Chipotle Mexican Grill Essay

I. gravest matchless Problem What Steven Ells began with a small taqueria in Denver, Colorado in 1993, one may not strike foreseen this venture to become the fastest ontogenesis restaurant chain in the last decade. By 2006, Ells idea do its initial public straiting with 535 restaurants throughout the world. Things were going tremendously fountainhead for CMG until late aft(prenominal)noon on October 18, 2012 when Ells finished receiving the companys three quarter results. While data indicated an oerall satisfactory outcome, it was the contender from Yum Brands greaser toll and their recent launch of the Cantina campana posting that would result in what seemed to be the onset of a major problem. wetback cost had same a shot become a major competitor to Chipotle since the launch of their revolutionary(a) Cantina gong batting order put uping them to enter into the fast-casual segment in offering similar ingredients and items as Chipotle had. At the same time CMG paid a significant core more(prenominal) for their yields forcing them to charge a higher(prenominal) mensurate on their computer menu items. greaser Bell, however, now offered similar items for half(prenominal) the price. The bottom line contest was the root of this problem. The fact that Chipotle menu prices were higher as comp atomic number 18d to that of Taco Bells new menu would lead to consumers or normally faithful customers to give the Cantina Bell menu a try.After the launch of the Cantina Bell menu in the summer of 2012, CMG dividing line significantly declined nevertheless after third quarter results were announced. To add insult to injury, Jeff Einhorn, a hedge shop leader, presented at the Value Investors Conference in New York City proclaiming that CMG was an engaging stock for short-sellers because of the considerable rival from Taco Bell. He further stated, 23% of Chipotle customers had already tried Taco Bells Cantina Bell menuand two-thirds of those custo mers indicated they would return. Whats more, the customers virtually same(p)ly to return to Taco Bell were likewise 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% at heart hours of the conclusion of the presentation. The proclamation of projected increases in food costs on the part of CMG also contributed to the challenger between them and Taco Bell. While Chipotle stood by its belief that it is victuals with righteousness because of better ingredients, the Cantina Bell menu produced something similar season displace the cost a customer would have to conciliate for a meal, therefore, causing further competition between the two.II. Relevant TheoryBy sounding at the items offered on the Cantina Bell menu versus those on Chipotles menu, I determined that they both have a competitive advantage. Chipotle is a agiotage product offered at a higher price where it while awayes a broader grocery share that is resulting to pay more money. On the new(prenominal) hand, Taco Bells main strategic course is cost leaders which enables them to reach a broader market share with a lower price for the desired item.As shown on Example 1 the Competitive payoff and Economic Value Created are somewhat contrary between the two companies. Since Chipotle offers a better whole step of ingredients, consumers are allow foring to pay a higher price. As a result, creating a higher Value (V) for a burrito is at the same time creating a greater economic place (Value-Cost.) Meanwhile the economic range created by Taco Bell is small since the value of their product is less and consumers maximum leaveingness to pay will be lower. Example 1Since Yum Brands launching of the new Cantina Bell menu, this new organic ingredient-driven list of selections has been a pretty obvious attempt to grapple with fast casual giant Chipotle. This is what has become the major concern 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 feature and taste of Chipotle still has a slightly greater edge over Taco Bell. The value someone will be unbidden 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. sound judgment of AlternativesHow could Chipotle effectively draw close 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 laborious to provide a similar product for half the price. Some of the alternatives available to Chipotle to are Buy low cost candids to tighten up prices using Concentrated Animal Feeding operations (CAFOs) Another plectrum could be to offer a smaller burrito for a smaller price, or to al low in less amounts of meat as Taco Bell does go by doing what they do vanquish and differentiate themselvesShould Chipotle buy low cost goods to write out 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 contradict their philosophy of providing the lift out quality ingredients in their food. In doing so, it will change CMGs scheme from being 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 program line 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 distinction based on quality and sustainability. This approach supports its philosophical message of better food for the consumer and community as rise 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. veritable(a) thought Taco Bells new menu seems like a significant threat they are far from creating the same value and reputation Chipotle has cr eated since it opened its first restaurant in 1993. Not lone(prenominal) does Chipotle provide the freshest and best ingredients with a bold flavor, they are setting themselves away from any other restaurant chain and main competitor since they unceasingly are working toward better practices.They continue to push to sustainable sourcing like getting their meat form non Concentrated Animal Feeding Operations (CAFOs) while at the same time contributing to the promotion of good animal health and fighting against animal abuse. In addition, CMG buys products from local farms, builds restaurants to be eco friendly and LEED certified (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 ceaselessly be competition. CMG upholds steady 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 rise 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 direction than their competitors making them stand out and become a smoke harder to imitate. This alternative is truly the only logical option for Chipotle as it continues to administer 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 TakeawaysBefore reading this case, I knew nothing more or less Chipotle but after reading it I am quite strike 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 evenly impressed they choose organic products, to buy from local farms, being against big animal feeding as well as animal stiffness and that they are eco friendly and are looking to make 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 predict other companies and restaurants will follow similar suit.As mentioned earlier, there will always be competition in business, but a firm m oldiness find their differentiation advantage. As individuals become more educated and view the factor facing the environment people will be willing to make a change and help make a difference.