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Sample Business Strategy Case Study: Chipotle Mexican Grill Inc
The fast-food industry in the U.S. remains vibrant and highly competitive. Chipotle is one of the players in the fast-food industry, which is one of the most fluid and unpredictable owing to changing consumer preferences and the possibility of many variants of service models. Moreover, pricing, individual tastes, and preferences for exotic experiences are important factors in the fast-food industry, and many firms, including Chipotle, may be lagging behind in this regard. Thus, strategy development is important for Chipotle going forward. Strategy refers to a plan of action intended to achieve an overall or long-term objective. The firm must focus on a specific strategy to promote its business performance amidst the challenges it currently faces. First, emphasis must be on the efficiency of operations to ensure the consistency of both good food and appealing experiences for customers. Second, measures must be put in place to achieve effective marketing that will help the enterprise reach customers and communicate positive impressions of the firm's services. Third, the company should introduce innovative menus that offer healthy and indulgent options to meet emerging customer needs and preferences. Fourth, the firm must strive to understand the niche market to increase specialty food options for customers.
Innovation and Competitive Analysis
Chipotle's competitiveness can be analyzed using Porter's five forces model that includes the new entrant threat, the threat of substitutes, the bargaining power of suppliers, bargaining power of buyers, and industry rivalry. Chipotle has a competitive advantage over potential new entrants because of its brand image and consumer's loyalty (Chipotle Mexican Grill Inc., 2019). However, several brand substitutes are available, and these include Taco Bell and several restaurants and grocery stores that provide food that can serve as substitutes. Chipotle has leverage over the suppliers of its ingredients because it can easily replace suppliers who do not meet its requirements (Chipotle Mexican Grill Inc., 2019). With the stiff competition and several new entrants, buyers have higher bargaining power over restaurants like Chipotle. Moreover, Chipotle faces intense rivalry from different restaurants with various cuisines.
Chipotle is ahead in terms of innovation. Over the years, it has turned to technology to grow sales. One of these technologies is mobile ordering that enables customers to make food orders online in the comfort of their homes. The firm also has an AI-powered ordering strategy that enables customers to re-order their meals using Alexa's voice command. It has also expanded its voice assistant ordering service via phone to over 2,500 locations in the U.S.
Chipotle has revolutionized the fast-food industry by using technological advancements to provide efficient services; however, it can continue to exploit innovation to maintain its competitive advantage. First, Chipotle can exploit innovation breakthroughs by integrating a franchise model, which would enable the organization to increase its market share globally. As a result, the company will become a household name worldwide, thus increasing its revenue. Second, Chipotle can exploit innovation by utilizing self-service technologies to encourage consumers to select healthier menu options to increase its consumer base since the approach allows them to select ingredients for their meals. The disadvantage of this strategy is that it might be expensive for the company in the long run. A third strategy Chipotle can use to exploit innovation is aligning its marketing approaches with the current digital marketing methods. Through the adoption of the current marketing methods, the company is likely to increase its consumer base and revenue since it will connect with consumers from different parts of the country. However, a great challenge in this regard could be the constantly changing consumer trends that may make it challenging for the company to keep up, as seen on social media.
The Organization's Response to Change
The fast-casual restaurant industry, which Chipotle is part of, is considered one of the fastest-growing industries globally. Players in the industry have been forced to adapt to their changes to increase revenue and meet consumer demands and needs. Chipotle continues to invest its resources to improve its operations to respond to the current consumer demands. The company has expanded its operations to offer various dishes on its menu. It prides itself in providing consumers services founded on its primary principle, "Food with Integrity." So far, Chipotle has succeeded in adapting to the revolutionary fast-casual restaurant industry by ensuring that it integrates marketing paradigms that connect it with its target markets.
However, the fast-food giant needs to adopt innovative measures on top of what it has to respond to the industry's growth and competitive nature. First, it should develop additional brands to expand into international markets and appeal to the current market segment. Chipotle can "localize" its new brands to align itself with the target market's culture, values, and beliefs. Second, the company can encourage customers to personalize their products by selecting their own ingredients and cooking styles to meet consumer preferences. Third, Chipotle can integrate Porter's National Diamond model that will allow it to identify and assess potential sources for competitive advantage in the fast-casual food industry. The model can help the company to identify innovative and technology trends that provide it with a competitive status in domestic and international markets.
Business Strategy Case Study: Chipotle Mexican Grill Inc.
