Panera Bread's competitive environment and Porter's Five Forces analysis

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 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.