Abstract
Panera’s Restaurant is a well-developed company in the United States of America. However, it experiences challenges due to the rising level of competition and the necessity to comply with the client’s preferences. The overall industry alters due to the growing popularity of limited-service and casual restaurants. Meanwhile, the competitors tend to adapt to the fluctuations by introducing healthy and fresh dishes and communicating with the customers via different means of technology.
Financial, SWOT, industry, and competitive analysis contribute to the understanding of the key factors, which the company has to pay attention to while redesigning a strategy. In this case, Panera’s restaurants have to focus on the differentiation strategy while utilizing technology to deliver the messages to the customers and engaging them in the interactions and product development.
Introduction and Overview of the Case
Panera Restaurants is a network of the bakery-cafes, which utilizes franchises, as an operational scheme (Panera Bread Company: Annual Report, 2015). Its area of operations is vast, and the restaurants tend to be present in 46 states in the United States of America while having its locations in Canada simultaneously (Panera Bread Company: Annual Report, 2015). Nowadays, the corporation operates under several sub-brands including the Panera Bread, Paradise Bakery and Café, and Saint Louis Bread and Co. (Panera Bread Company: Annual Report, 2015). Nonetheless, despite to company’s extended geographical coverage, the organization has some issues related to brand recognition and might lose a substantial share of the market to its competitors.
In this case, the primary goal of the paper is to propose sufficient recommendations for Panera Restaurants to increase its competitiveness and recognition in the current market. In this case, the industry analysis will be conducted to reveal the other attractiveness of this area of operation. Meanwhile, the competitors’ analysis will have a substantial influence on the understanding of the critical aspects while defining key success factors of the competitors. Simultaneously, the company’s position depicts the features, which require modifications and adaptations. Based on a combination of factors displayed above, critical matters will contribute to the formation of the relevant strategic recommendations while finding the solutions to eliminate the influence of the existing issues. In the end, the conclusions are drawn to summarize the primary findings while emphasizing the most appropriate course of the action.
Analysis
Industry Analysis
Distinguishing Features of the Industry
The overall restaurant industry is represented by various facilities, which tend to provide services to its clients while having an established menu (Market Realist, 2014). Meanwhile, the range of the restaurant’s subtypes tends to grow due to the positive fluctuations in the employment rates since this phenomenon leads to the rise of the budget for entertainment (Market Realist, 2014). The restaurant market in the United States is fast growing while having 630,964 restaurants in the country (Statista, 2016).
Meanwhile, the overall restaurant market in the United States is divided into categories such as limited and full-service restaurants and bars while having $431 billion of sales in the United States only (Market Realist, 2014; see Figure 1). In this case, the full-service restaurants imply focusing on experience and occupy 44% of the market (Market Realist, 2014). The primary competitors of these segments are Darden ($7.5 billion in capital value), Brinker ($3.3 billion), and Buffalo ($3.1 billion) while representing the casual dining, and Cracker and DineEquity focus on the families (see Figure 2). Nonetheless, the market is prioritized by casual restaurants due to their ability to satisfy an extended range of needs while concentrating on dissimilar segments of the population to increase the revenues.
In turn, the limited services utilize less time for the preparation and have 55% of the market (Market Realist, 2014). Meanwhile, the type of restaurants use the scheme of paying up-front before the meal is delivered, and a menu is represented by afternoon, lunch, and breakfast meals while prioritizing buy-and-leave strategy (Market Realist, 2014). These entities focus on the satisfaction of the customer’s needs in the short-term while eliminating the time for the stay in the restaurant. This matter ensures the rapid circulation of the customers to increase the company’s revenue and profitability.
The critical competitors are McDonald’s ($98 billion), Yum ($35 billion), and Burger King ($15 billion) while representing the fast-food segment characterized by the low prices (see Figure 3). Starbucks is the leader among the cafes ($60 billion), and the fast-casual and pizza spheres are represented by Chipotle ($20 billion) and Domino’s ($5 billion) (see Figure 3). Consequently, it remains evident that the rest of the market is occupied by the bars and taverns in the United States of America.
Lastly, the economic and demographic trends have a crucial correlation with the decreasing unemployment rate, as this matter determines the ability of the individuals to have additional financial for various services and products. The continuously rising employment rate has a positive influence on the restaurant business, as the organizational entities will continue their operations while innovating menus and introducing new services to satisfy growing customers’ needs.
Consequently, the overall industry will continue to grow until the year 2017 (Restaurants in the United States, 2014). In turn, despite the innovative nature of the technology, food safety is one of the most vital issues of this industry, as the harmful intention of the ingredients might have an adverse influence on health (see Figure 4). Meanwhile, the products have to be fresh and comply with the existing regulations while prioritizing biotechnology as a priority in manufacturing (Restaurants in the United States, 2014).
How the Industry Is Changing?
Nowadays, any industry experiences alterations due to the various factors including changes in the consumer’s behavior and development of technology, as generation X aims at discovering novel tastes while modifying their food preferences constantly (Pwc, 2016).
This innovation could be regarded as a primary cause of the formation of the fast-casual restaurants, which implies the integration of the fast-food chain and full-service restaurants while delivering dishes within the limited timeframe (Market Realist, 2014). This segment is the most attractive one and continues its growth due to the favorable conditions and having eye-catching prices of $7.50, which are lower than in full-service establishments (Davis, 2016). Nonetheless, all restaurants tend to modify their services to comply with the altering preferences of the consumers continuously, as, otherwise, it could be regarded as a reason for the loss of the market share.
Speed efficiency can be viewed as another essential matter in the modern restaurant industry, as the minimization of the waiting time is vital to encourage the customers to return (Barklon, 2015). Alternatively, the frequency of the visits of the restaurants tends to increase, and the adaptation of the menus and facilities’ layouts is a necessity to comply with the busy lifestyle of the individuals (Barklon, 2015). In turn, the restaurants tend to pay attention to the essentiality of décor and interior design, as these features contribute to building an association with the brand while contributing to the generation of the desire to return (Barklon, 2015). A combination of these aspects assists in delivering exceptional services to the customers while creating trusting relationships and prioritizing consumer-centered interactions.
