Five Forces Analysis
I. Rivalry Among Competitive Sellers
The restaurant industry is a very competitive industry. On a typical day US consumers spend a total of $1 billion at eating establishments (Thompson). There are constantly new entrants to worry about as well as companies struggling to make a profit. Panera competes on many levels including fast casual dining and specialty foods (Panera). Panera’s main competitors include McDonald’s, Starbucks Coffee and Subway. However there are hundreds of restaurants that compete with Panera on a national, regional, and local level that has a negative impact on the company’s revenue and market share (Panera). To stay profitable in the highly competitive restaurant industry, Panera regularly reviews and revises their menu “to sustain the interest of regular customers, satisfy changing customer preferences, and be responsive to various seasons of the year” (Thompson). Panera develops an advantage in changing their menu over competitors such as McDonald’s and Subway who do not change their menu frequently and customers often lose interest in their menu offerings. Starbucks Coffee however, does offer seasonal coffee beverages and a la carte food items to stay competitive for similar reasons as Panera. Starbucks and Panera have similar in-store atmospheres that make them rivals. Both companies offer an atmosphere that invites patrons to stay for awhile with comfortable chairs, calming music and Wi-Fi. In order to gain a competitive advantage over Starbucks in terms of the atmosphere, Panera introduced meeting rooms at many of its locations to attract large groups of patrons. Panera, in 2004, introduced its catering service Via Panera to further expand the business and gain an advantage over rivals (Thompson).
II. Threat of Substitutes
In the restaurant and food industry, there are not any substantial substitutes to food because people have to eat food every day. Food is a basic need and nothing can substitute that. Since there are no major substitutes the threat is relatively low in this category. However, there are substitutes to Panera’s atmosphere and their coffee selections. Panera has developed an atmosphere that encourages people to hold meetings or get work done at the restaurant. A substitute to this could be to have the meeting in the office or just work from home. Panera has to offer people a reason to come into their restaurant as an alternative to the workplace or their home. The company competes with this substitute by offering a professional calming environment to get their work done without any distractions that may hinder people from working. One of Panera’s signature menu items is its coffee. Substitutes to coffee are caffeinated beverages and energy drinks. Instead of going into a Panera for a coffee, one could simply stop by the gas station and pick up an energy drink of caffeinated beverage. Panera has the advantage with this substitute because many people either prefer coffee or prefer energy drinks and stick to their preference so the risk of customers switching to a substitute is low.
III. Threat of New Entrants
The threat of new entrants is high because barriers to entry are low and the pool of entry candidates is large (Thompson). People are always looking for a new and different place to eat and because of this demand new restaurants open daily. In addition many restaurants do not stay in business for very long due to bad menus, dining experience, food quality and service (Thompson). Barriers to entry are low because there are little regulations from the government, there are usually no patent or legal protection needed, and there are little technological drawbacks that other industries experience (Hudson). If a person raised enough capital they could easily open up their own restaurant without many restrictions. New eateries also have an advantage over established restaurants because consumers are more likely to give new restaurants a try...
Please join StudyMode to read the full document