barringer e3 ppt 05

©2010 Prentice Hall 5-1

Chapter 5

Industry and Competitor Analysis

Bruce R. Barringer

R. Duane Ireland

©2010 Prentice Hall

Opening CaseBusinessesAtoZ

www.businessatoz.com

• Example of conscious positioning of a new business to offer the advantages that large competitors offer (reliability of webhost like Yahoo)…but the responsiveness of a small competitor.


Chapter Objectives1 of 2

1. Explain the purpose of an industry analysis.

2. Identify the five competitive forces that determine industry profitability.

3. Explain the role of “barriers to entry” in creating disincentives for firms to enter an industry.

4. Identify the nontraditional barriers to entry that are especially associated with entrepreneurial firms.

5. List the four industry-related questions to ask before pursuing the idea for a firm.


Chapter Objectives2 of 2

6. Identify the five primary industry types and the opportunities they offer.

7. Explain the purpose of a competitor analysis.

8. Identify the three groups of competitors a new firm will face.

9. Describe ways a firm can ethically obtain information about its competitors.

10. Describe the reasons for completing a competitive analysis grid.


What is Industry Analysis?

• Industry– An industry is a group of firms producing a similar product

or service, such as airlines, fitness drinks, furniture, or electronic games.

• Industry Analysis– Is business research that focuses on the potential of an

industry.


What is Industry Analysis Important?

Industry Analysis

Importance

• Once it is determined that a new venture is feasible in regard to the industry and market in which it will compete, a more in-depth analysis is needed to learn the ins and outs of the industry.• The analysis helps a firm determine if the niche market it identified during feasibility analysis is favorable for a new firm.


Three Key Questions

When studying an industry, an entrepreneur must answer three questions before pursuing the idea of starting a firm.

Is the industryaccessible—in other

words, is it is realisticplace for a new venture to enter?

Are there positions in the industry that avoidsome of the negative

attributes of the industry as a whole?

Does the industrycontain markets that

are ripe for innovationor are underserved?

Question 1 Question 3Question 2


How Industry and Firm-Level FactorsAffect Performance

• Firm Level Factors– Include a firm’s assets, products, culture, teamwork among

its employees, reputation, and other resources.

• Industry Level Factors– Include threat of new entrants, rivalry among existing

firms, bargaining power of buyers, and related factors.

• Conclusion– In various studies, researchers have found that from 8% to

30% of the variation in firm profitability is directly attributable to the industry in which a firm competes.


Techniques Available to Assess IndustryAttractiveness

Study Environmentaland Business Trends

The Five CompetitiveForces Model

Assessing Industry Attractiveness


Studying Industry Trends

• Environmental Trends– Include economic trends, social trends, technological

advances, and political and regulatory changes.

– For example, industries that sell products to seniors are benefiting by the aging of the population.

• Business Trends– Other trends that impact an industry.

– For example, are profit margins in the industry increasing or falling? Is innovation accelerating or waning? Are input costs going up or down?


The Five Competitive Forces Model1 of 3

• Explanation of the Five Forces Model– The five competitive forces model is a framework for

understanding the structure of an industry.

– The model is composed of the forces that determine industry profitability.

– They help determine the average rate of return for the firms in an industry.



• Explanation of the Five Forces Model (continued)– Each of the five-forces impacts the average rate of return

for the firms in an industry by applying pressure on industry profitability.

– Well managed firms try to position their firms in a way that avoids or diminishes these forces—in an attempt to beat the average rate of return of the industry.


Threat of Substitutes1 of 3

• Threat of Substitutes– The price that consumers are willing to pay for a product

depends in part on the availability of substitute products.

– For example, there are few if any substitutes for prescription medicines, which is one of the reasons the pharmaceutical industry is so profitable.

– In contrast, when close substitutes for a product exist, industry profitability is suppressed, because consumers will opt out if the price gets too high.



• Threat of Substitutes (continued)– The extent to which substitutes suppress the profitability of

an industry depends on the propensity for buyers to substitute between alternatives.

– This is why firms in an industry often offer their customers amenities to reduce the likelihood that they will switch to a substitute product, even in light of a price increase.



• A customer could easily get a cup of coffee cheaper at one of Starbuck’s competitors.• To decrease the likelihood of this, Starbucks offers high- quality fresh coffee, good service, and a pleasant atmosphere.• Starbucks has therefore reduced the threat of substitutes.