Furthermore, technological development is another essential trend, which is vital for the enhancement of the flow of the services and increasing customer engagement via touch screens, availability of the alternative methods of payment, and ordering from home (FreshKDS, 2015). In turn, digital receipts and cloud storage can be viewed as the additional enhancers of the overall quality of the services to ensure successful data retrieval (Tetreault, 2015).
Meanwhile, it remains apparent that these trends will continue to evolve due to the rapid improvements in the technological segment and necessity to adapt them to maintain at the same level of the innovative advancement as the competitors.
Rise of the green policies has a vehement reflection on the functioning of the organizations, as they aim at using technologies to reduce the waste and water and electricity consumption (FreshKDS, 2015). The presence of this trend will continue to rise due to the increasing popularity of this matter between the dissimilar segments of the population. In the end, it could be said that all of the factors aim at the enhancement of the consumer’s experience while minimizing the waiting time and creating attractive interior design and have to be applied simultaneously to ensure the effectiveness.
Key Success Factors of Industry
The innovative menu, modification of the traditions, and new product lines are critical matters, which help competitors stay on the market while defining their possibility for success (Market Realist, 2014). Meanwhile, the companies have to develop their strategies to focus on the right set activities including the establishment of the system to repeat success, creation of a special experience for customers while treating them as the members of the family, and targeting at profitability as a core outcome (Munsell, 2009).
This factor has a vehement interdependence with the overall organizational strategy, as it tends to portray the company’s values in its actions while aiming at meeting the organizational goals. In turn, it contributes to compliance with the constant modifications of the restaurant’s industry and maintaining the competencies at the same level as the competitors’ ones.
Meanwhile, the brand image can be regarded as a separate success factor, as it has a vehement effect on the revenues (Ashe-Edmunds, 2016). It determines the recognition of the company in the world while building the customer’s loyalty and creating particular perceptions and associations with the brand. A well-established image is one of the most important assets in the industry, as it defines the company’s ranking in the market, but it has to be applied to the efficient marketing strategy simultaneously.
In this instance, the essentiality of the employee training cannot be underestimated, as the employees play the role of the intermediary between the management and clients (Healy, 2014). The workers tend to generate a particular perception about the company with the assistance of the interactions with the customers, as communication is the core element of the augmented offering in the service industry.
Despite the vitality of the strategy and the brand image, the role of the budgeting of the financial resources cannot be underestimated, as the cash flow ensures the liquidity of the organization while maintenance of costs is critical for the profitability (Ashe-Edmunds, 2016). This important aspect enables the development of organizational productivity, and sufficient budgeting leads to the occurrence of the resources for the research & development, and marketing departments.
Generally, critical success matters are highly related to the ability to adapt to the changes mentioned above. Meanwhile, the company has to emphasize its exceptional nature to ensure the inability of the competitors to substitute the products. In this instance, the overall strategy has to focus on the idea principles including innovation (novelty and additional value proposition), differentiation (unique strategic features and principles), evolution (enhancement of the experience), and adaptation since these matters assist in creating an appropriate strategy (Tristano, 2013). Consequently, it could be said that the flexibility and innovative nature can be regarded as the core ideologies for the restaurants to stay competitive in the market, otherwise, the absence of connection will lead to the loss of the market share due to the constantly increasing competition.
Conclusions: The Industry’s Attractiveness
Based on the factors provided above, the attractiveness of the industry has to be evaluated, as it will contribute to the ability of Panera restaurants and other companies to increase their efficiency and productivity. It could be said that the assessment of the attractiveness will be based on an analysis of the key success factors analysis conducted above, as it revealed the presence of the changing environment of the industry.
The possibility for the expansion can be regarded as a critical definer of the industrial attractiveness, as it determines the potential and the ability of the companies to increase their productivity (Brown, 2016). In this case, the restaurant industry can be considered as being attractive and prosperous, as it has positive projections associated with the increasing demand for services and entertainment leading to the rise of the popularity of the food services in the world.
Meanwhile, entry barriers and an amount of start-up capital also determine the attractiveness (Brown, 2016; Bhasin, 2015). In the context of the restaurant industry, the start-up capital is dependent on the preferences of the founder of the business to utilize particular equipment and design in their facilities. This factor increases the flexibility of the choices due to the presence of a variety of options and has a high correlation with the attractiveness of the industry. In turn, the bargaining power of buyers and suppliers and the availability of substitute products can be regarded as the critical definers of the company’s capabilities and possibilities in the market (Bhasin, 2015).
In this case, the suppliers can be easily switched to the ones with lower prices due to the vast variety of services and food providers. This aspect is vehemently beneficial for the new entrants, as they can consider the alternatives, which will contribute to the increasing possibility of the achievement of the break-even point.
In the end, the restaurant industry is one of the spheres with a high level of competition, but it tends to experience growth due to the rising demands of the customers. Meanwhile, the alterations in the industry contribute to selecting the most relevant type of restaurant to pursue success. Furthermore, an extended plethora of the suppliers and possibilities for future development assure the ability of a new entrant to progress in a positive direction while increasing its market share.
Consequently, the industry highly attractive for the newcomers while the presence of this factor contributes to the substantial rise in the competition. Nonetheless, any company has to remember a vitality of key success factors since; otherwise, it will not be able to increase its market share due to the well-established company’s images of the competitors and continuous innovations to alter distinct competitive advantages.
Competitive Analysis
Nature of Competition
The nature of the competition has to be described to determine the overall construction of the market and industry. The restaurant business is highly competitive due to the strength of the existing firms and a variety of services coverage (Williams, 2016). Nonetheless, as it was mentioned earlier that the market is highly diversified, as the competitors tend to pursue different marketing strategies to increase their market share.
