Panera Bread's best cost provider strategy and market success

Panera Bread Company-Growth in a Difficult Economy

Panera Bread Company - Growth in a Difficult Economy

What is Panera Bread's strategy? Which of the five generic competitive strategies & #8230; What type of competitive advantage is Panera Bread trying to achieve?

Panera Bread's business strategy was to make the bread company a brand recognized nationally and to be a dominant restaurant in the specialty bakery-cafe segment. This was to be achieved by using a business model that aimed to satisfy customers' needs by providing quality food in a casual setting. Panera was able to get stable profits that enabled it to give this value to customers through food sales and collection of the franchising fees. Furthermore, the management at the Panera Bread Company intended to expand the business locations by 17% on an annual basis. This was to be done through an expansion strategy that targeted an expansion of one cafe per 160,000 people by 2010 (Thompson, 2012).

This was supported by the business environment within which the company operated. It had a 5% growth in 2006 and hence making its business strategy compatible with market conditions. Because of its operations in a competitive environment, Panera experienced threats from low cost and differentiated products. In order to make use of buyers who wanted good meals at affordable prices, Panera used the best cost provider strategy. The adoption of the best cost provider strategy and its dedication to providing food that customers could trust catapulted Panera to success. However, the competitive nature of the industry could not allow the strength of its strategy to become a competitive advantage. It was through the best cost provider strategy that Panera was able to acquire a market share of 0.5409%, which translated to $345 billion annual sales in the restaurant sector (Thompson, 2012). Evidently, this was a sizeable market share considering the nature of the industry. As a result, Panera developed strong financial position, which enabled it to face the competition. Therefore, Panera's strategy could be said to be effective as it played a role in the growth of the business and the acquisition of new clientele.

For the functional area strategies, Panera's marketing strategy had three main initiatives. One of the initiatives focused in the creation of awareness about Panera through the provision of quality crave-able food that could be trusted by customers. In addition, the strategy involved improving the appeal of its bakery-cafes as gathering places for customers. In the second initiative, the focus was in creating awareness and the trials of Panera at various meal times while the third initiative aimed to stabilize the consumers' perception of Panera as a favorable option for dinner. In an effort to strengthen its marketing strategy, Panera avoided the hard-sell advertising but instead opted for a gentle approach where consumers are allowed to experience the brand by themselves. This marketing strategy was successful as it was noted with the strong financial performance at Panera.

The production and distribution strategy for Panera involved the use of economies of scale and centralized operations for the dough making. In total, seventeen regional fresh dough facilities were strategically placed to serve over a thousand Panera bakery-cafe locations. The centralized operations contributed in the consistent production of quality dough. Ideally, Panera's production strategy supports the intentions of being better than other bread cafes and by having products that would entice customers to come back. This production strategy in Panera was strong and effective since it supported other company strategies.

Panera has unique franchise system where each franchise license served at least 15 bakery-cafes to be opened within a period of six years. The applicants who can meet this criterion are considered for licensing by Panera. It was also a requirement for the applicants to have at least net worth of $7.5 million and resources necessary for the expansion of 15 locations, an experience to operate a restaurant, an a commitment to promote Panera's brand and culture.

2. What does a SWOT analysis of Panera Bread reveal about the overall attractiveness of its situation? Does the company have any core competencies or distinctive competencies?

Strengths

Panera has demonstrated its ability to build a loyal clientele. More than 81% of its clients showing their willingness to try out the multiple meal times at Panera. Its growth strategy is also strong and attainable as indicated in its expansion strategy (Hitt, Ireland & Loskisson, 2007). The financial position for Panera shows a positive performance especially due to the lack of any long-term debt. Through research and development combined with product innovation, Panera has managed to maintain high quality foods that attract new customers and contribute in their retention.

Weaknesses

Panera has not fully utilized its potential in promotional strategy. The company is also located in some regions leaving out many customers from certain areas unattended. In addition, the frequent diners at Panera only visit the restaurant for one meal per day.

Opportunities

The life cycle in the industry is still growing and hence the company has a chance to expand. Moreover, there are large numbers of small buyers in the industry where the company can still get more customers for expansion plans (Hitt, Ireland & Loskisson, 2007). It is also likely that buyers will be willing to try out the new restaurants and hence clientele will be available for the new restaurants.

