge debt and loss of control to outsiders. First, the
company expanded too fast, and many stores could not afford their expensive rents. In
many cases, the company had purchased property for its mall stores. Second, the
nation's economic downturn in the early 1990s hurt Mrs. Fields' Cookies. Many
customers no longer could afford her expensive cookies (about $1 per cookie) and the
value of her real estate declined.
Last but not least, Debbi Fields's insistence on hands-on personal management and
reluctance to franchise did not work. Francorp's Don Boroian, a Chicago franchising
consultant, in the July 1993 Working Woman said he told Mrs. Fields' Cookies to
franchise when it was still a young firm. 'When you're trying to expand as they did,
with units in malls, you can't provide close enough supervision. By the time they
decided to franchise, the concept wasn't strong enough because of increased
competition, fewer customers, higher rents and a downturn in the economy. They
needed to add more products, and they're finally doing that now.' By 1993 the
company had added yogurt, coffee, and diversified with other products. It also had
closed most of its mall stores by 1993.
Chairwoman Debbi Fields in early 1995 announced that the company planned to add
100 new stores overseas. At that time, five percent of the firm's 617 stores were
located outside the United States. Fields said the company had franchise agreements
in Indonesia, Australia, the Philippines, Canada, and the Middle East and also was
targeting European and South American markets. Fields said the firm's long-term goal
was to franchise all overseas operations.
Like many other firms, Mrs. Fields' Cookies in the 1990s used the Internet to stimulate
sales. The company was one of over 100 businesses included on the Utah-based virtual
mall called iShopper started in July 1996.
In the 1990s the company moved its headquarters from Park City to offices on Bearcat
Drive in Salt Lake City. In the summer of 1998 it moved again, this time to a new
30,000-square-foot complex in Salt Lake City's Cottonwood Corporate Center.
However, it kept its facilities on Bearcat Drive and Lawndale Drive for about 40
employees. Its mail-order operation remained on Bearcat Drive.
Meanwhile, the family that started the business ended in divorce. Debbi Fields married
Michael Rose, the retired chairman of Harrah's Entertainment, on November 29, 1997,
and moved from Park City to live with her husband in Memphis, Tennessee. Debbi
Fields Rose served as a consultant to the firm she founded and also participated in a
public television show called Great American Desserts. Randy Fields continued to live
in Park City and work in the software industry. Thus the firm persisted even as what
Deseret News business writer Max B. Knudson called the 'media darlings' broke up,
after years of conflict and tension.
The company continued to expand in 1998 under the ownership of Capricorn Investors
and the leadership of Chairman Herbert S. Winokur, Jr., and President/CEO Larry A.
Hodges. Effective November 23, 1998, Mrs. Fields' Original Cookies purchased Denver-
based Pretzelmaker for an undisclosed amount. This acquisition added 229 pretzel
stores to the firm's already existing 1,324 cookie and pretzel stores.
Further Reading:
Brunvand, Jan Harold, 'Fresh Batch of Kooky Cookie Stories Is Served,' Deseret News,
October 25, 1991.
'Chips and Chocolate,' Economist, July 23, 1988, p. 56.
Fields, Debbi, and Alan Furst, One Smart Cookie: How a Housewife's Chocolate Chip
Recipe Turned into a Multimillion Dollar Business: The Story of Mrs. Fields' Cookies,
New York: Simon and Schuster, 1987.
Funk, Marianne, 'Mrs. Fields' Is Transforming Some Stores into Boutiques,' Deseret
News, July 16, 1990.
Knudson, Max B., 'Fields Cookie Without the Mrs. or Mr.?' Deseret News, May 20, 1998.
----, 'Marketing Plan for Park City Is Imaginative,' Deseret News, December 17, 1989.
----, 'Mrs. Fields' Cookies Says It Has Accord to Fuel Growth,' Deseret News, February
17, 1993.
Madden, Stephen, 'Tough Cookies?' Fortune, February 13, 1989, p. 112.
McKanus, Kevin, 'The Cookie Wars,' Forbes, November 7, 1983, p. 150.
Moulton, Tina, 'Fieldses Honored for Compassion and Service to the Community,'
Deseret News, May 8, 1988.
'Mrs. Fields' Cookies Goes East,' Fortune, February 7, 1983, p. 9.
'Mrs. Fields Inc. Back on Track with '89 Income of $1.5 Million,' Deseret News, April 11,
1990.
Newquist, Harvey P., III, 'Experts at Retail,' Datamation, April 1, 1990, p. 53.
Pogrebin, Robin, 'What Went Wrong with Mrs. Fields?' Working Woman, July 1993, p. 9.
Richman, Tom, 'Mrs. Fields' Secret Ingredient: The Real Recipe Behind the Phenomenal
Growth of Mrs. Fields' Cookies Cannot Be Found in the Dough,' Inc., October 1987, p.
65.
Williams, Jean, 'Send in the Clones: Top Secret Recipes,' Deseret News, June 18, 1996.
Source: International Directory of Company Histories, Vol. 27. St. James Press, 1999.
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CIS 465 - Work System Operations, Competitive Advantage, & E-
Commerce
Work System Operations

