As Panera Bread is a chain of bakery-cafes, it is reliant on transportation and infrastructure to deliver fresh produce daily to supply the bakeries with the necessary goods to keep the production of fresh baked goods going. Being the capital of Thailand, Bangkok has a developed road infrastructure. At the same time, Bangkok is a very overpopulated city, with a chronic traffic congestion problem (Assavavipapan and Sathaporn 925). The roads, though numerous, are typically blind alleys, and the area-to-road ratio is only 8%, compared to 20-30% in cities like New York, Tokyo, and Singapore (Assavavipapan and Sathaporn 930). Traffic congestion may cause issues with on-time deliveries of products to bakery cafes.
Distribution Barriers
The primary distribution barrier in Thailand and Bangkok specifically is the relative incompatibility of western-style baking with local cuisine (Tangtatswas et al. 5). Thai kitchen and cooking are very different from the typical menus offered in the US. Unless Panera Bread changes its menu to something more appropriate for the region, the company will struggle to maintain the same number of customers it enjoys in other places, where their produce fits into the cultural paradigm.
International Intermediaries
The company has no reason to sell its products to wholesalers or brokers due to the nature of its services and the overarching business model (Mangan and Chandra 126). Therefore, Panera could either represent its brand in Thailand as a new market, or purchase a local company within the café and fast-food industry, and change it into a bakery-style establishment (Mangan and Chandra 55). The former would require investments to develop the brand name, whereas the latter would start with an already existing customer base. At the same time, it would require time and money to account for operational and leadership changes.
Distribution Channels
Nearly all fast-food café-style businesses operate producing food on site. Therefore, the distribution channel delivering the product to the ultimate customer will engage in direct sales (Mangan and Chandra 71). Panera Bread will open up its cafes across Bangkok, where interested customers would be able to buy and enjoy their pastry in a comfortable setting.
Works Cited
Assavavipapan, Krirkchai, and Sathaporn Opasanon. “Thailand transportation infrastructure performance and the economics.” Asia Pacific Journal of Marketing and Logistics, vol. 28, no. 5, 2016, pp. 923-938.
Mangan, John, and Chandra Lalwani. Global Logistics and Supply Chain Management. John Wiley & Sons, 2016.
Tangtatswas, Ririnda, Puris Sornsaruht, and Paitoon Pimdee. “Fast-food restaurant customer satisfaction in Thailand: A structural equation model path analysis.” African Journal of Hospitality, Tourism, and Leisure, vol. 8, no. 5, 2019, pp. 1-14.
Panera Group is an organization that is involved with the bakery and delivery of fresh dough products. The company also runs restaurants that sell fresh products to its clients. Since its establishment, the company provides high quality fresh products.
Due to its competitive advantage in quality and freshness of the products, the company charges high prices leading to its revenue growth. The growth in revenue enabled the company to increase its operation in other regions by establishing new units. This study examines the strategic options for the company to grow and expand after analyzing its strengths and weaknesses.
Synopsis
Every organization usually aims at profit maximization and cost minimization. Panera Bread Corporation also has similar objectives in addition to providing high quality fresh dough products to its clients. The company realized increased profit consecutively since 1997. Due to increased revenue, the company diversified by establishing new manufacturing and distribution units in the year 2000.
Due to the legal and policy uncertainties in the year 2000 following political environment, the diversification of the company took longer than thought. However, the long diversification process led to a reduction in the revenue earned by the company with the company realizing only 9.1% and 12% growth in annualized unit volumes and sales revenue in the year 2003.
The analysis of the company reveals that it operates in a highly competitive industry. The company strength of fresh high quality products has enabled the company effectively compete with its competitors.
The company sells its products in outlets including restaurants. However, there is an opportunity for the company to reduce operating costs by using e-commerce and door-to-door deliveries. This approach can enable the company venture into low and middle-income regions. Such strategy will reduce its threats and further improve its gradually reducing revenue.
Company overview
Panera Bread is a Bread company that is based in Missouri. Ken Resenthal established it in 1987 under the name Saint Louis Bakery. The company began trading its shares publicly in 1993 while in 1998 it changed its name to Panera Bread. Apart from bread, the company also bakes other fine bakery products using fine and high quality and pure ingredients.
“Neighborhood bakery” concept is utilized by Panera Bread to measure the level of freshness of bread by the hour. The company is dedicated to high quality production that indicted by high quality baked products. The company participates in corporate social responsibility to the community by giving to the needy the unsold products.
Current Situation
A current Performance
The current position of the bank is not good due to its reducing sales revenue that arises from the low demand of the company’s products. Despite the expansion of the company’s new units, the firm has realized reduced growth in annualized growth volumes and sales when compared to other years. For instance, the increase in the annualized unit volumes and comparable sales increased by only 9.1% and 12% respectively in the year 2000. The performance of the company improved in terms of revenue and profit as indicated in the figure below.
Strategic posture
Mission
The mission statement is “A loaf of bread in every arm” (Panera, 2006, p. 2). The mission is not inclusive because it leaves out its employees in their operations in the bakery.
Objectives
The objective of the bakery is “With the single goal of making great bread broadly available to consumers across America, Panera Bread freshly bakes more bread each day than any bakery-cafe concept in the country” (Shaich, 2003, p. 11).
Strategic managers
Board of Directors
The company has a classified board of directors that is divided into three classes that have equal number of directors. Currently, the company has five members of board of directors that are divided into three classes.
They are “Domenic Colasacco and Robert T. Giaimo, with terms ending in 2003; George E. Kane and Larry J. Franklin, with terms ending in 2004; and Ronald M. Shaich, with a term ending in 2005” (Shaich, 2003, p. 15-20). The shareholders do elect the new directors of the company at each annual general meeting for a full term period of three years.
Top Management
The top management of the company makes decision in consultation with the board of directors. The top management acts as a strategic organ of the company because it strategically makes strategic decision that lead to the improvement of the performance of the company (Wheelen & Hunger, 2010, p. 29-1).
