Week 7 Discussion - Panera Bread (Case 5.1) 1. What environmental trends have influenced Panera's industry? 2. In Panera's industry, the threat of new entrants is high. What barriers to entry has Panera Bread created for potential competitors? 3. What type of industry is Panera Bread in? (See pages 175 to 178 in your textbook.) Explain your answer. CASE 5.1 Panera Bread: Occupying a Favorable Position in a Highly Competitive Industry Web: www.panerabread.com Twitter: Panera Bread Facebook: Panera Bread Bruce R. Barringer, Oklahoma State University R. Duane Ireland, Texas A&M University the newly combined companies observed that people were increasingly looking for products that were "special"- that were a departure from run-of-the-mill restaurant food. Second, they noted that although consumers were tiring of standard fast-food fare, they didn't want to give up the convenience of quick service. This trend led the company to conclude that consumers wanted the convenience of fast food combined with a higher-quality experience. In slightly different words, they wanted good food served quickly in an enjoyable environment. Introduction If you analyzed the restaurant industry using Porter's five forces model, you wouldn't be favorably impressed. Three of the threats to profitability--the threat of substitutes, the threat of new entrants, and rivalry among existing firms- are high. Despite these threats to industry profitability, one restaurant chain is moving forward in a very positive direction. St. Louis-based Panera Bread, a chain of specialty bakery-cafs, has grown from 602 company owned and franchised units in 2003 to 1,450 today. In 2010, sales increased by 7.9 percent. In 2010 and 2009, combined sales jumped 10.1 percent. These numbers reflect a strong performance for a restaurant chain, particularly during a difficult economic period. So what's Panera's secret? How is it that this company flourishes while its industry as a whole is experiencing difficulty? As we'll see, Panera Bread's success can be explained in two words: positioning and execution Changing Consumer Tastes Panera's roots go back to 1981, when it was founded under the name of Au Bon Pain Co. and consisted of three Au Bon Pain bakery-cafs and one cookie store. The company grew slowly until the mid-1990s, when it acquired Saint Louis Bread Company, a chain of 20 bakery-cafs located in the St. Louis area. About that time, the owners of The Emergence of Fast Casual As the result of these changing consumer tastes, a new category in the restaurant industry, called "fast casual." emerged. This category provided consumers the alternative they wanted by capturing the advantage of both the fast-food category (speedand the casual dining category (good food), with no significant disadvantages The owners of Au Bon Pain and Saint Louis Bread Company felt that they could help pioneer this new category, so they repositioned their restaurants and named them Panera Bread. The position that Panera moved into is depicted in the graphic titled "Positioning Strategy of Various Restaurant Chains." A market positioning grid provides a visual representation of the positions of various companies in an industry. About (continued