Competitiveness and Globalization - Case Study Example

Chipotle case analysis Introduction Chipotle Mexican Grill is a fast food company that was established in the year 1993 by the founder Steve Ell. This group or chain of restaurants currently has operations in most parts of United States and the United Kingdom. At the time of establishing this fast food chain of restaurants, Ell had a strategy that could be predicted based on five elements or features that are commonly found in restaurants fit for fine-dining. These proposed elements included: i. Ensured serving of burritos, burrito bowls, salads and tacos focused menus to the customers. ii. Ensured usage of raw materials of the highest quality and application of classic methods of cooking. This was to ensure that the restaurant produces dishes that are reasonably priced and ready to serve to customers in a short while. iii. Creation of operationally efficient restaurant having a pleasing aesthetic distinctive setting in its interior. iv. Friendly customer care services. v. Increased awareness and respect for the environment. This would have entailed the use of freshly grown organic produce and meat that is humanely raised and having no hormones or antibiotics. At the point of establishing these chains of restaurants, the main idea that was in the mind of the entrepreneur Steve was that, as a place of fast foods, the restaurant needed not to be quite expensive but, more accessible and affordable to most of the consumers. As such, when Steve commissioned the opening of the first of such restaurants in Denver in the year 1993, it became a great hit in the marketplace, and the majority of consumers were pleased with the services offered. According to the report, Chipotle grew in operations from a 1-unit restaurant to a 1,230-unit chain of restaurants that served in various parts of the country (41 states), and which managed to serve a daily customer base of about 800,000 people. The reasons for this great increase in sales turnover and high profitability index was due to a combination of various factors among them, provision of better quality fast foods compared to other restaurants, up scaling of the restaurant and the ability to deliver faster services to the customers. It is as a result of this extensive expansion and tremendous increase in sales turnover of the restaurant that Steve sought to expand the base into other neighboring states. Such expansions were to areas such as the District of Columbia, the United Kingdom and Canada. For instance, according to the financial reports of the year 2011, Chipotle managed to record revenues worth $2.3 billion and a $214.9 million in net income. The diluted earnings per share (EPS) for the same year were about $6.76 million. These are clear indications to a company with a positive growth profile hence, prospectively looking forward to increased business opportunities in the near future. A SWOT analysis for Chipotle Mexican Grill will be based on the past relations for continued existence of the company. For instance, the continued increase in the stock prices for a company is a likely indication of strength in the restaurant. There are a number of reasons as to why a SWOT analysis for a company is essential, especially to stakeholders and prospective investors to the company. This is because the analysis will help in making informed decisions about investing in the company or even buy shares and stocks from the shares of the company traded in the stocks market (Paiz, Dave, Ryan, Brian, Kristina, Frank & Mark 165). Chipotle Mexican Grill is recorded to have publicly started trading in its shares in the year 2006, and since then, it has had impressive stock prices recordings in the market. For instance, according to this report, the stock price of Chipotle Mexican Grill in the year 2012 climbed to record high of about $380 to $385 per every traded stock as compared to the previous year; thus, a representative 80% increase. Strengths 1. The availability of a well developed marketing strategy. A critical study into the report about Chipotle Mexican Grill as presented in the article is that it took the development of a strategic strategy for the chain of the restaurant to record impressive market results. Effective growth of a company can only be achieved when the same has a good and proper strategy. Looking into this report, I clearly note that Steve Ell developed an effective strategy that led to the ensured growth expansion prospects for the restaurant. The five main strategies that were developed in line to this respect are: a. Ensured serving of burritos, burrito bowls, salads and tacos focused menus to the customers. b. Ensured usage of raw materials of the highest quality and application of classic methods of cooking. This was to ensure that the restaurant produces dishes that are reasonably priced and ready to serve to customers in a short while. c. Creation of operationally efficient restaurant having a pleasing aesthetic distinctive setting in its interior. d. Friendly customer care services. e. Increased awareness and respect for the environment. This would have entailed the use of freshly grown organic produce and meat that is humanely raised and having no hormones or antibiotics. Looking at these strategies, one can be able to acknowledge that indeed Steve had a very comprehensive plan for the restaurant, which clearly gave rise to the enormous expansion in the operational activities of the restaurant. First, when Steve opted for the designing of a menu that could ensure that a focused menu of burritos, salads and tacos are prepared in the restaurant, he was strategically putting the restaurant into line with meeting the respective tastes and preferences of diverse customers. For any organizational growth, the satisfaction of customer needs is quite essential since, most hospitality industries such as hotels and restaurants depend on good ratings from satisfactions of customers. Consequently, the analysis of these strategies as espoused by Steve is that a healthy and high-quality provision of food needs to be emphasized in the food chain industries. Additionally, the implication of these strategies is that the restaurant setting and environmental surrounding needs to be constantly improved and maintained to help it gain a pleasing touch of quality. Further, development of a friendly customer care service acted as strength for Chipotle from the perspective that customers were warmly welcomed into the restaurants and received fast and efficient services. 