The strategy describes a plan of action intended to achieve an overall or long-term aim. In organizational operations, the strategy involves organizational management's actions to formulate and implement initiatives and goals that together offer direction to the operations of an enterprise. It involves determining fundamental long-term goals in an enterprise's operations and adopting a course of action, including allocations of resources, to carry out the goals and achieve success. The strategy aims at achieving a strategic position for an enterprise. Strategic positioning describes how an enterprise in whole distinguishes itself and its operations in a practical way relative to competitors to deliver value to market segments. It involves a sophisticated approach to strategic planning to define and differentiate an organization in an industry and market and place it in an advantageous position to acquire market share relative to rivals and succeed in the long term (Jolibert, Muhlbacher, Flores, & Dubois, 2012; Mishra, 2017). Chipotle's strategy is essential for businesses in the modern industrial and business environment since they face huge challenges relating to business performance and competitiveness in their industries and markets. Stiff competition in the market implies the need for firms and their management to focus on strategic thinking and develop and implement competitive strategies to achieve business success. In this case, study strategy is evident in Chipotle's focus on the combination of fresh, wholesome ingredients in its fast-food products, attention to animal welfare and environmental stability, local organically produced foodstuffs, and a unique dining experience involving the interior design of its restaurants and friendly service to distinguish itself from the competition. The organization's focus is on food that is freshly prepared for its customers. Chipotle specializes in organic ingredients that offer various items listed on the menu, which provides a distinct operation model for the fast-food industry, thereby positioning the enterprise strategically to exploit the market. This strategy's success is evident in the observation that Chipotle had grown into the best-performing stock in the fast-food industry by 2010, after only 17 years of operation, despite competition from established companies, such as McDonald's and Yum! (CMGDFB, n.d.). Strategy differentiated Chipotle effectively and made it the most successful new restaurant chain in the U.S. since 1990.
Chipotle's main strategies in its operations to confront the domination of established firms in the U.S. fast-food industry included the provision of a unique dining experience, the provision of fresh, wholesome, and organically produced ingredients and food, and emphasis on locally-produced ingredients. The company offers its customers freshly prepared meals from sustainably produced ingredients. It adopts an economic model of operations where customers make a line to order from a menu and watch as the kitchen staff prepares the meals from fresh ingredients in an open kitchen (CMGDFB, n.d.). While the menu comprises only salads, burritos, and tacos, it offers customers many choices regarding combinations of the ingredients. This model of operations allows customers an active role in the choice of their food at the restaurant. The opportunity to watch food preparation is a part of a broader dining experience that includes the application of classic cooking methods, friendly service, and a distinctive interior design (CMGDFB, n.d.). Chipotle's strategy of friendly and fulfilling service to customers also includes the aspect of the speed of service. In some Chipotle restaurants, employees serve more than 350 customers in an hour during lunchtime. Other strategies at Chipotle include the culture of training employees and promoting from within and the adoption of non-traditional, social media-oriented means of product promotion. Chipotle has illustrated a commitment to its employees' training, and a culture of promoting from within based on the philosophy "no experience preferred" (CMGDFB, n.d.). It has focused on providing its employees with opportunities to achieve career growth with its operations' expanding scale. This strategy has promoted Chipotle's ability to compete effectively with rivals in the fast-food market because it is highly motivating for employees. The strategy of using social media in product promotions has allowed the enterprise to reach and engage its customers effectively, based on the popularity of the media and the abilities of its users to generate and share custom content reflecting their personal experiences. In essence, using social media as a primary means of promoting its products has enabled Chipotle to learn the experiences and preferences of its customers and respond to these needs effectively, thereby boosting customer satisfaction and promoting market share.
Chipotle operates in the U.S. fast-food industry. This industry features a particular form of restaurant services involving fast-food cuisine and minimal table service. This is a fast-growing industry owing to the convenience of its services for Americans' increasingly busy lifestyles. The key competitors for Chipotle in this industry are brands under the Yum! Corporation (Pizza Hut, KFC, and Taco Bell), McDonald's, is the industry leader, Starbucks, Wendy's, and Darden Restaurants (CMGDFB, n.d.). Some of the strategies that these competitors have used are (CMGDFB, n.d.): Chipotle and its unique operation model, rivals, such as Taco Bell, have focused on revamping their menus and restaurant designs to make them more innovative and up-scale to fit emerging and changing needs and preferences in the market. Taco Bell introduced the "Cantina Bell" service model, which features an urbane design of a restaurant with an open kitchen and custom menu. The fact that Taco Bell largely imitated the design of service at Chipotle undermined this strategy's success because users had already associated Chipotle with this model. Taco Bell's strategy was successful in helping it retain its market share and prevent its customers from migrating to Chipotle. This strategy also helped to boost Taco Bell's business performance by giving the impression of its adaptability to industry trends and emerging needs and preferences among customers. An illustration of this strategy's success is the observation that Taco Bell's revamp influenced a fall of 7% in Chipotle's share price (CMGDFB, n.d.).
