Case study of Panera Bread's business model and strategy

Panera Bread
In its 2015 Form 10-K, Panera Bread describes itself as “one of the largest food service companies in the United States” and that its success is attributable to “our ability to create long-term concept differentiation.”
The company defines its strategy as differentiation, and this aligns with the generic strategy as defined by Porter. The differentiation strategy cites differentiation as a source of competitive advantage and the market scope as broad (MindTools, 2019).
In this, Panera bread is trying to achieve competitive advantage through concept differentiation. It cannot sustain competitive advantage based on things like the food it serves (fairly standard mainstream white people fare) or free wifi, but it believes that total package concept that it offers is sufficiently unique to win business in the long run. There are individual competitors, but few major competitors that do exactly what Panera Bread does. If Panera is competing against mainly quick service or fast casual businesses, it does offer a relatively unique value proposition in terms of the food and the in-store experience.
A SWOT analysis reveals that Panera does a lot of things well, and these competencies have allowed them to grow to be a very large player in its industry. Panera is a well-performing company, and does not have many real weaknesses, but it does have relative weaknesses, things that different competitors do better. Panera’s marketing is good, but not the stuff of legends like McDonalds. Panera has a solid in-store experience, but customers can easily trade up. They are good at creating an attractive menu, but also like to stay within their comfort zone on food. So there are many “weaknesses” which are really areas where Panera Bread can improve in order to win more business in the marketplace. But in general, the way that Panera has created a distinctive experience that in many ways doesn’t seem outwardly distinctive, the way they’ve built their brand, their ability to find great locations, these are all distinctive competencies that have helped Panera Bread to thrive thus far.
Panera Bread adds value throughout the value chain. Its inputs are largely things like food, location and labor, and in has systems that turn those things into quality food, convenient locations and decent prices. Those internal processes are a critical component of the value chain because as with all quick service restaurants, Panera relies on systems and processes to replicate the in-store experience across thousands of locations. Furthermore, Panera’s marketing helps bring in customers, the customer service side is a strong contributor to the value chain, and location scouting helps with outbound logistics, getting goods to the consumers.
Panera Bread’s financial performance is strong. While its net income is variable, it is always profitable, and its revenues continue to grow as the company has successfully been able to fuel expansion. Equity is about one-third of total asset value, which is not unreasonable, but the company’s equity value has dropped in recent years as it has added long-term debt.
There are a few things that I can learn from this case. The first is how a company can differentiate itself in a highly competitive marketplace. Panera has been able to identify and carve out a niche for itself, in a space where such opportunities seem few and far between.
The study of Panera’s value chain is also quite valuable. One of the major challenges in value chain is that Panera is able to execute across thousands of stores, which is an amazing accomplishment. It is very difficult to enjoy operational excellence across a large company, with systems that are so strong they can be implemented by workers of all levels with great success. There are some great lessons in how Panera Bread has been able to thrive, because on paper there are a lot of reasons why they wouldn’t. So the fact that Panera has been incredibly successful provides a lot of powerful learning opportunities.
References
MindTools (2019) Porter’s generic strategies. MindTools. Retrieved March 26, 2019 from https://www.mindtools.com/pages/article/newSTR_82.htm
Panera Bread 2015 Form 10K. Retrieved March 26, 2019 from https://www.sec.gov/Archives/edgar/data/724606/000072460616000042/a2015122910k.htm