Ronald M. Shaich, who is also a member of the board of directors, leads the top management. The executive Vice President of the company Paul E. Twohig and senior vice presidents heading different departments in the company assist the director. The management is very experienced in business and is responsible for the growth of the company (Wheelen & Hunger, 2010, p. 225).
External Environment
Natural Environment
The natural environment of Panera Bread is based on bread that is baked freshly using natural yeast, flour and water. In order for the company to be successful, the preparation and maintenance of the yeast is a key factor to providing a good product to customers. The yeast must be cultured fed and tended to by the attentive hands of master bakers.
Therefore, if the yeast is not properly maintained the process will slow down and die, and the bread would not rise (Wheelen and Hunger 29-1). Another part of the natural environment is the casual atmosphere that Panera Bread provides for its customers. Panera Bread provides a coffee shop style environment that invites an upscale décor, wireless internet, and a place to meet casually or for business.
Panera Bread delivers its dough products fresh within the most favorable distribution distance radius of 200 miles. However, weather makes the work of distributing the company’s dough products difficult to stores located in regions that experience bad snowstorms.
Societal Environment
In terms of Panera Bread’s societal environment, there are a number of factors involved when it comes to economics, technological, political-legal and socio cultural. The company strategically builds its facilities in affluent populations thus making it attracting to customers who are willing to try different tastes and styles without the worry of paying more (Wheelen and Hunger 29-4).
Panera Bread Company uses state of the art computer hardware and software that collects data and tracks marketing information, the average spending of each customer and product mix (Wheelen and Hunger, 2010, 29-15). The company also embraces the concept of meeting the dining needs of its customers by providing breakfast, lunch, daytime “chill-out” lunch in the evening and take- home bread (Wheelen and Hunger, 2010, p. 29-3).
Political and legal environment for the company are related because most legal regulations are influenced by politics. The uncertainty in legal and regulation policies surround the operations of the company. Political and legal policies uncertainty affected the growth and expansion of the bakery.
For instance, general elections in the year 2000 led to uncertainties in policies that the new political administration will formulate and implement hence slowing the expansion of the company. The social cultural environment for the company affects the operations of the company. Since consumers desire goods that are advertised on TV, the company incurs high expenses on TV adverts and promotion of its products.
Task Environment
Panera Bread’s task environment attracts a variety of customers such as movie- goers, shoppers, seniors, business and sales professionals (Wheelen and Hunger 29-3). The menu offers the expertise and strength of the company’s bakery by proving quality soups, made to order sandwiches and beverages (Wheelen and Hunger 29-9).
Although the company does very little advertising, the company relies on customers to stop in and try them out. No new entrants can be compared to Panera Bread. However, there are competitors who offer something similar with specialty foods and casual dining (Wheelen & Hunger, 2010, p. 109).
Internal Environment
Situation Analysis (SWOT)
Ronald Shaich started the Cookie Jar in 1980, which grew into a joint venture with Louis Kane and eventually became Panera Bread Company (Wheelen & Hunger, 2010, p. 29-2, p. 197). At the time the company went public it would have been considered a divisional structure (Wheelen & Hunger, 2010, p. 29-2, p. 147). As it sold off Au Bon Pain Co, it became more of a functional structure (Wheelen & Hunger, 2010, p. 29-2, p. 147).
Panera Bread’s corporate culture seems to be very good and not anything was said against it. Panera is very dedicated to human resources management and holding a strong professionalism within the company (Wheelen & Hunger, 2010, p. 29-16). Important is how the employees feel and treat the customers that can set the mood for an entire company.
Panera Bread has a lot going for them in the way of resources. As a very important resource, they have their CEO Ronald Shaich and their master artisan baker Mile Marino (Wheelen & Hunger, 2010, p. 29-1, p. 29-13). Ronald Shaich started it all with a phenomenal recipe that grew like wild flowers (Wheelen & Hunger, 2010, p. 29-1). Mile Marino has been with the company since 1987 and he manages the company’s fresh dough baking operations (Wheelen & Hunger, 2010, p. 29-13).
The second resource that Panera has is the franchise operations. Having a successful franchise operation can make the company grow faster along with bringing in a percentage of sales from all the stores (Wheelen & Hunger, 2010, p. 29-11). As of 2003, there were 429 franchised bakery-cafes open and commitments to open up another 409 (Wheelen & Hunger, 2010, p. 29-11).
The third resource that Panera has is the management information system. All the Paneras have computerized cash registers, but they give a lot more information than most businesses (Wheelen & Hunger, 2010, p. 29-15). These systems can do many things, such as help with cost managing, scheduling
Strengths
The first strength of Panera Bread Company lies in its corporate resources. The company has skilled leadership that has ensured its success in not only baking high quality bread and dough products, but also financial performance (Wheelen & Hunger, 2010, p. 42).
Through his leadership, Shaich has led to the development of the competitive advantage of the company in sourdough that enables the company produce and distributes fresh dough products. Using its corporate strategic resources, the company has been able to provide its clients with fresh high quality dough products. Not all companies are able to do that and it has enabled the company to increase it market share.
The second strength of the company is the ability of the company to frequently change its menu in the restaurants to fit into consumer taste and preferences. Panera Bread changes its menu frequently to suit the changing taste and preferences of the consumers. Through this strength, the company has been able to maintain a large number of loyal customers.
Weaknesses
The first weakness of the company is high prices that are charged to its fresh products. The company offers fresh bread and dough products daily to its customers. When it is compared with its competitors that offer organic food products, the company sells its products at higher prices. The high prices that are charged by the company are not favorable to some middle and low-income clients. Additionally, the prices of food products in Panera restaurants are higher than its competitors are.
The second and major weakness of the company is the incompetence of the company in research and development. Although there are limited field of research and development in the industry, the company does not have established department in charger of research and development or innovation.
Opportunities
The company has its first opportunity as diversifying its product mix. This is because it has a diverse culture of consumers who are capable of meeting the company’s price demands without any doubts.