The setting of product prices at lower levels relative to Chipotle is a favorite strategy among rivals to counter its rising popularity in the U.S. fast-food industry. Lower product prices are generally highly preferable among customers because of their impact on real purchasing power. When products are of the same quality and utility, customers are generally likely to prefer lower prices relative to more expensive ones. Nonetheless, this trend is not always true because, in some cases, the high prices of products are elements of prestige and luxury factors that make products appealing. In response to Chipotle's rising success, Taco Bell priced its steak burritos at $5.99 relative to Chipotle's $10.34 (CMGDFB, n.d.). Nonetheless, this strategy was not successful because of differences in product quality. While Taco Bell's steak burritos were significantly cheaper than Chipotle's, the latter's product was of superior quality, such that customers remained willing to pay the higher price for a higher quality product.
The fast-food industry in the U.S. remains vibrant and highly competitive due to changing tastes and preferences among customers. More people in the U.S. prefer taking their meals outside rather than make their own meals (Kara, Kaynak, & Kucukemiroglu, 2015). Towards the future, the fast-food industry is likely to continue growing significantly as more people and households prefer outside eating experiences. These trends allow enterprises, including start-ups, to exploit the market and attain competitiveness against established firms based on creative strategies. Sena (2020) notes that there are more than 200,000 small, medium, and large-scale fast-food outlets across the U.S., implying highly stiff competition in the industry. The fast-food industry is one of the most fluid and unpredictable due to changing consumer preferences and the possibility of many variants of service models. Besides pricing, individual tastes and preferences for exotic experiences are important factors in the fast-food industry. This means that Chipotle's management must be highly innovative to understand current and emerging market trends and provide inventive service models to keep customers and increase market share from rivals.
The CEO at Chipotle must focus on the following strategies to promote the company's business performance:
- Efficient operations to ensure the consistency of both good food and appealing experiences for customers
- Effective marketing to reach customers and communicate positive impressions of firm services
- Innovative menus, focusing on both healthy and indulgent options to meet emerging customer needs and preferences
- Understanding the niche market to increase specialty food options for customers.
Chipotle remains one of the top performers in the U.S. fast-food industry, although established brands, such as McDonald's, Starbucks, and Yum! still dominate the industry. Chipotle occupies a strategic position to exploit its resources and strengths to compete effectively with these dominant firms. Chipotle's innovative menu, restaurant design and experience, and human resource model are important strengths that the company could exploit to boost its business competitiveness against these market-leading brands. The company's human resource model of training employees and promoting from within supports employee productivity and employees' potential role as a strategic asset in this effort, while the innovative menu and restaurant design promote its uniqueness in the fast-food industry. Nonetheless, the company's management needs to focus on the continuous adaptation of operations to meet emerging market needs and preferences to achieve market competitiveness against the top brands.
In this context, the following three goals are suitable for the company in the next year:
- Improving the cost-effectiveness of business operations to increase revenue and efficiency
- Training employees for more friendly services to customers to improve customer experiences and fulfillment
- Promoting employees' involvement in decision-making to improve creativity in business operations and boost problem-solving approaches in business performance.
In the short-term, the business's focus should be on utilizing and improving current strengths and opportunities to promote business performance.
In the next five years, the following three goals are relevant:
- Changing the menu to reflect changing market preferences and tastes to remain competitive
- Expanding the scale of operations to new markets across the U.S. to diversify market risk and boost revenue while simultaneously improving economies of scale
- Incorporating better management and service models for more culturally competent services to customers from different backgrounds
Rationale: In the longer term, the management needs to focus on changing its business operations and services to fit emerging market needs and promote business competitiveness against rivals in the fast-food industry.
Competitive Analysis of Chipotle Mexican Grill Inc.
Chipotle Mexican Grill Inc. is extremely popular in many states. This corporation is well known for the delicious variety of foods they offer in the restaurant across the world. Founded in Denver in 1993, the company has redefined its supply chain to meet the dynamic market's needs. Chipotle's mission statement is to offer its customers "food with integrity." This mission revolves around the household name in the food industry serving the best food possible with nutritious value and great taste. Porter's five forces model analyzes Chipotle's current performance and potential in the competitive market. This report applies the five forces to understand the position of the company in the market. The current technology trends and recent developments facilitated by the company's leaders are outlined in this report.
Porter's five models utilize five forces that include new entrant threat, the threat of substitutes, suppliers and buyers' bargaining power, and industry rivalry in the extent of a company's performance in each market or industry. An extensive analysis of Chipotle Mexican Grill Inc. based on the model is as follows.
