Case Study Analysis: Chipotle Mexican Grill

Introduction

Established by Steve Ells in 1993 in Colorado, Chipotle has grown to be one of the most remarkable and respectable restaurant brands within the restaurant industry with its impression of an easy going and speedy restaurant. Its mission "Food with integrity" is the basis of the entire restaurant chain, through this mission, the restaurant ensures the provision of quality food. Chipotle is known not to provide its customers with full table service; instead, it guarantees better quality and standard of food by taking an organic approach with minimized chilled and pre-packaged food ingredients compared to fast food restaurants. The restaurant underwent a monumental growth of 550 percent inflation since 1999, which in fact is more than ten times the inflation that other fast food restaurants went through during the same period of time. This restaurant has perpetuated a well-built purchase ranking in the stock market by financial analysts as it constantly expands its customer establishment progressively. The restaurant has managed to successfully expand its customer base by providing them with a great and better restaurant experience every time they buy food from chipotle. Other than that, the restaurant also works hard to make sure that each of its branches has the same quality of food and customer experience. (Ferdman, 2015).

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Just like any other established restaurant brand, Chipotle requires a strategic plan to ensure an organized marketing plan that leads to growth. Considering the fact that Chipotle's mission is "Food with integrity," it only means that the restaurant has focused its business operations, policy, strategy, and marketing towards the provision of food with integrity. It has opted to attract consumers by marketing to their awareness of principled responsibility by enlightenment concentrated on both the negative and positive effects of conventional agriculture on the ecosystem and human health. (Niu, 2014). By doing so, the restaurant is able to focus on its fundamental capabilities, and this has led to the production of food that intrigues the millennials, therefore, increasing its customers within the restaurant industry.

The Porter's five forces model will be used to determine Chipotle's position in the restaurant industry. The chief five elements in Porter's five force model include the power of suppliers, the power of buyers, competition intensity, threats from substitute products and threats from new entrants. Each of these elements plays a significant role in the analysis and decision-making process that determines whether a certain threat if either low, medium or high to Chipotle.

The Porter's Five Force Model

The Power of Suppliers (High)

To begin with, Chipotle is known for using organic, healthy, and garden-fresh ingredients in order to build concrete trust with its customers and maintain its reputation. Therefore, it is mandatory that the restaurant is careful and prudent when it chooses its suppliers in order to purchase the best ingredients that would result in the best quality of food. The restaurant prefers receiving its supplies from local suppliers who meet its moral obligations when it comes to the restaurant's mission, animal welfare, social responsibility, and sustainability. (Chipotle Mexican Grill). Due to this, Chipotle has restricted supplier alternatives; therefore, it only operates with suppliers who concur with its "Food with Integrity" mission, this makes the suppliers have more bargaining power over the restaurant. Other than that, a restriction in supplier substitutes gives the suppliers more power since the restaurant is incapable of regularly changing suppliers and ingredients. To conclude this, Chipotle's supplies generally have a higher pricing power since the restaurant lacks a variety of suppliers; therefore, it has to commit to specific ingredient suppliers.

The Power of Buyers (High)

In addition to that, the power of buyers is generally affiliated with the demand and supply constants, in this case, Chipotle's buyers possess an outstanding power; therefore, it is mandatory that the restaurant contemplates on the power of buyers during its decision and policy-making processes. Firstly, buyers could opt to prepare meals similar to Chipotle's at home, which is easier, cheaper and healthier since they could add their own ingredients and seasonings. This option of decision making provides the buyers with a higher power over the restaurant as it could result in a reduction in potential customers which would, in turn, reduce the profits.

Secondly, buyers could decide to go to other restaurants that are less expensive compared to Chipotle. This gives buyers a higher power over the restaurant as they can easily opt to go to other restaurants depending on their preferences. Lastly, considering the fact that Chipotle uses organic, garden-fresh ingredients for its food, buyers have low power as it is difficult for them to find other restaurants the same food quality. However, weighing the buyer aspects, it is evident that they generally have higher bargaining power over Chipotle as they could substitute the restaurant's food with other realistic options. (Mann, 2018).

Competition Intensity (High)

Chipotle has established itself as an innovator in the fast food experience; however, the restaurant still faces competitive pressure from other restaurants in the industry. Each of these competitive restaurants has unique qualities that make them stand out, but they all share a similar conceptualization. The strength of competitiveness rivalry in the restaurant industry is high due to the increasing number of competitors, growth evaluation of the industry, cost of storage, product differentiation, and the deliberate stakes. Chipotle's unique products place them ahead of the competition, therefore, reducing the rivalry potency. Other than that, chipotle has serious direct competitors: Fresh Enterprises, Qdoba Restaurant Corporation, Rubio's Coastal Grill, and Mswg LLC. As a result, this increases the level of threat from competitors for Chipotle since consumers could purchase food from any one of the competitors without any consequence.