2. Good leadership For any company to have sustained growth in the market they function in, the outward appearance of leadership presented by the management of its objectives will greatly enhance growth. Furthermore, the presence of a good leader is quite essential to growth and development of sustainable production methods. In this case study about Chipotle Mexican Grill, Steve Ells is represented as an aptitude leader who apart from being the founder of the restaurant and a chairman of the same for a long period of time steered it to its current lucrative position. His vision for Chipotle back then and even to this present time was that it be the only chain of restaurant ‘to change the way or perception of how people think about and eat fast foods.’ As a result of the good leadership from him and other management positions, the restaurant was able to apply as a part of its ingredients only raw materials from organic food sources as well as meat without hormones in it. Consequently, the good leadership has also led to the enhancement of service delivery to the customer as is seen in the adoption of a friendly customer care through employment of customer friendly employees. This aspect of good leadership is considered strength for Chipotle since even other famous food chain companies such as McDonalds once sought to adopt the leadership style as developed by Steve Ells. This is because this leadership style, which was both visionary and influential, led to the company’s expansion strategies and obtainment of additional investment capital. McDonalds, for instance, prided in the skills and experiences of Steve Ells hence, a clear indication that this good leadership was strength for Chipotle Mexican Grill in its SWOT analysis. 3. Availability of efficient supply chain management The use of organic raw materials by Chipotle started in the year 2003 when Ells’ strategy of safe food was adopted. The use of organic raw materials is considered strength for the company in the sense that, through it, the commitment of Chipotle to customer safety and health measures is assured. As such, most customers were much contented when consuming the fast foods from Chipotle than from any other source. In line with ensuring efficient supply chain management, the report notes that Chipotle did not directly engage with the farmers or producers of the raw materials but, dealt with a number of reputable food industry suppliers, which they had developed long term relationships with. Despite this, Chipotle ensured that it set a high supply standard for suppliers, and disqualified those that did not meet its quality criteria or regarded it not fit to continue supplying inorganic food stuffs. It also competitively selected its qualified suppliers carefully and it source food materials from qualified suppliers. All these are clear indications of a success factor in the management of the food chain across all the markets that it has operations in. The report also notes that Chipotle owns 22 regional distribution centers, all of which have greatly helped with the purchasing and delivery of supplies needed for production of various food menus. Chipotle utilized in ensuring success has also improved its independently owned and operated regional distribution centers to purchase and distribute ingredients to each of its restaurants across the states and countries where such exist. The effect of using this supply method is that it has led to the shortening of the supply chain of Chipotle and saved the restaurant an immense amount of time and capital resources spent in the purchase and distribution of the raw materials and finished food products. 4. Effective marketing strategies To ensure that it attains great sales from the market of its products, Chipotle has hugely invested in the uptake and enhancement of better advertising techniques for its products. The spending in the advertising and marketing by the company have proved effective and led to the increased awareness of the available brands and types of food menus from the company nationally and internationally. Consequently, the marketing techniques that have so far been applied by the company have been aimed at retaining the customer base and attracting new customers. A good marketing criteria and effective advertising technique have the great effect of portraying the success factors of the restaurant (Hitt, Robert & Ireland 554). To be able to achieve this, Chipotle utilizes advertising/marketing channels such as radio, television, newspaper, theaters, online adverts and outdoor activities to market its products. Most of these campaigns have been much effective since new customers are recorded each day in the various outlets. Besides marketing its products, Chipotle Mexican Grill has an effective corporate social responsibility strategy that sees to it that it actively participates in communal activities such as fundraisings towards social amenities development in the areas where the restaurants are located. This has enabled it to adapt a strong emotional connection with most customers who perceive it as a friendly food chain. (Paiz et al, 545) Finally, Chipotle has been able to illustrate how effective its ‘invitation-only-reward program’ as a marketing strategy enhanced its sales abilities. In this program, loyal customers and passionate ones are allowed to learn more about the food chain restaurant, and be rewarded for the sharing of their knowledge on Chipotle with other people. This has enabled it to retain its loyal customers and gain new ones from the word of mouth. Weaknesses 1. Inability to meet the growing demand for organic products. The world, in terms of consumption trends, is changing as most consumers prefer organic foods over the inorganic ones. This move is increasingly becoming rampant as organic foods are viewed medically as being healthier than inorganic ones. This problem of organic foods is highly regarded in the supply management of Chipotle in the sense that there are few suppliers of the same hence, high costs in obtaining such raw materials. Since it cost more money and time to grow organic foods and raise such organic animals, it is increasingly becoming hard for