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INNOVATION & COMPETITIVE ANALYSIS 3

Porter's Five Forces Analysis of Competitive Advantage for Chipotle Mexican Grill, Inc.

Overview of the Company

Chipotle Mexican Grill, Inc. is one of the most prominent fast-food companies in the food and beverage industry in the United States. Over the past years, the company has experienced significant transformation in its business strategies (Burke, 2014). As a result, the company has realized a significant financial breakthrough. This paper analyzes porter's five forces of competitive advantage of the company. It also discusses the innovative trends within the food and beverage industry that the company can adapt to. Third, it discusses the company's capabilities and resources regarding its development. Finally, it accounts for whether the company's organizational structure impedes or supports its skills to innovate and achieve success.

Analysis of Porter's Five Forces of Competitive Advantage Threats of New Entrants

The new entrants in the fast foods and beverage industry bring new innovative ways of handling businesses. These innovative strategies put pressure on Chipotle Mexican Grill Inc. to lower the costs of its products. As a result, the company has to manage all the risks and develop practical barriers to protect its competitiveness. The company can address these threats by producing innovative products and offering unique services that don't match the new entrants.

Bargaining Power of Suppliers

Most of the companies in the fast food and beverage industry purchase their raw products from several suppliers. This fact can put the suppliers in an overriding position to reduce the profit margins for Chipotle Mexican Grill Company. Most suppliers use their bargaining power to negotiate prices and obtain high fees from the restaurants (Raj, 2020). The negative impact of this supplier power is that it can reduce profit margins for the company. Luckily, Chipotle can escape from experiencing such devastating effects by developing an effective supply chain with several suppliers. The purchase and distribution manager can then compare prices for the raw materials then buy the most affordable ones to ensure maximum profit regimes.

Bargaining Power of Buyers

Customers always come with extreme demands. This fact is particularly applicable in the food and beverage industry as customers will come with different tastes and preferences on how they want their products prepared and served. Furthermore, customers always want to buy the most affordable, delicious, and high-quality foods in the table (Burke, 2014). This bargaining power puts much pressure on Chipotle Mexican Grill Inc. to satisfy its customers through innovative products. The company can beat the bargaining power of its customers by developing a broad base of customers by targeting many customers with their products.

Threats of Substitute Products and Services

The company experiences the threat of new and substitute products that may replace its fast-food options. Other companies offer vegetarian options, ketogenic diet food, paleo diet foods, among others (Raj, 2020). This threat can cause devastating effects to the company, especially when the substitute products offer a value proposition that Chipotle Mexican Grill Inc doesn't. The company can avoid this threat by ensuring efficient and effective service delivery instead of focusing solely on the product.

Rivalry among the Existing Competitors

High competition from the existing companies within the food and beverage industry can drive the company to reduce its prices. This reduction in costs will then affect the company's profit margins. The company works in a highly competitive environment and industry with several fast-food companies like Mac Donald's, KFC, Domino Pizza, Starbucks, Burger King, among others that present intense rivalry for customers (Han, 2018). This competition takes a significant toll on the company's profitability. The company can beat this competition by developing a sustainable differentiation strategy to give it a solid competitive edge.

Two Innovative and Technology Trends That the Company Introduced

Vegan Options

Given all the publicity of health and fitness programs and veganism that people continue to adapt to keep healthy, it is no surprise that the company introduced vegan foods into the restaurant. According to Burke (2014), restaurants with already developed vegan options in their menu make significant profits out here. As a result, Chipotle adopted this trend to reap the benefits of healthy eating into its system and improve its competitive edge within the industry.

Expanded Delivery

The company recently introduced delivery options for its foods and drinks. The company focuses on delivering products in-house. It has collaborated with other companies such as DoorDash, Uber Eats, and Grub Hub to meet customer needs for in-house delivery (Han, 2018). This trend is feasible as many fast-food companies are incorporating it into their systems. Furthermore, this trend is relevant with the stay-at-home and social distance protocols as it reduces customers' exposure to the disease.

Chipotle Capabilities and Resources regarding its Development

Chipotle Mexican Grill has a robust and transparent strategy that enables it to support its organizational culture. First, the company is culturally relevant in developing a unique brand that meets customers' needs from different cultural diversities. It has adequate resources that ensure the brand is more engaging (Raj, 2020). Such resources include automated machines for developing brand names and other resources for providing a competitive advantage. Finally, the company plans on using its capabilities to grow its business internationally.

Does the Chipotle's Organizational Structure Impede or Support its Ability to Innovate

Chipotle's organizational structure maintains its status as a groundbreaking and innovative company in fast food delivery. The system enables employees to have flexible working hours, enabling them to alternate with others on different shifts (Han, 2018). Such changes will allow them to keep fresh and serve customers with a great attitude, attracting more customers.

References

Burke, C., (2014). A complete strategic analysis of the Chipotle restaurant chain from its founding in 1993 through the fiscal year 2012

Han, J. W., Ruiz‐Garcia, L., Qian, J. P., & Yang, X. T. (2018). Food packaging: A comprehensive review and future trends. Comprehensive Reviews in Food Science and Food Safety, 17(4), 860-877.

Raj, S. K., Lautoka, F., & Singh, N. K. (2020). Strategizing of Fast-Food Industries using A Balanced Scorecard Approach: A Case Study of McDonald’s Corporation.