Panera Porters 5 Forces
Porter’s Five Forces Rivalry Among Competing Sellers: HIGH/MODERATE
The rivalry among competing sellers, often the strongest competitive pressure, is also fairly high for Panera in the restaurant industry. No switching costs, numerous competitors, and an increase in the availability of healthy food
For a company in the restaurant industry, there are no switching costs for consumers. It is not like, for instance, the cable industry where cancellation fees are prevalent or an electronics industry where prices for a new product are high. If one day, the consumer decides that he or she would like to go to Sweet Green for lunch instead of Panera, the only switching cost would be the price difference between the two meals (which may be negligible or favorable for the consumer). This makes competition more important.
Something that Panera must be mindful of is the potential for decreased differentiation between their products and competing brands. Currently they have a strong reputation of providing high quality, healthy, and preservative-free food choices. Demand for this type of food is growing rapidly. As we look to the future it may become less of a strength for Panera and more of an industry standard. With increased demand, more restaurants will be willing to offer this type of product. Already we see a change occurring, according to research done by the Natural Restaurant Industry in 2010-2011 which indicated that more than half of all restaurants are offering locally sourced produce.
Related, is the fact that there are an incredibly large number of competitors in the restaurant industry in general, whether they offer organic/healthy options or not. Restaurants that offer Asian, Mexican, American, Italian, etc. must all be considered. There is an incredibly high number of competing restaurants for consumers to choose between. The number of eating place establishments in the US is 970,000.
There are a couple factors that work in Panera’s favor.
The rivalry among competing sellers, often the strongest competitive pressure, is also fairly high for Panera in the restaurant industry. No switching costs, numerous competitors, and an increase in the availability of healthy food
For a company in the restaurant industry, there are no switching costs for consumers. It is not like, for instance, the cable industry where cancellation fees are prevalent or an electronics industry where prices for a new product are high. If one day, the consumer decides that he or she would like to go to Sweet Green for lunch instead of Panera, the only switching cost would be the price difference between the two meals (which may be negligible or favorable for the consumer). This makes competition more important.
Something that Panera must be mindful of is the potential for decreased differentiation between their products and competing brands. Currently they have a strong reputation of providing high quality, healthy, and preservative-free food choices. Demand for this type of food is growing rapidly. As we look to the future it may become less of a strength for Panera and more of an industry standard. With increased demand, more restaurants will be willing to offer this type of product. Already we see a change occurring, according to research done by the Natural Restaurant Industry in 2010-2011 which indicated that more than half of all restaurants are offering locally sourced produce.
Related, is the fact that there are an incredibly large number of competitors in the restaurant industry in general, whether they offer organic/healthy options or not. Restaurants that offer Asian, Mexican, American, Italian, etc. must all be considered. There is an incredibly high number of competing restaurants for consumers to choose between. The number of eating place establishments in the US is 970,000.
There are a couple factors that work in Panera’s favor.