Analysis of Panda Express Market Environment - Case Study Example

Analysis of Panda Express Market Environment College: Analysis of Panda Express Market Environment Panda express is an American style Chinese fast food chain of restaurants based in the United States. The company serves American Chinese Cuisine operating within the US casinos, shopping malls, supermarkets, airports, malls and college campus. The organization has invested within the US restaurant industry that is considerably growing over time. While the demand is growing, there is evidence that competition is building within this market and the organization. While the political and technology are conducive for the organization, it is clear that the economic aspects and the social-cultural changes are changing within the environment posing a big challenge to the organization. Besides, there is evidence that competition, change in customer behavior and regulations are posing a threat to the future of the organization. The purpose of this essay is to make a thorough market environmental scanning with the aim of identifying critical issues that are likely to impact on the organizational performance both in the short and long-term. In the current business era, the ability of an organization to analyze its business environment, both internal and external, determines its ability to survive within the market. From a close look, Panda express has considerably influenced its internal business environment in a positive way. Evidently, the organization has managed to deliver quality products in the market, hence garnering customer attraction within the restaurant industry. The motto of Panda express has been to deliver quality foods and beverages to make better the life of its customers. The ability of the organization to satisfy the customer demands contributes to its ability to expand rapidly within the US (WooGon, 2009). Secondly, the organization has streamlined its workforce by paying satisfactory salaries, and employing behavioral approaches to create strong team behavior necessary for efficiency in the workplace. From this point of view, it is clear that the organization’s internal work environment is well aligned to the management strategies. An external market environment is essential for any organization since it has a large influence on its future performance. Unlike the internal market environment that is under the control of the management, the external market environment is above the manipulation of the organization. Therefore, every organization has a challenge to adapt to the rapidly changing market environment if it has to survive. The best way to analyze the general market environment factors for Panda express is to use the PEST analysis of its business environment (Slamanig, 2012). From a political point of view, government policies have contributed to the challenges of operation in the restaurant industry. The US government is designing policies to regulate the consumption of junk food for health concerns. The US government intends to control eating habits due to the increase in cases of heart diseases, blood pressure and obesity within the country. Therefore, political factors are likely to threaten the survival of restaurant industry in this market. From an economic perspective, the demand for restaurant products seems to remain constant. The US currency has remained fairly stable of the past years and the same is expected in future. However, the consumer power seems to be growing due to increase in the employment rate within the country. Therefore, the economic factors seem to be an added advantage in restaurant market. Social-cultural aspects in the US have experienced a rapid change over the past few years. The people seem to be changing their eating habits as they demand healthier and quality products. Therefore, these changes have impacted on fast food restaurants by reducing the demand of these services. Finally, it is clear that the technological factors are inevitable in a country such as US where technology has deeply penetrated within the public. Over 60% of the US population has access to a computer and more are joining the online population (WooGon, 2009). In addition, internet technology has ushered a new era of social media marketing, hence forcing many organizations to this direction. In a nutshell, organizations need to consider the general market environment factors if they will survive in the market. The task environment factors also influence the business performance in a great way, making it a crucial element for organizations. Particularly, competition is one of the issues that has undermined Panda Express’ market environment. Evidently, the investors in the restaurant market have increased in the past ten years and there are still investors who are planning to enter this industry. Similarly, the Chinese Cuisine market is becoming competitive and Panda express is bound to experience pressure from this end. The customer behavior is another factor in the task environment that is key for all organizations. In the US, as the customer pool becomes more diverse and continues to change rapidly, there is evidence that organizations have to shift their business strategies. Since the customers are at the heart of the restaurant industry, changes in the consumer pattern and behavior influences profitability and hence management strategies (Paeratakul, Ferdinand, Champagne, Ryan, & Bray, 2003). Next, market regulations are constantly changing as the government focuses on empowering the employees and demanding organization to use environmental-friendly approaches as they execute their business operations. Apart from this, the task environment is posing a threat Panda Express due to high costs of supply, which are contributing the increase in the cost of production. From a critical point of view, the task environment factors are likely to influence Panda Express strategic management. From the pest analysis of the Panda Express business environment, it is clear that the political, economic, socio-cultural and technological factors are likely to impact on the organizational performance. One important factor is the political aspect of the restaurant business industry in US. The political factors are important within any business market as they influence the product demand and the ease of conducting business. In US, the restaurant industry has considerably been influenced by government intervention strategies that aim at reducing the public intake of fast foods. The US government is increasingly campaigning against consumption of junk food and encouraging consumer to consider the value of natural foods. In the past three years, the US has reacted to the increase in the rate of heart diseases, obesity and hypertension by criticizing junk foods. The government is also considering introducing laws to regulate the restaurant industry to ensure that they offer healthy products to their customers (Schlosser, 2002). Considering that Panda Express offers a wide range of fast foods, it is likely that such political campaigns will reduce the demand for their products. The introduction of anti-junk food laws will constrain the fast food market and make it hard for Panda Express to operate. From this perspective, it is likely that Panda express will find it hard to expand its business as the demand for its products decreases due anti-fast food campaigns. In the recent past, the evolution of technology has adversely affected the general business environment. Over the past 30 years, Panda Express has operated in an era of rapid technological changes. Particularly, the internet technology is quickly penetrating in the US market as more target customers