With the depressed economy, full set-vice had less chance on lower prices than the others because Of food and beverage, labor and real estate costs. The consumer’s willingness of lower food price also affected Chipotle with the mission statement “Food with Integrity” because Chipotle’s price is a little higher for serving good quality food with inputs sourced using sustainTABLE farming practices. From the learned points of Chipotle’s case, we will analyze “Is Chipotle’s current strategy be TABLE to compete with the competitors in the ifficult economic times competing for a share of the customer’s stomach? or “Could Chipotle continue to use quality and sustainably sourced inputs as differentiators to justify a higher price menu? ” Introduction of Chipotle’s background In 1 993, Steven Ells, the founder of Chipotle Mexican Grill (CMG), opened the first restaurant in Denver, Colorado and his goal was to reinvent Mexican food with the excellent chef experiences of San Francisco. Based on his goal, Ells successfully opened 16 restaurants in 1998 and then got an initial nvestment to expand more units from McDonald’s corporation.
In October 2006, Chipotle and McDonald ended up going the separate ways according to different kinds of food, experience and culture. The mission statement “Food with Integrity” was occurred by Edward Behr’s article that was using without antibiotics or confining pigs. Now Chipotle, one of the fast casual segments, operates more than 1300 own restaurants and employs above 30000 hourly and salaried workers. Situational Analysis Strengths Organic agriculture and sustainTABLE sources Freshness (no freezers and microwave ovens)
Only company-owned restaurants Perfect well-planned operation and supply chain systems Typical restaurant’s smaller size Non-traditional marketing strategy Weaknesses Higher selling price than competitors Poor promotional method (word-of-mouth publicity and in-house advertising) Lack of customer relationship management Opportunities Globally fancy level in organic agriculture Initial investment from McDonald Environmental and sustainTABLE restaurants (use of solar energy and reduce carbon footprint) Threats Limited source of organic suppliers
Compete with all segments from restaurant industry People’s eating-out times reduce with the depressed economy “Einhorn Effect” – competitor produces similar products and greater risk of losing customers Key Issue Chipotle, currently running its owned restaurants in the fast casual segment of the restaurant industry, is recognized with “Food with Integrity: its current strategy”. Could Chipotle’s current strategy and sustainability afford to compete with the competitors who favored lower check prices to hold on the market share in the difficult economic times?
Or “Could Chipotle’s restaurants continue to use quality and sustainably sourced inputs as differentiators to justify a higher price menu? ” Alternative actions and Evaluation of Alternative actions Alternative actions pros Cons 1 . Differentiation strategy by “Food with Integrity” (current strategy) Good reputation Differentiated products can reduce consumer’s sensitivity to price increases Get loyalty of customers because of its hygienic and fresh products Highly dependent on organic suppliers Counterfeiting of competitor’s low-cost strategy Economic recession can reduce sales .
Cost leadership strategy by lowering the price Profit margin’s enhancement Can take the market’s shares that prefer lower prices Can effect on its image A significant potential entrants into the market 3. Integrated cost leadership/differentiation strategy by reducing price and “food with integrity” Brand promise Can give more customer satisfaction Earn more market shares Very difficult to implement effectively Can’t attract customers if not price low enough or differentiated Recommendation Strategic Intent: Chipotle aims to lead in the fast causal segment with its Food with Integrity” and reasonTABLE prices compared to the competitors.
Strategic Mission: Chipotle sustains its good quality food with reducing price by using customer relationship management (CRM) and information networks with organic suppliers to provide another source of flexibility. From the evaluation of the above alternatives, Integrated cost leadership/ differentiation strategy by reducing price and “food with integrity” should be implemented by emphasizing total quality management (TQM) to expand the market effectively rather than the currently-used differentiated strategy.