and
Competitive Advantage
Commerce
Mrs. Fields Cookies

Mrs.. Fields Cookies was founded in 1977 as a single
cookie store and grew to 600 stores within a decade.
As it grew, Mrs.. Fields Cookies faced the problem of
training and motivating relatively inexperienced
store managers to use the standards and procedures Mrs.
Debbi Fields developed when she operated her
first store in California.
Mrs. Fields Cookies used information systems as part of its
approach to these issues. Years of
experimentation and development work created a unique
information system that minimizes paperwork
and permits headquarters to monitor and control day-to-day
operations at each store.
While this part of the system makes data collection and
repetitive decision making as routine and
automatic as possible, another part provides a more human
touch. It permits Debbi Fields to send voice
and text messages to store managers to discuss problems or
pass on news. It also permits store managers
to request help from headquarters.
After many years of gradual evolution, the software in the
system has been generalized and is being sold
under the name Paperless Management to other businesses
that need to manage numerous retail outlets.
Unfortunately the strategy of maintaining consistency
across the stores was not sufficient to maintain the
company’s rapid growth in the face of a recession in the
late 1980s. In March 1993 Mrs.. Fields Cookies
was forced to exchange 80 percent of the company’s stock
for a write-off of 80 percent of its $94 million
debt. Debbi Fields relinquished her posts as CEO and
president and took a $150,000 salary cut.
Commerce
Mrs. Fields Cookies
Debate:
“Use of information systems
to automate
management decisions is
appropriate only if
management is not competent
to make the
decision themselves.”
Commerce
Mrs. Fields Cookies
Discussion Questions:
• Do competent Manager’s
Need an Information
System?
• Why are information
systems beneficial to even
the most competent
managers?
Commerce
Mrs. Fields Cookies

Commerce
Mrs. Fields Cookies

CUSTOMER
People who work in stores (direct customer of work
system)
People who buy cookies (indirect customer since
they receive benefits of increased customer service)
PRODUCT
Consistent Quality on repetitive operational decisions.
Effective communication between headquarters and
stores.
Attention to customer rather than data processing
details.

Commerce
Mrs. Fields Cookies

BUSINESS PROCESS
Major Steps:
• Record Sales data
• Make repetitive operational decisions
• communicate with stores
Rationale:
• Maintain consistency and productivity by
enforcing standards and procedures.
• Help staff focus on pleasing customers.
Commerce
Mrs. Fields Cookies

PARTICIPANTS
Store Managers
Headquarters Staff
INFORMATION
Quantity of Each sale
Store Inventory
Sales History
Messages to and from headquarters
TECHNOLOGY
Cask register
Computer
e-mail, v-mail
Telecommunications

Commerce
Mrs. Fields Cookies

• Despite the company’s expansion
problems, the case illustrates how
information systems can be integrated
into a company’s approach for
performing and controlling internal
operations.
• Information systems play a key role in
running the stores efficiently.
• Standardized methods for repetitive
operational decisions allows employees
to focus on customers.
• Data processing related to repetitive
decisions absorbs energy best applied
elsewhere.
Commerce
Otis Elevator’s Repair Service

