The essence of the firm/industry problem
The evolution of fast casual in the use of new concepts will dilute the market. In 2010, Chipotle enjoyed dominance since it became the first in the fast-casual segment and surpassed Panera bread and other competitors (Hitt & Ireland, 2007). With the emergence of new concepts, new entrants such as Better Burgers serve as potential threats of Chipotle.
Chipotle faces two strategic challenges that include consumer awareness and profitability in International expansion and increased competition from the quick service restaurants. In consumer awareness, the firm has to address two challenges. The consumers in the food market industry are not aware of Mexican cuisine and specifically from Chipotle. In the light of this, the firm faces stiff competition from rivals that have already established outside Mexican food category. The management attempts to develop the Mexican food category to establish a unique position for the firm. Similarly, the firm faces the issue of developing relationships with the local producers to enable them establishes a network supply to provide suppliers to the international market. Chipotle has the financial and the managerial incentive to raise its scale in the international market while it is crucial for the international operations to operate at full capacity so as to ensure the firm is profitable like the Western market. The firm faces threat of its profitability if it fails to establish the economies of scale in its international suppliers. International operations are a logical move for Chipotle for it can provide growth for the firm; the firm faces the challenge of consumer awareness for it to develop an efficient supply chain. The firm faces challenge of increased competition from new entrants that can counter constant growth in the food market in Mexico. Taco Bell that operates in America has opened a branch in Mexico called Cantina Bell that competes with Chipotle. Taco Bell and other new entrants in the market have modernized their restaurant interiors to compete with Chipotle (Hitt & Ireland, 2007). The quick service restaurants adopt fast casual traits such as renovating their dining room to encourage more dinner attendants. The quick service restaurants perform enhancement to attract the fast casual customers and provide a comparable product at a low price to serve as a threat to Chipotle.
Sustainable competitive advantage
Business level strategy- Chipotle adheres to a differentiation strategy where its products are premium priced and competes with other casual competitors such as Panera bread and Qdoba. The fast-casual food segment targets customers in search of better quality. Chipotle can satisfy customers that need fresh organic food prepared fast as they wait. According to Hitt & Ireland (2007), customer satisfaction is a good predictor of the customer future intention. Any customer repurchase intention is a sign of satisfaction. Since the firm had shared ownership with McDonald, the firm applied business autonomous that has made it successful until today. The firm adheres to a simple restaurant design to enable it create something fabulous. The firm prides itself with a unique philosophy that appeal to the fast-casual segment. The management believes that a sustainable raised product can make the food taste better in turn to give it a competitive advantage. Hitt & Ireland (2007) believes that Chipotle will realize more sales once they are aware of the source of the food.
International strategy- Chipotle adapts to a global strategy especially in the West. The company offers standardized products across markets with only slight differences. The firm enters the international market by establishing subsidiaries. The idea is expensive to the firm while it ensures high quality of the products in a differentiated brand.
Corporate level strategy- the firm experiences low diversification in the launch of Pizzeria Locale, Asian Kitchen, and Shop House. The management focuses on domestic and international operations that can help it increase diversification and future expansion.
Solution to the problem
In full view of completion in the domestic and international level, Chipotle targets the customers that seek high-quality food from a faster source and cost beneficial to the customers. The firm focuses of the customer experience to develop a better brand and build a strong following. The initiatives to develop employees and maintain strong personnel will enable the firm to continue experiencing success in the future. The company’s mission of food with integrity can set it apart from the competitors since Chipotle creates a unique taste that rivals cannot copy (Hitt & Ireland, 2007). The philosophy of integrity will enable the firm benefit from customer loyalty that can help increase patronage. The firm relies on organic suppliers so as to supply it with fresh, healthy produce. Chipotle will benefit from a set of connections of farmers that can help mitigate the risk of supply outages. By adhering to “Food with integrity,” the firm believes that high-quality ingredients can create a tasting meal that is different from rivals in the industry. The restaurants receive suppliers from more than 20 independent owned centers. Chipotle has an upper hand since the market has many suppliers and in that case will select the suppliers based on quality specifications. The firm prefers to work with family owned farms since they work independently to meet high standards in the required quality. The company attempts to reduce the operating costs in the use of centralized purchasing department to reduce its transportation costs. The firm succeeded in expanding internationally in 2010 and currently has branches in France, United Kingdom, and Canada. In addition to that, Chipotle has Shop House Asian Kitchen, Pizzeria Locale, Asian noodle, and organic tofu to attract vegetarians. Currently, the firm has managed to have more than 1500 locations and 37,000 employees to enable it compete with top American fast casual dining segment.
References
Harrison, J., & John, C. (1998). Strategic management of organizations and stakeholders: Concepts & cases (2nd ed.). Cincinnati, Ohio: South-Western College Pub.
Hitt, M., & Ireland, R. (2007). Management of strategy: Concepts and cases. Australia: Thomson/South-Western.
Harrison, J. (2003). Strategic management of resources and relationships: Concepts and cases. New York: Wiley.
Thompson, A., & Strickland, A. (1999). Strategic management: Concepts and cases (11th ed.). Boston, Mass.: Irwin McGraw Hill.