Since the company conducts market research on consumer taste and preferences, it should utilize the report to produce substitutes for specific customer segments. Additionally, the company operates restaurants that offer expresso bar drinks. It should exploit the opportunity of extending its options and offer a variety such as syrups that are sugar free (Wheelen & Hunger, 2010, p. 278-80).
The second opportunity is establishment of international franchise agreements. The company has succeeded in establishment of franchise business. By internationalizing using franchise business, the company will be able to operate in international markets and be able to improve its financial performance further through increased international outlets.
Threats
The first threat facing the Panera Bread is the threat of rivalry from the company’s competitors in the industry. The competitors include Starbucks Corporation, Chipotle Mexican Grill Inc. and Eighnstein Noah Rest Group. The competitors are very aggressive and the company must keep up with the pace on competitiveness in order to maintain its position in the market. The competitors pose a threat to the existence of the company (Wheelen & Hunger, 2010, p. 110-114).
The second threat to the existence of the company is the threat of new entrants in the industry. Due to the free entry and exit in the industry, new entrants have entered the industry leading to market saturation (Wheelen & Hunger, 2010, p. 110-11). Any person or organization with enough capital can establish a restaurant. The advantage of new restaurants is that customers are willing to try them while looking for a variety of meals. Panera competes with new entrants in the industry by providing a variety of meals to its clients.
Review of Current Mission and Objectives
The current mission statement of the company is not effective because it does not reflect the actions and needs of the entire organization. The mission statement does not spell out the organizational culture of the firm especially with in relation to its employees. However, the mission statement is successful in enabling the company achieve fresh delivery of dough products to its clients.
Strategic Alternatives and Recommended Strategy
Strategic Alternatives
The first alternative strategy for the firm is to utilize its internal strength of a strong corporate culture. The company has a very strong corporate structure that is promoted by the management. Using such a culture, the management should increase communication and teamwork. Promotion of teamwork in the company is important because it increase employee performance and strengthen the returns of the company on assets and investments (Wheelen & Hunger, 2010, p. 29-16).
The company ha san alternative strategy of offering substitutes to its clients. Most customers do conduct their meetings in offices rather than in restaurants. The company has established new conference rooms that offer clients a better environment for meetings compared to their offices. In addition, meetings held in the restaurant conference rooms are accompanied by high quality coffee provided by the company restaurants.
The external environment offers the opportunity of franchising to the company. The company should use the franchising opportunity to venture into other countries especially in Europe. Through franchising strategy, the company will be able to reduce operating costs by economies of scale and economies of scope (Wheelen & Hunger, 2010, p. 278-80).
Recommended Strategy
Panera Bread Company is known for the quality of its products. In order to sustain its continued high performance, the management of the company should pursue the diversification strategy. Diversification and integration will ensure growth and expansion of the company while maintaining high revenue as before. Outsourcing is another important strategy that will lead to reduced costs for the company. The company uses wheat and other resources that are used in production.
Sourcing goods from countries such as China where goods are produced cheaply is an option that should not be ignored. The simplification of the company product through value engineering is important for the management because it will reduce operations costs and maintain high quality fresh dough products. Additionally, the company can overcome the competitiveness pressure by producing substitutes to its competitor products (Wheelen & Hunger, 2010, p. 278-80).
Implementation
The above strategies are formulated by the top management of the company and are implemented by the entire workforce in the organization. The management should work with their subordinates to implement the strategies. The success of the implementation depends on the level of communication in the firm.
High level of communication ensures that the management is able to issues instructions to their juniors and their juniors are able to seek clarifications where instructions are not clear. Through high levels of communication in the company, the management can involve their subordinates in formulating policies and programs that will lead to successful implementation of the outsourcing, diversification and integration strategies (Wheelen & Hunger, 2010, p. 272).
Fiscal year 2011 – Panera Bread will begin the implementation of its strategy. The company should begin by market analysis on the cultural diversity of its market and the changes in tastes and preferences. Panera Bread has an active marketing team that collects market consumer information. The team should take a six months survey on the consumer tastes and preferences and the necessary changes required in the firm. The survey findings should be evaluated a plan made to execute the changes.
Fiscal Year 2012 – in this fiscal year, Panera Bread should utilize the market survey and strategic plan to launch new products. The new products should be included in the new menu of the company.
In the course of the year, the company should monitor the performance of each of its outlet units and the recommendations made at the end of the year. Additionally, the company should establish substitutes to its competitors especially the new entrants in the industry. The substitutes can include establishment of conference rooms in its restaurants to pull clients from holding meetings and conferences in offices.
Fiscal year 2013 – the company should close down poor performing outlet units and open new outlets in new strategic markets identified through the market survey. The closure of the poor performing units and their replacement of new high performing units will lead to increased financial performance of the company.
Fiscal Year 2014 – following the increased revenue in the prior year resulting from new ventures and closure of poor performing outlet units, the company should use the earned revenue to set up a research and development center.
The research and development center will supplement the market surveys by carrying out research in food varieties to be provided by the company in the restaurants. The segmentation of the market will help the R&D section to provide food variety to specific market groups such as the diabetic and people with specific needs.
Fiscal year 2015 – the company should continue monitoring its outlets while re-evaluating its pricing strategies. Given the company’s customer loyalty, the company should seek possible mergers and acquisitions even as it evaluates its entire operations.
Evaluation and Control
We are confident that our suggestions for Panera Bread will exceed expectations. However, in order to maintain the successes this strategic plan will bring, Panera Bread must monitor its progress and quickly move to resolve any issues that may arise. The company should use a balanced scorecard to evaluate how its customers and shareholders view it.
Some traditional financial measures such as Return on Investments (ROI), Return on Equity (ROE) and net earnings should be used to measure its financial performance. This form of evaluation monitors Panera Bread’s activities in terms of overall strategy and vision. It also gives the top management a balanced view of its organizational measures of service delivery, operational efficiency and financial performance.
The balanced score card should be measured by a set up team by the firm. The team will be able to provide feedback of internal business processes and external outcomes in order to improve strategic performance and results. The balanced score card is the best method for Panera bread because it includes necessary feedback of the customers of Panera Bread. Ultimately, if customers are not satisfied, they will find other retailers that will meet their needs.