Focused on the fast-casual dining market, Chipotle is currently investing in the fastest-growing restaurant segments with forecast growth of 7.5 percent in 2020. This figure is considered to double any other segment in the restaurant industry (Maze, 2018). The increasing number of new entrants in this market presents a great threat to the company. For instance, online groceries can offer alternative meal services, thus becoming a common threat to Chipotle. Being a popular brand in the U.S. and other countries, Chipotle has a competitive advantage over potential new entrants because of its brand image and consumers' loyalty (Chipotle Mexican Grill Inc., 2019). Because of their strong competitiveness of this corporation for its competitors, it will take time for the new entrants to position themselves and compete equally with such strong brands in the industry, such as Chipotle Mexican Grill.
In the food market, there exists a variety of substitutes. Chipotle does have not only brand substitutes, such as Taco Bell, that serve a similar menu but also different Mexican cuisines from different countries. At the highest level of the supply chain, several restaurants and grocery stores provide food that can be Chipotle's substitute (Chipotle Mexican Grill Inc., 2019). These brands compete on various components, including price, menu, food quality, marketing strategies, brand image, and geographic accessibility. Mexican restaurants are also existent in the U.S. with a wide range of cheap fast foods with similar fine dining settings (Daszkowski, 2018). Therefore, Chipotle is facing a high level of threat of new entrants.
In the food industry, multiple suppliers compete to seal the deal with popular and big brands to increase their sales and revenue (Daszkowski, 2018). Having saturated the market, suppliers compete in quality and prices to have lasting contracts with big food chains. This gives Chipotle leverage over the suppliers of its ingredients because the company can easily replace suppliers who do not meet its requirements (Chipotle Mexican Grill Inc., 2019). Moreover, Chipotle only hires suppliers who have a good reputation for providing quality foods and ingredients. This is crucial because Chipotle ensures it meets the required standard of food.
With high competition in the restaurant industry, consumers have a lot of options when it comes to food. The buyers can choose different restaurants that meet their needs in terms of food quality and price (Irving, 2014). With the stiff competition and several new entrants, the buyers have higher bargaining power over restaurants like Chipotle. If the restaurant's food quality declines in quality, it would be adversely affected in revenue due to a bad reputation.
The level of rivalry in the food chain market is remarkably high—chipotle experiences intense rivalry from different restaurants with various cuisines. Various brands, such as Taco Bell, Qboda, Panera, and Moe's, are in stiff competition with the brand because they target the same market niche (Chipotle Mexican Grill Inc., 2019). Chipotle, in turn, engages in a lot of market campaigns to keep its clients.
Chipotle has turned to technology over the years to grow its sales. One of the technologies is mobile ordering, which enables customers to make food orders online at their home's comfort. Customers download the mobile app, which shows the existing menu and prices. Through this technology, the company has been able to reduce the waiting time by 12 minutes. According to the company, mobile orders now account for 8.8% of its overall sales (Chipotle Mexican Grill Inc., 2019). With mobile ordering success, Chipotle Mexican Grill introduced additional technologies to enhance the digital ordering experience, including artificial intelligence (AI)-powered phone ordering, drive-thru pickup lanes, and Amazon's Alexa re-ordering feature (Pymnts, 2019).
Due to the enhancement of Chipotle digital system the improved technologies have played a key role in the growth of the company over the years. Chipotle's AI-powered ordering strategy enables customers to re-order their meals using Alexa's voice command. Users can download the app and activate the command to make meal orders. The company also expanded its voice assistant ordering service via phone to over 2,500 locations in the U.S. (Pymnts, 2019). These systems aid customers in making food orders and make suggestions or clarify questions regarding their favorite foods. Through the system, customers can pay for meals and save their future food preferences. AI technology gives customers convenient experiences as the majority can witness seamless engagement throughout the purchase journey.
Chipotle Inc.'s new technological ordering strategy functions in two-pronged steps. The first entails utilizing a digitized platform to add ordering solutions through a quick-service restaurant (QSR) feature (Chipotle Mexican Grill Inc.,2019). In the second stage, the company introduced "make lines," in which staff can handle both in-person and digital orders (Pymnts, 2019). Through technology, the company has witnessed significant success, with the operational team able to handle the system with ease. The make line orders are then placed on pickup shelves to receive their orders in time.
