Panara Ppt

What Does Internal Analysis Tell Us?

Internal analysis provides a comparative look at a firm’s capabilities

• what are the firm’s strengths?

• what are the firm’s weaknesses?

• how do these strengths & weaknesses compareto competitors?

Why Does Internal Analysis Matter?

• establish strategies that will exploit any sourcesof competitive advantage.

• determine if its resources and capabilities arelikely sources of competitive advantage.

Internal analysis helps a firm:

Panera Bread Company

Key Question for Panera Bread

• Is the plan of expansion and reliance on franchise partners the right strategy for Panera Bread to grow at the rate they want to?

Panera Bread Company OverviewOrigin 1981 Au Bon Pain Company founded by

Louis Kane and Ron Shaich.

Growth on US East Coast & Internationally 1980’s and 90’s – stores opened in malls, airports, shopping centers.

Industry Overview (Supply)

Porter’s five forces:

Rivalry among existing competitors

Threat of substitute products

HIGH

Bargaining powerof buyers

HIGH

Threat of new entrants

LOW

Bargaining power of suppliers

LOW

Porter’s Five Forces

Factor Analysis Impact

Threat of substitute products

• Substitute products are easily accessible (eat at home, convenient stores)• Economic downturn limits disposable income – substitute products become more appealing.

HIGH

Bargaining power of suppliers

• Panera has multiple options to source each ingredient they use. LOW

Bargaining power of buyers

• Economic downturn’s affect on consumer eating behaviors – cheaper meal at home.• Over 21 direct competitors/alternative eating establishments of Panera.

HIGH

Competitive rivalry • Differentiation and constant menu changes to appeal to consumer preferences. •Many competitors in industry.

INTENSE

Threat of new entrants

• High investment threshold to enter market LOW

Industry Overview (Supply)

Factor Ranking (1-5)

Threat of substitute products• Full range of alternatives; eat at home, fast-food, formal dining out •Substitute products offer lower prices and convenience. •The majority of meals are eaten at home – 76%

5

Bargaining power of suppliers• Panera is not limited by sourcing from a single supplier• Several suppliers are available for each ingredient

1

Bargaining power of buyers • Switching costs are non-existent for consumers with varied options

4

Industry Overview (Supply)

Factor Ranking (1-5)

Rivalry among existing competitors• Consumer preferences are constantly being targeted and adapted to by competitors• Competition is competing for $1 bn in daily sales

5

Threat of new entrants• Substitute products offer lower prices and convenience. •The majority of meals are eaten at home – 76% 1

Internal Analysis – Core CompetenciesCore Competency Description

Diverse Menu • Lots of variety, constantly experimenting• Options for all meals and times of day• High quality food at reasonable price

Strong Brand/Customer

Loyalty

• JD Power and Associates satisfaction award for QSR in Midwest and Northeast• “Best Of” awards in nearly all mkts in 36 states

Strong Relationship with Existing Franchise

Partners

• Employee training and certifications• Assistance with site selection and marketing•High satisfaction with concept and support received

Identifying Where to Locate New

Stores

• Proprietary software built to analyze data on attractiveness of new locations• Find attractive places to serve urban and suburban populations

Red – Easy for competitors to develop

Yellow – Possible for competitors to develop

Green – Very difficult for competitors to develop

Internal Analysis – Growth Initiative

• Expanding number of locations at a rapid pace

• Heavy reliance on franchise partners

• Targeting 17% increase per year in number of locations by 2010

• No international locations but considering expansion into Canada

• Is this aggressive growth strategy prudent in the highly competitive and mature QSR industry?

Year Number of new locations

Total Locations

Percent Increase

1993 0 20 N/A

1999 160 180

2006 155 1027

2010 973 2000

Internal Analysis - Franchises• Strong franchise network with strict

requirements to entry• New partners to commit to 15 cafes

over 6 years– Average startup cost $1 million to

$2.25 million per location ($15 million to $33.75 million for 15)

– Majority of franchise partner financed by debt (highly leveraged)

• Can Panera find enough new franchise partners to meet growth targets?

– Strong franchise partners are critical to preserve consistent quality and atmosphere at Panera restaurants

– Bad partner can damage strong customer loyalty Panera has built

– Panera does have out as it can elect to buy out any franchisee for a predetermined price

SWOT Analysis for Panera Bread

Strengths•Strong/Loyal Customer Base in NE & Midwest•Menu Options/ Variety•Able to provide healthy options to customers•Analysis of market

Weaknesses•No presence in large markets (south & west)•Want customers to “discover” Panera•Decentralized Distribution – each café placed orders•Rely on franchise partners as key to growth – very tough standards

Opportunities•130 consumers daily

Threats•Multiple types of competition – fast food, sit down restaurant, eat at home, fast casual •Differentiation?? What makes Panera’s different than competitors•76% of meals eaten at home

Recommendations1. Work with franchisees to acquire Corner Bakery Café??? (Franchisee locations

are more profitable and provide higher ROI)2. Expedite expansion in Canada or International (Europe)??

The BCG MatrixThe Boston Consulting Group (BCG) growth-share

matrix is most often used by organizations in multiproduct and multimarket situations.

BCG matrix offers a way of examining and making sense of a company’s portfolio of product and market interests.

It based on the idea that market share in mature markets is highly correlated with profitability and that is relatively less expensive and less risky to attempt to win share in the growth stage of the market.

Stars Question marks

Cash cows Dogs

Relative market share

High Low1X10X

Rat

e of

mar

ket

grow

th

Hig

hLo

w

The Boston Consulting Group matrix

BCG Matrix: Cash cows

Cash cows: A product with a high market share in a low-growth market is normally both profitable and a generator of cash.

Profits from this product can be used to support other products that are in their development phase, ‘milked’ on an on going basis.

Standard strategy would be to manage conservatively, but to defend strongly against competitors.

BCG Matrix: Dogs

Dogs: A product that has a low market share in a low-growth market is termed a dog in that it is typically not very profitable.

Once a dog has been identified as part of a portfolio, it is often discontinued or disposed of.

More creatively, a small share product can be used to price aggressively against a very large competitor as it is expensive for the large competitor to follow suit.

BCG Matrix: Stars

Stars have a high share of a rapidly growing market and therefore rapidly growing sales.

It is the sales manager’s dream, but the account’s nightmare.

It is often necessary to spend heavily on advertising and product improvement so that when the market slows these products become ‘cash flow.’

If market share is lost, the product will eventually become a ‘dog’ when the market stops growing.

BCG Matrix: Question marks

Question marks are aptly named they create a dilemma.

They already have a foothold in a growing market, but if market share cannot be improved they will become ‘dogs.’

Resources need to be devoted to winning market share.

Stars(ASIA)

Question marks

EUROPE

Cash cows

USA

Dogs

AMERICA

Relative market share

High Low1X10X

Rat

e of

mar

ket

grow

th

Hig

hLo

w

KFC EXAMPLE

Limitation of the BCG Matrix

There are many relevant aspects relating to products that are not taken into account.

The imprecise nature of its four categories and the difficulties inherent in predicting future market growth.

Global activity may add extra dimension to the process of portfolio analysis.