With this evaluation, one can establish the source of uniqueness in a company’s product or service offering and, therefore, what attributes the company should play up in order to attract the target market. Panera Bread, in the intention of entering the Australian market, must carry out a comprehensive, competitive analysis (Sandler and Keefe, 2005. Pg. 49).
Location
For Panera Bread to succeed in the Australian market, it has to have a clear picture of the locations of the stores of all the leading competitors. First, Gloria Jean’s Coffees has over 480 coffee stores in Australia. Secondly, McDonald’s in Australia had a total of 811 outlets at the end of 2010. Finally, Baker’s Delight has some 122 store locations in Australia. Panera Bread, to succeed in the new market, must invest in setting up a large number of outlets in the key areas of Australia (Lesser, 2005. Pg. 75).
Layout
Layout is about the configuration of departments, work centres, and equipment, with particular emphasis on movement of work, customers or materials, through the system (Crall, 2004. Pg. 88). In July 2011, Gloria Jeans introduced an open format store layout that is more relaxed, spacious and puts the coffee machine on display. Both McDonald/McCafe and Bakers Delight have invested in developing layout that has comfortable chairs, with groupings of tables and chairs.
Panera Bread’s layout, on the other hand, includes an average of 4600 square feet of space per outlet. The introduction of a new G-2 café design further enhances the appeal of Panera as warm and appealing to customers. The new design has cosier seats and a brighter and more open display case. Some outlets even have fire places. This is a considerable achievement compared to the competitors (Carysforth, 2006. Pg. 99).
Food/service quality
The quality of service and food is the main feature that attracts customers to fast food eating places. McDonald’s drew in customers with its “healthier choices” menu. McDonald’s products carried 85 per cent less trans-fat after using a cholesterol-free oil blend. Bakers Delight, on the other hand, uses real ingredients to produce traditional and gourmet breads.
Gloria Jean’s Coffees has high quality gourmet coffee beans and tea shopping with more than 30 flavours of coffees and teas, including gifts and treats. Compared to its competitors, Panera bread has considerable competitive advantage in the quality of its products. Panera Bread’s signature meal, the artisan bread, contains no preservatives or chemicals.
The high qualities of foods at Panera Bread are essential as it enters the Australian market. Panera bread also has over 20 varieties of bread baked throughout the day, promising high quality products. Panera Bread will surely succeed in dominating the market through its quality products and services (Peter and Donelly, 2011. Pg. 306).
Franchise style
Gloria Jean’s offers training and marketing support to its franchisees. On the other hand, McDonalds offers a generally recognizable brand for the franchisers. However, the initial franchise cost is too high, averaging $1 million. Bakers Delight offers a 16-20 week competency based training to its franchisees. This includes extensive in-house practical and written training. Their initial franchise cost is AUS$700000.
Panera Bread faces a considerable challenge on the franchising operations. Its requirements aim at the highly capitalised candidates, with a net worth of $7 million. This limits the company, considering that it relies on franchises to penetrate into the new market. On the brighter side, franchisees indicated a high level of satisfaction with Panera Bread Company’s concept, support and leadership (Wilson and Blumenthal, 2009. Pg. 85).
Financial Analysis
Panera Bread Company has maintained considerable liquid assets to enable it to open new outlets without taking on large debts. This results in a rise in annual revenues (Hainess, 2009. Pg. 36).
Performance of Panera Bread
Panera has awards for being the best restaurant in 36 states across several markets segments. In 2004 ,customers ranked Panera Bread the best fast food restaurants in various parts of the United States. Panera created this nationwide renown through the successful implementation of the company’s business model (Panera Bread Company, 2012).
Marketing Capabilities
Panera Bread has displayed various marketing capabilities in the high-risk, competitive and labour intensive restaurant business. The addition of “good carb” breads, antibiotic-free chicken, and an artisan line of sweet goods comprised part of a differentiation strategy (Peter and Donelly, 2011. Pg. 30).
Panera chooses sights and café environment using predictive modelling software. The software enables Panera to make accurate projections of revenues and profitability of possible sites. Because this resource has proven hard to duplicate, the site selection and café environment presents considerable competitive capability. This competitive capability is a strength that gives Panera a competitive advantage (Edwards and Economy, 2009. Pg. 84).
Marketing Strategies of Panera Bread
Panera’s marketing strategy entails raising the awareness levels of the company through high quality ads tasty meals. Secondly, Panera boosts awareness and menu trials during meal times. Panera also tries to enhance the view of the restaurants as options for dinner.
The positive financial results of Panera reveal the success of its strategies (Deeter-Schmelz 2010). Other marketing strategies adopted by Panera Bread include competitive pricing, high food quality, menu theme, signature menu selection, dinning ambience and atmosphere, quality service and superior locations (Ferrell and Hartline, 2011. Pg. 167).
Panera Bread Value Chain Analysis
Panera’s inbound logistics enables the company owned, and franchise cafés to buy dough at a low cost from the company. Therefore, Panera maintains the cost of the dough at a low cost. Panera provides extensive training to all franchises. This corporate level tactic impacts the company’s franchised and company owned stores by enabling Panera to develop systems used by all the cafés thus applying economies of scale to operations (Deeter, 2010. Pg. 380).
Panera produces dough at central locations to take advantage of economies of scale. Café bakeries buy the fresh dough at low cost. As part of its marketing strategies, all franchisees must submit 0.7% of their gross revenues to fund national advertising. Further, marketing administration and 2% must be spent on local advertising.
Panera ensures effective research and development through rolling out menus in selected outlets prior to carrying out a nationwide promotion. Executional and structural, low cost drivers must be implemented to ensure integrated value effect at Panera. The cost reduction across the value chain gave Panera a strong capability (Friel, 2012, pg. 58).
Conclusion
The competitive analysis reveals the various strengths that Panera Bread possess, enabling it to dominate the Australian market. Proper implementation of the strategies in place around the United States will lead to considerable success of Panera Bread in the Australian market segment.
