The source problem I would like to state here is that the Panera Bread Company is facing a stiff potential competition in the future. This would make it difficult for them to create an optimization of brand even though they have created a successful stand in the market providing higher quality meals and unique dining environment. Panera has been focusing on the growth of its operations all over the world through their own business set ups and franchisees from which they try to reduce costs out of the value chain. Optimization could lead to poor quality of products, low customer satisfaction and decline of profits in the business.
2. Secondary Problem:
1. Strategic Issues: These issues arise out of inappropriate strategies being implemented to the current market situation by which the company doesn’t meet its individual goals and deadlines and also brings down the profit margins. One of the most inappropriate strategies was to capitalize on the market potential by striving continuously on opening both franchisees based and company owned based stores simultaneously on a faster pace. This led them to focus more on stores and less on the product quality and their customers. Growth strategy is an area of concern for Panera Bread Company by which they don’t focus to break into the existing market in which they operate and give importance to market development of their product. This would give an edge for the competitors to improvise their growth strategy not met by Panera Bread Company and attract the consumer market.
2. Low product quality: Since Panera faces a tough competition in the fast food industry with capitalized competitors like Mc Donald’s and Starbucks it would be a tough task for them to build brand image and recognition in the international market. In the midst of creating a brand value for the company, Panera might focus more on how to tackle with the competition and could ignore the quality of the product produced.
3. Price: Panera Bread Company has a relatively higher pricing approach, through which it tries to inform their customers that it is worth paying for their products by providing them with higher quality ingredients, artisan breads and anti-biotic free chicken. This pricing system of Panera Bread Company can create competition when the competitors introduce similar low quality product at a much cheaper rate in order to attract the target market.
1. Over expansion – Panera has been focusing on huge expansion plans of its units to distribute itself to a wider market. In April 2006, they have entered into a contract to open around 42 franchisee groups which would cover 54 markets in 34 states. These franchisees also have plans to expand to more bakery café’s to around 425 units. Most of the revenues and income of Panera has been derived from the franchisees itself. This charges them to expand their units as much as they could to attain a higher market share and customer loyalty. But at the same time high competition is faced since over expansion can lead to concerns arising on the quality of the product due to changing locations and products.
2. Profit Decline in 2006:
| |2002 | 2006 | |Liquidity (Current Ratio) |1.83 |1.16 | |Operating Profit margin |12.0 |11.0 | |Net Profit margin |.076 |.071 |
The liquidity of the company has been declined by a margin of .67 between the year 2002 and 2006. This shows that the company might now face difficulties to cover up short term debts and also predicts that there is...