Otis Elevator uses Otisline to achieve the responsiveness
and quality essential to compete in the elevator
service business. Otisline is a centralized system for
dispatching mechanics to elevators requiring service.
It uses a centralized database containing complete service
records for each elevator installed.
Otisline improved service by handling all calls for service
at a centralized service center that handles
9,000 calls per day. The system maintains detailed records
and reports exception situations such as
elevators with high levels of maintenance.
The use of information technology also extends to the
service technicians and to the elevators. Using
handheld computers linked to Motorola’s nationwide
wireless network, Otis field service
technicians across the country can communicate instantly
with a central office in Connecticut for
technical assistance and job dispatching. Communication
can be initiated from a location as remote as the
inside of an elevator shaft.
Additional enhancements include remote elevator
monitoring, direct communication with trapped
passengers, and monthly reports on each elevator for
subsequent analysis of performance patterns.
Customers purchase the remote monitoring function for an
additional monthly charge. It uses a
microprocessor to report elevator malfunctions to the
dispatching office via modem.
Beyond supporting the dispatching function, Otisline serves
as a central conduit for exchanging crucial
information among field service mechanics, salespeople,
design and manufacturing engineers, and
managers.
Commerce

Commerce

CUSTOMER
Building owners and people who use elevators
PRODUCT
Elevator maintained in good operating condition
Timely elevator repair
History of service for each elevator

Commerce

BUSINESS PROCESS
Major Steps:
• Receive call about a problem
• Dispatch mechanics
• Perform repair steps
• Track progress until the elevator is fixed
• Update records
Rationale:
• Direct all calls for service to a centralized
dispatching office. Use handheld terminals to
maintain contact. Maintain records for
anticipating and solving future problems.
Commerce

PARTICIPANTS
Trained operators who answer calls for service
Local mechanics
INFORMATION
Notification of problem
Current status of all calls for service
Maintenance history of each elevator
Qualification and availability of mechanics
TECHNOLOGY
Computer at headquarters
Handheld terminals
Commercial wireless network
Commerce

Debate:
“The type of centralized dispatching and
remote
monitoring used by Otis is impractical with
most
products and services.”
“Today’s customer’s for most products
expect high
levels of post-sales service that must be
supported by
extensive information systems.”
Commerce
• Information systems are an

important part of the
service Otis offers its
customers.
• By centralizing dispatching
and gaining better control
of the maintenance
process, better service was
provided.
Commerce
Customer’s View of a Product
Goal: Improve the product of

IT-enabled work systems.
Consider Product
Architecture in three ways:
1. Product Content
o Information Product
o Physical Product
o Service Product
2. Product Controllability
and Adaptability
3. Customer Involvement
Cycle
Commerce
Viewing products as a combination

of information, physical, and service
components
• Most work system
products involve a
combination of
information, physical, and
service components.
• Examples:
o new cars
o encyclopedias
o consulting
Commerce
Viewing products as a combination

of information, physical, and service
components
Commerce
Information systems built into

automobiles
Commerce
Product Improvement
• Product Improvement
often comes about by re-
positioning the product or
by adding more of one
component type.
o Resumix - less physical form of
resumes, more information and
service content.
o Information products - more
information is not necessarily better;
less information more quickly
o Service warranties - not more
extended warranty, more reliable
product
Commerce
Controllability and Adaptability

• Customers may want to
control a product’s
functions over time, or
adapt its features and
functions over time as
needs change.
• Controllability:
o smart products
o interactive product
o programmable product
• Adaptability: provide the
features the customer
really wants -
customization
Commerce
Controllability and Adaptability

• Adaptability
o interactive or programmable
o customization and efficiency
o mass customization
• Early Information Systems
were not at all flexible and
lacked ‘controllability’ and
‘adaptability’.
Commerce
Customer Involvement Cycle
• The basis of customer

satisfaction.
• Quality is not everything.
• Five Steps:
o Requirements
o Acquisition
o Usage
o Maintenance
o Retirement
• Internal and External
Customers
Commerce
Opportunities to increase customer

benefits across the customer
involvement cycle
Commerce
Product Performance
• Customer’s View of
Product Performance
o Cost
o Quality
o Responsiveness
o Reliability
o Conformance to Standards and
Regulations
Commerce
Product Performance in Terms of