References
Carysforth, C. (2006). Business & Administration: S/NVQ Level 2 & Technical Certificate. Oxford: Heinemannorld. Print.
Crall, M. K. (2004). 100 smartest marketing ideas ever. Centennial, Colo: Glenbridge Pub. Print.
Deeter-Schmelz, D. R. (2010). Personal Selling and Sales Management Abstracts. Journal of Personal Selling & Sales Management, 30(4), pp. 371–387. ISSN 0885-3134.
Edwards, P., Edwards, S., and Economy, P. (2009). Home-Based Business. John Wiley & Sons Canada, Limited. Print.
Friel, A. L. (2012) Managing Risk from Advertising and Sales Promotions. Intellectual Property & Technology Law Journal, 24(2). Print.
Ferrell, O. C., & Hartline, M. (2011). Marketing Strategy. Mason, Ohio: South-Western Cengage Learning. Print.
Haines, S. (2009). The product manager’s desk reference. New York: McGraw-Hill. Print.
Lesser, M. (2005). Z.B.A: Zen of business administration: how Zen practice can Transform your work and your life. Novato, California: New W. Print.
Peter, P. J., & Donnelly, J. D. (2011). Marketing Management: Knowledge and Skills. New York : Mc-Graw Hill Irwin.
Panera Bread Company. (n.d.). Panera Home. Web.
Sandler, C., and Keefe, J. (2005). 101 small business ideas for under $5000. Hoboken: John Wiley & Sons. Print.
Wilson, J. S., & Blumenthal, I. (2008). Managing brand you: Seven steps to creating your most successful self. New York: AMACOM/American Management Association. Print.
The strategic analysis can help the company to advance its strategic position by studying the product, market, or the organization itself. The choice of these tools depends mainly on the organization’s needs and goals, as well as on the issues experienced by the company. Given the goals and concerns existing with the Panera Bread Company, there are three main strategic tools that would be useful to the organization.
Five Forces Analysis
Porter’s Five Forces analysis offers an overview of the external factors affecting the company’s performance. Porter’s model states that the key external factors affecting the company’s position in the market are the threat of entry of new competitors, the threat of substitutes, the bargaining power of buyers, bargaining power of suppliers, and the overall industry rivalry (Dobbs, 2014). The analysis would be useful for Panera Bread, as it is a company operating in a highly competitive fast-food market; therefore, having a solid knowledge of the external threats and factors affecting success would be useful to inform the organization’s strategic planning.
7S Analysis
The 7S Analysis is used to analyze the organization itself by researching how the separate elements of the company’s structure align with its goals (Ravanfar, 2015). The 7S analysis emphasizes the importance of human resources as the key factor affecting organizational performance (Ravanfar, 2015). The particular factors influencing the work of human resources are the ‘Soft S’ factors, including shared values, style, skills, and staff. ‘Hard S’ values, on the other hand, are the structure, systems, and strategy. Therefore, the model would be beneficial to Panera Bread as it allows studying the internal factors affecting organizational performance. The 7S analysis would complement the results of the Five Forces analysis, producing a well-rounded overview of the company and its strategic position.
Financial Performance Analysis
Like any other business, Panera Bread seeks to grow and develop its profits. Thus, financial performance analysis is crucial to keep track of the company’s success and identify any weaknesses in the current strategic approach. One of the key tools for financial performance analysis for Panera Bread should be the net profit margin, which is the main ratio describing the profitability of the company (Dyer, Godfrey, Jensen, & Bryce, 2016). In particular, it would be useful to perform a comparative analysis, judging the company’s financial performance against its competitors’ figures (Dyer et al., 2016).
Irrelevant Tools
There are also a few tools that would not be useful in analyzing Panera Bread Company and its strategic position in the market. For instance, among the financial analysis tools, Times Interest Earned would not be relevant, as the company does not have debt payments that pose a significant concern. The TIE tool is more appropriate for SMEs looking to enhance their creditworthiness and ensure the ability to pay out existing debts.
A PEST analysis, which is a popular strategic analysis tool, would not be used when studying Panera Bread Company’s current position. A PEST analysis seeks to examine political, economic, social, and technological factors affecting the company’s operations. However, being an established business with a large network of franchises, Panera Bread already functions in accordance with the political and socioeconomic factors affecting the industry.
On the other hand, if the company was considering introducing a new line of business, a PEST analysis would be required to ensure that it has the capacity to do so. Thus, although this tool would not be relevant in the current situation, it might be useful for future development.
References
Dobbs, M. E. (2014). Guidelines for applying Porter’s five forces framework: A set of industry analysis templates. Competitiveness Review, 24(1), 32-45.
Dyer, J., Godfrey, P., Jensen, R., & Bryce, D. (2016). Strategic management: Concepts and tools for creating real world strategy. Hoboken, NJ: John Wiley & Sons.
Ravanfar , M. M. (2015). Analyzing organizational structure based on 7S model of Mckinsey. Global Journal of Management and Business Research, 15(10), 1-7.
Panera Bread Company specializes in the running of bakery-cafés and it positions itself by providing quality and freshly baked breads and other bakery products to its customers across the United States.
The products and services rendered by the company are tailor-made for urban workers and suburban dwellers who require quick-restaurant services. Given the high quality products and services that the company provides, Panera Bread was rated among the best 121 competitors in the quick-service restaurant industry by Sandleman & Associates in 2005 (Thompson, 2007, p. 2).
This success is attributed to Ron Shaich’s wisdom to divest Panera’s subsidiary, Au Bon Pain Corporation in order to allow Panera Bread marshal its resources toward becoming one of the leading fast-casual restaurant chains in the country.
The management adopted a three-pronged approach to its expansion strategy by operating company-owned bakery-cafés, franchise-operated bakery-cafés, and a bakery-café supply chain facility that guarantees the quality of fresh dough used in all Panera outlets.
In the outlets, the company adopted a uniform provision of specialty bakery and café experience in the form of artisan sourdough breads made with craftsman’s attention to quality and detail.
