Occupying a Favorable Position in
a Highly Competitive Industry
Group 4
• Louis Bohan
• Tsatsral Dorjsuren
• Amarzaya Nasanjargal
Introduction
• Saint.Louis Panera Bread, specialty bakerycafes, has grown from 602 company-owned
and franchised units in 2003 to 1,270 today.
• In 2008 alone: sales increased by 23%,
• How come that Panera-Bread is prospering
while others are experiencing difficulties?
• Key of success of Panera Bread’s is
positioning and execution.
History
• It was founded in 1981 as Au Bon Pain.Co by
Louis Kane
• The company grew slowly until mid 1990,
when it acquired a company, chain of 20
bakery–cafes located in the St. Louis area.
• In 1993 acquired the St. Louis Bread
Company and change name to Panera
Bread
o
o
As a result of these changing , a new category
in the restaurant industry, called “fast casual,”
emerged. This category provided consumers
the alternative they wanted by capturing
advantage of the both fast food category
(speed) and casual dining category (good
food).
The position that Panera moved into is
depicted in the graphic titled “Position Strategy
of Various Restaurant Chain”.
Panera’s Version of Fast Casual
o They established fast-casual category and
added a bonus to mix – specially food.
o The company has become known as the
nation’s bread expert and offers a variety of
artisan breads, pastries, and baked goods.
o Panera Bread’s restaurants are open for
breakfast, lunch and dinner and also offer handtossed salads, sandwiches, hearty soups, hot and
cold coffee drinks.
o The company also provides catering services
through Via Panera catering business.
o Panera even suggests new time of day to eat
specially foods, calling the time between lunch
and dinner “chill-out” time.
o Panera Bread is now the acknowledged leader
in the fast casual category, sales were $941
billion in 2008.
o It is unique blend of fast-casual service and
specialty foods also continues to gain
momentum.
Discussion
Questions
Question 1 Part A
• How has Panera Bread
established a unique
position in the
restaurant industry?
• Saw a growing niche
“Fast Casual” market:
o
o
o
o
Tired of standard fast-food
Fastfood convenience
Special food selection
“The convenience of fast-food
combined with a higher-quality
experience.”
Question 1 part 2
• How has this unique
position contributed to
its success?
• They created a niche
market between
already established
markets; (1)fast-food,
and (2)traditional
higher quality
restaurants
• Faster and more
convenient than
traditional restaurants
• Higher quality food and
experience than fastfood restaurants
Question 1 part 3
• Do you think Panera
Bread will reach its goal
of becoming a leading
national brand in the
restaurant industry?
Why or why not?
• Yes, because:
o Fills void between fast, but bad
quality AND good but too slow
o Other restaurants are betting
on this new niche sector;
Chipotle, Five Guys, Panda
Express
o The niche is not a fad, but a
structural change in demand
• No, because:
o Many hybrid products fail, and
a hybrid restaurant will, too
o Confusing to customers, as to
what type of business it is
o Difficult to market to target
demographic
Question 2
Analyze the
restaurant industry
using Porter’s five
forces model. In
what ways has
Panera Bread
successfully
Positioned itself
against the forces
that are suppressing
the profitability of the
restaurant industry as
a whole?
Threat of
New
Entrants
Bargaining
Competitive
Rivalry
Power of
Suppliers
Within the
Industry
Threat of
Substitutes
Bargaining
of Buyer
Bargaining
Power of
Suppliers
Bargaining Power of
Suppliers
• This force is strong for “fast casual” sector, but weak
for most US restaurants due to the large variety of
average quality suppliers to choose from
• However, “Fast Casual” offers “special” quality food
at a competitive price. This means:
o Fewer suppliers to choose from
o Suppliers can set the price
o Higher food costs for Panera, Chipotle, etc.
• Example: Chipotle offers:
o Organic vegetables
o Free range and hormone/anti-biotic-free meats
Result: smaller profit margin between the high cost of high quality food and
the price that fast-food consumers are willing to pay.
