Term Paper on "Strategic Management at Panera Bread"

Term Paper 7 pages (1928 words) Sources: 12 Style: APA

[EXCERPT] . . . .

Strategic Management at Panera Bread

For a variety of reasons and factors that will be presented and explained in more depth in subsequent sections of this paper, the restaurant industry has changed and evolved over the past several years. Presented here is both a strategic management study of one particular restaurant chain, Panera Bread, as well as an overview of the restaurant industry as a whole. Upon completion of this study, a better understanding of Panera, as well as its industry will be gained. Additionally, recommendations will be presented regarding the strategy for Panera Bread going forward.

Industry/Company Overview

To understand the business model for Panera Bread, one must first understand the restaurant industry overall, as well as the specific segment of that industry in which Panera competes, known as the fast-casual market.

Worldwide, there are approximately 8 million restaurants, run by about 300,000 restaurant companies, traditionally consisting of the full service segment, which comprises the "conventional" restaurants such as family-style, buffet, and dinner houses, and the fast food segment, which typically serves sandwiches, hamburgers and the like in the McDonald's type of a format (Gilliard & Khandekar, 2004). Because of the maturity and intense competition in the fast food segment, and the fact that full service restaurants are likewise in a state of saturation (Korn, 2001), there emerged a large segment of the population whose desire to spend money at restaurants was going unanswered, due to the fact that these consumers were tired of fast food offerings, and did not always have the time/money to visit full service restaurants. Moreover, the conventional fast foods were proving to be unhealthy for the most part, and health conscious consumers sought an alternative- enter the fast-casual restaurant industry.

The fast-casual restaurant industry has been growing steadily at an annual rate of 15%-20% over the past several years, even in light of economic slowdowns and the like (Gilliard & Khandekar, 2004). Panera Bread competes and seeks to grow and evolve in this growing segment of an industry which holds a great deal of promise.

Situational Analysis

Panera Bread's specific situation is likewise important to consider and understand. Panera Bread is one of the fastest growing chain restaurant companies, working toward capturing as much of the $6 billion fast-casual restaurant industry as it can, boasting annual sales rapidly approaching $1 billion. The company has a rather unique business model, bringing the concept of the local bakery back to neighborhoods, offering freshly baked breads and other goods for retail sale, as well as a key ingredient of the many sandwiches, soups and other menu items offered at its restaurants; to be precise, 18 kinds of baked goods are offered at the typical Panera Bread restaurant, as well as gourmet coffees, and other non-alcoholic cafe drinks (Gilliard & Khandekar, 2004).

One of the moves which gave Panera Bread a decided edge over its competitors when it became the first national chain to offer high-speed Internet access to restaurant customers at no charge. Not only was this an embracement of the latest technology, but it was also a bold move designed to attract customers to its restaurants, which it can be fairly said added to the success of the chain from the beginning. This sort of forward thinking has typified Panera Bread over the years; another excellent example is the modification of their menu offerings to meet an emerging consumer trend. In the early 2000s, the proliferation of low-carb diets and an increased focus on healthy eating led Panera Bread to offer a complete line of low-carb breads and other baked goods, once again showing how the organization is willing to evolve, along with its customers, to build brand loyalty, a key strategic move for highly competitive situations (Dewar, 2002).

Two other critical attributes of Panera Bread can be seen as contributors to its success not only over its competitors in the fast-casual market, but also over more upscale offerings as the full service restaurant and even the fast food restaurant. Not only is Panera's menu different, the restaurant setting itself is different than other fast-casual restaurants. Unlike PF Chang's or Krispy Kreme, for example, Panera Bread restaurants feature a decor that resembles a French cafe, complete with a roaring fireplace and china dishes upon which the food is served (Sharos, 2006). What this presents to the customer is high quality food, served in a rapid manner, but still being offered in an attractive setting with all of the amenities.

Panera's business expansion model has also been highly successful, most of which has been achieved in recent years through the effective use of a franchising model. Since 1996, Panera Bread has been offering not what could be strictly called franchises to individuals, but rather what can be called area development agreements (ADAs), which give investors the opportunity to develop a series of Panera locations in protected territories, secured by their payment of fees to Panera Bread's corporate organization. The ADA owners are also given extensive training in the proper operation of a Panera Bread restaurant, assuring uniform quality and menu offerings for customers, no matter where they visit a Panera Bread location. This type of a franchise model so to speak, first popularized by McDonalds' in the 1950s, is still proven to be highly effective, and is definitively a key catalyst in Panera Bread's viability and possibilities for the future (Gubman & Russell, 2006).

Problems/Issues to be Addressed

For all of the success and growth that Panera Bread has enjoyed over the past several years, there are problems and issues that the company must address with sound strategic planning if its advantages are to be maintained over the long-term. Specifically, the following problems/issues need to be addressed:

Ensuring that the Panera concept remains unique- the originality of Panera Bread came as a refreshing change for the conventional restaurant customer when the company first emerged in the fast-casual industry some years ago; however, the challenge now is the maintenance of the Panera concept as something unique and, no pun intended, fresh. One of the main attractions of customers to Panera in the first place was the fact that while restaurant customers were showing no obvious desire to stop patronizing restaurants in the early 2000s, fewer people were in fact dining out because of a lack of satisfaction with the available alternatives (Warde, 2000). In this atmosphere of industry saturation, Panera Bread came as a welcome newcomer. The dilemma of staying new and relevant is critical at this point in its business lifecycle.

Delivery of top-notch service every day- Going hand in hand with the unique concept of Panera Bread, customers still demand excellent service, even in the slightly less formal setting of the fast-casual restaurant (Szegedy, 1988). While the customer service issue exists in many industries, it is very important in a people-oriented business such as restaurants.

Continued growth- Panera Bread has gained a great deal of growth through its franchising-type model, which promotes the development of an organization without boundaries, the sharing of research and development/technology, and the ability to recruit the most talented individuals in the restaurant industry to join the ranks of Panera (Gilliard & Khandekar, 2004). These types of strategies have been used successfully in other industries for years, and were wisely adopted by Panera, translating into effective growth strategy (Korn, 2001). At the present, the challenge lies in keeping this growth trend moving in a positive direction well into the future.

Sustained delivery of value to customers- an earlier discussed challenge involved the consistent delivery of quality service to customers; likewise, the sustained delivery of value is a daunting challenge. It would be extremely dangerous for Panera Bread to assume that value is a constant in its offerings; while its quality, for example, may remain constant, the perceptions of value on the part of paying customers is significant, and can change without notice (Dewar, 2002). Because of this, there is an extremely important responsibility here for Panera Bread to stay aware of whether or not it continues to deliver value to customers, based on customer perceptions of value, rather than its own viewpoint, which sometimes tends to be distorted by one's inflated self-image and the complacency that can come with a successful track record in the past.

Culture of change- Previously recognized challenges spoke of the evolution of Panera Bread and the problems associated with the evolution. What this comes down to essentially is the culture of change, and in this case, how a healthy culture of change can be maintained over the long-term. This is a formidable challenge for Panera Bread to closely consider.

Strategic Alternatives and Recommendations

Against the backdrop of the challenges that Panera Bread is facing, overall, the company is challenged by the need to continue to grow and change in light of increased competition and shifting consumer tastes. Looking at Panera Bread in terms of the strategic management alternatives available to the firm, keeping in mind the short- and long-term goals of the organization, the high level recommendations… READ MORE

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