Panera Bread operates more than 1,600 bakery-cafés in 44 states and Canada. How many of the four tests of the competitive power of a resource does the store network pass? Explain your answer.
Founded 31 years ago, Panera Bread has made a name of its own in the current date. It has expanded to now have 2,100 stores as of November 2017 (Panera Bread, 2017). The company is currently owned by JAB Holding Company which also owns Paradise Bakery & Café, Peet’s Coffee, Mighty Leaf Tea, and several other brands. The company specializes on bakery café type menu category as per its name and falls under the fast-casual segment of the market. As per one of the ranking Panera Bread falls on the 11th rank as per the sales revenue in the United States as of 2017 (Technomic Inc, 2018). They left behind some of the popular brands like KFC behind as well. The company aims to use cage-free eggs in all their store by 2020 (Ross, 2015). To see how well the business flairs when it comes to four tests of the competitive power, the business ability with regard to VIRN is accounted for. VRIN tests for valuable, rare, inimitable and non-substitutable (Gamble, Thompson & Peteraf, 2016). The more of the test and the performance in each one of them is as explained below:
Valuable : The company with 2017 store locations in the United States and hundreds more in Canada, grew the total number of stores by 3.2% from the previous year and their YOY sales by 5.8% show it is certainly valuable (Panera Bread/Saint Louis Bread Co., 2018). The company with that large number of stores have a wider coverage and convenience for people to visit their store. When you have one close to you, you’re more likely to visit it else people may move out to another competing product. This large number of stores allow them to cover a wider area and cater to the needs of the people. This does show that the company passes this test.
Rare : Panera Bread is a bakery café and offers items like bakery item, soups, specialty drinks, salads, sandwiches, and pasta. The business also has over two thousand stores in several parts of the United States and Canada. This is not that easy to copy for business, not in this category. Einstein Bros. Bagels is the closest competitor to the business and they’ve got a negative growth of 7.2% last year and were forced to close few of their outlet to survive, which does suggest that the entry into the market and rapid expansion isn’t possible easily (Einstein Bros. Bagels, 2018). They also have less than 10 times the sales as of Panera Bread. There are other market players however in fast food category which may enter the fray but their USP is a lot different from what Panera Bread does and thus may cause more harm than good. So, the company does pass this test as well.
Inimitable : If we’re to look at the bakery café that exists, the second highest number of outlet is by Einstein Bros. Bagels which has 395 stores and behind it is Bruegger’s Bagels which has 260 stores as of 2017. Both of them have lesser number of stores compared to the previous year. Other brands like Dominos, Pizza Hut, Chick-Fil-A which gross the highest sells even more than that of Panera Bread do have the capability to expand their menu item and enter into the new segment at least if we’re to look at the financial power. But to get anywhere close to where Panera Bread is and also move away from their current offerings of Pizza, Chicken and other specialized items, it’s a huge undertaking. Even with the financial power, when it comes to gaining a new customer, suppliers and to even acquire or train employees with regard to a different system of the bakery is a huge challenge. Considering this, Panera Bread does pass through this test as well.
Non-substitute : Panera Bread is known as a clean-ingredient bakery-café chain. Other businesses can come up with a different product under the same category to slowly make people move away from the brand. Also, rivals can start taking online order with home delivery service such that they can cater to the customer who is a bit far from their normal store location. That way they can start gaining more and more customer and expand their reach. With the financial power of the rivals in a similar category, that is very much possible and could lower the profit of Panera Bread. Thus, the business doesn’t pass this test.
From the analysis and explanation above, Panera Bread passes three of the four test of the competitive power of resource.
Einstein Bros. Bagels. (2018). Retrieved from https://www.restaurantbusinessonline.com/top-500-chains-2017/einstein-bros-bagels
Gamble, J., Thompson, A., & Peteraf, M. (2016). Essentials of Strategic Management (5th ed.). New York: McGraw-Hill Education.
Panera Bread History. (2017). Retrieved from https://www.panerabread.com/en-us/company/about-panera/our-history.html
Panera Bread/Saint Louis Bread Co. (2018). Retrieved from https://www.restaurantbusinessonline.com/top-500-chains-2017/panera-breadsaint-louis-bread-co
Ross, A. (2015). Panera to Use All Cage-Free Eggs by 2020. Retrieved from http://time.com/4101884/panera-cage-free-eggs/
Technomic Inc. (2018). 2017 Top 500 Chain Restaurant Report . Chicago, Illinois.