Chipotle to keep up with the growing market demand from its customers of the organic products. Chipotle is not able to make sure the supply of organic products is maintained or sustained. In my opinion, this appears to be the most important weaknesses facing the company. As a result of the low supply of organic raw materials, some of the restaurants of Chipotle across various states have been forced to serve inorganic foods due to the insufficiency of the organic ones. As such, this goes against the core strategy of healthy organic foods as was implemented by its founder Steve Ells. This situation pegs a huge issue of the most appropriate way to ensure an adequate supply of organic foods. This is a great challenge as Chipotle looks forward to maintaining on its promise of providing high quality fast foods. This is because if consumers note that it is unable to meet up to this promise, its reputation will begin to decline; hence low sales and revenue recorded. 2. Unavailability of adequate eating menu. In this respect, the menu served by Chipotle as well as its current eating environments are considered weak points of growth. According to the report, Chipotle’s simple menu of foods though easier to make and maintain are losing face in the presence of a changing market of the same. Most restaurants are developing more complex and detailed menus that is not the case with Chipotle. As such, it may be termed old-fashioned hence, begin losing on its customer base, especially among the young. Though customer could customize their own food, there are not enough choices for customers. The more variety the menu, the larger group of customer Chipotle can attract. 3. Inadequate restaurant environment Another weakness of Chipotle is the eating environment. A good eating environment can make customers feel comfortable so that customers will come back. Chipotle didn’t pay much attention to the construction of the restaurants. The idea was that Chipotle was in the “fast casual” segment of business; hence, no need for the provision of a great eating environment for customers. However, I think it should change this provide a comfortable environment for customers. The construction of Chipotle restaurant is very simple, and right now the company is even trying to lower the construction cost with an even simpler design, which may not be a good idea. Though it can reduce the cost and save some money, it might be unable to meet the customer’s requirement for efficient eating environment. They might lose customers due to the less comfortable eating environment in the restaurants. Opportunities 1. A fast growing casual segment with enhanced customer preferences According to the National Restaurant Association survey that was conducted, the restaurant’s segment of fast casual foods is a great opportunity for growth and expansion. If accordingly ventured into, it will present the restaurant with alternative means for expanding economic growth prospects in its line of business. This is so as it has been widely neglected and the company does not effectively seem aware of this opportunity. Even more, the current eating habits of individuals is fast changing, and most people would prefer organic and health foods regardless of the cost than cheap inorganic foods which have diverse side effects. Therefore, Chipotle should seize this opportunity, and greatly enhance its growth prospects through the concentration of its production strategies and opening up of new branches in various places fine-tuned towards the demands of consumers. This trend is much good for the restaurant than any other since it has been known to be providing healthy organic foods. Threats 1. Increasing cost of supply organic raw materials The supply and production of organic raw materials from the various suppliers of the restaurant is a great source of threat to its operations due to the daily increasing costs of doing the same. There is constant competition for organic food raw materials from other food companies and restaurants; hence, suppliers would opt to do the same to the highest bidders. Therefore, this will make it extremely difficult for Chipotle to maintain the high market demand for organic fast food products from its customers. With this real looming threat, the restaurant will soon be plunged into a crisis, or even forced to close some of the outlets. 2. New entrants into the market It is quite obvious that new entrants have entered into the restaurant market, which have continued to provide similar products to consumers at different rates, some more favorable. This continued pose of threats will greatly impact on the customer base of Chipotle hence, lead to lowered revenues. Completion is real and has been coming from other firms such as McDonalds among others which have proved more profitable over time than Chipotle. As such, Chipotle should be aware of the same and be prepared to compete with them on fair grounds. The main rival of Chipotle has been the Taco Bell of Mexico, which also produces quality fast foods. However, with the decline of the restaurant’s operations in the region, Chipotle should take up this opportunity and compete effectively. Recommendations to Chipotle In order to continue enjoying these positive growth prospects in the market, Chipotle should undertake these recommendations seriously. First, it should continue to operate within the strategic guidelines as were developed by Steve Ells, its founder. Second, there is an urgent need for the restaurant to add value to its list of foods in the menu and be able to provide customers with numerous choices. Third, Chipotle should enhance its advertising and marketing techniques to ensure that consumers are continually informed about their products. Finally, it would be essential that the firm’s management be informed of the threat of competition hence, be more informed and innovative in its production strategies so as to differentiate it from the other chains of restaurants. Works Cited Hitt, Michael A, Robert E. Hoskisson, and R D. Ireland. Strategic Management: Competitiveness & Globalization : Cases. Mason, OH: South-Western, Cengage Learning, 2013. Print. Paiz, Ernesto, Dave Anderson, Ryan Barone, Brian Bollinger, Kristina Calderon, Frank Lin, and Mark Toguchi. Analysis of Strategic Move by Chipotle. Mu?nchen: GRIN Verlag GmbH, 2011. Internet resource. Read More