The most recent changes with the COVID - 19 pandemic, employees, and customers' safety. Sanitation is a huge safety requirement, and the implementation of everyone wearing masks for this corporation to comply. Chipotle had to endure; they complied and introduced the Virtual Farmer's Market, an e-commerce platform that enables its suppliers to improve their websites' versions. The platform enables suppliers to sell products directly to consumers in the U.S. Through the company's assistance. Farmers can customize their online marketplaces to meet their respective clients' needs. This new development aims to give the suppliers a new revenue source and enhance their commitment to sustainable farming options. The company believes that the new technology is a way to achieve its mission and meet Chipotle's customers and the farming industry's future needs.
The organizational structure of Chipotle supports its innovative ideas. Its structure is based on a functional structure. The top management level constitutes the Chief Executive officers (CEOs), CFOs, Heads of Media Relations, and the Chief Creative and Development Officers (Chipotle Mexican Grill Inc., 2019). Although the organization is a small corporation as compared to its competitors, it relies on a vertical hierarchy system whereby all its stores operate under the policies put in place by the corporate headquarters. The business follows a set of guidelines set by company management (Whitten, 2018). This structure has helped the company maintain a competent supply chain that ensures quality services are offered.
The CEO of Chipotle must focus on the following strategies to promote the company's business performance: an efficient operation that promotes consistency in customer satisfaction; effective marketing to reach customers and communicate positive impressions to the customers; designed innovative menus that focus on both healthy options that meet emerging customer needs and preferences; and understanding the niche market to increase specialty food options for customers (Maze, 2018). Adopting such a leadership strategy guides the company towards collaborative decision-making. The company organizes frequent training to equip employees with the skills needed for excellent performance (Whitten, 2018). Also, the company's communication style encourages the sharing of ideas among employees. This ensures and allows everyone to know they all can contribute to the organization's service ideologies.
Exploiting Innovation: Chipotle Mexican Grill Inc.
Chipotle Mexican Grill Inc. has revolutionized the fast-food industry by using technological advancements to provide efficient services. The company has exploited innovative processes by developing new products and services, which have enabled it to increase its market share and revenue. Innovation is a critical component in entrepreneurship as it improves the marketing and communication strategies employed. For Chipotle Mexican Grill, innovation has been incremental since the fast-food restaurant has modified its products and services to meet its consumers' growing needs. Consequently, the company has experienced tremendous growth by integrating innovative business ideas aligned with the current market needs.
Chipotle has incorporated advanced technological strategies in its operations; thus, gaining a competitive advantage in the fast-food industry. Grant (2015) asserts that Chipotle uses traditional marketing mediums alongside current online digital advertising to create awareness about its products and connect with consumers. The company has continued to exploit the different marketing avenues to advance its branded content and engage consumers. Through effective marketing communication strategies, such as extensive media coverage, the company can interact with its consumers and inform them of its current projects and services (Grant, 2015). As a result, Chipotle has gained a competitive advantage, as it can ensure that its consumers are always informed about its current branded content.
The emergence of digital customer service, such as online ordering, has motivated Chipotle to adapt to current consumer behaviours. Chipotle has created and designed a mobile application that will allow consumers to order any of their favourites Chipotle meals online. In addition to the Chipotle app, the company opened its first "digital-only" restaurant to cater to the growing online sales (Lucas, 2020). The digital-only restaurant has eliminated dining-in and line ordering services and requires customers to place their orders in advance via the Chipotle app or affiliate platforms. This approach has enabled Chipotle to optimize the shift to virtual activities as the coronavirus has forced consumers to increase their online orders. According to CNBC reports, the company's shift to offering online services has tripled its digital sales this year by making approximately $2.5 billion (Lucas, 2020). Thus, despite the pandemic affecting most businesses in the food industry, Chipotle has continued to thrive due to its innovative strategies.
Chipotle can foster innovation by creating a sustainable franchise model founded by its stores across the country. Through incremental innovation, the company can succeed in improving how it delivers its products and services. The company has currently developed an "owned media" advertising strategy, which it uses to upload its video and music that inform its customers about its brand content. Therefore, as part of its incremental innovation, Chipotle can develop self-service technologies, which are advancements that provide customers with the autonomy of coming up with their product or service. According to Hanks, Line, and Mattila (2015), self-service technologies are effective and efficient since they increase business-customer interactions. For instance, mobile services and Internet marketing are sustainable technology methods that enhance customer-business involvement (Linton & Solomon, 2017). Moreover, self-service technologies can reduce the customer waiting time; thus, enabling the restaurant to serve many customers within a short time.
