Panera Case study free essay sample

The SWOT Analysis revealed about Panera Bread Co. (PBC) in its overall attractiveness in the following. SWOT analysis is a simple but powerful tool for sizing up a company’s strengths and weaknesses, its market opportunities, and the external threats to its future wellbeing. Strengths of the company have made it the leading competitor in the â€Å"fast-causal† dinning segment of the restaurant industry. Basing a company’s strategy on its most competitively valuable strengths gives the company its best chance for market success. The core competence of fresh bake items proficiently performed is the internal activity that is central to a their strategy and competitiveness. Their menu of fresh breads, salads, soups, sandwiches, and combination plates are very appealing to Americans since the culture has change their eating habits to healthier choices. Promoting their bread-baking expertise of artisan breads will distinguish them from the dozens of deli/coffee shops that are competing in the restaurant industry, and in their market segment. Their bread expertise is their distinctive competence which means is a competitively valuable activity that a firm performs better that its rivals. Panera offers these healthier choices in their â€Å"fast casual† atmosphere giving the consumer the option to eat ‘n go or dine in their â€Å"third place† establishments. Panera’s establishments offer consumers alternative place, naming this theory the â€Å"third place† to relax, catch up with friends, do work/study by offering free wifi, and of course EAT! Panera has achieved to acquire a good brand name and high consumer satisfaction ratings. Their success with catering is another indicator that their products are preferred over competitors in the market. Their franchisee program is unique with most of the initial money up front, therefore boosting financial strength and growing without much debt. Based on the article the franchisee owned stores reported higher sales than the company-owned stores. Weakness of Panera Bread Company is highly concentrated geographically in North American. I consider this a weakness because when compared to other competitors such as McDonalds or Starbucks, PBC lacks scale. PBC will have to consider international operations if they want to grow financially. Global expansion will enhance their competitive power that is needed to broaden the company’s position to pursue emerging market opportunities. A company’s weaknesses are shortcomings that constitute competitive liabilities. Opportunity for Panera Bread Company is with expansion of its menu and number of outlets in designated areas. The expansion of the menu to include vegan, vegetarian, organic, tofu and other healthier options will tap into the emerging market opportunities. New recipes will keep returning consumers interested in the company. PBC should expand their outlet areas to colleges and other younger demographic areas, so they can capitalize on the â€Å"third place† idea to get consumers stay longer in their establishments to spend more money. I believe these to be interests of an absolute â€Å"must pursue† market opportunities which will represent much potential but is hidden in the future. Threats of Panera Bread Company include competitors coming at all directions. These can be considered normal course-of-business threats. PBC has to constantly evaluate what strategic actions can be taken to neutralize or lessen their impact of competitors in their market segment if they want to stay competitive. A simple shift in buyer needs and tastes away from the industry’s product can result is a substantial financial blows. PBC has to prove themselves in specialty food, quick service, and casual dining against competitors like Starbucks, Chipolte, Noodles and Company, and McDonalds just to name a few. PBC has to keep finding ways to distinguish themselves against their competitors, because the market is so saturated with industry rivals. SWOT reveals about the overall attractiveness of its situation is the brand awareness and customer loyalty that Panera has based upon their 9 million domestic users loyalty program It has been able to reinvent their menu with changing consumer likes and introducing new marketing information and incorporating the data to improve their profits. Example is introducing evening meal options because they found that Panera customer only think of Panera for breakfast or lunch. Even though SWOT stresses to heavily place strategic plans on a company’s best competitive asset, Panera decide to . 