Question

Complete a competitive forces analysis for Chipotle Mexican Grill

Using Porters 5 forces:

Porter's five forces are:

1. Competition in the industry

2. Potential of new entrants into the industry

3. Power of suppliers

4. Power of customers

5. Threat of substitute products

Answer 1

Chipotle Mexican Grill is one of the leading firms in the Restaurant industry. It is an American Restaurant chain that serves over 1 million customers daily. The company has a restaurant in Canada, England, France, and Germany. It was founded by Steve Ells in 1993 and its headquarter is in Denver.

Porter's five force analysis for Chipotle Mexican Grill -

Competition in the industry -

1) Chipotle Mexican Grill operates in a very competitive Restaurant industry. Restaurants like Moe's, Panera, Qboda, Taco bell, etc are in very high competition with Chipotle.

2) Chipotle products are moderately differentiated due to their quality of ingredients and the experience of employees.

3) The industry in which Chipotle Mexican Grill is growing every year and is expected to continue for a few years ahead. Positive industry growth means that competitors are less likely to engage in completive action because they do not need to capture market share from each. Thus the rivalry among existing firms is weak in the industry.

Potential of new entrants -

1) New entrants in the restaurants bring innovation, new ways of doing things and put pressure on Chipotle through lower pricing strategy, reducing cost and providing new value to the customers.

2) Chipotle has fair brand loyalty, which is common for differentiated products.

3) Moreover, there are large barriers to entry as a  large - scale operations like Chipotle. Thus the potential of new entrants is low.

Power of suppliers -

1) Chipotle is very conscious when choosing their suppliers, as supplies are very important to their final product. Thus the restaurant tries to have those suppliers onboard who have a very good reputation in the market.

2) Some ingredients are in short suppliers at various times of the year due to the seasons, and even due to natural disasters.

3) As Chipotle should ensure its mission is being met at every step of production, it limits the number of its suppliers. Thus the power of suppliers is moderately high.

Power of customers -

1) In the restaurant industry, buyers have a lot of options to choose from all cuisines. As the competition is generally high in the restaurant industry, the bargaining power of customers is high.

2) Therefore Chipotle has to create loyalty among its customers by giving them quality food and should create a great customer experience.

The threat of substitute products -

1) Chipotle does have a substitute in the form of Taco bell which serves Mexican food and also some food chain brands serving cuisines from all over the world.

2) Price is not the factor among substitutes for Chipotle. Thus the threat of substitutes is moderate .