Chipotle Mexican Grill Essay

I. Key Problem What Steven Ells began with a small taqueria in Denver, Colorado in 1993, iodin may not swallow foreseen this venture to start out the fastest growing restaurant chain in the last decade. By 2006, Ells idea made its sign public oblation with 535 restaurants throughout the world. Things were going tremendously well up for CMG until late afternoon on October 18, 2012 when Ells complete receiving the comp whatsoevers third quarter results. While data indicated an overall satisfactory outcome, it was the challenger from Yum Brands taco doorbell and their recent launch of the Cantina doorbell menu that would result in what seemed to be the onset of a major problem. wetback bell shape had now become a major competitor to Chipotle since the launch of their saucily Cantina Bell menu allowing them to enter into the fast-casual segment in offering similar ingredients and items as Chipotle had. At the self equivalent(prenominal) time CMG paid a significant amount to a greater extent for their products forcing them to charge a higher equipment casualty on their menu items. greaser Bell, however, now offered similar items for half the monetary value. The bottom line contender was the solution of this problem. The fact that Chipotle menu prices were higher as comp atomic number 18d to that of greaser Bells innovative menu would ace to consumers or normally loyal customers to give the Cantina Bell menu a try.After the launch of the Cantina Bell menu in the summer of 2012, CMG stock significantly declined just after third quarter results were announced. To loan insult to injury, Jeff Einhorn, a h mete fund leader, presented at the Value Investors Conference in New York urban center proclaiming that CMG was an attractive stock for short-sellers because of the considerable competition from Taco Bell. He further stated, 23% of Chipotle customers had already try Taco Bells Cantina Bell menuand two-thirds of those customers indicated they would return. Whats more, the customers most likely to return to Taco Bell were in like manner those most likely to eat at Chipotle, a dynamic that indicates to me that Chipotle is most at risk of losing its frequent customers.This message led to CMGs stock falling by more than 4% within hours of the conclusion of the presentation. The announcement of projected increases in intellectual nourishment equals on the part of CMG also contributed to the competition between them and Taco Bell. While Chipotle stood by its belief that it is Food with Integrity because of better ingredients, the Cantina Bell menu produced something similar while lowering the cost a customer would have to stand for a meal, therefore, causing further competition between the two.II. Relevant TheoryBy looking at the items offered on the Cantina Bell menu versus those on Chipotles menu, I determined that they both have a private-enterprise(a) advantage. Chipotle is a premium product offered at a higher price wher e it reaches a broader market appoint that is willing to pay more money. On the other hand, Taco Bells main strategical course is cost leadership which enables them to reach a broader market sh atomic number 18 with a lower price for the desired item.As shown on Example 1 the Competitive Advantage and Economic Value Created be somewhat different between the two companies. Since Chipotle offers a better quality of ingredients, consumers are willing to pay a higher price. As a result, creating a higher Value (V) for a burrito is at the same time creating a great economic value (Value-Cost.) Meanwhile the economic value created by Taco Bell is small since the value of their product is less and consumers maximum willingness to pay will be lower. Example 1Since Yum Brands launching of the crude Cantina Bell menu, this new organic ingredient-driven list of selections has been a sensibly obvious attempt to compete with fast casual giant Chipotle. This is what has become the major c oncern for Chipotle where competition is becoming fierce and for practically half the price the Cantina Bell menu is a definite value. However, you do get what you pay for and the overall quality and taste of Chipotle still has a slightly greater edge over Taco Bell. The value someone will be willing to pay for a Taco Bell burrito will be less than the value Chipotle has created with their better quality ingredients, hence creating a greater economic value.III. Assessment of AlternativesHow could Chipotle effectively progression their key problem which is Taco Bells new Cantina Bell menu? What seems to be the main concern for Chipotle is that Taco Bell is trying to provide a similar product for half the price. Some of the alternatives available to Chipotle to are Buy low cost goods to squinch prices using severe Animal Feeding Operations (CAFOs) Another option could be to offer a smaller burrito for a smaller price, or to include less amounts of meat as Taco Bell does Continu e doing what they do best and differentiate themselvesShould