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What Does Internal Analysis Tell Us?

Internal analysis provides a comparative look at


a firm’s capabilities

• what are the firm’s strengths?

• what are the firm’s weaknesses?

• how do these strengths & weaknesses compare


to competitors?
Why Does Internal Analysis Matter?

Internal analysis helps a firm:

• determine if its resources and capabilities are


likely sources of competitive advantage.

• establish strategies that will exploit any sources


of competitive advantage.
Panera Bread Company
Key Question for Panera
Bread

• Is the plan of expansion and reliance


on franchise partners the right
strategy for Panera Bread to grow at
the rate they want to?
Panera Bread Company
Overview
Origin 1981 Au Bon Pain Company
founded by Louis Kane and Ron
Shaich.

Growth on US East Coast & 1980’s and 90’s – stores opened in


Internationally malls, airports, shopping centers.
Industry Overview (Supply)
Porter’s five forces:
Threat of
substitute products
HIGH

Bargaining power Bargaining power


of suppliers Rivalry among of buyers
existing competitors
LOW HIGH

Threat of
new entrants
LOW
Porter’s Five Forces
Factor Analysis Impact
Threat of substitute • Substitute products are easily accessible HIGH
products (eat at home, convenient stores)
• Economic downturn limits disposable
income – substitute products become more
appealing.
Bargaining power of• Panera has multiple options to source each LOW
suppliers ingredient they use.
Bargaining power of• Economic downturn’s affect on consumer HIGH
buyers eating behaviors – cheaper meal at home.
• Over 21 direct competitors/alternative
eating establishments of Panera.
Competitive rivalry • Differentiation and constant menu changes INTENSE
to appeal to consumer preferences.
•Many competitors in industry.

Threat of new • High investment threshold to enter market LOW


entrants
Industry Overview (Supply)
Factor Ranking (1-5)
Threat of substitute products 5
• Full range of alternatives; eat at home,
fast-food, formal dining out
•Substitute products offer lower prices and
convenience.
•The majority of meals are eaten at home
– 76%

Bargaining power of suppliers 1


• Panera is not limited by sourcing from a
single supplier
• Several suppliers are available for each
ingredient

Bargaining power of buyers 4


• Switching costs are non-existent for
consumers with varied options
Industry Overview (Supply)
Factor Ranking (1-5)
Rivalry among existing competitors 5
• Consumer preferences are constantly
being targeted and adapted to by
competitors
• Competition is competing for $1 bn in
daily sales

Threat of new entrants 1


• Substitute products offer lower prices
and convenience.
•The majority of meals are eaten at home
– 76%
Internal Analysis – Core
Core
Competencies
Description
Competency

Diverse Menu • Lots of variety, constantly


experimenting
• Options for all meals and times
of day
• High quality food at reasonable
price

Strong • JD Power and Associates


Brand/Customer satisfaction award for QSR in
Loyalty Midwest and Northeast
• “Best Of” awards in nearly all
mkts in 36 states
Strong • Employee training and
Relationship with certifications
Existing • Assistance with site selection
Franchise and marketing
Partners •High satisfaction with concept
and support received Red – Easy for competitors to
develop
Identifying Where • Proprietary software built to
to Locate New analyze data on attractiveness
Stores of new locations Yellow – Possible for competitors
• Find attractive places to serve
urban and suburban populations
to develop

Green – Very difficult for


competitors to develop
Internal Analysis – Growth
Initiative
• Expanding number of Year Number Total Percent
locations at a rapid pace of new Location Increase
• Heavy reliance on locations s
franchise partners
• Targeting 17% increase
per year in number of
locations by 2010 1993 0 20 N/A
• No international locations
but considering 1999 160 180
expansion into Canada
• Is this aggressive growth
strategy prudent in the 2006 155 1027
highly competitive and
mature QSR industry?
2010 973 2000
Internal Analysis -
Franchises
• Strong franchise network with strict
requirements to entry
• New partners to commit to 15 cafes
over 6 years
– Average startup cost $1 million to
$2.25 million per location ($15
million to $33.75 million for 15)
– Majority of franchise partner
financed by debt (highly leveraged)
• Can Panera find enough new
franchise partners to meet growth
targets?
– Strong franchise partners are
critical to preserve consistent
quality and atmosphere at Panera
restaurants
– Bad partner can damage strong
customer loyalty Panera has built
– Panera does have out as it can elect
to buy out any franchisee for a
predetermined price
SWOT Analysis for Panera
Bread
Strengths Weaknesses
•Strong/Loyal Customer Base in NE •No presence in large markets
& Midwest (south & west)
•Menu Options/ Variety •Want customers to “discover”
•Able to provide healthy options to Panera
customers •Decentralized Distribution – each
•Analysis of market café placed orders
•Rely on franchise partners as key
to growth – very tough standards

Opportunities Threats
•130 consumers daily •Multiple types of competition – fast
food, sit down restaurant, eat at
home, fast casual
•Differentiation?? What makes
Panera’s different than competitors
•76% of meals eaten at home
Recommendations
1. Work with franchisees to acquire Corner Bakery Café???
(Franchisee locations are more profitable and provide higher
ROI)
2. Expedite expansion in Canada or International (Europe)??
The BCG Matrix
 The Boston Consulting Group (BCG) growth-share
matrix is most often used by organizations in
multiproduct and multimarket situations.
 BCG matrix offers a way of examining and making
sense of a company’s portfolio of product and
market interests.
 It based on the idea that market share in mature
markets is highly correlated with profitability and
that is relatively less expensive and less risky to
attempt to win share in the growth stage of the
market.
Relative market share
High Low
10X 1X
High

Stars Question marks

Cash cows Dogs


kr a mf o et a R
Low

The Boston Consulting Group matrix


BCG Matrix: Cash cows
Cash cows: A product with a high market
share in a low-growth market is normally both
profitable and a generator of cash.
Profits from this product can be used to support
other products that are in their development
phase, ‘milked’ on an on going basis.
Standard strategy would be to manage
conservatively, but to defend strongly against
competitors.
BCG Matrix: Dogs

Dogs: A product that has a low market share in


a low-growth market is termed a dog in that it is
typically not very profitable.
Once a dog has been identified as part of a
portfolio, it is often discontinued or disposed of.
More creatively, a small share product can be
used to price aggressively against a very large
competitor as it is expensive for the large
competitor to follow suit.
BCG Matrix: Stars
 Stars have a high share of a rapidly growing market
and therefore rapidly growing sales.
 It is the sales manager’s dream, but the account’s
nightmare.
 It is often necessary to spend heavily on advertising
and product improvement so that when the market
slows these products become ‘cash flow.’
 If market share is lost, the product will eventually
become a ‘dog’ when the market stops growing.
BCG Matrix: Question
marks
Question marks are aptly named they
create a dilemma.
They already have a foothold in a growing
market, but if market share cannot be
improved they will become ‘dogs.’
Resources need to be devoted to winning
market share.
Relative market share
High Low
10X 1X
High

Stars(ASI Question marks


A) EUROPE

Cash cows Dogs


kr a mf o et a R

USA AMERICA
Low

KFC EXAMPLE
Limitation of the BCG Matrix

There are many relevant aspects relating


to products that are not taken into account.
The imprecise nature of its four categories
and the difficulties inherent in predicting
future market growth.
Global activity may add extra dimension
to the process of portfolio analysis.