The fast-food industry's annual growth is an indication that the industry will evolve to occupy the largest market share from the world's consumption rate. Mason et al. (2016) affirm that restaurant franchises are opened annually as the hospitality, food, and beverage consumer markets double in size. The taste, price, and quality of fast foods appeal to consumers across America. Fast food restaurants and fast-casual restaurants are considered quick-service restaurants. According to Mason et al. (2016), quick-service restaurants have dominated the hospitality industry due to their consistency, simplicity, and convenient locations. The growing innovation and technological advancements will stimulate the rapid growth of quick-service restaurants worldwide. It is possible that in the next five to ten years, quick-service restaurants will dominate the hospitality industry.
Chipotle continues to capitalize on the innovative ideas and technological advancements in the world today. The company's ability to seamlessly integrate technology in its services gives it a competitive advantage over its rivals. For instance, the company had succeeded in tripling its revenue during the pandemic, when most restaurants were going out of business. By digitalizing its services, Chipotle has doubled its revenue compared to last year (Lucas, 2020). The company's success in the industry is supported by its ability to use modern technology to advance itself. Innovation and technology have provided Chipotle with the capability to adapt to new market trends and consumer behaviours.
Chipotle can exploit its innovation breakthroughs by integrating a franchise model, providing healthier menu options, and improve marketing using current digital platforms. Developing a franchise model will enable the organization to increase its market share globally. As a result, the company will become a household name worldwide; thus, increasing its revenue. Franchising will be an expensive process that will require the organization to invest its resources and revenue. Furthermore, the company may find it challenging to globalize its brand while adopting innovations and technology advancements.
The company can utilize self-service technologies to encourage consumers to select healthier menu options. This strategy will increase its consumer base as it allows them to select the ingredients that should be in their meal. The disadvantage of this strategy is that it might be expensive for the company. Thus, the company must develop innovative ways to address the financial constraints that may emerge. The third strategy requires the organization to align its marketing approaches with the current digital marketing methods. By adopting the current online marketing methods, the company is likely to increase its consumer base and revenue since it will connect with consumers from different parts of the country. However, the constantly changing consumer trends may make it challenging for the company to keep up, as seen on social media.
The company can pursue self-service technology to increase the interaction between its customers. It can pursue this strategy by enabling customers to personalize their Chipotle app. For instance, customers can design their own menu or create their individual meals based on their preferences. Consequently, the restaurant can use this information to deliver the client's meal as scheduled on the app. This move will prevent clients from constantly writing their orders as they will have automatic delivery so long as they have paid their monthly subscription. Hanks et al. (2015) assert that self-service technologies have influenced the food industry to adapt to new technology innovations. Therefore, the recommended approach will ensure that Chipotle stays one step ahead of its rivals as it provides efficient services.
Chipotle Mexican Grill Inc. is a household name in the fast-food industry. By exploiting innovation, the fast-food giant stands to gain a significant amount of market share. Chipotle can create a sustainable franchise model founded by its stores across America to continue fostering innovation. The fast-food industry is growing rapidly, and it could dominate the hospitality industry in the next five to ten years. Chipotle should thus take advantage of the rapid growth by investing more in innovation. The company's top advantage over competitors is its ability to integrate technology into its services seamlessly. The best strategy that Chipotle can use to exploit its innovative breakthroughs in the future is to pursue self-service technology to increase the interaction among customers.
Chipotle Mexican Grill, Inc.: The Organization's Response to Change
Whether Industry Is Maturing or Declining
Chipotle Mexican Grill, Inc. operates in the fast, casual restaurant industry and has undergone numerous changes influenced by the industry's trends. The fast-casual restaurant industry is maturing since it is considered one of the fastest-growing industries globally. The industry's growth and development are attributed to changing consumer demands, preferences, and attitudes towards food consumption. According to Dawe et al. (2019), the fast-food industry is rapidly growing due to the increasing consumer trends to desire "away from home food" (AFHF). The growth in urban population, economic growth, and increased per capita income have motivated people to consume fast-casual restaurants. Additionally, factors such as globalization and the fast-food culture have introduced consumers to various foods, ingredients, and preparation styles. These factors have made it easier for fast-casual restaurants to penetrate the industry and find sustainable ways to meet consumer demands.
Restaurants in the fast-casual restaurant industry have been forced to adapt to the industry's changes to increase revenue and meet consumer demands and needs. Chipotle Mexican Grill continues to invest its resources to improve its operations to respond to the current consumer demands. Vasavda (2016) asserts that Chipotle Mexican Grill is a brand that has contributed to the growth of the fast-casual restaurant sector since it has built a strong and innovative brand. The organization has expanded its business operations by serving quick-casual meals that are popular and affordable to most Americans. For instance, it has integrated modern marketing strategies, which enable it to identify and address the current consumer needs and expectations.
