A Value Chain Analysis for Chipotle - Case Study Example

23 March A Case Study of Chipotle Chipotle Mexican Grill popularly referred to Chipotle is a group ofrestaurants in the United States of America, Canada, France and the United Kingdom. It was first established in the year 1993 and concentrates on burritos, tacos and burrito bowls. It has steadily expanded to over 500 branches based in different localities. Started by Steven Ells, Chipotle is committed to serving high level nutrition to its clients. Over the years, Chipotle has majorly focused on the efficiency of its operations. This has been achieved through offering products prepared from sustainable organic materials. It also thrives by having smaller entities which immensely subsidize on the labor costs. As part of achieving high output, the company adopted solar panels for its peak period operations. This has also ensured high degree of environmental friendliness. The first part of this study involves carrying out a value chain analysis for Chipotle. Value chain analysis is the instrument for assessing the competitive advantage in relation to the market trends. The aim is to help a company achieve the greatest possible significance over its competitors. It also makes the company more appealing to win the people being served, that is, the whole idea is customer-focus (Bischoff 5). And for Chipotle, this is in line with its mission, which is to deliver high quality output at a low cost and a considerable shorter duration of time. The rapid development and substantial revenue of Chipotle saw it attract many investors. Also, with the steady increase of clients preferring the good quality food it offers, it became successful expanding into a big corporation. But the decision to increase the food prices affected its stock significantly. This was coupled with the stiff competition from other restaurants resulting into a 4 percent decline of output. To address this, Chipotle should continue with its gourmet ingredients at relatively lower prices, since its competitors do not offer organic components as it does. This will make it thrive since its marketing strategy is also through promotional events and verbal advertising of which none of its competitors uses. This makes it more outstanding than other businesses because it is able to stay in touch with its clients, thereby can get immediate feedback concerning the quality of services. Chipotle must continue to major on showcasing its value ingredients, i.e. displaying the quality of its products. This is because of the stiff competition and rivalry that exists in the restaurant industry, which makes thriving hard. Showcasing the ingredients can be achieved by doing full implementation of the strategies that have seen it flourish over the past years. It might not be enough to depend on the brand name alone as this may weaken its market share. This is because many clients come with high expectations and some may identify it with Mexican foods (Paiz 5). Chipotle should therefore switch to differentiated value provision and healthier dining methods. This will win the customers’ loyalty and increase their consumption. As a result, the overall business growth will be realized. Chipotle can also achieve a substantive growth by taking advantage of the customers’ preferences and capitalizing on them. It is the buyers’ satisfaction and preferences that boosts any industry. Therefore, by adapting high value standards that meet the consumers changing needs, Chipotle will override its competitors. This means it must assess the quality of supply by the service providers to enable the company fulfill its mandates. Bischoff asserts that value is not only achieved through changing the product features but also by meeting the existing changing needs (5). This calls for a good inflow of funds to ensure zero debt for financial stability. Chipotle must maintain a good financial scope such that it will not suffer restrictions resulting from huge amount of debts. This is because finances constitute a large percentage of any business operation. Hence it should have sufficient internal capital so as to edge out any external funding. The second part of this study involves outlining and substantiating the business level strategy that Chipotle pursues. A business level strategy is a plan that details how a company or a firm will participate in the market (Ireland, Hoskisson and Hitt 103). The main purpose of developing this kind of strategy is to ensure consistency in the company’s service delivery to the customers. The strategy must be fully understood by everybody in the firm for it to accomplish the intended objectives. This is to enable a firm have a competitive benefit in the market. In regard to this, Chipotle pursues three major business level strategies which include: cost leadership, differentiation and focused differentiation levels. Differentiation business level strategy refers to a plan aimed at producing services with unique features (Plunkett, ‎ Allen and Attner 118). It gives the customers products that are different from others and also helps in avoiding rivalry with the prevailing competitors. Chipotle offers unique services with high quality natural ingredients made from organic materials. This is evident in its attempt to develop networks with suppliers through which it can get access to natural farm produce, such as chicken and vegetables. In addition to this, Chipotle has to switch suppliers in the event they compromise on their standards. This is to ensure that it fulfills its commitment of serving what the customers need. Chipotle also emphasizes uniqueness and in so doing, it achieves customer satisfaction hence gaining a competitive edge over its competitors. The second strategy that Chipotle pursues is the cost leadership level. Cost leadership business level strategy is where an organization competes for a wider base of customers (Daft 65). It involves exploring new geographical areas and at the same time, remaining in touch with the customers. The essence of maintaining the contact is to help in identifying any change in customers’ tastes. Chipotle pursues this strategy by choosing to unveil a new Asian restaurant with the aim of taking its defining features to a new cuisine. This new restaurant offers a menu that includes the Indian, Malaysian, Thailand’s and Indonesian tastes. The approach puts Chipotle on a higher level of competitive benefit than its competitors. This is because it captures a massive portion of the Asian food segment benefiting from the flow of consumers who come in need of healthier organic food. The third level of business strategy that Chipotle pursues is the focused differentiation. This is an action plan a business adopts to offer services to a targeted group of customers. The services being offered are perceived to be unique based on the interests of the customers. The differentiation must be continuously done so that the services remain relevant to the needs of the clients. Chipotle’s business strategy is different from the ones used by its competitors, which is also evident in the way they build, own and market their products. By pursuing this strategy, Chipotle is able to create more value for its services, which the competitors do not have. In conclusion, for Chipotle to continue building its solid product equity, it must strive to adapt to the expectations of its clients. The market is full of superior products with much better tastes. Hence it must seek the leadership position and be innovative within the fast growing and competitive restaurant industry, if it is to survive. Works Cited Bischoff, Anna Lena. Porter’s Value Chain and the REA Analysis as an Accounting Information System. Norderstedt: GRIN Verlag, 2013. Print. Daft, Richard. Organization Theory and Design. 11th ed. Mason: South-Western Cengage Learning, 2012. Print. Ireland, R. Duane, ‎Robert Hoskisson and ‎Michael Hitt. Understanding Business Strategy: Concepts & Cases. Mason: South-Western Cengage Learning, 2008. Print. Paiz, Ernesto et al. Analysis of Strategic Move by Chipotle. Norderstedt: GRIN Verlag, 2011. Print. Plunkett, Warren R., Gemmy Allen and Raymond Attner. Management. Mason: South-Western Cengage Learning, 2012. Print. Read More