Despite the ability of the full-service restaurants to offer exceptional services, the fast-food industry dominates the market, as it tends to provide customers with efficient services and affordable prices (Market Realist, 2014). Meanwhile, fast-casual restaurants is another establishment, which combines the features of fast food and traditional restaurants and attracts an extended number of customers (Market Realist, 2014).
In this case, Table 1 presents the leaders from different segments of the industry by ranking them by their capital values. In this case, McDonald’s is a clear front-runner in the market with $98 billion while the rest of the positions is also occupied by limited-service restaurants including Starbucks, Yum, and Chipotle (Market Realist, 2014). Meanwhile, the leader in the full-service industry subjugates the last position in this rating while having only $7.5 billion in the capital.
Table 1. Nature of Competition (Market Realist, 2014).
In turn, Figure 5 presents the positions of the companies in the market while depicting the location of Panera’s restaurants in the competition based on the revenue and popularity in the United States of America. Panera does not have leading positions while McDonald’s is the market front-runner. It could be said that the presented ranking correlates with the modifications of the consumer’s behavioral patterns and the desire to receive the orders rapidly. In this instance, the newcomers of the fast-food industry have a high possibility of success. Despite a high level of competition, a desire to try something new is often regarded as a priority.
Key Success Factors of Competitors
The primary goal of this section is to determine the factors, which define the success of the selected organizations in the market, as it interferes with the key success principles of the industry. In this case, the role of the brand cannot be underestimated, as McDonald’s tends to have its leading position due to its global brand recognition (Kasperkevic, 2015). Meanwhile, other competitors pay attention to the maintenance of the brand image to increase the customers’ returns. The presence of this matter defines the ranking displayed in Table 1, and it can be determined by the loyalty of the customer’s to the particular brand due to its well-established recognition and assurance of the quality (Williams, 2016).
As for the determiners of success, one of them is the continuous necessity of evaluation of trends in the hospitality industry. For instance, the current trend is related to the growing popularity of healthy eating (Anderson, 2014). These aspects also have a reflection on the actions of the competitors, as they tend to introduce new product lines, which do not comply with their initial traditional strategies. This matter creates controversies but attracts customers by using contrasting features of fast food and healthy eating. Consequently, it has to be depicted as a core element of the strategy to assure the profitability of the organization.
Customer support and the minimization of waiting time are also critical in any restaurant, especially, in the fast-food industry, as the delivery defines the consumer’s satisfaction and determines the customer’s return (Barklon, 2015). In restaurants such as McDonald’s the orders are proceed and delivered rapidly, and this matter explains the substantial differences between the values of the revenue of McDonald’s and the subsequent position. In turn, this aspect complies with the busy lifestyle of the majority of the visitors and creates a perception of the fast service provider.
Another matter is continuous attention to the establishment of sophisticated marketing campaigns to portray the novelty of the place and promote changes in the menu (Healy, 2014). The competitors use dissimilar marketing instruments to ensure the delivery of the message to the final users while increasing the target groups’ coverage. This aspect will contribute to the growth of the market share and ability of the company to attract new customer segments to its locations while increasing the percentage of the customers’ return.
Nonetheless, the features mentioned above could not be considered as being effective while being applied separately. A distinct application of each will contribute to the increase in the company’s profitability in the short-term. Meanwhile, the utilization of all the factors a significant part of the strategy will differentiate the company from the competitors and define its possibility to become one of the market leaders.
Competitors or Rival Firms
The fast-casual restaurants can be viewed as critical competitors due to the belonging of Panera to this segment, but the overall leaders have to be considered, as the threat is rising (Market Realist, 2014). The primary rivals of Panera’s restaurants are MacDonald’s, Darden Restaurants, Yum, and Starbucks as they tend to occupy a significant share of the market in the United States of America while being vehemently recognized in the world. It remains evident that the primary competitor is McDonald’s, as it operates at the global level while having 36,000 stores in 100 countries (McDonald’s: Company profile, 2016).
It aims at success while emphasizing the importance of being a progressive and innovative leader in the burger industry while trying to deliver modern experience (McDonald’s: Company profile, 2016). The company’s product ranges are highly diverse, but different variations of burgers still could be regarded as a priority. It could be said that a combination of a well-developed strategy, brand recognition, and focus on the particular product line while being innovative define McDonald’s position as a front runner of the industry in the United States.
In turn, Yum is a food services provider, which is represented by KFC, Taco Bell, and Pizza Hut while having operations globally (Yum! Brands Inc., 2016). In this case, the concepts mentioned above tend to focus on different cuisines. For instance, KFC utilizes chicken as a primary product while Pizza Hut tends to provide ready-made pizzas (Yum! Brands Inc., 2016). Lastly, Taco Bell can be regarded as a Mexican-style food provider (Yum! Brands Inc., 2016). In this case, it could be said that a vast coverage of different types of cuisines allows the company to be one of the most successful restaurants in the fast-food industry while having coverage of an extended range of the target markets.
Darden is a group of full-service restaurants, which includes an extended variety of brands such as Red Lobster, Oliver Garden, Bahama Breeze, Seasons 52, Wildfish Seafood Grill operating in the United States of America and Canada (Darden Restaurants, Inc., 2016). In this case, the organization tends to satisfy dissimilar customers’ preferences by having representatives of Italian cuisine, stakes, chicken, Caribbean flavors, vegetarian dishes, and grills (Darden Restaurants, Inc., 2016). It tends to utilize fresh ingredients and provide an exceptional experience to the users.
Additionally, Starbucks can be regarded as another competitor, as it tends to have high recognition in the world while providing excellent services and high-quality products. The company is well-known for its signature coffee while offering a unique experience to its users and brand merchandise for sales (Starbucks Corp., 2016). It has extended geographical coverage while being present in the Middle East, Europe, the United States of America, Africa, and Latin America (Starbucks Corp., 2016). In the end, despite the diversified areas of operations, the companies tend to occupy a significant share of the market while establishing a strong brand image and extending geographical coverage.