Panera Bread is a chain of stores serving bakery items and a casual restaurant in the United States and Canada. Its typical location are the suburban strip malls and target customers are the bread loving trendsetters and traditionalists. With lunch and afternoon as the busiest times and providing order or pick up at the counter its competitive edge would be the fresh dough prepared every day. (Barancik, 2002)
Competitive value of the resources or capability
Competitive value is something that the company has those others do not. This is something that stands out. For Panera Breads its service and product was something that was unique which that catered to the unseen segment of fast food and fine dining. For over 15 years they were the early bird in the segment (Dow Jones, 2015). They have introduced an online order where customers place order and do not have to stand in long lines. They differentiate themselves from others with their ambience which boasts of freshness and an oasis away from the everyday rush of life. The customers are greeted by name and big loafs of bread proudly showing the time it was taken out of the oven.
Capability to copy and imitate
Eatery chain such as Panera Bread may have competitive advantage, and rarity in its product but it is nothing that others cannot copy or imitate. This segment was enjoyed by Panera Breads for almost 15 years before other competitors entered the market.
Rarity of the resource or capability
Panera Breads excels and is strict about fresh and health eating. They are critical in purchasing antibiotic free chicken and also bake their breads on location and whole grain breads. They value their employees and offer them 50% to 75% up to 10$ meal in any of their shops. "A Panera Bread baker wrote in a 2015 Reddit AMA that they were able to “take home ten dollars-worth of food every time I work” at their restaurant.Imitability or able to copy resources or capability (Cain, 2018).”
For Panera Breads substitution comes in the form of Starbucks and Atlanta Breads to name a few. Any eatery that caters to the health meal between fast food and fine dining and provides its services at the lunch and high noon hours can be substitution for what Panera Bread has to offer.
In these ways Panera Bread stands performing strong each year. Their main focus should be both customer relation and product quality that is going great for the company. There however was a leak in their website where millions of customer’s personal data was leaked which was something the company should have managed better as their customer loyalty is very high and this is their competitive advantage over their rivals.
Barancik, S. (2002, October 2). DOING IT FOR THE DOUGH:. St. Petersburg Times; St. Petersburg, Fla.
Cain, A. (2018, August 4). 7 insider facts about Panera Bread that employees know and most customers don’t. Business Insider .
Dow Jones. (2015, February 21). CEO Spotlight: “Flour On His Shoes” – Barron’s. Dow Jones Institutional News; New York .
Panera Bread is the one of the largest breaker company in USA. It was first founded by Ronald M. Shaich and he is Chairman of that breaker company since in 1987 to current. It is food and beverage industry and it has 2100 plus stores in USA and Canada and they are also planning to expand it all over the world. The main head office of the breaker shop is Sunset Hills Missouri. Mr. Blaine E. Hurst is CEO and President of company. The major product of the company is Sells soups, breaker items, paste, salad etc. From 2016 annual report, the annual revenue was $2.8 billion and the total asset is $1.6 billion and the total number of staff was 50000. Panera Bread company is the sister organization of JAB holding company (Company Overview of Panera Bread Company, 2018). It is one of the growing and branded bread shop in the world.
The following are the 4 tests of the competitive power of Panera Bread Company. (Competitive Power Test (VRIN)):
Valuable: The Company has a strong food policy and they are one of top bakery shop in world. It is a big bakery brand and its market value is high. They manufacture different bakery product like soups, breaker items, paste, salad etc. most raw materials are developed from company self. They use clean ingredients to make their product so that the trust of customer is very high and they capture the large market due to their quality product. The main strategy of the company is they provide high quality food for their customer at low cost so that they have large market segment. So, this company passes the valuable test.
Rare: As I already told that they self-developed bakery raw material so that they can serve quality food product to their customer at a low cost. They have strong and unique food and breakery research and development team. So that they can manufacture variety of product by mixing those raw materials. So they severe rare and unique bread and soup items by mixing different raw materials. So, this company passes this test.
Imitable: The bakery industry in USA is very competitive job. So they should have strong market policies for existing the market because there are others big competitors like Starbuks, and Chipotle Mexican Grill. They are popular and big brand in USA so for competing with these, the company has big show room in high - center shopping center, they already tie-up with other Mart and showroom like Walmart and others. They use healthy food ingredients and quality raw material so that customer have high trust among the company. Its customer relationship strategy is also very good.