Besides that, the growth rate of the Mexican restaurants in the industry is relatively low, and this creates room for more competitors to join the industry, therefore increasing competition intensity against Chipotle. Considering the fact that Chipotle relies on organic garden-fresh ingredients, the restaurant is forced to invest in proper storage which leads to high storage costs. This means that Chipotle spends more on storage compared to its other competitors and this results in highly competitive intensity. Lastly, Chipotle uses its unique products to differentiate itself from other competitors. The use of fresh ingredients has enabled the restaurant to have a competitive edge and maintain its customer establishment, therefore, minimizing competitive rivalry. Despite all that, the competitive intensity against Chipotle remains to be high.

Threats of Substitute Products (High)

Despite having established itself as a unique brand, Chipotle still faces threats of substitute products that consumers could opt to buy. The threat of substitute products is faced by most of the restaurants in the industry, due to this, Chipotle constantly aims at stabilizing between quality, effectiveness, and suitable pricing that attracts most of the consumers in the market. This provides Chipotle with the ability to compete and win against its substitute products: grocery stores, fast food restaurants, and full-service and casual restaurants. To begin with, grocery stores allow consumers to purchase their preferred ingredients and cook them at home. Home cooking is inexpensive and because of this most consumers prefer to purchase ingredients, this, therefore, increases the threat of substitution of Chipotle.

In addition to that, despite being slightly more expensive and demanding than fast-casual restaurants like Chipotle, full-service and casual restaurants are known to provide consumers with quality food in a more contemporary dining domain. Lastly, fast food restaurants are a substitute threat to chipotle since they are less expensive and offer fast services. Regardless of the threats, these substitutes pose, Chipotle has an advantage over them as it offers superior food quality compared to them. (Monroe, 2016)

The Threat of New Entrants (Moderate to High)

Considering the fact that Chipotle is a company within the Mexican fast food industry, the restaurant has minimal threats from new entrants. To begin with, Chipotle is a well-established brand, has already successfully installed distribution mechanisms, has patented understanding, and has effortless access to the required raw materials for its ingredients since it sources its products from local suppliers. Chipotle also has a uniquely exceptional relationship with its suppliers, and this is hard for new entrants to duplicate, this gives Chipotle an added advantage and lowers competitors power. This minimizes threats of new entrants since it would take some time for any competition to establish itself and be as successful as Chipotle.

Adding on to that, Chipotle's unique products minimize threats of new entrants since a new brand competing against the restaurant would take years to grow and attain the level of recognition of Chipotle. Aside from that, opening a new restaurant is easy, but the capital requirements needed to build a successful brand like Chipotle is significant. This, therefore, eliminates new competition as most new entrants in the restaurant industry fails to establish themselves successfully as a popular brand with a good reputation. Lastly, patented understanding aids in reducing the threat of new entrants since Chipotle makes sure that all of its chefs master the cooking expertise and develop unique recipes distinct to the restaurant. Generally, this gives Chipotle more competitive power, therefore, minimizing the threat from new entrants. (Carullo, 2016).

As a brand, it is crucial that Chipotle uses a generic competitive strategy in order to minimize or eliminate any forms of competition within the industry. For Chipotle to achieve a competitive advantage over its competition, it needs to have a lead over its rivals in consumer attraction and methods of managing its competitive intensity. Chipotle, therefore, makes use of Porter's generic competitive strategies: the best-cost provider strategy, the broad differentiation strategy, and the focus strategy.

To begin with, Chipotle uses the best-cost provider strategy which is a strategy that usually produces marketing from high probabilities of a buyer's inclination to purchase a product. (Gamble, 2013). Chipotle relies on the quality of its products to attract consumers, considering the fact that the brand provides customers with high-quality food made from the best ingredients, it is obvious that they will be willing to buy the food despite it being expensive compared to other restaurants.

In addition to that, the differentiation strategy is applied to increase the value of products by making sure that a particular product appeals to the consumer. Chipotle majorly manipulates the broad differentiation strategy to present the uniqueness of its food products to its consumers. The differentiation of Chipotle from its competition is the fact that it provides high-quality food that is perceived to be of higher value compared to other restaurants as their mission is to provide "Food with Integrity." This is due to the fact that the restaurant specifically uses fresh ingredients of high-quality and unique recipes.

In addition to that, Chipotle uses interior design to stand out from other restaurants, its outlets have been designed to ha...