Threat of New Entrants1 of 6

• Threat of New Entrants– If the firms in an industry are highly profitable, the

industry becomes a magnet to new entrants.

– Unless something is done to stop this, the competition in the industry will increase, and average industry profitability will decline.

– Firms in an industry try to keep the number of new entrants low by erecting barriers to entry.

• A barrier to entry is a condition that creates a disincentive for a new firm to enter an industry.



Barrier to Entry Explanation

Economies of Scale

Product differentiation

Capital requirements

Barriers to Entry

Industries that are characterized by large economies of scale are difficult for new firms to enter, unless

they are willing to accept a cost disadvantage.

Industries such as the soft drink industry that are characterized by firms with strong brands are difficult to break into without spending heavily on advertising.

The need to invest large amounts of money to gain entrance to an industry is another barrier to entry.




Cost advantages independent of size

Access to distribution channels

Government and legal barriers

Barriers to Entry (continued)

Existing firm may have cost advantages not related to size. For example, the existing firms in an industry may have purchased land when it was less expensive

than it is today.

Distribution channels are often hard to crack. This is particularly true in crowded markets, such as the

convenience store market.

Some industries, such as broadcasting, require the granting of a license by a public authority to compete.



• Non Traditional Barriers to Entry– It is difficult for start-ups to execute barriers to entry that

are expensive, such as economies of scale, because money is usually tight.

– Start-ups have to rely on nontraditional barriers to entry to discourage new entrants, such as assembling a world-class management team that would be difficult for another company to replicate.




Nontraditional Barriers to Entry

Strength of management team

If a start-up puts together a world-class management team, it may give potential rivals pause in taking on

the start-up in its chosen industry.

First-mover advantage

If a start-up pioneers an industry or a new concept within an industry, the name recognition the start-up

establishes may create a barrier to entry.

Passion of the management team

and employees

If the employees of a start-up are motivated by the unique culture of a start-up, and anticipate large

financial reward, this is a combination that cannot be replicated by larger firms.




Nontraditional Barriers to Entry (continued)

Unique Business Model

Inventing a new approach to an

industry

If a start-up is able to construct a unique business model and establish a network of relationships that

makes the business model work, this set of advantages creates a barrier to entry.

If a start-up invents a new approach to an industry and executes it in an exemplary fashion, these factors

create a barrier to entry for potential imitators.

Internet Domain Name

Some Internet domain names are so “spot-on” that they give a start-up a meaningful leg up in terms of e-

commerce opportunities.


Rivalry Among Existing Firms1 of 3

• Rivalry Among Existing Firms– In most industries, the major determinant of industry

profitability is the level of competition among existing firms.

– Some industries are fiercely competitive, to the point where prices are pushed below the level of costs, and industry-wide losses occur.

– In other industries, competition is much less intense and price competition is subdued.



Factors that determine the intensity of the rivalry among existing firms in an industry.

Number and balance of

competitors

Degree of difference

between products

The more competitors there are, the more likely it is that one or more will try to gain customers by

cutting its price.

The degree to which products differ from one product to another affects industry rivalry.



Factors that determine the intensity of the rivalry among existing firms in an industry (continued)

Growth rate of an industry

Level of fixed costs

The competition among firms in a slow-growth industry is stronger than among those in fast-

growth industries.

Firms that have high fixed costs must sell a higher volume of their product to reach the break-even

point than firms with low fixed costs.


Bargaining Power of Suppliers1 of 3

• Bargaining Power of Suppliers– Suppliers can suppress the profitability of the industries to

which they sell by raising prices or reducing the quality of the components they provide.

– If a supplier reduces the quality of the components it supplies, the quality of the finished product will suffer, and the manufacturer will eventually have to lower its price.

– If the suppliers are powerful relative to the firms in the industry to which they sell, industry profitability can suffer.



Factors that have an impact on the ability of suppliers to exert pressure on buyers

Supplier concentration

Switching costs

Switching costs are the fixed costs that buyers encounter when switching or changing from one supplier to another. If switching costs are high, a

buyer will be less likely to switch suppliers.

When they are only a few suppliers that supply a critical product to a large number of buyers, the

supplier has an advantage.



Factors that have an impact on the ability of suppliers to exert pressure on buyers (continued)

Attractiveness of substitutes

Threat of forward

integration

The power of a supplier is enhanced if there is a credible possibility that the supplier might enter

the buyer’s industry.

Supplier power is enhanced if there are no attractive substitutes for the product or services

the supplier offers.