In exhibit 2

According to exhibit 2, the number of bakeries increased steadily from 478 o 1453. This also symbolizes a steadfast financial position since the company is expanding into larger boundaries. It also symbolizes an increase in profit margin hence the best results.

In exhibit 3

This shows the increase in company expansions in various states and locations. It also has 341 locations in the various sixty foreign countries. This signifies an increase in revenue and also development in terms of marketing strategies.

According to these statistics, the company has showna great improvement in terms of its financial perfomance and expansion. The company is stable and capable of achieving great resuls and outputs.

5. What strategic issues and problems does Panera Bread management need to address?

One of the strategic issues that Panera needed to address was utilizing its potential in internal franchising efforts. This could enable it to take advantage of the industry life cycle that is still in the growing phase. Another strategic issue that Panera needs to address is to vary its existing promotion strategy especially in the untapped markets (Schermerhorn, 2011). This will enable the bread company to capture the customers' willingness to venture into new restaurants.

The Panera bread management also needs to address the strategic issue of using its internal strength and capability in developing customer loyalty. This is useful in dealing with the threat of the low switching costs and the low customer loyalty. The final strategic issue to be addressed by Panera is strengthening its research and development department in order to make use of the growing number of buyers in the industry. In addition, the company needs to observe the entry and exit of its competitors. With the current changing trends, the company can keep its competitors under constant observation to ensure that they monitor all the new strategies introduced in the market. The company is experiencing growth in a very competitive market and very fine strategies need to be put in place to ensure that this company remains on top of the competition. It is thus important for the management to consider this aspect.

6. What does Panera Bread need to do to strengthen its competitive position and business prospects vis-a-vis other restaurant chain rivals?

For Panera to invest effectively in the low and untapped markets, Panera Bread needs to pursue a more aggressive promotional strategy. This will help Panera to deal with the stiff competition from both the upcoming restaurants and the established ones like Starbucks. Because of penetrating into the untapped market, Panera will be able to achieve its desired ratio of 1:160,000.

It is also recommended transforming the soft-sell marketing strategy to purely a promotional strategy. A vibrant promotional strategy should focus in bringing new customers into the Panera cafes by letting them understand why Panera stands out from other restaurants. Since the customers are willing to try out new joints, Panera should embrace the promotional strategy especially when opening new joins across various locations (Spinelli & Rosenberg, 2004). In addition, the promotional campaigns should be organized in order to coincide with the launch of new cafes. This will also be instrumental in creating brand awareness by attracting new customers. Although this is an effective strategy, it may not be helpful in the highly-penetrates markets since Panera brand is already well established in such areas.

In order to retain the current customers, the management at Panera should come up with a system that recognizes and rewards the return customers. The rewards can be in various forms such as complimentary meals or beverages, price reductions on some items, or some shopping vouchers. This is likely to take care of the low switching costs threat by giving customers a reason to remain loyal. However, for this rewards to have any impact on customer retention, they should be given to the return customers or customers who refer others to Panera.

For the company to attract more customers, Panera should focus in diversifying its products and services. For instance, the company should initiate the sale of alcoholic beverages such as wines, beers, and Irish coffee. However, this should be done on some select Panera locations where regulatory laws permit. Thorough research should be done to find out the customer tastes and preferences for alcoholic drinks before determining those to be stocked. Indeed, if this is given an appropriate approach, Panera is likely to increase its market share by attracting new types of customers while trying to retain the existing customers.

Maintaining an excellent consumer experience could also help the company remain competitive in the market. This will make them market your products through the word of mouth to their friends and colleagues hence adding up o the list of many customers. The image that the company presets to the outside world really matters. It determines people's perception about your services as well as the nature of products you offer.

Finally, the company should aim at increasing its consumer volume. This implies that the people coming to the particular restaurant need to be many. This will highly improve the sales advertising as well as recognition. Through this awareness, many people will recognize the services even through the many social Medias that exist. It is thus important to ensure that the average amount of persons in attendance at the cafe is high and almost full to its capacity. Implementing the above will make the company stay ahead of its competitors in many ways.