It specialized in freshly baked breads, soups, salads, custom roasted coffees, among other café beverages. Consequently, the company’s competitive advantage was distinctive menu, signature café design, inviting ambience, operating systems, and unit locations. It could thus compete in five submarkets of the food-away-from home industry (Thompson, 2007, p. 3).
Shaich’s wisdom had been adopted as the company’s long-term objective and the above strategy “was to make Panera Bread a nationally recognized brand name and to be the dominant restaurant operator in the specialty bakery-café segment (Thompson, 2007, p. 3).
The management further introduced Panera fresh catering to extend its market to workplaces, schools, parties, and home gatherings. Moreover, its marketing strategy focused on the competition based on providing an entire dining experience, not on lower pricing only.
The management thus projected to expand the number of Panera Bread locations by 17% annually through 2010 and achieve 25% growth rate of earnings per share annually.
In fact, according to the selected statistics of the company (2000 – 2006), its financial returns were impressive and expansion both by company-owned units and franchised ones, were equally progressive and consistent with the objective.
Analysis
Panera Bread Company seems to be operating its business smoothly toward the achievement of its objective as one of the leaders in the quick-service restaurant industry in the U.S. The company’s CEO, Ron Shaich managed to convince the board of Au Bon Pain Corporation, then a subsidiary of Panera Bread, to divest the business in order to reserve some resources for the implementation of the strategy.
This was an important step that facilitated the expansion of the business through establishing more company-operated as well as franchise-operated units in target market. Furthermore, extra finances was used by the company to enhance its menu and start providing all round meals apart from the casual/quick-service baked food (Thompson, 2007, p.13).
The concept used by the company enables it to provide a premium specialty bakery and café experience to its customers. It specializes in freshly baked breads, soups, salads, custom roasted coffees et cetera.
The company’s chosen target market, urban workers and suburban dwellers, is appropriate given its core business activity. The rationale is that these customers are busy and in need of quick service meal and an exquisite dining experience.
However, the company should not pursue this crop of customers only if it has to be the leader in the industry for this will limit its customer base in the long run and curtail the achievement of its objective.
Product and service positioning of Panera Bread is excellent for it helps attract customers to the outlets. The distinctive menu that consists of freshly baked food, whole grain foods, and a variety of foodstuffs; the signature café design and cosy ambience; the operating system, et cetera, are strategy that define this positioning.
The positioning was encapsulated in the CEO’s speech during the 2005 annual report: “…it’s our Product, Environment, and Great Service (PEGS) that we count on to deliver our success…” (Thompson, 2007, p. 3). Panera Bread has made PEGS its competitive advantage in the industry and has therefore, attracted more diners in its nationwide outlets.
Panera Bread adopted a novel strategy toward expanding its market share by rolling out a Panera fresh catering program. Through it, the company is able to access the untapped markets in workplaces, schools, parties, and home gatherings.
The ambassadors of the company take Panera’s core business activities outdoors to these places with a bid to win their loyalty to the brand. The strategy of market penetration is good for a company that targets the top position in a country’s restaurant industry. Moreover, Panera’s marketing strategy designed to incorporate PEGS, in addition to low pricing is a plus for the company.
In tandem with the strategy is the company’s policy on site selection and café environment, which should be within the target market and exquisite enough to reinforce the ‘entire dining experience’ marketing strategy (Thompson, 2007, p. 8).
The three-pronged approach that Panera Bread has adopted as an expansion strategy is commendable. It facilitates its growth by operating company-owned bakery-cafés and through franchising, which has been the company’s key component of market penetration.
Given the importance of franchise operation to the company, the management has established stringent criterion for selecting franchisee candidates. The criterion ensures that the franchisee adheres to the standards provided by Panera Bread Company both in terms quality and pricing of its products and services.
Franchising enables the company to get more revenues, paid in form of royalties of about 4% – 5% on sales and a franchise fee of $35,000 per bakery-café; and at the same time expand its customer base. By 2006, the company was in agreement with a total of 42 franchise groups spread in 54 markets in 34 states and were committed to opening 423 additional franchise-operated bakery-cafés (Thompson, 2007, p. 9).
To cut on cost and ensure standardization of fresh dough in all its stores, Panera Bread established a bakery-café supply chain with a network of 17 regional facilities supplying fresh dough to both company-owned and franchised bakery-cafés.
This backward integration is not only economical to the company, but also an aspect of competitive advantage. The latter is achieved through consistent quality and dough-making efficiency by the facilities.
The management reckons that it is far much cheaper to dedicate the production of dough to a few facilities rather than having each bakery-café perform the activity. Besides, the revenue generated by the facility adds to the profitability of the company-run bakery-café segment of the business (Thompson, 2007, p. 11).
From the foregoing discussion, it is evident that Panera Bread Company is scrupulous with its strategy of achieving market leadership objective. However, it faces a somewhat daunting task of outsmarting all the dominant players in the restaurant industry such as McDonald’s, Burger King, Taco Bells, among others.
In other words, competition is rife in the industry and Panera Bread must polish its strategy to counter it. The fierce competition in the industry has thrown competitors to adopt differentiation strategy, by lower pricing, location and ambience, convenience, seasonal menu sensitive to consumers’ frequently changing tastes, et cetera.
According to the report, the industry is lucrative with total forecast sales of about $511 billion in 2006 yet still growing at the rate of 5% per annum (Thompson, 2007, p. 12).
Porter [Michael] would easily attribute this cutthroat competition to the industry growth and since Panera Bread does what everybody else is doing, it is high time it changed tact (Analoui & Karami, 2003).
For instance, it can incorporate in its current business line, fast-casual restaurant services in order to close the gap with its closest rivals and have virtually ‘everything’ in the industry under one brand: Panera Bread.
Alternative Courses of Action
Panera Bread can try cost leadership strategy and further differentiate its products and services to distinguish itself from the rest of players in the industry.
Cost leadership comes with proper target costing measures that will substantially reduce cost of production. The company has partly employed backward integration strategies insofar as acquiring fresh dough is concerned, nevertheless it ought to extend the supply chain strategy to all supplies the way McDonald’s does (Defee, Stank & Esper, 2010).
