Panera Bread Company - Pestel and Swot Analysis

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technology allowed for better management operating systems that helped company’s see sales patterns and develop new strategies for growth.

Porter’s Five Forces

Threat of rivals – Very High

Panera’s threat of rivals is very high because the food industry is extremely saturated with a multitude of different food venders. Since Panera also serves food throughout the entire day it must not only compete with restaurants that do the same but it must also compete with restaurants that only serve breakfast, lunch, or dinner. This increases the pressure of Panera bread to create a multitude of different strategies. The competitiveness of the industry increases the need to differentiate oneself from its rivals, but with fast food restaurants starting to offer premium salads and sandwiches that are advertised as more nutritious and dine in restaurants instituting carry out programs, Panera Breads hold on the fast casual dining experience is shrinking rapidly. Because rivalry intensifies as the numbers of competitors increase and as competitors become more equal in size and competitive strength, it is very clear that rivals are a very big threat.

Threat of new entrants- Moderate

The threat of new entrants is moderate because barriers for entry are low in the restaurant business. People are always looking for new and different places to eat, which drives new restaurants to open daily. These new entrants have an advantage over established restaurants because consumers are very willing to give new restaurants a try. However it can be costly to open a new restaurant and many new entrants have short life spans. The sheer volume of new restaurants, even if they fail quickly, is enough to be considered somewhat of a threat.

Threat of substitutes – Moderate

There is a moderate threat of substitutes in the restaurant industry because while customers can choose to eat at home or buy cheaper groceries from a store Panera protects itself because they can offer higher quality products than one can find in a store. The fresh made bread with no perspectives or chemicals that Panera bread offers could be enough to outweigh the cheaper possibly less healthy alternative.

Power of suppliers- Low

The power of suppliers is very low. Panera Bread obtained its ingredients for its products from many different suppliers and while some ingredients were sourced from a single supplier at a regional facility Panera could always get ingredients from another supplier if needed. There is no risk that the suppliers could drive up the price of ingredients on Panera Bread because the almost all of the ingredients were very simple and easy to find.

Power of Consumer- High

The food industry is highly competitive which gives the buyers a lot of power over Panera Bread. There is relatively no cost in switching from one restaurant to another and dining out is not necessary. If a customer finds that they like another restaurant better or that they offer the same quality for a lower price they can easily switch.

Key success factors

Panera Bread is a leader in the fast-casual dining experience, offering high quality food quickly and at a reasonable price. The combination of speed and convenience along with quality food and an appealing atmosphere was very key to Panera’s success. Its fresh baked artisan bread made with craftsman attention to detail was key in differentiating Panera from its competitors and added value to the experience they were trying to create.

Customer service was another key success factor because it added value to the meal. The consumer was not just purchasing food; they were paying for a pleasant experience. When employees go above and beyond to be kind and courteous to customers it makes people feel good about going to Panera Bread and makes them want to come back again and again. Good customer service also created word of mouth advertising because people wanted to tell their friends about the great experience they had had at Panera, which was a key factor in the growth and success of the restaurant.

Another Key success factor was being able to respond to market demand from customers. Consumers are constantly changing what they want and adapting to these changes is a must. When customers changed their preferences to a healthier low-carb diet Panera changed its menu so that it better fit the needs of the consumer. Panera also took into consideration seasonal changes and made soups more prevalent in the winter months and adding pumpkin flavors during the holidays. Panera does a good job of adapting its menu to consumers and thus staying competitive in a very large industry.

Panera used nearby suppliers to provide consistent quality, reduced cost and better overall supply chain efficiency. Panera’s target growth rate was 15 to 20 percent and while not always achieved, they did maintain steady growth. This allowed them to have consistent cash flows and increase investor confidence.

The wide array of products offered at Panera was a key strategy in obtaining high consumer volume. The breadth of menu items included breakfast, lunch, dinner, soups, salads, pasta, frozen drinks and espresso bar options. The broad selection ensured that most consumers could find something on the menu they could be satisfied with. This along with brand recognition and word-of-mouth advertising was essential in having high customer foot traffic, which is key to a restaurant success and ability to grow.

Internal Analysis

Financial Analysis

Panera Bread Company

Year 2007 2009 2010 2011

Net Income $57,456 $86,050 $111,866 $135,952

EPS $1.81 $2.24 $2.81 $4.59

Growth in Income -2% 17% 28% 22%

Return on Assets 8.22% 10.01% 10.28% 13.23%

Return On Eguity 12.88% 13.62% 14.41% 20.75%

VRIN

Valuable

The most valuable resources Panera Bread had were their 1,493 store locations, their highly trained dough makers, their fleet of about 200 temperature-controlled trucks, their 24 dough-making facilities, their brand recognition, and their management information system.

Rare

The rare resource that Panera bread

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