Research Proposal on "Panera Bread Must Continue to Execute"

Research Proposal 5 pages (1451 words) Sources: 2 Style: APA

[EXCERPT] . . . .

Panera Bread must continue to execute the strategy that has allowed it to become successful thus far. There is no evidence of difficulty at the company. There are no major strategic issues. With revenues, net income, earnings per share and shareholder equity all on strong, steady growth trajectories, the main strategic area of concern for Panera Bread is how best to keep the firm's momentum.

Industry Analysis

The quick service restaurant industry is a challenging one in which to operate. Competition in the industry is intense. In many markets, there is overcapacity, which leads to a high restaurant turnover rate. The only saving grace is that customers have a high propensity to switch among restaurants, which gives all new market entries the opportunity to succeed, if they are able to excel. The nature of competition depends on the segment of the industry. In Panera's space, price and consistency of experience (both food and atmosphere) are the key demand drivers. Panera faces competition from a wide range of food providers, some of whom are larger and more experienced, but most of which are smaller and less experienced. As a result, Panera can be expected to have a competitive advantage over many of its competitors in any given market. It must also combat market share incursions by other chains, however, in particular those with stronger brands and more experience in the industry.

Although most consumers eat out regularly, dining out is for many a luxury item. As such, the restaurant business tends to suffer during economic downturns. The space in which Panera Bread operates could benefit from customers trading down but customers may also substitute home meals and cheaper takeaway fare from the Panera Bread experience.

The high propensity for buyers to substitute and the industry's chronic overcapacity means that buyers have significant pricing power. They negotiate price with their business -- a restaurant that does not deliver quality equivalent to their price points is unlikely to succeed. A chain like Panera Bread has high pricing power over its suppliers, due to the high volume of business that they do.

Internal Competencies

Panera Bread is developed competencies primarily in marketing, but also in consistency and in franchisee selection. Panera's brand has grown due to the firm's aggressive marketing, which has exposed the brand to consumers. The marketing allows Panera to cultivate an image of having artisan bread, even though it comes from factories, thereby differentiating Panera from other marketers of industrial fast food. This differentiation places Panera in a favorable market position vis-a-vis its most direct competitors and against the major fast food chains. The extensive marketing gives Panera strong brand recognition and brand equity, resulting in a competitive advantage over small chain and independent competitors.

The other major internal competency is the ability of the firm to deliver a consistent customer experience with respect to both food and atmosphere (Rockwood, 2009). Panera has a specific look and feel that it wishes to have in its stores and works with franchisees to ensure that this is consistent throughout the chain. The consistency of experience works in concert with marketing to allow consumers to feel comfortable with the quality of the food and atmosphere at any Panera Bread outlet.

The firm also has a competency in the franchisee selection process. The stringent requirements allow Panera stores to be managed only by those with the financing and experience to run such stores successfully. Franchises are sold to owners who can deliver upwards of 15 stores in a geographic area, rather than to single unit owners (Schaefer, 2009). There are additional controls in place to ensure that the company can reclaim a store that is not being run properly. The result is that Panera stores are not subject to the same failure rate as the industry in general.

Going Forward

Panera Bread's current growth trajectory is based on the goal of having 2000 outlets opened by the end of 2010. This requires a high growth strategy, focused on building out the franchise rapidly. As the company grows, however, it has the free cash flow to do this with company-owned stores, and can expect to have high demand from potential franchisees as well. There is no indication that Panera will be unable to grow through 2010 as expected.

The main question is with regards to the post-2010 strategy. Panera must consider… READ MORE

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