Product Performance Variables
COST
Typical measures:
• Purchase price
• Cost of ownership
• Amount of time and attention
required
Common information system roles:
• Reduce internal cost of business
process or increase productivity,
making it easier to charge or allocate
lower prices to customers
• Improve product performance in
ways that reduce the customer’s
internal costs
Commerce
QUALITY
Typical measures:
• Defect rate per time interval or per
quantity of output
• Rate of warranty returns
• Perceived quality according to
customer
Common roles:
• Insure the product is produced more
consistently
• Make it easier to customize the
product for the customer
• Build information systems into the
product to make it more usable or
maintainable
Commerce
RESPONSIVENESS
Typical measures:
• Time to respond to customer request
• Helpfulness of response
Common roles:
• Improve the speed of response
• Systematize communication with
customers
• Increase flexibility to make it easier
to respond to what the customer
wants
Commerce

RELIALBILITY
Typical measures:
• Average time to failure
• Failure rate per time interval
• Compliance to customer
commitment dates
Common roles:
• Make the business process more
consistent
• Make the business process more
secure
• Build features into the product that
make it more reliable on its own right
Commerce

CONFORMANCE TO STANDARDS
AND REGULATIONS
Typical measures:
• Existence of nonconformance
• Rate of complaints about
nonconformance
Common roles:
• Clarify the standards and regulations
so that it is easier to determine
whether they are being adhered to
• Systematize work to make the output
more consistent
Commerce
Using Information systems for

Competitive Advantage
• Organizations compete based on their
product’s value chains - the series of
processes that create value for external
customers.
• Competitive advantage occurs when a
product’s value chain generates superior
product features based on quality,
service, adaptability, lower cost, or other
things customer’s find important.
• Competitive advantage comes from
many sources.
Commerce
Competitive Approaches in Different

Industries
AUTOMOBILE A
• Solid car at reasonable price
• Good for families
• Good service
• Long warranty
AUTOMOBILE B
• Flashy foreign car
• Excellent power and handling
• Image associated with youth and wealth
• Reasonably good repair record
• Reputation for having the newest features
HOSPITAL A
• Best service and best doctors
• Excellent food
• High ratio of nurses to patients
• Pleasant rooms
• Long-term success in difficult heart operations
HOSPITAL B
• Lowest cost for the patient
• High volume general care
• Few complex cases
• Cooperative with local ambulance companies
Commerce
Strategies Used to Compete

• From Porter:
o cost leadership - competes on lower
costs by reducing its own costs, its

supplier’s costs, or its customer’s
costs, or raise competitor’s costs.
o Product differentiation - provide
more value than a competitor, or

eliminate a competitor’s
differentiation.
o Focus - sell products or service into
a restricted product niche with

limited competition.
• When thinking about roles for
information systems, these strategies can
be reduced to two factors: cost and
value.
Commerce
Strategic Information Systems

• Competitive use of information systems
is an approach for creating competitive
advantage or counteracting competitor’s
strategies.
• Integrating information systems into the
value chain creates mission-critical
information systems, even if they
provide no competitive differentiation.
• Failure of mission-critical systems can
be disastrous.
• Strategic information systems are
designed to play a major role in an
organization’s competitive strategy.
• Over time, these features become a
competitive necessity
Commerce
Interorganizational Information
Systems
• Many of the best known and most
successful examples of competitive
advantageous information systems are
those that link a company to its
suppliers, distributors, or customers.
Such systems are often called
interorganizational information
systems.
• They enable the movement of
information across organization
boundaries.
Commerce
Extended value chain for a

manufactured product
Commerce
Some well known Interorganizatioanl

Information Systems
• American Hospital Supply
- ASAP
• American Airlines Sabre
System
Commerce
Competing by Increasing Value and