Relative Strengths and Weaknesses of Each Rival
Nonetheless, it is vital to evaluate to determine the strengths and weaknesses of each competitor, as this analysis will contribute to the understanding of the principles of building their competitive advantages and designing the strategy for Panera Restaurants. Despite high brand recognition in the market, McDonald’s tends to have weaknesses, which might have an adverse influence on the functioning of the corporation in the future.
Firstly, McDonald’s is a multinational company with its distinctive restaurants in an extended number of countries (Kasperkevic, 2015). In turn, it tends to have strong marketing campaigns while prioritizing technological development and cost-effectiveness (Ma’arif, 2007). Nonetheless, the primary weakness of McDonald’s is decreasing consumers’ preference for fast food and the subsequent decline in sales (Kasperkevic, 2015). In turn, this matter is related to the inability of the company to project the potential development of the actions of the competitors while not taking the advantage of innovation.
Table 2. McDonald’s strengths and weaknesses (Ma’arif, 2007; Kasperkevic, 2015).
Meanwhile, Darden also has a similar issue, as, in this case, the critical strength of this competitor is the high brand recognition, as Darden restaurants have a well-develop customer base across the United States of America while increasing brand image by acquiring recognized brands (“Darden Restaurants, Inc.: Darden Restaurants”, 2012). It contributes to the development of the loyal customer base while complying with the consumer’s preferences due to an extended variety of menu offerings. Nonetheless, the primary weaknesses are related to the limited areas of operations and the lack of the development of the organizational strategies related to the expansion (Darden Restaurants, Inc., 2016).
Table 3. Darden’s strengths and weaknesses (Darden Restaurants, Inc., 2016).
In turn, Starbucks has similar issues, and its internal operations have to be evaluated to emphasize the primary drawbacks in its operations. In this case, the core strengths are related to global brand recognition and financial excellence due to the ability to integrate cafes with the stores and communicate with the customers on the regular basis (Ferrell & Hartline, 2016). Nonetheless, the company has weaknesses, which might affect negatively financial performance. In this case, the company is losing its ability to meet the rising customers’ demands and does not adapt its offerings to marketing fluctuations (Ferrell & Hartline, 2016).
Table 4. Starbucks’ strengths and weaknesses (Ferrell & Hartline, 2016).
Lastly, the analysis of Yum has to be conducted, and its core strength is the company’s brand recognition, as it utilizes several sub-brands to ensure the coverage of the significant segments of the target market. In turn, an interesting and dissimilar menu of each facility is can be regarded as an additional enhancer of the company’s success (Griffin, 2012). Consequently, it contributes to the development of the brand image, financial performance, and effectiveness of the marketing campaigns (Griffin, 2012). Nonetheless, its primary weaknesses are the lack of a focus on R&D leading to the ability to meet the expectations and innovate (Griffin, 2012).
Table 5. Yum’s strengths and weaknesses (Griffin, 2012).
In the end, the core strength of the primary competitors in the industry is their brand recognition, as it assists in extending the customer’s base while attracting additional segments to try their meal. Nonetheless, all of the chains mentioned above tend to have weaknesses. In this case, the drawbacks are associated with the ability of the company to comply with alterations of the industry. Consequently, the lack of flexibility might be regarded as one of the most dangerous aspects while operating in a competitive market.
How Competitors are Changing
Nonetheless, the competitors tend to adapt to the changing consumer preferences, as, otherwise, it will damage their profitability and financial liquidity. In this case, it could be said that McDonald’s healthy campaign can be regarded as one of the examples, as the company modified its strategy to attract the individuals who consider healthy eating habits of high importance (Lutz, 2015).
This matter does not comply with the company’s critical principles of the fast-food chain, but it is regarded as a necessity due to the rising popularity of this trend. Additionally, McDonald’s has launched white-chocolate mocha to expand its drink offerings (Market Realist, 2014). It is apparent the company tends to comply with the existing trends while introducing new product lines and providing exceptional products to satisfy customers’ rising demands.
In turn, the presented above introduction of the franchise by Darden Restaurants and continuous expansion of its facilities has a beneficial influence on the company’s performance. This adaptation contributes to the growth of Darden while reducing additional costs and increasing the overall financial efficiency, as these matters are necessary due to the limited presence of this restaurant chain in the world (Darden Restaurants, Inc., 2016). The utilization of these operations is critical for the company’s functioning and the rise of the market share, as the competitors already utilize this strategy for their financial prosperity and worldwide recognition.
As for Starbucks, it tends to increase its attention to the retail segment, as more and more merchandise is present in cafes. Nonetheless, it prioritizes the production of the coffee by extending the range of drink specialties (Starbucks Corp., 2016). Speaking of other competitors such as Yum, the organizations tend to adapt their strategies to ensure the fast delivery of the products while modifying their menus. It could be said that the changes in the menus tend to occur in all of the companies, as the preferences of the consumers tend to be modified depending on the season.
In the end, the description of the adaptation of each rival revealed that the companies tend to change their concepts while using the alterations in the customer’s demand as a basis for their actions. In turn, this analysis depicts that the primary rivals tend to prioritize the essentiality of the customers while making them a center of the interactions. In the context of the presented research, it is clear that the restaurants mentioned above tend to change their actions ultimately, and this matter explains the existing ranking depicted in Table 1. It could be said that that flexibility is a crucial problem for the company’s endurance, and the lack of compliance with the changing trends will affect the organizational market share adversely.
Rivals’ Anticipated Competitive Moves
As for the moves, it is apparent that the companies tend to adopt their strategies to the constantly changing environment, as it is vital to the company’s survival in the market. For instance, McDonald’s has introduced new components of the menu, which have a tendency corresponding with the growing consumer’s interest to healthy eating (Lutz, 2015). In this case, the company tried to change its initial strategy while complying with the changing preferences of the consumers. Meanwhile, it emphasizes the vitality of the burgers due to the prioritization of this dish as a core ingredient.