Non-substitutable: By using clean ingredients and high quality raw materials, it is one of the best and branded bakery items so that others brands have difficult to replace this brand. The resources used by this company are not substitutable because of their need for organic natural dough, which is needed to keep quality on their products (Kukuljan, 2017).
Company Overview of Panera Bread Company . (2018). Retrieved from Bloomberg: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=252717
Competitive Power Test (VRIN) . (n.d.). Retrieved from the website too: http://websitetoon.com/resources/strategy/competitive-power-test-vrin/
Kukuljan, S. (2017). Reporter of Panera Bread Industry. St. Louis Business Journal .
Panera Bread, an American chain of bakery cafe located in the United States and Canada combines the concept of fast food and fine dining together to serve the customers in the best possible manner. It owns, operates and franchises retail bakery cafes and offers freshly baked breads, bagels, muffins, sandwiches, muffins along with soups, salad, pasta and beverages to a wide range of customers through more than 1600 bakery cafes located in 44 locations (Bloomberg, 2018).
The competitive power of resource or capabilities of an organization is measured to determine where the company stands in the market. The VIRN test that stands for valuable, inimitable, rare and non-substitutable is conducted to examine the sustainable competitive advantage of the company. The more tests a company pass, the better position it holds in the market (Gamble, Petaraf, & Thompson, 2015). The competitive power of Panera Bread is also examined under this four headings:
Is the Resource Competitively Valuable?
The resource available, at its basic should contribute in the company’s strategy to be valuable. The valuable resources serve as the core competencies of the organization that will help it compete in the market (Gamble, Petaraf, & Thompson, 2015). Relating to Panera Bread, it follows the food policy and provide freshly baked/cooked items using clean ingredients. The artificial additions like color, sweetness, flavors and preservatives is avoided by the company. In addition, the customers do not have to wait for longer time to get their orders delivered. The offering of healthier and high end food at reasonable prices in comparison to the competitors like McDonald, Popeye, Olive Garden and Chili make it pass this test (Bruno & Doolin, 2017).
Is the Resource Rare?
Having rare resources will provide the company with uniqueness in the market and the consumers will be ready to pay premium price for its products and services. In case of Panera Bread, the cafes are located at regional shopping malls and trade centers that help it reach the target audience easily making the company a national brand. Similarly, the brand image, team-oriented and dedicated employees, proper supply chain and location enables the company to offer fresh menu items in regular basis that is not possible in every bakery and fast food cafe. The unique combination of fast food and fine dining itself makes the company rare (Custom Essays, 2018).
Is the Resource Inimitable?
The resources of a company are said to be inimitable if the social complexity and causal ambiguity of the resources make it difficult for other companies to copy them. The inimitability of resources help the company to sustain the competitive rivalry in the market (Gamble, Petaraf, & Thompson, 2015). Other companies may copy some of the ingredients used by Panera Bread but copying the entire process of delivering healthy food quickly at lower price in the prime locations is not something that the competitors will be able to do. In addition, copying the practices of offering free refill of beverages, not using artificial additives, using clean ingredients, getting equally qualified employees will be costlier for the competitors to imitate. Thus, Panera Bread passes the test of inimitability too.
Is the Resource Non-substitutable?
If the company’s resources are non-substitutable, it will have competitive advantage over the competitors. For Panera Bread, the ingredients it uses can be acquired by the competitors and they could use new and advanced technology to make better products than that of Panera Bread and substitute it in the market. The competitors of Panera Bread like Starbucks, McDonald, Subway and Popeye are financially strong to invest in research and develop new products that will cater the similar needs of customers in cheaper and more efficient ways. So, the company does not pass this test as there is always chances of better substitute products coming in the market.
To conclude, Panera Bread has competitive advantage in terms of valuable, rare and inimitable resources. However, it needs to pay more attention towards innovation for preventing the effect of substitute products in its business.
Bloomberg. (2018, September 21). Company Overview of Panera Bread Company. Retrieved from Hotels, Restaurants and Leisure: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=252717
Bruno, A., & Doolin, H. (2017, May 4). 15 Things You Need To Know Before Eating At Panera Bread. Retrieved from Delish: https://www.delish.com/food-news/a45940/things-you-didnt-know-about-panera-facts/
Custom Essays. (2018). Panera Bread Analysis. Retrieved from Custom Written Essays: http://911customessay.com/panera-bread-analysis/
Gamble, J. E., Petaraf, M. A., & Thompson, A. A. (2015). Essentials of Strategic Management: The Quest for Competitive Advantage (Fourth ed.). New York: McGraw Hill Education.