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Chipotle is currently the fastest growing food chain-store restaurant in the United States (US) with outlets in Canada and the United Kingdom. The company was founded in 1993 by Steve Ells with the mission statement, ‘Food with Integrity.’ Currently, the business is operating in about 39 states in the US in addition to those located in Canada and the UK totaling to more than 1100 location outlets. Originally, Steve founded the headquarters of the company in Denver Colorado. In analyzing this business, the study will look at the opportunities and threats facing the business organization n the external environment focusing on both competitiveness and the general environment in which the company operates in. Also, the study will analyze the strategic alternatives in the long term and short term business success and the recommended strategy. In conclusion, the research will establish the implementation of some programs in the firm and the evaluation and control of the strategies and measures adopted for business success
From the onset, Chipotle came up with a strong product brand that was quickly encrypted and adopted by the consumers. Together with the trusted and valued fast food products, the Chipotle Mexican Grill brand has realized easy acceptance and adoption among the customers even in the bad economic periods. The rigorous corporate culture of community involvement and strong emphasis on quality in the business has seen the corporate draw more customers and hence increased business revenues due to its strong brand equity. Chipotle store sales revenues recently in 2011 increased by 11 percent.
That translated to an increase in sales revenue from US$ 476 million to US$ 591 million from the previous year. That significant rise in revenue saw the company topping the average expectations in analysis of US$ 584 million. Consequently due to the product brand, the market share price rose to $ 1.90 from $1. 52. This, Steve Ells, the CEO attributed to the product brand reinforced by the organization’s strong food culture (Valente, 2011).
40% Market saturation and Emerging Markets Abroad
The 1,162 restaurant outlets in the US, UK and Canada only represent about 40% of the total food market at the disposal of Chipotle to go after and economically exploit. Even inside the localities that the corporation is already operational, statistics show that more new customers are showing up steadily to add on the number of the existing customer base that the business has created. Four promising nations include Ireland, Japan, UK and Australia. Such nations show steady and continuous economic growth, high affinity for US products, high populations and emerging tendencies towards active healthy lifestyles. Therefore, with such a large market presented by the global market, the current market can only at most be 40% saturation leaving an expanse market yet to be satisfied by the Chipotle Mexican Grill products. The potential market not only paints a fertile ground for Chipotle but also for other companies in the food industry.
Positive Corporate Culture
The authenticity of the business organization has increasingly been translating to profits and more revenues opportunities seems to be beckoning from that cultural practice. Steve has openly stated the sources of its ingredient products even on national TV holding the company accountable and ultimately translating to its authenticity. The company has prided itself with responsible farming, natural wholesome ingredients, stimulating workplace and communal stewardship (Monaghan, 2009). The values that the customers share with the company offer a stable healthy market for present and future generations.
The recent events of the economic downturn threaten to reverse the progress that the business organization has witnessed up to date. The market conditions have forced the company to significantly increase the prices of its commodities due to the high cost of primary products. With the reduced purchasing power of most Americans, a sustained price increase may lead to the detriment of the business corporation if the consumers cannot afford its products leading to slow business growth or even stagnation.
The American market presents about 75% of the total business revenues and therefore, any significant market slow-down in the market significantly negatively affects the business (Valente, 2011). With the expected government policy to increase taxes so as to reduce the government’s tax burden, the company will obviously be a target and that will significantly reduce its net profits in the future.
Competition and Price Wars
The Chipotle business organization faces stiff competition from other large and small firms operating in different localities in numerous states. The MacDonald’s for example presents the ultimate rivalry especially considering that both business adopt related business practices and corporate cultures. With increase in size and internationalization comes rigidity in doing business. Small firms in the industry have the advantage of being flexible and sensitive to customer needs including the ability to cut prices without significantly affecting their revenue margins and also offering substitute products that can reduce the market share enjoyed by the business organization (Valente, 2011). As a result of the economic crisis, other firms have resulted to price cuts to maintain customers and Chipotle is threatened to losing its customers if they maintain the increased prices for its commodities coupled with the emerging rigidity in the local and global markets without franchising.
Strategic Alternative Recommendations and Implementation
To maintain the core values that have seen the business grow and expand to its present glory, franchising presents the perfect strategic alternative recommendation to counter rigidity and insensitiveness in the business that would underscore the achievements realized so far. Franchising would realize the flexibility and business enthusiasm needed for the expected future projections. Franchising of the business firms outside of the US would significantly reduce the administration overhead costs while still maintaining the business core values. The strategy would especially ensure steady revenues for the company in the present troubled economic stricken economy in the US by steady inflows of revenue both in the short term and the long run from the franchised outlets in the areas outside the US that have not experienced the economic crisis such as in Japanese and Australian markets (Hoy & Stanworth, 2003). The strategy should first be tried out in the Australian market before expanding to other less familiar grounds.
Chipotle since its founding has enjoyed some strengths and unique weaknesses that have shaped the business to its present position as a leader in the food industry. Such include a strong management team, community involvement, strong brand equity reinforced by a positive culture and a strong focus on the quality of its products. Such qualities have presented the company with business opportunities ranging from product branding, a less saturated business environment and the ability to expand in the US markets and abroad. Consequently, the firms faces competition from both small and large enterprises in the food industry, price wars, government legislations and the economic crisis that threaten to downplay its present success. Therefore, Chipotle is presently at a favorable vantage position to lead the market for a long time if it can effectively control the threats it faces by the recommended strategy.