Nonetheless, this trend is gaining popularity among other restaurants, for instance, Darden tends to focus on the availability of the dietary options in the menu (Darden Restaurants, Inc., 2016). Consequently, this approach contributes to the constantly increasing popularity of Darden’s locations. In turn, Darden Restaurants enhanced its international presence while introducing the franchise scheme globally (Darden Restaurants: International Franchising, 2016). It remains apparent that rapid development is the necessity in this sphere, as, otherwise, the restaurant chains will lose their market share to the competitors with innovative productions and affordable prices.
Speaking of Starbucks, the company tends to pay substantial attention to the development of the menu while offering various seasonal specialties for its customers Ferrell & Hartline, 2016). Nonetheless, the company tends to rely on its brand image due to the underestimation of the actions of the competitors. This matter might hurt the company’s operations while influencing financial performance dramatically. In turn, Yum also tends to modify their menus while offering the dishes, which are vehemently associated with the different cuisines (Griffin, 2012). Nevertheless, the organization tries to support the initial image of the brand while paying attention to the meals associated with KFC and Taco Bell.
Conclusion
It remains apparent that the competitors’ analysis contributes to the understanding of the efficiency of the functioning of the organization and its position in the market. Meanwhile, it is critical for the understanding of the overall competitive nature of the market since these aspects influence the company’s success and a possible market share in the future. Consequently, the competitive assessment determines the key success factors of the competitors and their strengths and weaknesses to ensure the design of an appropriate strategy for the organization.
It could be said that it was revealed that the competitiveness analysis is critical for the understanding of the current trends while depicting changes in the behavior of competitors and consumers. In the context of the presented case, Panera restaurant has to understand the strengths of its primary competitors, as they tend to occupy a substantial share of the market and have high recognition worldwide while causing a significant threat to Panera’s development. Alternatively, the analysis revealed that the companies adopt the strategies of the competitors, like Darden Restaurants starting using a franchise’s operating scheme as a core instrument for the expansion.
In turn, McDonald’s decided to diversify its menu with fresh and healthy snacks to support a rising trend of a healthy lifestyle. Meanwhile, the companies tend to have weaknesses, as not all of them can adapt to the constantly changing economic and demographic environments. For instance, McDonald’s is losing its market shares, as the customers alter their desires while decreasing the demand for junk food. It could be said that the presence of the weaknesses contributes to the presence of equality while facing the competition, as the restaurants can generate efficient marketing campaigns while evaluating the effectiveness of the tools while using the examples of the rivalries.
Based on the information provided above, the company has to highlight the vitality of the flexibility while combining it with the appropriate marketing strategies and introducing reliable modifications of the menu to comply with the customers’ preferences.
Nonetheless, the organization can utilize the weaknesses of the rivals as a benefit for the development of its competitive advantage. This matter is highly correlated to the ability of the company to conduct a sophisticated analysis while adapting to the constantly changing environment and adjusting its services and products to the consumers’ preferences. In the end, the matters associated with flexibility and competitor’s changes can be regarded as essential elements of the basis of the strategic development, as the understanding of these features will contribute to the ability of the company to alter its critical thinking and problem-solving principles in a positive direction.
Company Analysis
Financial Analysis
Finances play a critical role in the company’s sustainability, and the evaluation of its principles will have a substantial effect on the understanding of the company’s current position in the market. Meanwhile, the analysis will contribute to the determination of the firm’s strengths and weaknesses related to this sphere. In this case, the company’s financial ratios have to be analyzed to understand the company’s liquidity and sustainability.
Table 6 presents the fluctuations in the values of the organization’s ratios (see Table 6). In this case, it is apparent that the company’s liquidity experiences positive changes, and it is critical for the maintenance of the cash flow. Nonetheless, its profitability tends to decrease, and these aspects affect the company’s profitability and position in the market. In this case, the company has to prioritize the necessity to maintain the profit margins on sufficient levels while cultivating the growth of liquidity ratios.
Table 6. Panera’s Ratios Comparison (Nasdaq: PNRA: Ratio, 2016).
Additionally, it is critical to compare the financial figures of Panera restaurants with the competitors, as it will portray and reflect the position of the company in the market with the assistance of various financial instruments and cash flow. In this case, Table 7 depicts the comparison of the companies by using their revenues, gross profit, and net income. In this instance, it is apparent that the company’s financial position is questionable, as the competitors tend to have higher revenues and net incomes. For example, the gap between McDonald’s and Panera is critical while causing damage to the company’s reputation.
Table 7. Comparison of the Company with the Competitors.
In the end, the overall position of Panera’s restaurants could be considered as developing in a positive direction, as its liquidity ratios tend to rise in their values. Nonetheless, it is apparent that the company’s overall financial performance is below average in the industry and decreasing profitability might lead to the inability of the company to grow and develop sufficiently to occupy a substantial share of the market. In this case, the company has to pay vehement attention to its cash flow and level of income while evaluating the relevance of mergers, acquisitions, and other investments.
Current Strategy
A strategy is a critical component, which is vital to the company’s success as it has a reflection of the company’s values, vision, and mission. It tends to determine the flow of the actions associated with the delivery of the primary message to the customers and reflect the key principles of the corporate culture. In this instance, the initial goal of this section is to highlight the core features of Panera’s current strategy.
Nowadays, Panera utilizes a sophisticated approach to depicting the organizational competitive advantage and value creation from all angles due to the essentiality to emphasize all segments to stay competitive in the market. Firstly, the value proposition of the concept of the service delivery implies using only natural materials while baking only fresh bread every day for the customers while highlighting the importance of transparency (Panera Bread Company: Annual Report, 2015). Meanwhile, it emphasizes the essentiality of the policy of transparency to ensure the compliance with the principles of the utilization of the fresh materials for its meals (Panera Bread Company: Annual Report, 2015).
