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Panera Bread Company Essay

Executive Summary

This report focuses on what Panera Bread Company (PBC) needs to do in order to be profitable, provide healthy and quality foods to consumers and above all retain its leadership potentials in the restaurant and fast food business. The report also looks at what organization’s vision and mission statement means. It touches strategic objectives by dealing with strategy formulation, analysis and implementation.

Corporate governance has to be used to reposition the operations of PBC, analysis of both the micro and macro environmental points of view of the organization – where demographic, socio-cultural, political/legal, technological and global considerations of the organization in question. It also dwells on strength, weaknesses, opportunities and threats including studying trend analysis of the organization.

Porter’s five forces model, concept of strategy groupings, resource based view, triple bottom line reporting, value chain analysis and financial analysis would have to be examined critically so as to make PBC have competitive advantage over its rivals.

Based on the above concepts in this report, it is hereby recommended that PBC has to:•open new markets and establish branches in other countries by targeting major cities and towns using same standards, quality, menu, site selection and construction.

•develop more healthy and quality foods, unique brands, always be ahead of competitors and try to use trend analysis to know the lifestyles of people, tastes, maintain its corporate social responsibility with stakeholders, look at marketing mix, develop its technological base and have a friendly atmosphere at their various cafes including motivating employeesIf these recommendations are implemented, it is believed that PBC will occupy more than 30% of the market share within the next few years.

1.Introduction1.1The aims of the report•how PBC can reposition its leadership edge by ensuring the management concepts remains special, opening up franchises, encourage transparencies in management practices and be proactive in terms of change and innovations.

•how PBC can sustain its rising profit and growth levels.

1.2Objective of the report•how PBC can ensure consistency in their vision, mission and strategic objectives by using major processes like strategy analysis, strategy formulation, implementation and corporate governance•Analyzing the micro and micro environments of PBC

•Using Porter’s five forces model and concept of strategy groupings to make PBC have competitive advantage over their competitors.

•Using resource base view and value-chain analysis to identify possible opportunities and threats for PBC.

2.Background of the CompanyPBC is a market leader in the restaurant industry business. Started business in 1981 with three bakery cafes and by 1997, their bakery cafes were 160 with branches in five countries and cafes in domestic airports and hotels.

PBC’s concept is to sell only fresh dough and no preservatives. Their mission is ‘a loaf of bread in every arm’ with 18 different products. It intends to establish Wi-Fi access in 2003, and has many awards in its kitty.

They have a good distribution network, franchise operations, management information system and supply chain management and highly professionalized staff.

The 2004 first quarter performance showed an increase of 26% over same period in 2003 with a highly priced shares.

3.Case Study AnalysisStrategies are set of actions that firms use to achieve its goal. While strategic management focuses where an organization is at present and where it intends to be in the future. The task of analyzing a firm’s internal and external environment and selecting an appropriate strategy is known as strategy formulation. Strategy implementation involves putting appropriate controls and organization mechanisms to keep the company’s chosen strategy into action. Vision statement is the long run aspirations of the organization while mission statement means what is expected of the organization by its stakeholders.

This report focuses on micro-macro environment of PBC in order to retain their leadership role, increase market share and profitability. Resource Based View, Porters five forces model, strategic groupings, value chain, SWOT and financial analysis including triple bottom line reporting, and how these concepts would help the PBC to be a market leader would be analysed.

3.1Macro EnvironmentMacro economic factors are political, socio-cultural, environmental, economic, technological and legal.

3.1.1Political considerationPBC has to maintain its corporate governance issue by making sure that taxes are paid promptly and study government policies as it affects the business. At the moment political consideration is not really a big issue with PBC but if it intends to expand its operations, government polices of countries it wants to do business would have to be examined to see if it is business friendly or not.

3.1.2Demographic forcesAreas that are less profitable by the organizations should be closed down and move to areas that increases profitability (Hill et al 2004). Presently there is significant growth for young people and children who rarely cook at home and they patronize these fast casual restaurants. These youths are concerned about their health by eating healthy and quality foods which PBC should target for high profitability.

3.1.3Socio-cultural factorsIncreases in the population of women in workplaces are massive and higher levels of health consciousness have created a boom to many industries (Campbell et al 2006). PBC should study population demographics, income distribution and lifestyles changes within their areas of operation to their advantage.

3.1.4EnvironmentalOperating environments have to be friendly. This should done in such a way that corporate social responsibility to communities in terms of pollution, waste disposal and environmental protection laws are adhered to (Johnson et al 2005). At the moment it runs ‘Operation Dough Nation’ where all monies received and all unsold inventories goes back to the community it operates.