Decreasing Cost
• View Suppliers and Customers as Part of
the Value Chain (e.g. ASAP, Sabre)
• Make product features competitive (e.g.
Resumix’, Otis Elevator).
• Competing on Time (e.g. reorganize
work flows, remove bureaucracy, CAD
systems, bar coding in quick response
systems).
• Compete on cost
Commerce
Internal costs versus costs borne by
the customer
Commerce
Electronic Commerce: Providing

Product Differentiation and Cost
Reduction
• Electronic Commerce: the

use of information systems
in selling and distributing
products or services to:
o inform a customer of a product’s
existence.
o Provide in-depth information about a
product.
o Establish the customer’s
requirements
o perform the purchase transaction
and, in some cases, deliver the
product electronically
Commerce
Electronic Commerce
• Some Applications
o Electronic retailing
o electronic stock trading
o electronic banking
o electronic publishing
• Technical Aspects
o validate transactions
o digital signature
o certificate authority
o digital certificates
Commerce
Three ways to make airline

reservations
Commerce
Advertising on the Web
Commerce
Direct customer participation in

customizing an information product
Commerce
Handheld terminal used to speed the

process of returning rental cars
Commerce
Ford’s Service Bay Diagnostic

System
Commerce
Be Realistic:
How elements of a business combine
to determine competitive outcomes
Commerce
Electronic Commerce
Commerce
Introduction
• What is “E-Commerce”
• Happy Puppy - A New

Internet Company:
o http://www.happypuppy.com
o “business to consumer sales”
• Canadian Tire Corporation

Using EDI
o Electronic Data Interchange - links
business with suppliers”
o “business to business”
• E-Commerce is a lot more.

Commerce
Happy Puppy - A New Type of
Business
• The normal distribution

channel for games has each
person along the way take
his/her share of profit.
• Use Internet to sell directly
to consumers.
• Download trial versions
for free. If you like,
purchase the full version
directly.
• Search the net for
discussion on electronic
games.
• Sell advertising on your
web-site.
Commerce
Canadian Tire Corporation

• Using EDI Canadian Tire has been doing
business with 3000 different suppliers
since 1995.
• EDI allows for electronic transmission
of routine business transactions for
ordering, billing, payables, etc.
• Doing so, they drive down operating
costs and increase cooperation between
trading partners striving for quick
deliveries and low inventories.
• Benefits include reduced cost, reduced
cycle time, improved customer
satisfaction.
Commerce
What is E-Commerce?
• Electronic Commerce (EC) is an
emerging concept that describes the
buying and selling of products, services,
and information via computer networks,
including the Internet.
• EC is diverse and interdisciplinary with
issues ranging from technology to
marketing, to consumer behavior.
• Technologies included can be diverse
(e.g. EDI, e-mail, smart cards, Internet,
etc.).
Commerce
Some Brief History

• Electronic Transfer of Funds - limited to
financial institutions. - the 1970’s.
• “direct deposit”
• EDI expanded e-commerce to other non-
financial types of transactions and
expanded use to manufacturing, retailers,
services, and other forms of business. -
the 1980’s
• The Web had brought applications to
hundreds of millions of potential
customers.
Commerce
Corporate Web Sites
• General Motors
Corporation
• General Electric
• Objective: interesting and

up-to-date experience.
• “You’ve Got to check this
out”
• Companies are trying to
become ‘web-centric’ in
dealing with customers.
Commerce
A Framework for E-Commerce

Commerce

Commerce
Another Framework or Perspective:
Inter-organizational
Information Systems
vs.
Electronic Markets
Commerce

Commerce
Drivers of IOS
• IOS are the result of the
growing desirability of
interconnecting business
partners to streamline
business processes:
o by reducing the cost of routine
business transactions
o improve quality of information flow
o compress cycle time
o eliminate paper, inefficiencies, and
costs
o make the trading process easier
Commerce
Types of IOS
• EDI
• EFT (Electronic Funds
Transfer)
• Electronic Forms
• Integrated Messaging -
delivery of e-mail and fax
documents through a
single transmission system
that can combine EDI, e-
mail, and e-forms.
• Shared databases -
information stored in
repositories is shared
among trading partners and
accessible to both
Commerce
Electronic Markets
• Rapidly emerging alongside IOS as a
means for conducting business.
• Market = a network of interactions and
relationships where information,
products, services, and payments are
exchanged.
• Business center is not a building but a
network.
• The electronic market is where shoppers
and sellers meet.
• E-markets illustrate the move from
market-centric to a customer-centric
environment.
Commerce
Functions of Markets
• Matching Buyers and

