Chipotle is the chain of Mexican food located in United States, United Kingdom, Canada, Germany and France. Their most famous dishes include Tacos and burritos. People from all over the world love their food because of their authentic Mexican taste. However, it is most popular in the United States.
Porter’s five forces model analysis is used to analyze the external factors of forces that act in an industry and effects any company’s competitiveness and position in the market. This model uses five forces including threat of new entrants, threat of substitutes, bargaining power of suppliers, bargaining power of buyers, and industry rivalry to study how these forces can act on a certain company. Here in this report, we will apply these forces on Chipotle to see where its position in the market.
Threat of New Entrants
There is already various numbers of alternatives for Chipotle present in the market; however it does not mean that if the market is saturated, new entrants will not enter. So there is a possibility of new entrants in this industry considering the cost needed to establish such business is not very high and it is not difficult for brands to penetrate into the market. It must also be kept into notice that brands like Chipotle will have an advantage over these new entrants because of the kind of loyalty and brand image they have developed over time. In order for new entrants to reach that position and compete with such brands, it will take them some time. Though there are fewer barriers to entry in this market, the threat of new entrants on Chipotle is still moderate.
Threat of Substitutes
When it comes to food, there are always many substitutes present in the market. Chipotle does not only have substitutes in the form of brands like Taco Bell which serve Mexican food, but also other food chain brands serving cuisines from all over the world. These companies in the restaurant industry compete on different factors including menu, price, quality, geographic reach, their brand image and marketing strategies. Chipotle claims to provide a perfect combination of affordability and convenience. The substitutes of Chipotle try to compete in the restaurant industry through their marketing strategies and maintaining their brand image. It was seen that Chipotle faced a drop in sales due to food quality issues. To come out of that, Chipotle is all set to launch a brand new marketing campaign in 2017 to regain their position in the market. It can be seen that Chipotle is facing a high level of threat from its substitutes.
Bargaining Power of Suppliers
With so many competitors acting the industry, the suppliers are on the look out to seal the deal with these big companies to improve their sales. Suppliers compete with each other in terms of price and quality in order to get into a contract with these big restaurants chains. However, companies like Chipotle have to be very cautious when choosing their suppliers, as their supplies are very important to their final product. Thus, these brands try to have those suppliers on board who have a very good reputation in the market. These suppliers are also crucial because these brands have to maintain a certain standard of food to follow the laws and any fault found in their food harms their reputation. So in the case of Chipotle, the suppliers have very moderate bargaining power.
Bargaining Power of Buyers
With all the competition present in the restaurant industry, buyers have a lot of options to choose from in all cuisines. They have a range of restaurants that meet their needs of price or quality food. With such competition in the market, the buyers have a very high bargaining power over Chipotle and it is the company’s job to attract and retain their buyers in this case.
Industry Rivalry
There is a strong rivalry present in the market in terms of food chains. Chipotle faces intense rivalry in the market from chain of restaurants in different cuisines. With Chipotle currently facing a loss in sales, other rivals in the industry are taking advantage of that. Restaurants like Moe’s, Panera, Qboda, Taco Bell, and many others are in high competition with Chipotle. Chipotle is however trying to rebuild their brand image by offering coupons to their customers as well launching a completely new marketing campaign this year. The industry rivalry is very high in this case.
References
Daszkowski, D. How did Chipotle Mexican Grill Get Started? Retrieved July 13, 2017, from https://www.thebalance.com/history-of-chipotle-mexican-grill-3973222
California Transparency in Supply Chain Act. Retrieved July 13, 2017, from https://www.chipotle.com/transparency
Wohl., J. (2017, January 10). Chipotle’s Marketing Menu for 2017: Biggest Campaign Ever, Fewer Promos. Retrieved July 13, 2017, from http://adage.com/article/cmo-strategy/chipotle-s-marketing-menu-2017-biggest-campaign-fewer-promos/307461/
Speculations, G. (2017, January 13). How Chipotle Mexican Grill Plans To Drive Revenues In 2017. Retrieved July 13, 2017, from https://www.forbes.com/sites/greatspeculations/2017/01/13/how-chipotle-mexican-grill-plans-to-drive-revenues-in-2017/#5801a6584cc9
(2015, May 20). Who are Chipotle’s (CMG) main competitors? Retrieved July 13, 2017, from http://www.investopedia.com/ask/answers/052015/who-are-chipotles-cmg-main-competitors.asp