In turn, the company pays vehement attention to the quality of the services to provide its customers with an exceptional experience while increasing their return to the restaurants (Panera Bread Company: Annual Report, 2015). The client’s satisfaction is a critical component in the service industry, as the achievement of the relevant level of satisfaction implies the possible increase in the company’s market share. The prioritization of this component has a positive influence on the customer’s behavior while establishing a potential return to the location.
Nonetheless, the factors mentioned above highlight that the strategy tends to cover all the principles, which are vital in the service industry, but its unique nature is questioned as competitors with a more remarkable image tend to prioritize the same features. Meanwhile, it also lacks the compliance with the changing trends while not being in a trusting relationship with the customers. Despite the criticism and an extended variety of issues related to Panera current strategy, the company has to cherish its initial values, as they tend to reflect the firm’s mission and vision statements. In this case, it could be said development and modifications of the existent approach are a necessity, as a continuation of the prioritized features of the current strategy might be discovered as a cause of the decline in the customer’s returns.
Strengths and Weaknesses
Meanwhile, the company utilizes its strengths as the core components of its strategy, as they tend to form the company’s competitive advantages while increasing its share of the market. In this case, the critical strengths are related to Panera’s desire for excellence while aiming substantial attention to the quality of its services (Panera Bread Company: Annual Report, 2015). Customer-oriented relationships are vital for the restaurant services to build positive associations with the brand.
Additionally, it could be said the company actively utilizes its technological novelties to enhance the customer’s experience while offering mobile applications with an easy interface to cultivate better connections with the customers (Panera Bread Company: Annual Report, 2015). This matter contributes to generating of the trusting relationships with the customer’s while encouraging them to participate in the interactions.
Speaking of the weaknesses, they have a tendency to be dependent on the company’s internal structure and the organization of the performance. In the context of depicted case, Panera’s income is highly dependent on the elements of the franchise while any changes in its dynamics will contribute to the loss of the revenue (Panera Bread Company: Annual Report, 2015). This matter has to be considered of high importance, as the maintenance of the flow of the information within the organization is critical.
Consequently, the insufficiency of the computerized system for the organizational maintenance might be considered as another potential weakness since its dysfunction affects the organizational performance (Panera Bread Company: Annual Report, 2015). This drawback might cause negative alternations with the customers and employees while causing the incompliance of the expectations and reality.
In turn, lack of brand recognition, limited geographical coverage, and the lack of a well-developed marketing campaign can be regarded as the principal drawbacks since the company such as McDonald’s tend to maintain excellence in these areas while having a well-established brand image (Kasperkevic, 2015). This aspect has a significant influence on the operations of Panera’s restaurants while increasing the necessity to regard one of these matters for the formation of the strategy.
In this case, strengths and weaknesses tend to depict the internal functioning of the organization while forming a basis for the development of the sophisticated strategy. In the context of this situation, the company’s strengths are related to its extended years of operations and its ability to portray the firm’s values in the current strategy. Nonetheless, the organization has to understand the essentiality of the weaknesses, as they present the critical drawbacks, which can affect the company’s profitability of the restaurant chain and its operations. In this instance, the company has to pay vehement attention to the system’s maintenance and conduct the continuous evaluation of the risks related to the supplies and the usage of franchise scheme. Meanwhile, increased recognition of the brand has to be prioritized due to its essentiality for the enhancement of the financial performance.
Opportunities and Threats
The assessment of the externalities is vital for the understanding of the company’s image in the market, and it contributes to the establishment of the relevant strategy for enhancement of the operations. Meanwhile, it reveals what matters have to be taken into account to minimize the risks and assure the ability to take all the proposed opportunities. In turn, this analysis contributes to the evaluation of the market and to the develop a relevant strategy for the organizational functioning while taking advantages of the external possibilities.
In this instance, one of the opportunities is the necessity of the organization to take an advantage of the technological development, as it has a well-developed technical basis. In turn, it can increase the number of its facilities across the United States of America while enhancing its recognition by participating in various events and fairs. Meanwhile, the organization can take an advantage of the side events as this matter does not require high investment and is vehemently gaining popularity in the country (Best, 2012).
Speaking of threats, the jeopardies are highly correlated to the functioning of the supply chain, rising competition, alterations in customer’s behavioral patterns, and changes in costs of raw materials and maintenance services. In this case, any changes in economics and demographics will modify a position of the company while having a negative effect on its profitability and sustainability. Meanwhile, the alterations in proprietary and healthcare laws and regulations and the lack of risk assessment of mergers and acquisitions are being assessed and portrayed at national and international levels (Panera Bread Company: Annual Report, 2015).
In this case, the modifications in the jurisdiction might limit the areas of operations while making the activities in some countries impossible. Meanwhile, the actions of the companies are also dependent on this matter in the United States of America and Canada. In turn, the insufficient planning of company’s expansion strategies might cause an investment in unfavorable entities while leading to the loss of the part of the revenue and negative return on the investment.
The opportunities and threats highlight the primary risks and future approaches for development, as the understanding of these matters contributes to the evaluation of the unrevealed possibilities and jeopardies in the market. Based on the analysis provided above, the company has to pay attention to the threats, as, otherwise, its productivity, efficiency, and organizational performance will be adversely affected by the constant social, demographic, and economic fluctuations at national and international levels. Meanwhile, it has to take advantage of the opportunities to increase the awareness of the company in the world and benefit from its technological advancement.
Conclusion
It could be said that the analysis of the company contributes to the understanding of the organization’s competitiveness while being able to propose a suitable strategy based on its strengths, opportunities, weaknesses, and threats. It is apparent that the company takes the advantages of its strengths, as it prioritizes them in the current strategy while aiming at the excellence of services via means of technology. Nonetheless, the company’s weaknesses such as the lack of the brand image and issues in the maintenance of the systems have a negative reflection on the financial performance while being one of the reasons for the existence of the gap between Panera and the frontrunners of the market.