Sellers
• Facilitation of Transactions
• Institutional Infrastructure
Commerce
Functions of Markets - I
• Matching Buyers and

Sellers
o Determination of product offerings
 Product features offered by
sellers
 aggregation of different products
o Search (of buyers for sellers and of

sellers for buyers)
 price and product information
 match seller offerings with buyer
preferences
o Price Discovery
 process and outcome in
determination of prices
Commerce
Functions of Markets - II
• Facilitation of Transactions
o Logistics
 delivery of information, good, or
service to buyer
o Settlement
 transfer of payment to seller
o Trust
 credit system, reputations, rating
agencies like Consumer Reports

and Better Business Bureaus
Commerce
Functions of Markets - III
• Institutional Infrastructure
o Legal
 Commercial code, contract law,
dispute resolution, intellectual

property protection
o Regulatory
 rule and regulations monitoring
enforcement
Commerce
How the Internet Affects Markets - I
• Product Offerings
o increased personalization and
customization of product offerings
 customer tracking technology
 one-to-one marketing
o aggregation and disaggregation of

information-based product
components to match customer needs
and support new pricing strategies.
 Information-rich products lend to
cost-effective customization
Commerce
Determining Product Mix

• When determining Product Mix, Sellers
must decide which components or
features are included in an offering.
These decisions are often driven by:
o production cost
o transaction and distribution cost

o binding cost
o menu cost
• Internet marketplaces change the

constraints imposed by these costs and
can foster new types of intermediaries
that create value by aggregating services
and products that were traditionally
offered by separate industries.
Commerce
Example: Test Driving a Car
• Traditional Market
o experience from test drives
o research from auto magazines and
Consumer Reports
o recommendations from friends
o negotiate price order vehicle and
take delivery through a dealer

o arrange financing through a bank
o purchase insurance from insurance
company
• E-Markets
o www.auto-by-tel.com
o www.carpoint.com
Commerce
How the Internet Affects Markets - II
• Information Goods
o digital information goods allow
perfect copies to be created and
distributed almost without cost.
o Dramatic reduction in the marginal
cost of production and distribution.
o Micropayment technologies can
reduce transaction costs for
commercial exchange.
o New opportunities for repackaging
content
 bundling, site licensing,
subscriptions, rentals, differential

pricing, per user fees
Commerce
How the Internet Affects Markets - II
(contd.)
• Information Goods - contd.

o Aggregating or disaggregating
information goods
o Examples: Software bundling, fixed
fee access to digital content.
o Aggregation of large numbers of
information goods can result in
higher profits for sellers and wider
distribution of goods, but eliminating
intermediaries.
Commerce
How the Internet Affects Markets - III
• Search
o Lower buyers costs to obtain
information about a product,
increasing economic efficiency.
o Multimedia, high-bandwidth
technologies all help in this process.
o Search engines and banner
advertising.
o Intelligent Agents (Smart books)
o e-Bay and the second hand goods
markets
Commerce
How the Internet Affects Markets - IV
• Price Discovery
o New types of price discovery
o Example: Last minute auction of
airline seats to highest bidder.
o Intermediaries have developed to
facilitate this new role.
o Consider price negotiation
o The ability tom customize products
combined with the ability to access
information on potential buyers
allows sellers to price discriminate.
o Who benefits here?
Commerce
How the Internet Affects Markets - V
• Facilitation
o Cost of Logistics
o Electronic Markets improve
information sharing between buyers
and sellers lowering costs of
logistics, and promoting quick, just-
in-time deliveries, reducing
inventories.
o Distribution of information goods
will continue to be transformed
o Rise of intermediary firms
specializing in logistics (Fed-Ex,
UPS).
o Electronic payment systems will
further lower transaction costs.
o Growth of Verisign like companies.
Commerce
Internet Marketplaces and

