Name: Thao Tran Professor Teckchandani Mgmt 465A October 1st, 2011 Question 1: Paneras profitability through the

Porters Five Forces Model A. Threat of Substitutes: Restaurant business is highly competitive, thus, Panera Bread encounters great threats of substitutes for just being in the industry. The companys indirect competitors of the corporate level are from the casual dining (Applebees, Red Lobster, Chilis, etc.) and fast-food category (McDonalds, Wendys, Burger King, Taco Bell, etc.). Although Panera Bread restructured and identified a new restaurant chain category, fast-casual, the brand still faces direct competition within its category, such as Chipotle, Cosi, Brueggers, etc. Besides, any mom-and-pop restaurant can be a substitute for the firm. B. Threat of New Entrants: Threats of new entrants can be rated medium, given the fact that the fast-casual category is relatively new compared to casual dining and fast-food. Panera Bread distinguishes itself from the competition through its combined quality of casual dining and convenience of fast-food. For that matter, new entrants of the fast casual category must possess these combined features. More importantly, they have to execute this concept differently or better than Panera Bread to penetrate the market. It is a complicated process; however, new entrants do not necessarily have to take the ontrend fast casual to be successful, they can start off from any category. C. Rivalry among existing firms: Positioning itself in the fast-casual category, Panera Bread competes on mainly quality and convenience among other aspects. Thus, the company faces a diverse group of competitors from fast foods to casual dining chains and small mom-and-pop restaurants. Such high rivalry among existing entities requires Panera Bread to continuously improve its service and product quality and prices to retain the market share. D. Bargaining Power of Suppliers: In the restaurant business, from all categories, the challenge does not usually lie at the suppliers but rather than the execution step. It is more likely the recipes, followed by operations, location, dcor, etc. that can help any restaurant overcome the challenges and penetrate the market. A good relationship with the suppliers can better a restaurants economies of scale. However, with the great availability of substitutes, it is not too complicated to find matching suppliers in restaurant business; thus, their bargaining power should be rated relatively low.

E. Bargaining Power of Buyers: With the everyday-meal oriented menu, Panera Breads prices can be deemed acceptable in regard the working or middle class daily income. At Panera Bread and other restaurant chains with somewhat similar menus, the bargaining power of buyers should be considered relatively low since the purchases take up a very limited percentage of their income. Question #2: A. Paneras basis for differentiation: It is the strategic positioning that contributes much to Panera Breads growth and distinguishes itself among any restaurant chain in the industry. A dining experience at Panera is different from any fast foods or casual dining restaurants thanks to its combined features of convenience (speed) and quality (good food). Overtime, this strategic differentiation has become Paneras basis for its execution, improvements and expansion. B. Paneras Core Competencies: Paneras core competencies must lie in the execution upon its concept. For instance, to compete with fast-food restaurants, the firm adds specialty foods to complement its generic items, such as bagels, baked goods, pastries, etc.; to compete with casual dining chains, the company offers quick service, free wi-fi and meeting-friendly atmosphere. Panera Breads strategic positioning would not prevail if it werent for these thoughtful executions. C. Panera Breads Strategic Assets: Since Panera Breads core competencies originated from thoughtful executions, one of the companys strategic assets must be its management team. The majority of the firms executives, including its founder are Harvard-educated.1 Panera Bread needs to use these assets strategically to continue creating value for the customers, carry on the history, and achieve new goals. D. Panera Breads Partnership Network: Panera is keen on building a strong brand through seeking committed franchisees. Specifically, the company sells typically 15 units at one time with a requirement of all openings in six years.2 Overtime, this franchising rule will help Panera build a long-term network with investors who are passionately committed to the brands strategy, financially capable of taking it to the next level and making greater impact sin the industry. Question #3: A. Panera Bread vs. the Forces: Positioning itself in the fast casual category, Panera Bread is challenged by a diverse group of competitors, from fast food to casual dining chains.
1

Board of Directors. www.PaneraBread.com. Retrieved Oct 3, 2011, from http://www.panerabread.com/about/company/board.php 2 Franchise Information. www.PaneraBread.com. Retrieved Oct 3, 2011, from http://www.panerabread.com/about/franchise/

However, it was the full commitment to this combined concept that the company managed to create many unique products and operation methods to fulfill its ambition to possess the core competencies of two opposite restaurant chains, casual dining (high quality of food) and fast-food (speed of service). B. Panera Bread & Barriers: As a pioneer in the fast casual category, Panera Bread has laid the basis for this new restaurant positioning strategy. Overall, new entrant must have both high quality of food and the convenience factor to be considered fast casual. It is not too difficult to implement this model since new-comers can learn how Panera executed and committed to the concept. However, as being the leader in the fast casual category, Panera has developed strong brand equity and economies of scale that can help the company implement its concept at low prices and create pricing barriers to future competitors. C. External Threat: To certain extent, Panera Bread can be seen too ambitious with its business model. The restaurant chain is open for three meals of the day like a fast food restaurant; its a bakery, caf and also a catering company. This model should be continuously improved to prevent the situation where the new entrants have a more defined and simpler fast casual model and potentially take over the market. D. External Opportunity: There are some external factors that can ensure Panera Breads future such as, the fast growing health-conscious group and the international popularity of American cuisine. The company should consider the global expansion opportunity. Many fast-food chains from the States have successfully penetrated the international market and developed a base for American cuisine. By franchising this fast casual model, Panera Bread creates more options for the oversea customers when it comes to American foods. Question #4: The pay-what-you-want Model Panera Breads pay-what-you-want is a unique marketing campaign, designed to distinguish the chain from others in the industry and strengthen its brand image. Major America fast-food and casual dining chains spend an enormous amount on marketing. The results from media expenses are often difficult to measure or monitor; however, many entities in the foods industry identify these expenses as the necessary contributor to their existence and prosperity. Panera Bread is actually not making profit this model; the company seems to aim for the break-even (Sandwich Philosophy). For that matter, pay-what-you-want is rather than a marketing act of an innovative leader in the industry and designed to reach out to the public personally and efficiently. According to Sandwich Philosophy, Panera Bread recovers 90% of its costs from these restaurants. This is more of a ideal marketing model where the company can recover 90% of its marketing expenses and efficiently generate good-will image in the community.