In turn, the presented opportunities can contribute to the ability of the company to exploit its technological excellence while utilizing the novel means of the innovative features of the technology. As for the events, they contribute to the development of the marketing campaign to ensure the delivery of the message of the company’s excellence to its customers. Speaking of threats, they are highly associated with the changes in regulations and rising competition. The company has to monitor these fluctuations to ensure its position in the market while shifting the flow of the rivalry.
Despite the ability of the company to provision the demographic and economic changes, the company’s strategy lacks the portrayal of the distinct competitive advantage and does not prioritize marketing instruments for the brand construction. Based on the information provided above, the company has to pay vehement attention to the compliance of its strengths with the primary threats and opportunities, as, otherwise, it will not be able to face an intensified competition of the restaurant industry. In the end, all the matters are critical and have to be taking into account while designing the strategy and presenting the issues of the current one.
Strategy
Key Strategic Issues
Despite the existence of strengths, the problems associated with the strategy have a tendency to be present and have to be revealed in details to propose the further steps of actions. These factors will contribute in acquiring the overall image of the market while determining the basis for the matters, which require substantial attention. Meanwhile, it is vital to understand and assess the consequences of the issue, as dissimilar solutions might be applicable and appropriate in different cases.
The first subject is the fact that the restaurants’ marketing is rising and popularity while increasing a level of competition in the industry. In this case, the primary consequences are the inability of the company to monitor the actions of the competitors leading to the loss of the market share. Meanwhile, the introduction of new products and services can be regarded as an issue since these matters increase the competition’s intensity. Nonetheless, the company has to monitor the actions of the competitors on the regular basis to assure the relevance of their actions while selecting potential novelties to be implemented in the dishes.
The second issue is associated with the differences in the customer’s preferences, as the alterations tend to modify the overall demand in the industry while causing an increase in competition and innovation in the industry. The current restaurant market is associated with the rapidly altering trends and possibilities. Paying vehement attention to the trends is critical, as this aspect has a substantial correlation with the actions of the competitors. Meanwhile, in this case, the primary problems are related to the capability of the companies to predict the changes in the consumer behavior and alter their strategic initiatives in time.
The third issue is related to the economic downturn, as any economic fluctuations have a tendency to have a negative influence on the financial excellence and efficiency of the organization. The financial downturn has a significant number of consequences, as it alters financial performance, company’s operational strategy, the overall quality of the services and products, and the expansion options. In this case, its affects the ability of the company to invest in the particular options for enlargements. Furthermore, it has a vehement impact on the possibilities related to the product development, as the presence of the downturn requires the assessment of the resources for the sufficient diversification.
In this instance, it is apparent that the issues are vital for the company’s functioning, as they tend to cover various segments of the company’s operations. It is critical to consider these aspects of the continuous organizational development, as, otherwise, the rising level of competition, presence of the economic downturn, and the inability to comply the preferences of the customers might have an adverse impact on the company’s functioning leading to failure. Despite the essentiality of all problems, a company has to evaluate its current condition critically and determine the potential aspects of the development, as, otherwise, it will lead to the imbalance of the expenditure and revenues.
Courses of Action
Strategic Initiative Options
Based on the information provided above, the company can have multiple strategic initiative options to pursue to take advantage of the opportunities and strengths while minimizing the weaknesses and threats. In response to the first issue, the company has to alter its overall vision, as the company’s strategy does not present a unique competitive advantage. The analysis shows that the organizations with the stronger image utilize a similar strategic approach. The second option is the fact that Panera’s restaurants should prioritize the essentiality of the marketing instruments for the brand creation, and this matter leads to the lack of the recognition in the world. The third option is the focus on technological improvement while using applications and social networks for the creation of the brand.
In response to the second problem, the company has to consider various changes in consumer’s preferences. The first possibility is to observe the necessity for the introduction of the new services or advancing old ones to attract more customers to the market, as innovation is not regarded as core principle currently. Nonetheless, it has to conduct a sufficient analysis of the market before the implementation of the particular strategies since otherwise, the establishment of any alterations might lead to negative or no return on investment.
The second option is the necessity to design applications to encourage the clients to participate in the design of the products. In this case, this novelty will contribute to the increase in the popularity of the brand due to having constant interactions with the customers. Furthermore, the company will be able to benefit from its technological excellence.
Lastly, several responses to the last problem tend to exist to the last issue, as the company has to emphasize the essentiality of the geographical coverage and operational scheme, as the inability to conduct a sufficient analysis of the relevant risks affects the decision-making and profitability of the organization. The first option is the possibility to expand the market with the assistance with the mergers and acquisitions.
The second choice is the necessity to conduct the analysis of the jeopardies and opportunities. The third possibility is modifications of the operational schemes while combining stores and cafes in one location. The last option is the essentiality to reduce production costs, as the role of finances cannot be underestimated since they determine the company’s profitability while referring to the financial liquidity.
Preferred Courses of Actions and Rivals’ Reactions
Based on the aspects stated above, the company should create its unique competitive advantage by introducing a completely unique service or experience, which was not existent previously. At the same time, the proposed actions will lead to the reaction of the primary rivals as they have a tendency to monitor changes in the strategies of the competitors to maintain their market shares. Meanwhile, the strategic initiatives described above are aimed at increasing company’s differentiation and brand development within the next ten years while taking the advantage at national and international levels.
In this case, the recommendation one implies that Panera’s restaurants should consider the introduction of the novel services and products associated with the customers’ trends such a healthy lifestyle as a critical matter of the company’s sustainability in future since, otherwise, the company will start losing its market shares due to the intensified competition. Meanwhile, the utilization of this strategy will ensure the compliance with the constantly changes environment and allow development of the organization in the right direction while having a positive influence on its profitability. In this case, one of the options is the utilization of the special technology for the bread production while offering an extended variety of products.