Competition
• Impact of Lower Search
Costs
o the ability of internet marketplaces to
reduce search costs for price and
product information may
significantly affect competition.
o Lower buyer search costs promote
price competition among sellers.
o Sellers can no longer depend on
geography or customer ignorance of
the low-cost seller.
o However, this may change the
construction of prices (e.g. look at
airline pricing models).
Commerce
Internet Marketplaces and

Competition - II
• Increasing Differentiation
and Lowering Cost of
Product Information
o higher degree of product
differentiation can lead to increase in
seller profits.
o Buyers in a ‘differentiated market’
face the cost of obtaining price
information as well as the cost of
obtaining product characteristics.
o Buyers may still want to ‘test-drive’
specialized products.
Commerce
Role of Electronic Intermediaries
• The growth of electronic

markets will lead to the
extinction of some types of
intermediaries and promote
roles for new ones to
replace them.
• Some current internet-
based intermediaries may
‘freeload’ on traditional
intermediaries (e.g. test
drive the car).
Commerce
Summary
• Internet-Based Electronic
Markets are still at a
formative stage, but are
creating major
transformations, full of
strategic opportunities for
intermediaries to add value
for buyers and sellers in
the new marketplace.
Commerce

Commerce

Commerce
Electronic Markets
• Market Mechanisms
o Lead Generation
o Catalog Aggregator
o Cooperative Workflow
o Auctions
o Reverse Auctions
o Exchanges
Commerce
Benefits and Limitations of

E-Commerce
Commerce
Benefits to Organizations
• Expands market place to national and
international markets.
• Decreases the cost of creating,
processing, distributing, storing, and
retrieving paper-based information.
• Saves inventory costs with supply chain
management and “just-in-time”
processing.
• Reduces time between outlay of capital
and receipt of products or services
(related cycle time).
• Supports BPR efforts
• Use of Internets reduces
telecommunications costs. Web cheaper
than VANs.
Commerce
Benefits to Consumers
• Provides customers with more choices.
• Allows consumers to “comparison shop”
easier.
• Can allow for quicker delivery of
products or services.
• Allows 24 hours per day shopping.
• Can receive relevant and detailed
information in a matter of seconds.
• Allows customers to interact with other
customers
Commerce
Benefits to Society
• Enables more individuals to work at
home, having less travel on roads and
less pollution.
• Allows some merchandise to be sold at
lower prices. Less affluent consumers
can buy more and increase a standard of
living.
• Provides products and services to
outlying areas (e.g. third world
countries).
• Facilitates delivery of public services,
reducing the cost of distribution and
increasing the quality of the distribution
system.
Commerce
Technical Limitations
• Lack of system security, reliability,
standards and communication protocols.
• Insufficient telecommunications
bandwidth.
• Software development tools are evolving
and changing rapidly.
• Difficulties integrating the Internet and
e-commerce software with some existing
applications and databases.
• The need for special web servers in
addition to network servers.
• Some Interoperability problems
Commerce
Non-technical limitations
• Accessibility to the Internet is still
expensive and/or inconvenient for some
customers.
• Some legal issues are unresolved.
• Government regulations and standards
are not refined enough for some
circumstances.
• Some benefits are difficult to measure,
I.e. cost justification methodologies.
• Customers resist change.
• Support services (e.g. copyright
clearance, EC tax experts).
• Some say it contributes to breakdown of
human relationships.
Commerce
The Process of E-Commerce
• For a trade to occur

between there must be a
complete business process.
• Note advantages of repeat
customers.
Commerce
Applications: Business to
Consumers
• Advertising
o Web Presence
o Interactive Marketing
o push technology
o electronic catalogs
o advertising and entertainment
o how effective is the advertising?
• Electronic Publishing
o on-line archives and databases
o New mediums: edutainment -
Yahoo!
o News on demand

Commerce
Keys to Successful Interactive Marketing

Commerce
Applications: Business to
Consumers
• Electronic banking
• personal finance
• stock trading
• Job market
• auction, bids and bartering
• travel and real estate
• electronic retailing

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