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Chipotle Market Essay

Chipotle was established in 1993 with the idea to demonstrate that fast food does not have to come with the typical “fast-food” experience. Chipotle’s niche market prefers high quality ingredients that’s healthy, tastes good, and uses classic cooking methods with unique interior design. Chipotle has changed the fast food market and uses the short and sweet mission statement to “forever provide food with integrity”. The company’s vision statement is “to change the way people think about and eat fast food” and its mission statement is to provide “Food with Integrity” (Chipotle, 2014). The vision statement has been successful in driving to its front door where it’s not unusual to see a line leading to the assembly kitchen within an hour of closing. The mission statement is short but the company constantly works to ensure the quality of the food is consistent and fresh and stocks from reliable vendors. The strategy Chipotle uses in its vision and mission statement is to ensure they are intertwined.

Chipotle exemplifies Michael E. Porter’s proposal that managers can make the organization more profitable and less vulnerable by using a differentiation strategy. Chipotle seeks to distinguish it’s food from all others in the industry. It uses the local grown and sustainable products differentiation and its ability to produce food that a good price and produces in high volume that allows the company to make a handsome profit. Even while new fast casual companies such as Noodles and company have come along, no national chains have come close to creating a threat in the type of food that Chipotle makes. One competitive advantage the company has is that the food it serves caters to health consciousness in consumers. This compliance to the healthy food trend comes from shifted consumer sentiment away from food that facilitates obesity. Another competitive advantage is that Chipotle sits somewhere between fast food and casual dining.

This is referred to in the article as fast casual dining. Chipotle offers the quality of food that many full-service restaurants serve and pair it with the speed and convenience of fast food. Chipotle prides itself in doing a few things really well. Chipotle only uses ingredients sourced from local suppliers. It is the only national restaurant that has a significant commitment to using local produce on a large scale. All of Chipotle’s ingredients come from within a 350 mile radius of the restaurant where it will be served. This local food supply provides a competitive advantage in the freshness and reliability of the ingredients it uses. Chipotle also works with local farmers to ensure they use sustainable operations. This sustainable operation in turn allows Chipotle to gain efficiency and ultimately better prices. Chipotle’s marketing strategy focuses on a narrow market segment through use of a differentiation strategy.

This focused differentiation strategy’s uses the company’s commitment to providing organic ingredients raised with respect for the animals, the environment and the farmers. This resonates to a large segment of the population who want to deal with companies that stress sustainability. This ultimately contributes to exceptional taste, wholesome nutrition and great value. In order for Chipotle to implement the strategy, consistent relationships with local suppliers is paramount. The assumption is that the less distance the food has to travel, the better. This is a benefit to all involved. The company benefits with being known by the market it serves as serving the local community. The suppliers benefit in that it can deal with a reliable and consistent partner for supplying the food. The local community benefits by improved economy and decent paying jobs.

The importance that Chipotle strategy has in industry is that it is a great example of Daft’s organizational goals that states “The best strategies come from systematic analysis of organizational strengths and weaknesses….” Chipotle does not have a desire to please all customers with every taste. While the average price of a Chipotle burrito is about $7, this is a similar price point as most food places, the company has a relatively narrow customer base of those who want fast casual Mexican food. This focus allows the company to reduce the ingredients and inventory needed. This allows the company to spend more time creating relationships with local supplies to ensure the freshness and integrity of the ingredients.

Another thing Managers can learn from the Chipotle model is that of Overall Performance. This is that the performance is expressed in terms of net income, earnings per share, and return on investment. Chipotle’s stock price has increased 600% in the past five years. So while increasing the number of stores in the system, the company has also increased the sales per each store while also improving net income. This in turn follows in the equation for earnings per share.

References

Daft, R. (2013). Organization theory & design (11th ed.). Mason, OH: South-Western, Cengage Learning. Article Link:
https://docs.google.com/document/d/1pfdTX89Abt8on2NowLB-KY2wSgcxCgDKvaPAsa56dwI/preview?markAsViewed=false


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