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MGT604 : Strategic Management

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MGT604 : Strategic Management

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Course Code: MGT604
University: ECPI University

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Country: United States

Read the Chipotle Case and answer the following questions. You are advised to use the appropriate analysis tools and theories to help direct your responses. Merely repeating back information from the case is not adequate.1. How would you define the industry that Chipotle is operating? Would you argue that the industry is an attractive industry to be in, compared to other food sectors?2. Is the Value System of Chipotle a source of competitive advantage or merely a feel good factor for the founder?3. Did the mega environment shape the current food service industry, in what ways?4. Do Chipotle possess core competencies that they can continue to leverage?5. What challenges do Chipotle face in the mid and long term?6. What approach should Chipotle take on the challenges discussed in Q5?

The global food industry is significantly developing with each day passing. The organizations in the concerned industry are observed to try their level best in order to cope up with the changing preferences of their customers so that they be able to survive in the industry for a longer period of time. The fast casual concept is significantly important for those organizations as it ensures the organizations get proper and sufficient worth for the high quality foods and services that they offer to their customers. The focus of his paper is to analyse the business operation of one such organization which follows the fast casual concept in a significant manner. The chosen organization for the case is Chipotle Mexican Grill.
1). The chosen industry sector is significantly full of opportunities for the organization. The analysis of the threat of the substitutes will show that the business model that the chosen organization is following in the mentioned industry, is followed by very large number of organizations. The organizations like Baja Fresh, Panera Bread, Qdoba and Pei Wei is producing tough competition to the chosen organization. However the Panera Bread is the closest rival for Chipotle with an annual sales of 1.54 billion US dollars compared to Chipotle’s 1.83 billion US dollar in the year 2010.
The chosen organization will face very low threat of the suppliers as it is associated with considerable number of suppliers Niman Ranch, Meister Cheese Company along with The Chef’s Garden. Apart from this the organization was observed to receive ingredients from 22 regional operators who are independently owned. Hence the bargaining power of the suppliers and the distributors are significantly low for the organization as it only purchases from the agencies which are able to satisfy the quality specifications. Apart from that the organization purchases in accordance to the pricing guidelines and the protocols, it has established with the relevant parties. Hence any sort discrepancy is not able to pose significant amount of impact on the operations of the organization.
The power of the buyers in the concerned industry is significant as the organization faces considerable amount of competition from the above mentioned competitors. Hence the option for the customers is high. But the fast casual method of the chosen organization is observed to create notable customer satisfaction and that is instrumental in the growth of the organization which is evident with the largest amount of sales for the organization in the year 2010.
The threat of the new entrants is also low as the model of business that the chosen organization follows requires considerable number of suppliers and distributors who are able to produce quality ingredients. Any new organization will find it significantly difficult to cope up with these sort requirements. Apart from that the industry largely observes 4 above mentioned organization to be conducting the business in an effective manner.
Industry rivalry among the market competitors is high as all the organizations are striving towards the achievement of such a business operation which will be able to guarantee the customer satisfaction and their repetitive purchases.
The financial statistics will be a valid proof of the fact that the concerned industry is significantly attractive for the business organizations compared to the other food sectors and along with the intense market competition is sufficient to acknowledge the attractiveness of the mentioned industry.
2). The overall assessment of the facts and the figures of the financial statement of the organization justifies that the value system is a source of the competitive advantage for them. Chipotle’s “food with integrity” philosophy was significant step from the part of the organization in making sure that they offer high quality food with quality ingredients that are sourced without any sort of adverse impact to the environmental balance. The fast casual segment of the organization was dedicated to look for a better quality food than the fast food. Along with this, the main objective of the organization was to satisfy their customers with customisable, quick and fresh food that was to be prepared in front of their customers. The organization largely believed that the sustainably raised products was able to make the taste of its food better and that was instrumental in production of a competitive advantage over the other organizations. However the organization’s belief of sourcing healthful product is significantly controversial as it is observed that even if the organization provides quality and sustainable ingredients, the menu options of it is packed with calories.
3). The business conduction of the organization was not significantly affected by strict laws and regulations or the political preferences. The organization only had the liability to make sure that their products satisfy the health standards of the concerned nation’s legislation.
The organization was a part of a market that registered annual sales of 3.85 billion US dollars with a 25 million US dollar marketing expenses. The organization significantly observed a rise in the generated revenue as it jumped from 1.33 billion US dollar of 2008 to 1.51 billion US dollar of 2009 and then in the year 2010 it reached 1.83 billion US dollars. Hence the organization had a viable market opportunity to create significant revenue.
The organization was delivering high quality food products to the customers with a quick and cost effective manner. The organization was observed to source the best quality ingredients for their food products and along with that the organization largely believed that the food products were significantly healthy for their customers.
The organization used the presence of technology for the customization of the orders of their customers and along with that the preferences of their customers regarding the ingredients were assessed and reported by the application of technology.
4). The core competency that the organization can continue to leverage is their quality in the services and the products which enabled them to create a customer loyalty among their customers. The formation of the customer loyalty was incredibly used by the organization in the generation of the profit with the introduction of the fan engagement activity and the social media connection. The organization had much better social media penetration than its competitors with its representation in the Facebook. Apart from that the organization was able to achieve the word-of-mouth marketing of its loyal customers which ensured that the service and the products of the organization get better highlighted among a larger number of probable customers.
5). The mid-term challenges for the organization will be the severe market competition among the market leaders of the concerned industry and the chosen organization. Along with this, another major concern for the organization will be the increment of the cost due to the sourcing of the high quality ingredients and the increment in the operating cost of the business.
The long-term challenges for the organization lies in the plan of the market expansion in domestic and international format. The major issue in this case is the cultural and organizational challenges. The organizational structure of Chipotle is pretty simple with one main office monitoring all the business operations and that creates significant difficulty as it is difficult to manage the organization and effectively communicate to all the relevant parties from one single space. It creates significant problem in the proper understanding of the cultural and local differences in the new locations. The finding of the appropriate location is a major challenge domestically and in case of the international business expansion, the main issue is the absence of the proper brand awareness among the people of the new locations.
6). The organization needs to effectively manage operating cost by introducing centralised purchasing department which will be instrumental in reducing the transportation cost as well. Apart from that the organization must focus in increasing the quality of the food products along with making the products more cost effective.
For the long term issues, the organization must open a branch at every new location so that they do not face significant in monitoring from some other country or state. Along with this, the cultural differences will be reduced as well by following this format. The organization needs to use the social media platforms in a more frequent manner in order to promote their services and the products as that will make sure that the company be able to achieve a proper brand in the international market.  
Chipotle.com. (2018). The only ingredient that’s hard to pronounce at Chipotle is “Chipotle.”. [online] Available at: https://www.chipotle.com/#
Dobbs, M., 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
Foodstandards.gov.au. (2018). Food safety standards (Australia only). [online] Available at: https://www.foodstandards.gov.au/industry/safetystandards/pages/default.aspx

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