Business Policy and Strategy: Panera Bread
Discuss the Environment they Operate in as of March 27, 2012, there are 1,552 Panera bakery-cafes in 40 states and throughout Canada, which work to deliver fresh, authentic artisan bread and bakery products served in a warm environment by engaging associates (Company Overview, 2012, pp.1). In order to capture this warm environment, the most important part of the Panera business strategy is for the company to ensure that it provides a welcoming, safe, and reliable environment in which its employees and customers can work and interact. While this depiction contains the qualities of Panera’s general environment, its task environment, which includes the many different ways in which the organization interacts directly and indirectly in order to achieve its overall goals of maintaining its standards of operation and quality, maintaining its customer base, maintaining a valued place amongst competitors, and most importantly, turning a profit.
As such, in order to achieve these aforementioned company goals, Panera operates under the general understanding that “Porter’s Five Forces” must be adhered to in order to achieve success. Above all else, Panara operates with an understanding the considerable rivalry exists within the realm of bakeries and restaurants, but Panera has carved out a niche for itself by combining these two facets into one operation. In viewing the threat of substitute products which exists within Porter’s Five Forces, the impact of such can be considered quite high as substitute products are easily accessible at home and in grocery and convenient stores. Additionally, the recent economic downturn has significantly limited disposable income, which has led consumers away from companies like Panera and into their own homes.
The bargaining power of suppliers, in viewing Panera, is quite low, as Panera as a corporation has multiple options to source each ingredient they use from national distributors to local farmers. Next, is the bargaining power of buyers, which in the context of Panera is quite high. Again, with the economic downturn affecting consumer eating behaviors, the cheaper meal can be found at home. Additionally, there over 21 direct competitors and alternative eating establishments that compete with Panera, and all looking to draw in customers through pricing schemes and specials (Espire, 2010, pp.1). As such, the competitive rivalry in the industry in which Panera exists is extremely intense, but thankfully for Panera, the threat of new entrants to the market in the current economic environment is quite low, as such a high investment threshold currently exists to enter the market.
Prepare an EFAS
An external factor analysis summary (EFAS) form, accounts for the opportunities and threats that exist within an organization and weighs these factors on a scale of 1,0 to 0.0 in order to calculate these factors’ probable effects on Panera’s strategic position, for which the total weights for all items must sum to 1.0. Additionally, these factors are rated from 5 (outstanding) to 1 (poor) to calculate how well Panera is positioned to take advantage of the opportunity or to deflect the threat (Purdue University, 2012, pp.1). Finally, a weighted score is calculated to tell how well Panera is responding generally to the factors present in its external environment as depicted below:
External Factors
Weight
Rating
Weighted Score
comment Opportunities
Limited Competition
0.2
2
0.4
Doing well
Room to Expand
0.1
3
0.3
Doing well
Customer Satisfaction
0.1
3
0.3
Doing well
Threats
Rise of Chipotle
0.1
1
0.1
Needs improvement
Weakened Economy
0.2
3
0.6
Doing well
Increase in Wages
0.1
1
0.1
Needs improvement
Increased Food Costs
0.2
3
0.6
Doing well
Total scores
1
2.4
Discuss the General Environment
In beginning to view the external environment facing Panera, one must look at the opportunities and threats that are present in the field. Within the industry, Panera is at the top of its gain, bringing in considerable profits, focusing on new technology and sustainability, and continuously expanding its presence throughout North America. Additionally, its societal focus on healthy living and environmentally friendly practices through the preparation of clean, healthy, and sustainable products continues to place Panera on the map in terms on new opportunities such as expansion, limited competition in the field of healthy products, and room to expand.
Panera boasts a host of opportunities, as mentioned, based primarily on its service of 130 million customers daily (2010 Annual Report, 2012, pp.6). In this capacity, Panera has the ability to expand its potential market base considerably should it market itself correctly to the public and to its current consumer-base. In the field in which Panera exists, Panera, while essentially fast food, is a company that sets itself apart from its competition through its ability to provide quick and healthy meals to its patrons in clean and friendly environment that will keep them coming back for more. Panera has been able to set the standard of excellence in the area of healthy eating since its inception as a company.
However, there are certain threats that have the capacity to alter Panera’s consumer base, should Panera be unable to deal with their effect. For instance, in an environment in which the economy and people’s bank accounts are still reeling from the recent recession, while fast food has become a viable and heavily-utilized food option, the sheer amount of fast food, sit down restaurants, quick service restaurants, fast casual restaurants, and the ability to simply eat at home continue to encroach on Panera’s business outside of its loyal consumer base. Additionally, with companies such as Chipotle rising to success throughout the country, offering the same types of healthy food items, a large threat is present if Panera is not able to differentiate itself from its competition.
Discuss the Internal Structure, Culture and Resources
Above all, Panera has created a company culture and internal structure that bases itself around excellence. Panera uses highly-trained staff and employees to provide high-quality food products to its customers in a clean, friendly and welcoming environment. Panera has been able to gain a considerably large and equally loyal customer base in the United States, specifically in the Northeast and Midwest. Panera not only offers healthy options to its customers, but it does so in an exceedingly large menu with a large variety of options that can serve any customer’s particular tastes. Panera, however, does have its own set of weaknesses which stem largely from its status as a franchise, which makes expansion tough, especially in times of economic hardship. Additionally, though Panera is not yet present in every state, as would be ideal, the company continues to make strides in ensuring its presence will be completely nationwide in the years to come. As such, Panera’s strengths far surpass its weaknesses, as has been the case since its creation — a vital reason behind its continued success.
References
Espire Marketing. (2010 April 16). “Panera Bread Company Case Study.” Web. R
etrieved from: http://www.espiremarketing.org/panera-bread-company-case-study/. [Accessed on 13 June 2012].
Panera Bread. (2010). “2010 Annual Report to Stockholders.” Web. Retrieved from:
http://www.panerabread.com/pdf/ar-2010.pdf. [Accessed on 13 June 2012].
Panera Bread. (2012). Company Overview. Web. Retrieved from: http://www.panera bread .com/about/company/history.php. [Accessed on 13 June 2012].
Purdue University. (2012) “Strategic Business Planning for Commercial Producers,
Completing the EFAS Form.” Web. Retrieved from: http://www.agecon.purdue
.edu/extension/sbpcp/resources/CompletingEFASForms.pdf. [Accessed on 13
June 2012].