3.1.5Economic factorsAlmost all the industries are prone to general economic conditions. High interest and exchange rates, and average disposal income can affect organizations to larger extent (Campbell et al 2006). At the moment business is booming for PBC, therefore it has to consider business cycles, product trends, interest rates, inflation and also disposable income of consumers in order to have a competitive edge.

3.1.6TechnologicalThis is now a global phenomenon in virtually every business. For a company to remain competitive it has to enhance its technological base to compete with rivals (Campbell et al 2006). PBC is expanding its technological base by introducing point of sale machines and credit cards network at each café. This helps in planning for marketing information, product mix, quicker accounting information and other variance analysis.

3.1.7LegalJohnson et al (2005) pointed out that organizations should be cautious of health and product safeties, employment laws and legislations. Taken into account its franchise operations with other organizations, it has to make sure that organizations’ it enters into agreements comply with its standards, quality, menu, site selection and construction of cafes. The training program organized by the organization prior to franchisee starting business is applauded.

3.1.8GlobalChanges in the environment such as political and economic have created a business boom to some countries, while some have witnessed economic recession as a result of this. Government policies and changing cultural patterns by consumers have had a positive impact in some industries while some are unhappy with these changes (Hill et al 2004). PBC should study these changes and know those ones that affect their business especially intra-country trades where they have to convert currencies of their branch companies overseas.

3.2SWOT AnalysisThis shows the internal strengths and weaknesses of an organization from the customers’ point of view as they relate to external opportunities and threats (Hannagan 2002).

3.2.1StrengthStrengths of organizations are the committed leadership zeal of managers, experience in the industry, clear and articulate line with external stakeholders, strong product design and commitment to consumers in the area of innovation (Lee et al 1999). The strengths or core competencies PBC has at the moment over its competitors include the product, distribution and franchising, operations, marketing mix, general managerial ability and low personnel turnover.

3.2.2WeaknessesThese can be in the form of no clear management styles, poor image, research and development issue, competitive disadvantage, poor track record, insider problems, financing problems and possible training problems by managers and supervisors (Dess et al 2007). PBC has to invest in research and development, improve its image with stakeholders and improve on its marketing strategies.

3.2.3OpportunitiesThe growing demand for healthy and quality foods is an opportunity that PBC has at the moment over its competitors and it has to be sustained to make them have continuous dominant role in this industry (Stead et al 2004). Managers of PBC should analyse competitive forces in the restaurant sector in order to identify the various opportunities in terms of product enhancement and new products, create new markets and prediction of trends.

3.2.4Threats:What makes an organization to be strong is to identify possible threats within its operational base. The threats could be in the form of government policies, research, competitive pressures, new entrants, changing customers tastes, adverse demographic changes, recession, growing bargaining power of suppliers and customers (Dess et al 2007). PBC has to lay particular emphasis on new entrants, watch industry indicators, government adverse policies and changes in customers needs and tastes.

3.3Resource based viewThis considers the opportunities available to a company either to add value to its products and services or look at ways of reducing costs (Dess et al 2007). It may be possible to add value to the value chain of an organization in terms of procurement of raw materials and production processes. The present system that PBC is using where it has signed agreement with Dawn Food Products and also having economic of scale in terms of supplies makes the pricing of their product very competitive.

3.4Porter’s five force industry competitionPorter’s five force industry competition include the threat of new entrants, the bargaining power of suppliers, the degree of rivalry among competitors in the same industry, the bargaining power of buyers and the threats of substitutes products. Porter argues that the stronger these forces are within an industrial setting the more limited companies raise prices and earn greater profits (Campbell 2006). As far as this is concerned a strong competitive force can be regarded as a threat because it would drastically reduce the profit of an organization (Williamson 2004).

3.4.1The threat of substitute productFirms within the same industrial setting are competing amongst themselves. Substitutes limits potential returns on an industry by placing a ceiling on the prices companies charge. This should be a lot of concern for PBC because there are lots of organizations offering same product in the market.

3.4.2The threat of new entrantsWhen new entrants enter the industry they tend to take extra effort in order to take full control of the industry. The extent to which new entrants can enter an industry exerts a significant influence on the degree to which companies may act to earn above average in terms of bottom line (Johnson et al 2005). At the moment PBC enjoys some element of economies of scale, brand recognition, access to distribution channels and experience in carrying out operational activities leading to lower cost of production. But it is good for new entrants to enter the market because this brings about competition in the industry.