Bargaining
of Buyer
Bargaining Power
of Buyer
• This force is strong, because in the US there is a wide
variety of cheap “fast-food” restaurants.
• Fast-food restaurants can very easily add higher
quality items to menu, satisfying both “fast-food”
and “fast-casual” customers.
• Panera cannot satisfy the budget-oriented fastfood customers, so this market will be lost.
Threat of
New
Entrants
Threat of
New Entrants
• This force is very strong, because entry cost in US is
relatively low (avg. startup costs $225,000)
• Entry is easy
• Experience, not only food are important in “fast
casual” sector, so newcomer could capture market
share simply by offering a new experience
Competitive
Rivalry
Within the
Industry
Competitive Rivalry
Within the Industry
• Based on firms gaining a competitive advantage,
using one of four ways:
1. Changing Prices
2. Improving product differentiation
3. Creatively using channels of distribution
This force is strong, because competitors can easily
compete with “fast casual” restaurants?
• Fast food restaurants can rebuild interiors and add
new high quality menu items
• Traditional restaurants can lower prices and
increase speed of service
Threat of
Substitutes
Threat of
Substitutes
• This force is strong
• Because “Fast casual” restaurant prices are same,
$7-$11 avg. check
• Because customers may choose cheaper fast-food
restaurants, or eat at home
• Customers have many options
Only advantages:
• Over fast food: fast casual has casual dining lounge
• Over Casual restaurants: if customer wants to sit
down and be waited on, and pay more
Question 3
• What barriers to entry has Panera Bread created
for potential competitors?
• How significant are these barriers?
Question 3
1. A barrier to entry can be defined as obstacle that makes
new firm difficult to enter a given industry.
o products differentiation to try differentiate itself from its rivals and this
has created brand recognition for customer because their products are
distinctive in terms of their taste and quality –> new related products
hardly penetrate the market
2. Another barrier that Panera Bread has created to limit the
new entrant is cost advantages independent of size.
o
o
Panera Bread as a first mover defined shape, size, taste and anything
else that this industry was going to be
Panera has more than 20 years experience which new entrants don’t
have
Question 4
• What are the Panera Bread’s primary sources of
competitive advantage?
• In your judgment, are these sources of
advantage sustainable? Why or why not?
Question 4
• Positioning in restaurant industry (good food served
quickly)
• Establishing of new category fast casual (is not
associated with unhealthy food)
o good and healthy food is served fast
o Food is more healthy than in fast food (Mc Donalds) and the food is
served quickly than in restaurants
• Nice and warm atmosphere of restaurants (exterior
and interior)
Question 4
• Yes
• Since people put more and more focus on healthy
living style as well as are busy and do not have lot
of spare time, they will always need healthy food
that is served quickly
• Panera-Bread has great background (knowledge
as well as finance) to maintaint this business
sustainable by keeping follow the customer‘s needs
(regarding assortment, environment…innovation)
Application Question 2
Think of at least two other businesses that have established
unique positions in their industries. How have their unique
positions contributed to their success?
Monsanto
• Uses patented GMO
• Products optimized for
existing pesticide
• Sells product on subscription
basis
• Cross-pollination causes
accidental seeding
• Farmers sued for illegal use,
or forced to subscribe
Paypal
• Created a bot that would
buy goods on eBay, then
insist on using Paypal to pay
• Created fake activity to
incentivize sellers to use
Paypal, “seeding demand”
• Sellers then asked other
buyers to use Paypal
• Paypal’s reliability lead to
dominance
References
• http://www.ohiodominican.edu/uploadedFiles/Libr
ary/CoursePages/Courses/Bus/Bus498/ApplicationPortersFiveForcesModelPaperExample.pdf
• http://www.mathmarketing.com/content/are-youtrying-solve-too-many-problems
• http://platformed.info/seeding-youtubemegaupload-paypal-reddit/