Business process re-engineering will enable Panera Bread to eliminate the non-value adding activities in the business process with a view of achieving the target cost.
The company has a considerable strength in franchising segment of its business, which has made it expand its market share. To be able to achieve fully its objective, Panera Bread should try joint venture strategy or mergers with fast-casual restaurants to stand out from the rest in the industry.
The combination of company-owned bakery-cafés, franchised bakery-cafés, holistic bakery-café supply chain facilities, and joint ventures incorporated with excellent management will guarantee the achievement of the CEO’s vision of Panera Bread acquiring market leadership position.
Recommendations
Besides cost leadership strategy, holistic backward integration, and forming joint ventures/mergers with fast-casual restaurants, the management at Panera Bread Company should revise it marketing strategy.
The niche marketing that it pursues is proper but it should expand the segment beyond urban workers, suburban dwellers, catering facilities. For instance, it can open its outlets around airports and subway stations to cater for the culinary needs of travelers, which is a relatively big market.
It should maintain the delivery of quality fresh sourdough as well as the signature café design and ambience and make its business consistent with PEGS.
Revising the menu is also recommended owing to the changing lifestyles that Americans lead, which no doubt affects their eating habits. The company must therefore endeavor to satisfy the diverse but changing needs of its customers. The introduction of whole grain food products by the company is a commendable step toward satisfying customer needs.
Implementation
All the alternative courses of action and recommendations form part of business and operational strategy to be handled by middle-level managers and departmental heads because they are geared toward gaining competitive advantage.
Consequently, resources should be allocated to the strategic business units as per Igor Ansoff’s growth matrix (Barrow & Molian, 2005, p. 176). Given the company’s financial statistics since 2000, it has the capacity to fund the implementation of these strategies.
References
Analoui, F. & Karami, A. (2003). Strategic management in small and medium enterprises. New York, NY: Cengage Learning EMEA.
Barrow, C. & Molian, D. (2005). Enterprise Development: The Challenges of Starting, Growing and Selling Businesses. New York, NY: Cengage Learning EMEA.
Defee, C.C., Stank, T.P. and Esper, T. (2010). “Performance implications of transformational supply chain leadership and followership” International Journal of Physical Distribution & Logistics Management. 40(10): pp. 763-791.
Thompson, A. (2007). Case 8: Panera Bread Company. The University of Alabama.
Panera Bread Company has expanded its business rapidly considering the demand of the US market; in addition, it focused on distinctive menu, prompt services, and signature café design to achieve long-term objectives and to become the dominant restaurant operator (Thompson 615).
However, this company has already launched a catering service in order to expand its market, for instance, people need such service to arrange parties or other gatherings; as a result, this company should carry out this type of effective services while it had earned more than $80 million in the fiscal year 2004/05 from this service.
Most closely fit strategy from the five generic competitive strategies:
Figure 1: The best strategy of Panera Bread
Broad differentiation strategy would fit with this company because Thompson (615) stated that the prime objective of Panera Bread is to attract local customers with quality food menu at reasonable price (typical meal costs $7 – $12) and achieve loyal customer base; however, type of competitive advantages are – it offers quality food items, atmosphere and rapid services to attract target consumers.
SWOT Analysis of Panera Bread Company
Figure 2: SWOT Analysis of Panera Bread Company
Source: self-generated
Strengths
Main strongest points are –
High customer satisfaction rate in accordance with the survey report of Power and Associates’ and Sandleman & Associates;
It has more than 66,000 loyal customers who like the products due to excellent taste, flavour and quality;
Panera Bread is committed to offer healthy food items;
It has well trained employees, chefs, and dealers;
Panera Bread management team had long experience and outstanding leadership quality to develop good supply chain and distribution channels;
It has already received several awards due to maintaining quality of food items;
Weaknesses
Panera Bread Company needs to focus on the price of raw materials and operating expenses to compete with the rivals;
Some competitors have more establishment and brand awareness;
Opportunities
Thompson (2) stated that Panera Bread has opportunity to expand its business in the international market using broad market appeal, brand awareness and existing customer base;
Rising demand and earning from franchise operation would create new business dimension to diversify product line;
Financial strength creates new scope to consider vertical diversification;
Threats
Many large competitors like Atlanta Bread Company offer similar products at affordable costs;
Strategies along with marketing policies of the other competitors including franchise food companies;
Location and menu selection
Core Competencies or Distinctive Competencies
According to the view of Thompson (167), Panera’s lineup of bread varieties, quality products and skilled employees are the key success factor and core competencies of this company; therefore, many food its including Panera’s signature sourdough bread, Asiago Cheese items, traditional Italian flatbread Focaccia, Tomato Basil, Artisan Sesame Semolina and classic French bread become more popular items day by day.
Panera’s Closest Competitors in Accordance with the Information of Exhibit 9
Thompson pointed out key variables of different fast-casual restaurant chains (about 21 renowned companies), such as, number of locations, financial condition and menu categories to assess completive position; however, considering the presence of different states, it can argued that Chili’s Grill and Bar, Cracker Barrel, and Starbucks are the main competitors of Panera Bread.
According to the data of exhibit nine, Cracker Barrel has about 527 combination retail stores as well as restaurants in 42 states, Chili’s Grill operates in more than 1074 sites in 49 states and 23 nations, Starbucks has business operation in 3000 places in the global market and more than 7500 locations in the local market.
However, number of outlets and business operation in the international place are not only criteria to find out closest competitors; however, California Pizza Kitchen, Jason’s Deli, Brinker International, Cracker Barrel, Qdoba Mexican Grill, and Starbucks offer some signature food items and popular dishes.
On the other hand, Thompson analysed the financial position, for instance, in 2005, Au Bon Pain earned $245 million, California Pizza Kitchen generated about $480 million, Qdoba Mexican Grill earned $2.5 billion and Starbucks generated $6.4 billion; however, Panera’s closest competitors is Starbucks considering all variables.
