Panera Bread Company Analysis

Published: 2021-07-06 06:25:23
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IntroductionPanera bread company is an American bakery chain café in Canada and America. Main headquarters are in St. Louis, Missouri, Sunset Hills and majorly operates as Saint Louis Bread Company in St. Louis area. Major offerings from Panera Bread company includes Salads, soup, pasta, sandwiches, bakery items and specialty drinks. At the time of beginning the business in 1981, Panera was founded as Au Bon Pain Co. and had three bakery-café and one cookie store. In Saint Louis area they acquired an St Louis bread company in 90’s. The combined effort and analysis of the consumers revealed of the “special” food with quality and speed in serving them. This is termed as “Fast Casual”. Panera’s unique strategies and positioning made it in acquiring a distinct place in the mind of the customers. And also an extra edge in their choice, preferences by serving well in a cozy environment.They also added a meal time called “chill-out” that attracts many consumers. Thus the company expanded in many regions by franchising and positioning.Chief Elements of Panera Brand StrategyBusiness StrategiesFranchising strategy of Panera bread was to enter into the franchising agreements with different franchiser to open up at least 15 franchises in different locations in six years. The franchisee candidate must be well capitalized and should have the better know how about the bakery industry. One can say that it’s Panera’s growth strategy. Essence is one of the concepts used by Panera management to attract and retain customers. To attract and retain, Panera offers products that are baked and handcrafted in a bakery on a regular basis. It serves products with high quality and with reasonable prices. The customer services provided by Panera is so courteous that customers do not prefer going somewhere else for having the same bakery items that Panera offers. Another thing that Panera uses is the designing of the café that appeals the crowd and makes them curious about what’s happening over there (Thompson, 2008).The strategic intent of Panera of the company was to become the dominant player in bakery industry and to make Panera bread recognized at the national level. For this, they have to make products that are more quality efficient than the products that the guy across the street is making. In 2010, Panera was focused on opening up a café in the area who has minimum 160,000 people residing. Panera faced threats from the low cost and differentiated products as it was operating in an absolute competitive environment. Panera employed best cost provider to cater this situation so that the customers who want the best quality along with reasonable price can be retained.Functional StrategiesThree distinct initiatives have been contained in Panera’s marketing strategy. first, wa focused on raising the awareness about the products Panera is offering. The second was to increase the trials at different places for the Panera products, this was mainly due to increasing the awareness among the people. The third and last initiative was to attract more and more people towards the cafe. In the entire marketing strategy, Panera did not focus on hard selling rather advertising on the face. Financial performance of the company was good which shows that the marketing strategy implemented was good.Production and Distribution StrategyThe product and distribution strategy of Panera revolves around economies of scale. The operations are centralized in dough making process. This controlling of the process led Panera to ensure Panera efficient dough making process. Better then guy across the street is the slogan for product and distribution strategy, Panera does not want to lose its customers and let them wal away to tej guy across the street providing same products with low cost.SWOT AnalysisSwot comprises of strengths, weaknesses, opportunities, and threats.StrengthsThe strong and attainable growth strategy is one of the key strengths of the company.The ability to build loyal clients by offering them quality efficient products.Opening up new franchises along with its site selection.Product innovation along with continuous research and development.Strong financial position in terms of lack of debt.\WeaknessThe ineffective promotional strategy used for the items.Main customers of the company only come at a meal for one time a day.One of the main weakness of the company is it’s only located in regional areas.Other competition may have different choices for dining at best places.OpportunitiesLack of bargaining power of the buyers and a high number of small buyers in the industry is one of the key opportunities the company have.Buyers always wanted to try new things that are coming into the market.Low-cost substitutes viewed as a low-quality product.Since they are the leaders in five sub places they can utilize this as an advantage.By lowering prices according to the market they can capture more market and pose high threats to other competitors as a big competition.ThreatsProduct Is a discretionary purchase.The wide breadth of competitive rivalry.Steep learning curve.Low switching cost.Source of competitive advantageThe position of the company in the restraint industry is one of its source of competitive advantage.The brand strength of the company for many years.The unique and distinctive nature of the bakery products.Financial Performance AnalysisFinancial performance shows the operations run by the company, how much cost has been incurred, how much profit company made during a year. It shows that how well the company is performing in the industry or market (Hunjra & Bashir, 2014). By looking at the financial provided in the case study, the following are some of the points that explain the company performance. Capital expenditure increased in 2014 to $224.2 million with 75% of company bakery café operations, in 2013 capital expenditure was $192 million, which was 80% of company bakery café operations. Revenue from franchise operations was $123.7 million with operating profit of $117.8 million, which is equal to terrific 95.2% operating profit margin. Hence continuing for opening more franchises is important for increasing the overall financial performance of the company. The change in operating profit margin can be used to forecast the change in return on assets one year ahead ( Fairfield & Yohn, 2001). Operating profit as of percentage to revenues were highest for franchise operations (95.2% in 2014, 94.5% in 2013, 93.5% in 2012 and 92.8% in 2011). Second highest for a company owned bakery café was (17.9% in 2014, 19.6% in 2013, 20.2% in 2012 and 19.3% in 2011). Third highest for a company owned bakery café was ( 6.2% in 2014, 6.1% in 2013, 5.7% in 2012 and 7.3% in 2011). In order to calculate operating profit margin divide the operating profit by the revenue and multiply it by 100, one would get the answer like I did. In order to get the percentage of operating profit to revenues in different franchise operations apply the same scenario again and will get the percentages like I did. The form above all we can say that company is making an astonishing performance in the market.Strategic Problems associated with Panera bread management and RecommendationSome of the strategic issues or problems faced by Panera Bread company are explained in common lines. The first strategic issue was Paneras potential to use its internal franchising capabilities so that it could take advantage of the fact that the industry life cycle remained in its growth phase. Another strategic issue Panera faced was, customers always want to try new things coming into the market but due to current promotional strategy company is not able to cater it. The third strategic issue that Panera faced was related to low switching prices and low customer loyalty towards the bakery products. A final problem that Panera issues are how to use its internal capabilities of research and development to cater the presence of large buyers in the industry. First and foremost recommendation for altering the promotional strategy is to use effective promotion related to bakery items to cater the problem. The strategy should be in such a way that customer would come and try the product. It may not be successful in the market as Panera is already an established company in the market. Recommendation for catering with the issues related to the internal franchising capabilities is to find franchisee who has a in-depth knowledge about the industry and bakery items so that it will not impact on the prestige of the company.ReferencesThompson, A. A. (2008). Panera Bread Company. AA ThompsonStricklandA. J. IIIGambleJ. E.(Eds.), Crafting and executing strategy: The quest for competitive advantage. New York, NY: McGraw-Hill.Fairfield, P. M., & Yohn, T. L. (2001). Using asset turnover and profit margin to forecast changes in profitability. Review of Accounting Studies, 6(4), 371-385.Hunjra, A. I., & Bashir, A. (2014). Comparative Financial Performance Analysis of Conventional and Islamic Banks in Pakistan. Bulletin of Business and Economics (BBE), 3(4), 196-206.

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