2. Which rival chains appear to be Panera’s closest rivals? In the article Exhibit 3 gives a detail list of industry rivals that competed against Panera Bread in some or many geographical locations. From the chart I reviewed the â€Å"Key Menu Items† to decide the closest rival chains. Panera’s rivals include any fast casual dining place with fresh baked breads, soups, salads, and variety of hot and cold drinks. Some of those are Corner Bakery Cafe, Brueggers, Atlanta Bread Company, Au Bon Pain, Einstein Bros. Bagels, Jason’s Deli, and Starbucks. I based this on high volume at breakfast or lunch to differentiate the market segment further. The rival chains with international operations are the competitors that Panera needs to address in their strategy. Their weakness is lack of international operations and penetrating those market opportunities. Starbucks, Au Bon Pain, Bruegger’s are strong competitive forces. Panera will have to factor whether competitive forces seem likely to intensify and squeeze industry profitability to subpar levels or whether the company should be able to earn good profits despite the expected strength of competitive forces. I believe that industry overcapacity is a domestic issue for Panera to go internationally will bring in more profits in global areas that are not over compensated with fast casual dining. 3. What strategic issues and problems does Panera’s management need to address? Panera’s management needs to address the restaurant business is always going to be laborintensive, extremely competitive, and risky. PBC management should evaluate and pursue differentiation strategies to set themselves apart from rivals via pricing, food quality, menu theme, signature selections, dining ambiance and atmosphere, service, convenience, and locations. While being aware of changing demographics, likes, trends, culture to pursue strategic differentiation course of actions. In the article, I was surprised that in the early years, marketing only play a minor role is the success of the company. Their targeted market segment was urban socialites, suburban upper middle class families, and the trendy â€Å"foodie† conscious people who have access to commercials via internet, cable, and smartphone apps. So why not utilize marketing? Their band awareness is built on customer satisfaction with their dining experience and word of mouth by these happy patrons. My conclusion is that Panera establish their value chain very early in the development of the company. Value chain identifies the primary internal activities that create and deliver customer value and the requisite related support activities. Customers believe that Panera gives them value. My suggestions would be constant evaluation of the value chain, keep an eye on trendy menu items, and pursue the dinner and third place strategy for additional profits. 4. How do they look from a financial point of few? In the last portion of the article Panera reported strong financial and operating results highlighting: ? 18 percent increase in sales revenue, from $743. 3 million to 873. 2 million ? 30% increase in net income, from $52. 5 million to 68. 5 million ? Average check growth of 1. 5% ? First quarter of 2011 sales increases (compared to 2010) average 3. 3% at existing company owned bakery-cafes, 3. 4% at existing franchised-operated baker-cafes, and 3. 3% at existing bakery-cafes systemwide ? Panera’s stock prices traded between $129 and $132 per share 2011 a net of 40 new company-operated and franchised bakery-cafes were opened boosting the systemwide total locations 1,453 to 1,493 locations. Even the weak economic conditions Panera only saw about a 7% decline in shares, and 4. 5% average sales growth. Evaluating how well a company’s strategy is working should include quantitative as well as qualitative assessments. These figures are commonly used to evaluate a company’s performance and balanced sheet strength. Profitability ratios include: Reference Exhibit 1 and 2. ? Gross Profit Margin: shows the percentage of revenues available to cover operating expenses and yield a profit. Higher is better and the trend should be upward. ? Return on Sales: shows the profitability of current operations without regard to interest charges and income taxes. ? Net return on total assets: a measure of the return earned by stockholders on the firm’s total assets. ? Return on stockholders’ equity (ROE): The return stockholders are earning on their capital investment in the enterprise. A return in the 12-15% range is â€Å"average† and the trend should be upward. ? Debt-to-equity ratio: Shows the balance between debt and the amount that stockholders have invested in the enterprise. The further the ratio is under 1. 0, the greater the firm’s ability to borrow additional funds. ? Price-to-earnings ratio: P/E ratios above 20 indicate strong investor confidence in a firms outlook and earnings growth; firms whose future earnings are at risk or likely to grow slowly typically have ratios below 12. In conclusion Panera is a profitable company, but in the â€Å"restaurant rat race† they will need to be constantly evaluating their strategic plans for improving their value chain as a company.