Executive summary
Panera bread is a product of Panera Group that specializes in baking of breads, doughnuts, cakes and other bakery products. Over the years, the company has succeeded in offering high quality products in the entire North America.
The company’s financial performance has been significant, a progress driven by high sales volume due to high customer base and the company’s ability to serve them well.
The following brief report tries to examine the company’s financial performance, its strengths and weaknesses as well as the strategies it has been applying to beat the other market competitors and still remain the consumers company of choice.
This is not to say the company is free from troubles or the company is not facing any problems. One of the major problems facing the company is the stiff competition from other market participants and this may threaten the company’s survival unless appropriate counteractive measures are adopted.
The company’s overall goal of producing great bread is highly being compromised and the best strategy that the firm can now use is the one that can guarantee the organization’s survival. The possible course of action needs full implementation if indeed any tangible benefits are to be realized.
Though the company has tried as much as it can to beat its competitors, a lot remains to be done to enable it achieve its set goals and objectives. This call for change of strategies and a different direction need to be taken.
This means looking for new customers and expansion of its business activities will come after the existing customer retention strategy has worked out successfully. The organization has already large customer base who can guarantee future good prospects if well maintained.
Introduction
It is the prime goal of every organization to achieve high and perpetual revenue growth. This has been the main driving force for Panera Group since its establishment in the year 1981. Revenue maximization and costs minimization are the only strategies that can help a profit-minimizing firm achieve this goal (Wheelen & Hunger, 2010).
Other non-financial concepts have to be put in consideration since they are equally important in maintaining a good reputation for the company as well as improving its financial performance for instance customer satisfaction and community social responsibility.
The most successful firms have devoted their resources towards meeting customer needs and balancing their growth and development with environmental protection to gain an economic status commonly referred to as circular economy. In addition, market risks have to be well understood and the means to deal with them appropriately put in place.
Problem Statement
The major problem facing the company at hand is the rising competition and the economic uncertainties mostly recession and depression (Wheelen & Hunger, 2010). The recession has not only affected Panera restaurant section but also the entire bakery industry.
Only the efficient and strong market players are able to achieve under these hard economic times. The competition is highly threatening the existence of Panera and the only solution to combat this is to use the best strategies ever to avoid it.
How Panera Company has survived the prevailing Economic Recession
Since the beginning of US recession in late 2007, many bakery companies have suffered to a greater extend. There has been decline in revenues and loss of customers on the part of the baked products, which is partially caused by the rising unemployment that accompanied the recession.
Despite the challenges Panera faced in containing this hard economic time, the Group’s revenue rose by 24 percent and at the same time it added 191 café-bakeries (Panera, 2006). In addition, the workforce rose by 20 percent and was able to recruit 4001 extra workers.
From the look of things, it is as if the company took the period as an opportunity since while making this significant progress, the entire US restaurant industry registered an overall drop in sales by 2 percent in the year 2009 that included 4.7 percent decline at casual restaurants.
During this recession period, Panera had to act differently to convince its consumers devote their spending on their products. As noted out by one of the company’s associates, the best time for business expansion and better performance is during recession while the worst time to grow is when there is prevalence of booms (Shaich, 2003).
During the booming periods, the company tightened its real estate standards. One of the common struggles during the beginning of recessions is that real estate markets become under disruption just like the residential housing market. During this recession, commercial landlords demanded the rents they would get six months earlier.
This affected the company’s productive space to some extend and getting extra stores in which the company would operate was a major problem. They had to wait until the economy improved slightly and in the year 2010, the company built high-class cafes that boosted the company’s performance.
This has been accompanied by high sales volume and increased revenues. As the company was looking for the best means on how to survive the recession, other competitors were talking on how to pull costs of the menu.
According to Panera Bread chairman, pulling costs out at a faster rate than sales fall off is likely to tax customers more. Recession represented a greater change for Panera since the company got an opportunity to create substantial competitive differentiation and thus increasing its competitive advantage (Shaich, 2003).
When all the market competitors pulled back, Panera invested heavily in the customer experience, marketing strategies, operations development, and product development.
Panera’s Counter- strategies in fighting increasing Competition in US
The increasing global competition has posed a potential threat to many profit maximizing firms. The organization’s revenue generation is being compromised. The situation is severe in perfect competition markets where there are many firms producing similar good. Panera Company is not an exception in this case.
Since competition is unavoidable, the firms need to adopt strategies that will increase their chances of survival (Wheelen & Hunger, 2010). However, the strategies to be used depend on the nature of the competition.