Chipotle buy low cost goods to reduce prices using Concentrated Animal Feeding Operations (CAFOs), it would allow them to offer menu items at a lower cost to the consumer providing greater competition between them and Taco Bells Cantina Bell menu. However, in doing so would vary their philosophy of providing the best quality ingredients in their food. In doing so, it will change CMGs strategy from beingness a premium product and higher price to a cost leadership strategy and at the same time reducing the value of its product.Another option could be to offer a smaller burrito for a smaller price, or to include less amounts of meat as Taco Bell does in its Cantina Bell menu. This would also allow for cost effectiveness on both the consumer and Chipotles side, however, it would go against CMGs mission statement of being Food with Integrity, lower its value and become a cost leadership strategy as opposed to being a premium product and higher price.A third alternative is for CMG to continue to compete effectively by doing what they already are doing which is differentiation ground on quality and sustainability. This approach supports its philosophical message of better food for the consumer and community as well as being environmentally conscious. This allows CMG to maintain its values and remain within their strategy segment. On the contrary, this alternative force Chipotle to increase their menu prices while reducing its consumer surplus.IV. Suggested Course of ActionAfter carefully analyzing the different alternatives, the best course of action is to continue to compete effectively on differentiation based on quality and sustainability given the mounting competitive and sourcing challenges. Even thought Taco Bells new menu seems like a significant threat they are far from creating the same value and repute Chipotle has created since it opened its first restaurant in 1993. Not only does Chipotle pro vide the freshest and best ingredients with a abrupt flavor, they are setting themselves apart from any other restaurant chain and main competitor since they endlessly are working toward better practices.They continue to push to sustainable sourcing like getting their meat miscellanea non Concentrated Animal Feeding Operations (CAFOs) while at the same time contributing to the progress of good animal health and fighting against animal abuse. In addition, CMG buys products from local anesthetic farms, builds restaurants to be eco friendly and LEED qualified (leadership in Energy and Environmental Design) while trying to keep the cost and price of other items down. As their value statement proclaims, Food with Integrity is a mission of serving good quality food with inputs sourced using sustainable farming practices.Even thought new threats like Taco Bells Cantina Bell menu are presenting a challenge there will always be competition. CMG upholds pissed beliefs to do what is best for the environment and for its communities in order to provide the best products to its consumers. This is precisely why they have grown so fast from the opening of their first taqueria, to the capital infusion from McDonalds, to its initial Public offering (IPO.) They have been the fastest growing chain in the last decade and just like any fast growing business, regardless of their success, they will reach a slower growth as they approach maturity.There will still be opportunity for expansion. Chipotle is certainly heading toward a different elbow room than their competitors making them stand out and become a lot harder to imitate. This alternative is truly the only rational option for Chipotle as it continues to enforce its philosophy of providing Food with Integrity. There will always be competition between companies and products, however, if Chipotle chooses another route for combating this rivalry with Taco Bell, it would not allow itself to differentiate from them.V. Key Ta keaways forward reading this case, I knew nothing about Chipotle but after reading it I am quite an impressed by the approach CMG has taken choosing to go a different route most companies are afraid of doing because of higher cost prices. I was equally impressed they choose organic products, to buy from local farms, being against massive animal feeding as well as animal cruelty and that they are eco friendly and are looking to bring about all their restaurants like this. Of course, I should also mention that one knows one will be eating the best ingredients and most fresh available foods. I am confident as the values of this company are brought to the attention of more of the public, Chipotle will reach a bigger market share as the public demand will rise. I would also betoken other companies and restaurants will follow similar suit.As mentioned earlier, there will always be competition in business, but a firm must find their differentiation advantage. As individuals become more educated and understand the factor facing the environment people will be willing to make a change and help make a difference.