Chipotle's brand has adapted to the developing consumer market across the United States and the world by expanding its operations to offer various dishes on its menu. The company prides itself in providing consumers services founded on its primary principle, "Food with Integrity." Thus, despite the industry's changes, Chipotle Mexican Grill commits itself to ensure that its customers have the desired experiences with their foods and services. According to Vasavda (2016), marketers that are successful in building a strong brand name create innovative marketing strategies that communicate an organization's desires, beliefs, attitudes, ideas, emotions, and opinions. Chipotle has succeeded in adapting to the revolutionary fast-casual restaurant industry by ensuring that it integrates marketing paradigms that connect it with its target markets.
Consumers' choices have influenced how fast-casual restaurants produce and serve their foods. For instance, customers have become cautious about the AFHF they consume due to the rising incidents of lifestyle diseases; thus, they limit their fast-casual foods consumption. Such choices determine how restaurants, such as Chipotle, operate and market their goods and services. As outline by Ragas and Roberts (2009), Chipotle uses natural ingredients that are nurtured and sustained concerning consumers, animals, and environmental rights. The company reassures its consumers that it is committed to using quality ingredients that promote positive health outcomes. Consequently, Chipotle's commitment to addressing consumers' concerns is part of its dedication to its corporate social responsibility.
Chipotle needs to adopt innovative measures on top of what it has to respond to the industry's growth and competitive nature.
The company should develop additional brands to expand into international markets and appeal to the current market segment. Chipotle can "localize" its new brands to align itself with the target market's culture, values, and beliefs. This will be a strategic approach that will enable the company to overcome any social, cultural, or economic barriers present during its attempts to enter new markets. Additionally, the company can encourage its customers to personalize their products by selecting their own ingredients and cooking style to meet its consumers' preferences. Thus, with each brand extension, Chipotle will have a unique concept that is consumer-focused and is aligned with its brand and marketing strategy.
The fast-casual food industry is likely to overtake the food and service industry in the next five to ten years. For instance, in the United States, fast-casual restaurants can be found in every state and neighborhood on the streets, in malls, or at rest stops. The increasing numbers of fast-food restaurants in the country and internationally demonstrate the evolving dynamics in the industry. Furthermore, this industry's a consumer and business trends have revolutionized how products and services are created and delivered. According to Dixon, Miscuraca, and Koutroumanis (2018), the fast-food industry has experienced an increase in diverse restaurant and menu concepts that meet the changing consumer taste in the past decade. This evolution is an indication that the industry responds to the shifting consumer preferences and business owners are willing to explore new promising market segments. Fast-casual restaurants are also likely to evolve with the industry as consumers seek quick services and products, which enable restaurants in this segment to acquire additional market shares.
Chipotle Mexican Grill Inc. must adapt to the evolving industry to remain competitive in the next decade. Porter's National Diamond is an effective model that will allow the organization to identify and assess potential sources for competitive advantages in the fast-casual food industry. The model can help the company identify innovative and technology trends that provide it with a competitive status in domestic and international markets. According to Porter (1990), the model comprises the following determinants of competitive advantage: firm Strategy, structure and rivalry, factor conditions, demand conditions, and related and supporting industries. These determinants are used to analyze an industry and determine why a business in a specific industry is likely to succeed in one country but fail. Therefore, this model is used in this analysis to examine the main advantages and disadvantages of vertical integration versus outsourcing for Chipotle Mexican Grill Inc.
Factor conditions describe the natural, capital, and labor resources accessible in a specific country. Chipotle will benefit from vertical integration if it controls the natural ingredients used in production and manages its labor and capital resources. The company can increase its revenue, enhance efficiencies, and reduce costs if it grows its natural ingredients and ensures that its labor force is skilled and knowledgeable. Moreover, the organization will gain a competitive advantage through this approach as it will develop specialized factors, which it can continuously invest in to improve its efficiency and performance. For instance, by ensuring that its employees are technology savvy, Chipotle does not have to worry about conducting its business and marketing activities online.
Demand conditions refer to the opportunities and challenges available in new market segments that help a company grow and develop. Vertical integration is a strategy that will help Chipotle develop, be innovative, and improve its quality for the tastes and preferences to be met.
To meet the changing consumer tastes and preferences. The company's efforts to satisfy its customers' needs will challenge it to adopt innovative and technological methods to respond to current and future consumers' needs across the globe. For example, with the emergence of online marketing, the company uses social media as an effective tool to curate and advertise its products. Similarly, customer demands of a specific market segment will give the company an overview of what buyers want and need, thus, pressuring them to implement innovative and sustainable approaches that provide it with a competitive advantage against its rivals. However, this may be costly as the company will consistently invest in improving its production, marketing, and supply strategies to respond to growing consumer preferences.