In the recent past, Panera Company has been facing stiff competition from its rival though it has somehow succeeded in beating them from the company’s financial performance outlook.
Quite number of eateries in the United States has upgraded their quality and thus improving the value of products and services they are offering. Many people have always believed that cheap prices will attract many consumers for particular products.
According to Panera, this is not the case since as long as the product has the right appeal and the highest quality is maintained for that particular product, consumers will go for it regardless of the price charged. Many consumers do not care how cheap a product is, what matters to them is quality.
The chairman of Panera asserts that his company has been able to offer high quality baked products across the United States than the company’s key competitors. Nevertheless, the prices are not expensive to an extend of discouraging the potential consumers.
The price of a commodity must always equal the value attached to that particular product (Wheelen & Hunger, 2010). The company has been providing, protecting and having price that is manageable by consumers and avoidance of unnecessary price fluctuations has been guiding philosophy.
During the recession, when market competitors were talking of pulling out their costs, their restaurants were characterized by long queues and the tables in their restaurants had dirty dishes. This was an advantage to Panera as it continued to invest in labor improvement in their cafes that led to subsequent productivity.
The quality of foods is excellent. When the other competitors tried to pull back, the difference between the Panera and its competitors widened. In the market share, the same-store sales tripled during the recession (Panera, 2006). Currently, Panera is running 1467 bakery-cafes in Canada. This is an expansionary plan aimed at opening many outlets across many parts of the world.
SWOT Analysis
The financial strengths of Panera can easily assist it in encountering the problems it is facing and the ones it is likely to face in future. For instance, economic problems such as recession and depression can only be handled by those firms with strong financial base.
In the financial year 2010, earnings per share grew by 30 percent. In addition, shareholder value increased by $1.9 billions (Panera, 2006). This progress can be primarily attributed to high product differentiation that has boosted the organization’s competitive advantage.
The other strength that the company can boast of is its ability to produce high quality products and its operational size that enables it to enjoy the economies of scale. So many opportunities are available for the company to increase its productivity and expansionary process.
The competitor’s inability to produce high quality products and their highly costly production processes presents an opportunity to Panera. Despite the potential strengths and opportunities, there are still weaknesses and threats that may not favor the smooth production of Panera.
One of the weaknesses of Panera bread is its inability to successfully implement important strategic initiatives. The success of this company is highly dependent on these strategies and may bring about devastating effects if not properly implemented.
The other weaknesses are the company’s inability to protect its trademarks and high rate of its brand damage that has ruined its reputation. The threats facing the company are increased costs of food and other supply costs (Panera, 2006).
Supply complications in its fresh dough facilities and the prevailing hard economic situations that are so uncertain together with the increased competition are also possible threats.
Alternative course of action
Having identified the major problems facing the Panera bread Group, the company can take a different direction that will see its performance change to a greater extend. Panera can diversify its markets and distribution channels across many countries and in particular countries that are likely to have stable economies.
This will cushion out the firm from the effects of recession or depression in the event that these happenings are taking place in particular countries. It is a form of horizontal integration. Alternatively, the company may opt to apply vertical integration (Wheelen & Hunger, 2010).
This may be enhanced through acquiring huge land that will see the company grow its own wheat, do the processing to produce its own floor that will be used for bakery purposes.
If possible, the company may create efficient distribution and marketing channels that will be handled by the company itself. The integration of such activities will see the company cut down its operational costs by a great percentage.
Recommendation
From the analysis of Panera Group, it is recommendable that some aspects need to be adjusted if in deed the company plans to maintain its existing image and good performance. Product differentiation and improvement of its services must be encouraged in order to increase the firm’s competitive advantage.
Creation of new brands will also help the firm increase the volume of sales since consumers are always interested in new brands (Wheelen & Hunger, 2010).
Again, the marketing of the company’s products need to be modified for instance the adoption of e-commerce in order to make the marketability easier. The interested consumers may be in a position to order the products they require online.
Conclusion
Panera group has had impressive financial results and significant performance ion the past years. Despite the progress, the company is likely to face some problems that are likely to disrupt its operations (Panera, 2006). The company has the ability and capacity to employ the available resources to combat any problem like competition and recession.
References
Panera. (2006). Panera Bread Company: 2006 Annual Report. Web.
Shaich, R. (2003). Panera Bread Company 2006 annual report to stockholders. Web.
Wheelen, T. & Hunger, D. (2010). Strategic management and business policy achieving sustainability. 12 Edn. New York, NY: Prentice Hall.