Bargaining Power of Buyers1 of 3

• Bargaining Power of Buyers– Buyers can suppress the profitability of the industries from

which they purchase by demanding price concessions or increases in quality.

– For example, the automobile industry is dominated by a handful of large companies that buy products from thousands of suppliers in different industries. This allows the automakers to suppress the profitability of the industries from which they buy by demanding price reductions.



Factors that have an impact on the ability of suppliers to exert pressure on buyers

Buyer group concentration

Buyer’s costsThe greater the importance of an item is to a

buyer, the more sensitive the buyer will be to the price it pays.

If there are only a few large buyers, and they buy from a large number of suppliers, they can

pressure the suppliers to lower costs and thus affect the profitability of the industries from which

they buy.



Factors that have an impact on the ability of buyers to exert pressure on suppliers (continued)

Degree of standardization

of supplier’s products

Threat of backward integration

The power of buyers is enhanced if there is a credible threat that the buyer might enter the

supplier’s industry.

The degree to which a supplier’s product differs from its competitors affect the buyer’s

bargaining power.


First Application of the Five Forces Model1 of 2

• First Application of the Model– The five forces model can be used to assess the

attractiveness of an industry by determining the level of threat to industry profitability for each of the forces.

– If a firm fills out the form shown on the next slide and several of the threats to industry profitability are high, the firm may want to reconsider entering the industry or think carefully about the position it would occupy.


First Application of the Five Forced Model2 of 2

Assessing Industry Attractiveness Using the Five Forces Model


Second Application of the Five Forces Model1 of 2

• Second Application of the Model– The second way a new firm can apply the five forces model

to help determine whether it should enter an industry is by using the model to answer several key questions.

– The questions are shown in the figure on the next slide, and help a firm project the potential success of a new venture in a particular industry.


Second Application of the Five Forced Model2 of 2

Using the Five Forces Model to Pose Questions to Determine the Potential Success of a New Venture in an Industry


• Emerging Industries– Industries in which standard operating procedures have yet

to be developed.• Opportunity: First-mover advantage.

• Fragmented Industries– Industries that are characterized by a large number of firms

of approximately equal size.• Opportunity: Consolidation.

Industry Types and the Opportunities They Offer

1 of 3


• Mature Industries– Industries that are experiencing slow or no increase in

demand.• Opportunities: Process innovation and after-sale service

innovation.

• Declining Industries– Industries that are experiencing a reduction in demand.

• Opportunities: Leadership, establishing a niche market, and pursuing a cost reduction strategy.


2 of 3


• Global Industries– Industries that are experiencing significant international

sales.• Opportunities: Multidomestic and global strategies.


3 of 3


Competitor Analysis

• What is a Competitor Analysis?– A competitor analysis is a detailed analysis of a firm’s

competition.

– It helps a firm understand the positions of its major competitors and the opportunities that are available.

– A competitive analysis grid is a tool for organizing the information a firm collects about its competitors.


Identifying Competitors

Types of Competitors New Ventures Face


Sources of Competitive Intelligence1 of 3

• Collecting Competitive Intelligence– To complete a competitive analysis grid, a firm must first

understand the strategies and behaviors of its competitors.

– The information that is gathered by a firm to learn about its competitors is referred to as competitive intelligence.

– A new venture should take care that it collects competitive intelligence in a professional and ethical manner.



Ethical ways to obtain information about competitors

• Attend conferences and trade shows.• Purchase competitor’s products.• Study competitors’ Web sites.• Set up Google and Yahoo! e-mail alerts.• Read industry-related books, magazines, and Web sites.• Talk to customers about what motivated them to buy your product as opposed to your competitor’s product.



• Many companies attend trade shows to not only display their products, but to see what their competitors are up to.• This is a photo of the the 2008 Consumer Electronics Trade Show in Las Vegas.


Completing a Competitive Analysis Grid

• Competitive Analysis Grid– A tool for organizing the information a firm collects about

its competitors

– A competitive analysis grid can help a firm see how it stakes up against its competitors, provide ideas for markets to pursue, and identify its primary sources of competitive advantage.


Competitive a Analysis Grid for Expresso Fitness


Review Question 1

What is an industry? Provide an example of an industry and several firms in it.

– An industry is a group of firms producing a similar product or service.

– An example of an industry is the airline industry. A partial list of the firms in the airline includes: Air Canada, WestJet, Porter, Bearskin, CalmAir.


