Panera Bread Utilizes a Differentiated

Panera Bread utilizes a differentiated strategy. While it should be acknowledged that to some extent all firms in the quick service industry are cost leaders, within that category firms must differentiate themselves further. The food options and free Internet provide points of differentiation that can attract consumers. Panera targets a broad market with this differentiated strategy. The company is seeking to have a competitive advantage in product quality and customer experience within the framework of the quick service business.

Panera has a few strengths from which it can draw competitive advantage. The food is generally of good quality for the industry. Panera has good profitability for the industry, and this profitability has been stable over the past five years. In addition, there is good balance sheet strength, with strong liquidity and no long-term debt. Operationally, Panera is strong but nothing unusual for the industry. The major weakness for Panera is that it lacks economies of scale relative to other competitors in the industry like Subway. There are no glaring weaknesses, however. For Panera, the major opportunity is to fill in the nation by increasing the density of stores. There is also some opportunity to sell more to existing clients, through product diversification or by encouraging repeat visits. There are also some threats, however. The quick service restaurant industry is characterized by intense competition that is always a threat. In addition, many firms in the industry struggle when the economy struggles as consumers have less discretionary income for eating out. Panera Bread has core competencies in operations that allow it to be a consistently profitable competitor, and its marketing allows it to charge more than competitors without turning customers off.

3. Panera is doing well financially. Its revenues and profits have been growing steadily for the past five years. The gross margin is 61.4% and its net margin is 7.46%. Panera is liquid, with a current ratio of 1.59 and a debt to equity ratio of 0.52. Inventory turns over 13 times per year. The ROA is 14.9%, the ROE 22.93% and the ROC 19.3% (MSN Moneycentral, 2012). In general, these figures are positive and moving in the right direction. There are no red flags in the Panera Bread financial statements that would indicate that the company is not performing well.

4. The chains that are the closest rivals to Panera are Subway, which is much larger and smaller sandwich companies like Quizno's and Boston Market. In terms of immediate market share, the closest rivals are lower-end companies like Chick Fil a and Arby's. Panera Bread also must compete against coffee-centric companies like Starbucks and Dunkin Donuts.