As for the second alternative, the company has to adapt Starbucks’ scheme and combine a shop with a café. The potential products might include various companies’ products such a signature bread and merchandise with the company’s logo while creating a perception of being a Starbucks competitor. This approach will have a beneficial influence on the company’s brand image while determining an association with the signature bread and creating a perception of the best bakery company.
In turn, the fourth option is the possibility of the company to expand its functioning with the assistance of the mergers and acquisitions in different countries. Nonetheless, a sufficient analysis will be regarded as a necessity, as it is vital to determine the profitability of its actions. Meanwhile, the company has to evaluate the alternatives on the regular basis to ensure the absence of bias associated with decision-making.
Furthermore, the last option is prioritization of the marketing campaign as a key definer of the company’s development and success. In this case, the company has to expand its promotional instruments by participating in various events and culinary festivals. In turn, Panera can generate the popularity by using social media, and designing an application ‘Design your own bread’ to allow the users to customize their products and establish trusting relationships with the customers. Nevertheless, the company has to combine this strategy with the efficient risk assessment since, otherwise, it will lead to the negative return on investment and low revenues. It is clear that these matters have to be applied simultaneously to ensure the efficiency of the strategy.
Nonetheless, it is apparent that the competitors such as McDonald’s, Darden’s, Yum, and Starbucks will spot a rising popularity of Panera’s restaurants. In this case, their potential actions will be included in the sufficient research of the chain while depicting its strengths, weaknesses, opportunities, and threats. In turn, the companies will introduce Panera’s specialties while adapting them to their strategies and culinary principles. In this case, Panera should build an association with the best bakery in the United States to avoid the adverse changes in reactions. These matters will tend to intensify competition for Panera while creating the necessity to comply with the competitor’s actions.
Counter Moves
Additionally, the counter moves also have to be described, as they contribute to the formation of the algorithm for the strategic improvement while describing potential alterations in the strategies of competitors. Firstly, McDonald’s might react to the actions of Panera as new approach proposes to focus on the development of the healthier menu while diversifying bread options. In this case, the largest burger provider will have to establish new offerings, which comply with the constantly growing popularity of sports and healthy lifestyle.
Diversifying the menu will help McDonalds remain the leader in the market, but it has to remember to maintain the popularity of the burgers, as it was original company’s specialty. Consequently, Panera has to pay vehement attention to the development of the customers’ trends and adapt the menu to the changes while designing new marketing campaigns.
In turn, Starbucks will also have to adjust to the strategy, as, its weaknesses related to the ability to provide personal services tend to rise. In this case, Panera’s adaptation to Starbuck’s strategy will contribute to the necessity to alter the existent structure of the stores aiming at customer-centered relationships. In turn, Starbucks has to develop its menu, as it has to add a new flavor to its signature coffees. Meanwhile, Panera should regard these actions as a threat and be prepared to introduce exceptional offerings for the lower prices.
Darden will also have to modify its strategy after the increase in advertising campaigns, technological advancement, and well-developed menu related to compliance with the healthy lifestyle in Panera’s restaurants. In this case, the most reasonable actions of Darden will be connected to the increased marketing campaigns while diversifying meals with fresh and juicy dishes. Nonetheless, it will not change its operations schemes, as it belongs to the full-service restaurants and has popularity in this segment.
Despite an extended number of Yum’s restaurants with various dishes, the actions of Panera’s restaurants might increase Yum’s activities in R&D and lead to the development of the marketing campaigns. Nonetheless, the company might not react fast, as it has difficulties related to the functioning of the organization and its responsiveness to the marketing changes, and Panera has time to introduce well-developed menus via marketing campaigns. Consequently, Yum might start losing its market shares due to the inability to adapt to the actions of the competitors.
As for the other firms, the companies will try to modify their strategies to ensure their growth while focusing on social media and application development. The alterations in the actions of Panera’s restaurants will lead to the rise of the newcomers to the industry as the company tends to develop popularity of a new niche while combining high-quality bread with the delicious, healthy offerings. In the end, Panera’s restaurants have to be prepared for the counter moves of the competitors and ensure the strengths of its new positions and values.
Conclusion
The overall paper has a sophisticated portrayal of the attractiveness of the industry, competition, and overall organizational performance of the organization while using the findings as the basis for designing the relevant strategies to cultivate the enhancement of the corporate performance. Currently, Panera’s strategy tend to combine the core values and principles of the firm, but the company lacks the brand recognition and has to diversify its products to ensure the rising popularity in the market. Currently, the company is not a leader in the market while losing its position to McDonald’s, Starbucks, Yum, and Darden. In this case, the company has to apply the differentiation strategy while developing new product lines and creating a recognizable brand image.
Panera’s restaurants have to focus on its unique product’s features while building a substantial association with the bakery brand in America and Canadian markets. In this instance, this matter will have a considerable effect on the creation of the company’s brand image. In the context of the presented case, Panera has all required characteristics to have a market share while the lack of the organization’s recognition leads to the inability of the company to contribute to the increase of its popularity. Using social media and designing an application with an easy interface will have a substantial influence on the company’s recognition. The application will help build trusting relationships with the customers while generating innovative ideas for the future product lines.
A combination of a store and a café is also critical for the company’s recognition and success, as it tends to create an exceptional opportunity of to explore the offerings in details and purchase an item with the beloved brand. It could be said that this innovation will assist in the generation of the additional revenue. In turn, it will have a substantial influence on building the correlation with Starbucks while associating Panera’s restaurants with the high-quality bakery with exceptional features.
In the end, the company has to consider the proposed recommendations for the formation of a novel strategy, as they tend to correspond to the primary trends of the industry such as flexibility, innovation, and development. Nonetheless, the company has to create a perception of the brand image among the customers while building the association with the best product and service. Despite the essentiality of the brand image, the company has to conduct a sufficient analysis and evaluation of the alternative solutions related to the marketing campaigns and instruments for the expansion.
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