Review Question 2

What is the purpose of industry analysis?

– Industry analysis is business research that focuses on the potential of a particular industry.


Review Question 3What are the four primary categories of environmental trends? Provide an example of how a trend in each category could affect the toy industry?

The four primary categories of environmental trends are economic trends, social trends, technological advances, and political and regulatory changes.

– Economic trend: The recession is impacting the discretionary income that people have. Because toys are largely a discretionary purchase, toy sales are likely to be negatively impacted by the recession.

– Social trend: Children are experimenting with video games at earlier ages than ever before, which may negatively impact traditional toy sales.

– Technological advances: Advances in video games (think Wii) and alternative products like the Apple iPod are providing young children alternatives to traditional toys.

– Political and regulatory changes. Since most toys are made in low labor rate countries like China, any political or regulatory changes that impacts U.S. China (or similar country) trade may have an impact on the toy industry.


Review Question 4

Identify the five competitive forces that determine industry profitability.

– The threat of substitutes, – the entry of new competitors, – rivalry among existing firms, – the bargaining power of suppliers, – and the bargaining power of buyers.

These are the forces that comprise Michael Porter’s five-forces analysis, as described in the book.


Review Question 5

Describe how the threat of substitute products has the potential to suppress an industry’s profitability.

– The price that consumers are willing to pay for a product depends in part on the availability of substitute products.

– When close substitutes for a product exist, industry profitability is suppressed because consumers will opt not to buy when the price is too high.

– Consider the price of movie tickets. If the price gets too high, consumers can easily switch to watching rented videos, pay-per-view, or some other forms of entertainment.


Review Question 6

How does the threat of new entrants have the potential to suppress an industry’s profitability?

– If the firms in an industry are highly profitable, the industry becomes a magnet to new entrants.

– Unless something is done to stop this, the competition in the industry will increase, and average industry profitability will decline.


Review Question 7What is meant by the term barrier to entry? Describe the six major sources of barriers to entry that firms use to restrict entry into their markets.

A barrier to entry is a condition that creates a disincentive for a new firm to enter an industry.

The six major sources of barriers to entry are as follows:– Economies of scale: Industries that are characterized by large economies of scale are

difficult for new firms to enter, unless they have substantial resources or are willing to accept a cost disadvantage.

– Product differentiation: Industries such as the soft drink industry that are characterized by firms with strong brands are difficult to break into without spending heavily on advertising.

– Capital requirements: The need to invest large amounts of money to gain entrance to an industry is another barrier to entry.

– Cost advantages independent of size: Entrenched competitors may have cost advantages not related to size that are not available to new entrants.

– Access to distribution channels: Distribution channels are often hard to crack, particularly for new firms.

– Government and legal barriers: In knowledge-intensive industries, patents, trademarks, and copyrights form major barriers to entry. Other industries, such as banking and broadcasting, require the granting of a license by a public authority.


Review Question 8

How does rivalry among existing firms have the potential to suppress an industry’s profitability?

In most industries, the major determinant of industry profitability is the level of competition among the firms already competing in the industry.

Some industries are fiercely competitive to the point where prices are pushed below the level of costs.


Review Question 9Describe the four primary factors that play a role in determining the nature and intensity of the bargaining power of suppliers. How does the bargaining power of suppliers have the potential to suppress and industry’s profitability?

The four factors that play a role in determining the nature and intensity of the bargaining power of suppliers are:

– Supplier concentration. When there are only a few suppliers that supply a critical product to a large number of buyers, the supplier has an advantage.

– Switching costs. If switching costs are high, a buyer will be less likely to switch suppliers.

– Attractiveness of substitutes: Supplier power is enhanced if there are no attractive substitutes for the product or services the supplier offers.

– Threat of forward integration: The power of a supplier is enhanced if there is a credible possibility that the supplier might enter the buyer’s industry.

In some cases, suppliers can suppress the profitability of the industries to which they sell by raising prices or reducing the quality of the components they provide.


Review Question 10Describe the four primary factors that play a role in determining the nature and intensity of the bargaining power of buyers. How does the bargaining power of buyers have the potential to suppress an industry’s profitability?

The four factors that play a role in determining the nature and intensity of the bargaining power of buyers are:

– Buyer group concentration: If the buyers are concentrated, meaning that there are only a few large buyers, and they buy from a large number of suppliers, they can pressure the suppliers to lower costs.