The Strategic Concerns and Problems Those Need to Concentrate by the Management
The management team of this company should broaden the target market because this company highly targeted urban employees and suburban dwellers to increase demand of the bakery and café; on the other hand, large competitors have focused more on the mass population.
At the same time, the management of Panera Bread Company has concentrated more on the marketing strategy to enhancing the quality and demand of its breads and baked items; however, other strategic issues and problems are –
The company has experienced success by selecting suitable place for the restaurant; therefore, the management should always penetrate new market considering market survey reports and population of the area;
The management team carry out new campaign like “chill out” campaign because they had gained competitive advantages by taking some successful marketing initiatives to develop awareness and increase multiple meal times;
Since the position of the competitors is one of the main strategic concerns, the management needs to increase customer demand and new customer base;
The management teams eager to open a number of franchised bakery-cafés in order to meet growth target, but the company not grant single unit franchises, which creates hindrance to expand its business
The opening of a store in another region can rightfully be compared to the launch of a new business. It is especially true of the South-East Asian area where other cultural, legislative, and food standards prevail. Therefore, to achieve financial stability and success in the foreign restaurant business sphere, such a representative of Western cuisine as Panera needs to determine the promotion goals and develop an appropriate strategy. The initial and most crucial goal of any company promotion is to increase awareness through advertising in various old and social media (Gitman et al. 106). Further, it is necessary to interest customers to try dishes through on-the-house additional products and cooperation with local celebrities (Gitman et al. 106). To achieve trust between clients and the restaurant, it is also crucial to inform about various ingredients and their effects. The next steps are to keep the customer-focused and increase the frequency of their visits by mentioning in the advertisement about continuous improvement. After reaching the desired audience, it is necessary to begin the identification of new customers.
Business Environment
A paradigmatic feature of the culture of South-East Asian farming is the rice basis. However, recent studies show that Bangkok customers are increasingly interested in Western food assortment (Wahyudi and Kofahl 31). It is noticeable in high demand for dairy and flour products, Western sauces, such as mayonnaise and ketchup, and American style dishes, namely snacks and hot dogs (Wahyudi and Kofahl 30). Thai people also like Western confectionery, namely classic ice cream and cakes (Wahyudi and Kofahl 30). Political and economic benefits allowed by Thailand law are 50% corporate income tax, as well as a maximum of 8 years of exemption, the possibility of owning land, and free currency transfer. It is important to note that Panera “serves fresh-baked goods, soups, sandwiches, pasta dishes, salads, and custom roasted coffee” (Nanjapla). Therefore, it can be confidently stated that the promotion campaign can be based on the offer of already proven standard dishes, which will also distinguish Panera in the South-East Asian restaurant market.
Media plan
Significant differences from the US are visible in the balance of power in the media field of Bangkok. An analysis of the availability of media showed that Bangkok residents learn about a particular brand most often through television and radio (Daosue and Wanarat 66). Old media of a print type, such as magazines, newspapers, and leaflets, occupy the second place (Daosue and Wanarat 66). Street advertising methods, such as billboards, as well as modern social media, have the least promotion feasibility (Daosue and Wanarat 66). It means that the most successful promotional method will be advertising through TV and radio from biases to the announcement of discounts and free additional products.
Promotional Strategy
Choosing the right marketing strategy plays a crucial role in opening a branch store in a foreign region. There are two main types of such approaches, namely, push and pull. According to Thompson, “for push marketing, consider sales displays at your grocery store or a shelf of discounted products.” This promotion strategy allows the brand to quickly find its niche in the market that interests the entrepreneur and achieve significant profits in a highly competitive environment. Nevertheless, the push method is designed more for short-term and industrial enterprises. In turn, “pull marketing, the idea is to establish a loyal following and draw consumers to the products” (Thompson). This promotion principle is aimed at gradually building a loyal audience that is aware of its interests through a broad advertising campaign. Having a long-term character and a promotional approach that is more suitable for a restaurant business, a pull strategy will be preferable for Panera.
Suggested Action Plan
Recommended Promotional Goals
Increasing the Awareness of the Target Audience
Televised Ads; Radio Ads; Print Ads; Street Ads; Online and Social Media Ads.
Interesting the Target Audience
On-the-House Additional Products Promotion; Cooperation with Local Celebrities;
Informing the Target Audience
Informative Ads.
Keeping the Target Audience’s Focus
Continuous Improvement Ads.
Increasing the Frequency of Customers’ Visits
Price Discounts; Special Displays; Rebates; Coupons.
Identification of New Customers
Televised Ads; Radio Ads; Print Ads; Street Ads; Online and Social Media Ads.
Cultural Environment Effects on Promotion
South-East Asian farming culture has a rice basis;
Bangkok citizens are interested in Western cuisine;
High demand for dairy and flour products, Western sauces and confectionery, snacks-like products, and fast food.
Recommendations
The processes of globalization have opened a large number of different cuisines for the people of Thailand and Bangkok. American food has become one of the most sought-after gourmets and ordinary consumers. Appealing to the American style in both design and menu assortment will attract a large number of customers. An entrepreneur should not save upfront money on a promotion because Thai political and economic laws are incredibly favorable for foreign companies.
Promotional Strategy Recommendations
Preference for televised and radio ads;
Promote on-the-house additional products;
Cooperate with local celebrities;
Promote price discounts.
Recommendations
It is essential that the people of Thailand still prefer the old-style media. TV and radio advertising campaigns should focus on proposing price discounts, special displays, and rebates. PR managers should pay special attention to on-the-house additional products, as well as cooperation with local celebrities. Research of the restaurant and food business show that Thai people often use coupons, so different magazines should have them.
Daosue, Chamaiporn, and Sawat Wanarat. “The Effects of Advertising and Sales Promotion on Brand Awareness for A Food Product Brand in Wholesale Shops, Bangkok, and Metropolitan Areas.” ABAC Journal, vol. 39, no. 1, 2019, pp. 57-75.
Gitman, Lawrence J., et al. Introduction to Business. OpenStax, 2018.