Related and supporting industries refer to other businesses that operate within the same industry. Chipotle may benefit from alliances and partnerships with other organizations operating in the information and technology industries. Companies in these industries may enable the company to maximize its value for customers and make it more competitive. Suppliers such as online delivery platforms will enhance the company's innovation by increasing efficiency and quality. During the pandemic, Chipotle has managed to serve its customers by using delivery services to send its products to customers once they make their orders from home. Additionally, social media has enhanced communication between Chipotle and its customers by ensuring immediate feedback.
Firm strategy, structure, and rivalry define the context in which an organization operates its business. According to Porter (1990), the approach used to create, organize, and manage an organization influences its strategy and structure. As experienced in the United States, domestic rivalry for Chipotle is essential as it prepares it for global competitiveness. Competition in the U.S. fast-casual food industry has helped Chipotle to implement exclusive and sustainable advantages and capabilities, which have contributed to its growing brand. The rapid growth of the fast-casual food industry in America has challenged Chipotle to be innovative and improve to remain relevant and uphold its competitive advantage. Moreover, domestic rivalry in the U.S. market prepares Chipotle for vertical integration since it helps it enter the global arena and compete with foreign rivals.
Based on Porter's National Diamond analysis on Chipotle Mexican Grill, its top advantages include its capabilities to integrate advanced technology, produce natural ingredients, and competitive advantage in the U.S. domestic market. All these factors provide the organization with the resources and abilities to increase its market share and evolve to address the increasing consumer needs and demands. Chipotle continues to integrate innovation and technology to improve efficiency and quality, which have contributed to its brand development and helped it meet the consumers' changing preferences and attitudes.
The BCG matrix is used as a corporate planning tool that displays a company's brand portfolio. The growth-share matrix utilizes the relative market share and industry growth to assess a business' potential based on its brand portfolio and propose appropriate investment approaches. Based on BCG analysis, Chipotle Mexican Inc.'s strategic position and business brand portfolio provide the company with a competitive advantage. The company has developed its brand to respond to the fast-casual restaurant industry growth rate and competitiveness. As a result, Chipotle has managed to revolutionize the fast-food industry through its products and services. Chipotle's relative market share is significantly high, which enables it to generate increased revenues. According to Vasavda (2016), Chipotle produces more goods and services that meet consumer needs; hence, it can benefit from the industry's high economies of scale. Furthermore, the company's large market share across the U.S. provides it with a foundation to penetrate other foreign markets.
The fast-casual restaurant industry is promising, which implies that there is a possibility for high market growth. This means that Chipotle has the capability to maximize the growing industry and increase its profits. Additionally, the organization can use the revenue to invest in innovative and technological advancements to improve its growth. The innovation strategies that Chipotle can use to achieve breakthrough will require it to introduce new products or approaches to improve business performance. One of the company's strategies is improving its business activities to meet current customer demands.
The coronavirus pandemic has changed how businesses in the food and hospitality industry operate as more restaurants are pushed towards adopting virtual services. Hanks, Line, and Mattila (2016) assert that self-service technologies have motivated companies in the food industry to adapt to new technology innovations. This approach may be costly for the organization as it will be required to implement new policies and practices that increase efficiency and productivity. However, the strategy is effective since it will enable Chipotle to improve the quality and range of its current products and services. Secondly, the company can add value to its current products and services to meet local customers' needs in foreign markets. This strategy will provide the company with a competitive advantage by helping it differentiate its business activities from its domestic and international rivals.
The CEO at Chipotle can use the expertise approach to implement the proposed strategies. This approach will require them to select and disseminate responsibilities based on an employee's skills and knowledge. Thus, the CEO will dedicate the company resources to developing programs that lead to the continuous improvement of expertise, such as allowing employees to acquire skills in current technological advancements. These skills can contribute to improving the company's services and products. Additionally, the CEO's decision-making style should be conceptual since the proposed innovative strategies are expected to have long-term effects on its performance and productivity.
In conclusion, the fast-casual restaurant industry is maturing at a fast rate and requiring companies operating in it to evolve alongside it. Chipotle Mexican Inc. has adopted innovative and technological advancements to address the changing customer preferences, ideas, and tastes. The result of this is that Chipotle's company has gained a competitive advantage in its domestic markets across the United States, helping it to penetrate foreign markets across America. Chipotle's position in the industry and market share demonstrates that its advantages outweigh its disadvantages compared to other companies operating in the fast-casual restaurant industry. Consequently, the company has managed to overcome challenges that may have hindered its success by using innovation as a tool to advance itself within the industry.
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