become connected to a sustainable online presence. While the restaurant industry may be least affected by technological aspects, it touches on one of the most important sectors of the organization. Internet technology has presented an opportunity for organizations to push their products within the online market. Therefore, internet technology has become both an opportunity and a challenge for Panda Express’ marketing strategy. The ability of a company to push its business online and to appeal to the online population influences the number of customers that flow within its restaurants. Panda express uses the internet not only to create product awareness but also to sell its products. Currently, there are over 254 million internet users in the US and this population is expected to increase by 10% in the next two years (Harrison, 2013). Therefore, Panda express has an opportunity to increase its number of target customers due to an upward growth of the online population. Another crucial factor in the US business environment is the economic perspective as it impacts on the customer purchasing power and the profitability of business operators. Economic variables within the market environment influence the market stability and the variation of the consumer purchasing pattern. For instance, when there is inflation within a country, customer will tend to focus on basic needs and reduce their spending on luxury products. The same way, customers are likely to spend less on expensive dishes and look for cheap products. This implies that currency inflation is likely to affect business market negatively (WooGon, 2009). For the past two years, the US currency has remained fairly stable in value, leading to a stable purchasing behavior. However, it is likely that increase investment in the US may result to a financial crisis. Therefore, there is likelihood that the currency value is likely to decrease in the near future. Therefore, the purchasing pattern is likely to change and the restaurant industry will be adversely affected. Therefore, Panda express is threatened by economic variation if it does not position itself in the market. For local companies, task environment factors are crucial points of consideration for future survival in the business market. One crucial task environment factors in Panda’s market environment is competition from similar brands. Notably, the US restaurant industry is bound to reach saturation within the next five years (Senauer, Asp & Kinsey, 2013). Market analysts rate that US restaurant industry as one of the most competitive and predict that competition is bound to be worse due new market entrants. Panda Express has experienced stiff competition from major Chinese cuisine restaurant companies that produce similar products. Its major competitors include Pei Wei Asian Diner, Sarku Japan and PF Chand’s. Competition has adversely affected the price of products within the restaurant industry. When competition increases, organizations surrender their bargaining power to the customers, leading to a rise in price competition strategy. Price is one of the most crucial aspects of product as it impact directly on the profit value of the organization. Therefore, Panda is bound to experience product price reduction, which will in turn reduce its profits. Moreover, competition is bound to increase, promising harsh market conditions for Panda express. Next, the change in consumer behavior in the US in the task environment has deep implications for Panda express. United States is experiencing rapid transformation of in consumer behavior due increase health awareness in the country. The increase in health awareness in the US has negatively impacted on the volume of sales in the fast food restaurant industry. As the government and health institutions increase their effort to create public awareness, the consumers are shifting focus to healthy feeding patterns. One of the most affected target groups is the college students, which has been a target segment for Panda express (Paeratakul, Ferdinand, Champagne, Ryan, & Bray, 2003). Unlike in the past when college students preferred cheap fast foods, they are now withdrawing and preferring to eat fruits and other healthy natural foods. This means that the demand is narrowing and Panda express will experience a reduction in its sales. As long as these campaigns persist and emphasis for natural foods remains, Panda Express’ business environment is bound to stagnate. Therefore, change in feeding patterns among consumer is further worsening the market environment. Lastly, market regulations are playing crucial roles within the fast food market environment. To begin with, the US government compels all organizations to adhere to strict laws government environment protection. For instance, all organizations are responsible for disposal of their wastes within the environment. The impact is that these laws require organization to spend more on waste disposal, which add expenses on the organization’s operation budget. Heavy penalties are charged for any organization that ignores environmental laws (Messina, 2006). Worse still, the labor organization has set minimum employee salaries and requires that organizations provide full benefits to its employees. This market law is important for Panda express at a time when reducing operational cost is vital. Panda express employs a labor force of more than 25 thousand workers, who are governed by the labor laws. Therefore, the company is bound to have its profits reduced as the minimum salary wage continues to rise as per the labor laws. On this ground, it is clear that harsh market regulations are becoming a threat to survival of Panda express within its business environment. In conclusion, a thorough external environment scanning of Panda Express’ business market shows both opportunities and threat of survival in the business market. Economic stability and development of digital technology in the US has presented the organization with the opportunity of increasing its customers and operating stably. On the other hand, it is clear that a number of general and task environment factors undermine the potential for growth in the fast food market. The height of business competition is rapidly growing considerably affecting product prices. Secondly, the shift of consumer behavior from fast foods to natural foods is further constraining the market. The problem has worsened with the introduction of tough market laws and the launch of anti-fast food campaigns which have increased the cost of production while reducing the number of buyers. As a result, Panda express is operating within a sensitive business market in which it has to adapt for its short and long-term survival. References Harrison, A. L. (2013). Business environment in a global context. Oxford: Oxford University Press. Messina, J. (2006). The role of product market regulations in the process of structural change. European Economic Review, 50(7), 1863-1890. Paeratakul, S., Ferdinand, D. P., Champagne, C. M., Ryan, D. H., & Bray, G. A. (2003). Fast-food consumption among US adults and children: dietary and nutrient intake profile. Journal of the American Dietetic Association, 103(10), 1332-1338. Schlosser, E. (2002). Fast food nation: What the all-American meal is doing to the world. London: Penguin. Bottom of Form Senauer, B., Asp, E., & Kinsey, J. (2013). Food trends and the changing consumer. Eagan Press. Slamanig, M. (2012). PEST Anaylsis Hungary: Country Evaluation and Selection of Hungary. München: GRIN Verlag GmbH. WooGon, K. (2009). The determinants of capital structure choice in the US restaurant industry. Tourism Economics, 3 (4), 329-340. Top of Form Bottom of Form Read More