3.4.3The power of buyersBuyers are seen as competitive threats when they are in a position to demand lower prices or better service . Conversely when buyers are weak, a company can raise its prices and declare higher profits (Johnson and Scholes 2002). This has to be taken into account by PBC following volume of restaurants around. PBC should recalculate its costs since it intends to increase prices by 2% to see the justification prior to embarking on it.

3.4.4The power of suppliersSuppliers can be viewed as threats when they are able to force up the price for raw materials or reduce quality of materials. However, if suppliers are weak, companies can force down their prices and demand higher raw material quality. PBC believes it can have cost savings from switching to Dawn.

3.4.5Rivalry among established companiesIf rivalry is weak this will result to increase in prices of products at the detriment of consumers and ultimately increase profits and vise versa (Johnson 2005). PBC should regularly study competitors’ moves.

3.5.Value Chain Analysis (VCA)VCA helps managers to understand how effectively and efficiently the activities of their organizations are structured and coordinated. In other words, it seeks to provide an understanding of how much value an organization’s activities add to its products and services compared to the costs of the services used in their production. This helps management to identify core activities, know if there is breakdown or blockages to their detriment (Tsai et al 2006). The distribution network of PBC is good since it uses an independent contractor that delivers products to the bakery cafes and thus making the organization to concentrate in the retail operations. Their franchise operations should be sustained.

3.6Strategic groupsPotter (1980) defined strategic (SG) groups as group of firms in the same line of business having identical strategy following through the strategic direction. Carroll et al (1992) as cited in Flavian and Polo (1999) organizations within the same SGs often compete for market share. PBC has a lot of organizations within the same SGs, and therefore should use this to their advantage by understudying their competitors strengths and weaknesses.

3.7Tripple bottom lineThis is the combination of social, environmental and financial reporting for an organization to its stakeholders (Dess et al 2006). PBC does not show its report in this format, although this is optional for organizations but to enable stakeholders understand PBC’s business better they should incorporate this into their report like the Operation Dough Nation and the unsold inventory proceeds.

4Recommendation•Encourage research for new products and branding.

•Explore the possibility of new branches across borders.

•Improve marketing drive to increase sales since its closing inventory in 2003 was $8066 million dollars as against $5191 million dollars in 2002.

•Identify threats and weaknesses through strategic groupings•Pursue recovery of debts from debtors which shows $9646 million in 2003. Reduce its liabilities which gave $35,552 million dollars.

•Plan for succession incase of possible changes in leadership hierarchy.

5.ConclusionIn conclusion, PBC should regularly scan the micro and macro environments for signals of environmental changes or general trends that are occurring. On observing a trend that may lead to a market changes, the company needs to monitor the change so it has a better understanding of the exact nature of the change and whether it applies to the organization. If the monitoring mechanism suggests the change is relevant, then the company needs to forecast how the change will affect its operations in future. It is then necessary to assess the forecast implications to determine whether the market change will require a change in the company’s strategy. Benchmarking, reengineering and total quality management should not be left out.

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References

Dess, GG, Lumpkin, GT, Eisner, AB 2007, ‘Strategic management’ , 3rd edn, McGraw-Hill, New York.

Campbell, D, Stonehouse, G, Houston, B 2006, ‘Business strategy’, 2nd edn, Elsevier Butterworth-Heeinemann, Oxford.

Stead, EW, Stead, GJ, Starik, M 2004 ‘Sustainable strategic management’, M.E. SharpeInc., New York.

Tsai, YC, Fan, CL, Liou, CN, Wu, CL 2006 ‘The application of parts control and standardization by exploration of the value chain in new product development and innovation’, The Business Review, vol. 6, no. 2, pp 213 (online Emerald).

Hanaagan, T 2002 ‘Mastering strategic management’, Palgrave, New York.

Hill, CWL, Jones, GR, Galvin, P 2004, ‘Strategic management: an integrated approach’, 5th edn., John Wiley, Milton.

Johnson, G, Schooles, K, Whittington, R 2005, ‘Exploring corporate strategy’, 7th edn, Prentice Hall, Harlow.

Williamson, D, Jenkin, W, Cooke, P, Moreton, KM 2004, ‘Strategic management and business analysis’, Elsevier Butterworth-Heinemann, Burlington.

Johnson, G, Scholes, K 2002, ‘Exploring corporate strategy’, 6th edn., Prentice Hall, Harlow.

Porter, ME 1980, ‘Competitive strategy’, The Free Press, New York


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