Introduction to Management Essay
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Panera bread Ronald Shaich, CEO and chair man of Panera bread made a phenomenal growth in revenue of the company from $350.8 million to $ 977.1 million in just 3 years from year 2000 to 2003. However the growth has continued slowing down from that year on so a strategy is being strategized to help Panera Bread survive.
The objective is to make Panera a nationally dominating brand by following a corporate strategy of growth by the combination of company and franchise efforts. With a clear objective it would help the company and its staff to know their goal and what they are achieving for.
The concept is to deliver against the key consumer trends; to present a fast casual dining experience but also providing varieties of new and healthier menus to cater for the market segments. Improvements are done not only the product but also improving the overall operating systems, design and real estates. For the company’s image participating in the local community charity for corporate social responsibility.
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The policies are all franchisees are to follow the same standards for product quality, menu, site selection, and bakery café construction as the company’s. The company believed that the employee was a critical part of successful product and a unique company so by entrusting the employees to the fresh dough and support center operations with skilled associates and invested in training programs to ensure the quality and its operations.
Panera is to adopt Growth strategy through horizontal integration and using franchising as its key component to Panera’s growth strategy. The reason for continuing the horizontal integration is because does not have the capabilities to employ full backward/ forward integration. Thus vertical integration is not suitable in this case. The horizontal integration matches with the Panera’s concept bakery-cafes and it is the way for Panera to be able to grow more rapidly.
Competitive strategy used is Differentiation, employing the Differentiation strategy; Panera will be able to charge higher prices to cover the increasing fixed costs. However with higher quality products than of fast food chains’, tailored menus, upscale décor and Panera’s commitment to customer it is very possible to charge higher price.
Improvements should be made in the Human Resource department in compensation & benefits system. Salaried staffs get product discount, bonuses, incentive programs, training, and employee stock ownership plans however salaried worker should be rewarded too through recognition & award system or giving out vouchers to the non salaried workers.
The management team would be lead by all the executives and presidents in the company who has and extensive experience in managing and executing the Panera business. Mainly to manage all the important sectors like the Concept, Development, Joint Venture, Franchise, Supply Chain, Operating, Financial and the Administrative.
II. COMPANY BACKGROUND
Panera bread has been around from 1976. Ronald Shaich, CEO and chairman of Panera bread was the person who created the company together with the master baker called Shaich who combined ingredients. The duo made the phenomenal growth of the company with the guidance of Shaich, the revenue of Panera bread rose from franchise of 419 shops, the average annualized unit volumes (AUVs) increased from 9.1% to 12% a well but in the consecutive year the increase slow down from 0.2% to 0.5%.
Before it became a very successful company, there was Au Bon Pain which was purchased by Louis Kane in 1978. The bakery faced a $3 million in debt while struggling with 13 stores but 10 was shut down. Ronald Shaich came into the picture when Kane was about to declare bankrupt. Shaich who owned a bakery: Cookie Jar merged together with Au Bon Pain in 1981 these was to help the sell in the morning. The two expanded the business and decreased the debt between 1981 and 1984.
In 1985 Au Bon Pain became a place for urban folk who were tired of fast food. By 1991 Kane and Shaich took the company public and had 200 stores and $183 million in sales. The duo continued expanding by buying over St. Louis Bread Company from Ken Rosenthal, which had 19-store bakery café in St. Louis area. While Au Bon Pain was focusing on making St. Louis bread a national brand the expansion of the urban outlet had operational problems and had a debt of $65 million. Lacking of capital they sold Au Bon Pain and concentrated on Panera, which the name that was change to in May 16, 1999, being debt free the cash allowed expansion of the bakery cafe stores.
III. CURRENT SITUATION
III.A. CURRENT PERFORMANCE
Panera has been experiencing rapid growth under the leadership of Ronald Shaich. Under his guidance, Panera ‘s total system wide revenue rose from $350.8 million to $ 977.1 million in just 3 years from year 2000 to 2003 respectively. This rapid growth is caused by the new unit expansion of 419 bakery-cafes from 1999 to 2003. However as the year passed by, the company’s system wide sales & average annualized unit volumes began to decline. The growth rate has slows down for Panera. To continue growing, Panera will need to develop new strategies, initiatives and new unit growth.
There are 2 classes of Common Stock ownership in the company:
(1). Class A Stock with 28,345,754 shares outstanding and 1 vote per share.
(2) Class B Stock with 1,761,521 shares outstanding and 3 votes per share.
The company’s revenues were derived from company-owned bakery-café sales, fresh dough sales to franchisees, and franchise royalties & fees. The total company revenues rose 28.1% to $355.9million in 2003 compared to $ 277.8 million in 2002. The increase in revenue was due to the opening of 131 new bakery-cafes in 2003.
From 2002 to 2003 the bakery-café sales has increased by 25.1% from $212.6 million to $265.9 million. This is due to a full year’s operation of 23 company-owned bakery-cafes created in 2002, the opening of 29 company-owned bakery-cafes in 2003, and the 1.7% increase in comparable bakery-café sales for 2003.
III.B. STRATEGIC POSTURE
• Mission statement
1. To extend its franchise relationship beyond its current franchises.
2. To doing the best bread In America
3. Panera’s concept was designed around meeting the needs and desires of consumers, specially the need for efficient, time saving service and the desire for a high quality dining experience.
1. To make Panera a nationally dominant brand.
1. The concept is to deliver against the key consumer trends, to present a fast casual dining experience.
2. Following a corporate strategy of growth by the combination of company and franchise efforts.
3. Providing varieties of new and healthier menus to cater for the market segments.
4. Testing prototypes for product development.
5. Improving the overall operating systems, design and real estate.
6. Participating in the local community charity.