– Buyer’s costs: The greater the importance of an item is to a buyer, the more sensitive the buyer will be to the price it pays.

– Degree of standardization of supplier’s products. The degree to which a supplier’s products differ from its competitors affects the buyer’s bargaining power.

– Threat of backward integration: The power of a buyer is enhanced if there is a credible threat that the buyer might enter the supplier’s industry.

Buyers can suppress the profitability of the industries from which they purchase by demanding price concessions or increase in quality.


Review Question 11

Identify the nontraditional barriers to entry that are particularly suitable for entrepreneurial firms.

– Strength of management team, – first mover advantage, – passion of management team and employees, – unique business model tied together by a network of

relationships, – unique or “spot on” Internet domain names and – inventing a new approach to an industry and executing the

idea in an exemplary fashion.

These nontraditional barriers to entry are important for firms to consider and utilize when appropriate.


Review Question 12

How can a start-up avoid or sidestep the pressure applied by one of the five forces on industry profitability by establishing a unique “position” in an industry?

– A company’s position determines how it is situated relative to its rivals.

– An example of a company that has positioned itself in a favorable manner is Panera Bread, the subject of Case 5.1.

– By establishing a new category in the restaurant industry, which Panera Bread calls “fast-casual,” Panera diminishes the “rivalry among existing firms,” by avoiding direct head-to-head competition with the fast-food and the casual dining segments of the restaurant industry.


Review Question 13

Describe the characteristics of a fragmented industry. What is the primary opportunity for new firms in fragmented markets?

– A fragmented industry is one that is characterized by a large number of firms of approximately equal size.

– The primary opportunity existing for start-ups in fragmented industries is to consolidate the industry and establish industry leadership as a result of doing so.


Review Question 14

Describe the characteristics of a mature industry. What is the primary opportunity for new firms in a mature industry?

– A mature industry is an industry that is experiencing slow or no increase in demand, has numerous repeat customers, and has limited product innovation.

– The primary opportunity existing for start-ups in mature industries is to introduce new product innovations.


Review Question 15

What is a global industry? Describe the two most common strategies pursued by firms in global industries.

– A global industry is an industry that is experiencing significant international sales.

– The two most common strategies pursued by firms in global industries are the multi-domestic strategy and the global strategy.

– Firms that pursue a multi-domestic strategy compete for market share on a country-by-country basis and vary their product or services offerings to meet the demands of the local market.

– In contrast, firms pursuing a global strategy use the same basic approach in all foreign markets.


Review Question 16

Describe the purpose of a competitor analysis. Make your answer as complete as possible.

– A competitor analysis is a detailed analysis of a firm’s competitors. It helps a firm understand the positions of its major competitors and the opportunities that are available to obtain a competitor advantage in one or more areas.


Review Question 17

Describe the differences between direct competitors, indirect competitors, and future competitors.

The three different types of competitors referred to above are as follows:

– Direct competitors: These are businesses that offer products identical or similar to the products of the firm completing the analysis.

– Indirect competitors: These competitors offer close substitutes to the product the firms completing the analysis sells.

– Future competitors: These are companies that are not yet direct or indirect competitors but could move into one of these roles at any time.


Review Question 18

What is meant by the term competitive intelligence? Why is it important for firms to collect intelligence about their competitors?

– The information that is gathered by a firm to learn about its competitors is referred to as competitive intelligence.

– All companies benefit by knowing as much as is ethically possible about their competitors.


Review Question 19

Identify three sources of competitive intelligence.

– Attending conferences and trade shows, reading industry related books, magazines and Web sites,

– Talking to customers about what motivated them to buy your product as opposed to your competitors.

– Other choices include setting up Google and Yahoo! e-mail alerts and reading industry-related books, magazines, and Web sites.


Review Question 20

What is the purpose of completing a competitive analysis grid?

– A competitive analysis grid is a tool for organizing the information a firm collects about its competitors. It can help a firm see how it stakes up against its competitors in key areas and illustrates a firm’s primary sources of competitive advantage.

– To be a viable competitor, and new venture must have at least one clear competitive advantage over its major rivals.


Application Questions

Chapter 5

Industry and Competitor Analysis


What Went Wrong?Chapter 5

Bath and Body Works

How One Company Lost a Favourable Position in an Industry


Bath and Body Works

Question for Critical Thinking 1:What specific industry trends did Bath & Body Works miss?

What steps, if any, could Bath & Body Works have taken to prevent the loss of its favourable position in the bath and beauty products marketplace in the early 2000s?

5-68


Bath and Body Works

Question for Critical Thinking 2:Look at the website for Bath & Body Works and Sephora.

How would you describe the positioning differences today?

Which firm do you thinks has the most distinct positioning strategy?

What industry trends do you think Sephora is relying on to continue it’s positive momentum?

5-69


Bath and Body Works

Question for Critical Thinking 3:Why do you think Bath & Body Works seemed to get caught off-guard

by emerging competition at the top end from Sephora and others and the bottom end from Target and Wal-Mart?

5-70


Bath and Body Works

Question for Critical Thinking 4:Use Table 5.2 to complete and industry analysis on the bath and

beauty industry today.

Is it an attractive industry?

Would it be a good or poor industry for a start-up firm to enter?

5-71


Application Question 1

Question:

Jason Murphy is thinking about starting a firm in the fitness drinks industry. When asked by a potential investor if he had studied the industry, Jason replied, “The fitness drink industry is so full of potential, it doesn’t need formal analysis.” Will Jason’s answer satisfy the investor? In what ways will Jason limit his potential if his current attitude about the importance of industry analysis doesn’t change?


Application Question 1…Answer:

Jason’s answer will not satisfy the investors. • While it may be true that the fitness drinks industry is full of potential, that doesn’t

mean that the potential is available to startups. • The window of opportunity for new entrants may be closed, or one or more of the five

forces that determine industry profitability may be decidedly against new entrants. • For example, barriers to entry in the fitness drinks industry are high, particularly if the

goal is to get the drink on grocery store shelves. • Jason needs to determine specifically what the barriers to entry are and demonstrate

to investors that his startup has the potential to overcome the barriers. • Rivalry among existing firms is also high. Jason needs to have a plan for how to take

market share away from rivals.

Jason will limit his potential to attract investors if he doesn’t change his attitude about industry analysis. Knowing the dynamics of the industry that one plans to enter is an important component of selling the potential of any new venture.


Case 5.1

Panera Bread: Occupying a Favourable Position in a Highly

Competitive Industry


Case 5.1 – Panera BreadQuestion 1 – positioning

• Panera Bread has established a unique position in the restaurant industry.

• The “fast casual” position that Panera has established allows it to capture the advantages of both fast food and casual dining.

• It is clear that this unique position has contributed to Panera’s success.• It provides Panera a distinct point of differentiation between itself and

many of its competitors, and allows the company to sell a fairly large volume of high margin food products.


Case 5.1 – Panera BreadQuestion 2 – five forces analysis

Competitive Forces

Low Medium High

Threat of Substitutes XThreat of new entrants XRivalry among existing f irms XBargaining pow er of suppliers XBargaining pow er of buyers X

Threat to Industry Profitability

The Restaurant Industry


Case 5.1 – Panera BreadQuestion 2 – five forces analysis

• Threat of Substitutes – Panera has lessened the threat of substitutes by creating a pleasing atmosphere in its restaurants and making its bakery second to none.

• Threat of New Entrants – Panera has lessened the threat of new entrants by establishing a first-mover advantage (or near first-mover) in the fast-casual portion of the restaurant industry.

• Rivalry Among Existing Firms – Panera has lessened the threat of rivalry among existing firms by creating a position that appeals to both fast-food consumers and casual dining consumer. The strength of its brand creates a barrier to entry.

• Bargaining Power of Suppliers – This is not a major threat to Panera.

• Bargaining Power of Buyers – This is not a major threat to Panera.


Case 5.1 – Panera BreadQuestion 3 – barriers to entry

• Panera has created barriers to entry in the following areas:

Product Differentiation – Panera’s brand is growing in strength. In addition, its Artisan breads and other bakery products are distinctive in terms of their taste and quality.

Cost Advantages Independent of Size: As a first-mover, Panera has snapped up many of the locations that are ideal for a fast-casual restaurant.


Case 5.1 – Panera BreadQuestion 4 – primary sources of competitive advantage

Panera’s primary sources of competitive advantage are:1. Its position in the restaurant industry (ie., fast-casual vs.

fast-food or casual dining)2. Its brand strength3. The atmosphere of its restaurants (which has created a

new time of day for people to eat specialty foods, which Panera calls “chill-out” time (which is between lunch and dinner), and

4. The distinctive nature of its bakery products


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Copyright ©2010 Pearson Education, Inc. publishing as Prentice Hall

barringer e3 ppt 05

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