Read Case: Real Marketing 3.1 - Chipotle’s Environmental Sustainability Mission: Food with Integrity (Kotler and Armstrong, 2016, Principles of Marketing sixteenth edition )
The case above gives a brief overview of the company and provides a summary of the situation analysis relevant to the development and growth of Chipotle.
Students are required to develop a marketing plan for Chipotle with a new objective and strategy that will support the organisations vision/mission.
The case above gives a brief overview of the company and provides a summary of the situation analysis relevant to the development and growth of Chipotle.
In Part 1 of your course work students are required to develop a marketing plan for Chipotle with a new objective and strategy that will support the organisations vision/mission.
For Part 2 (here) - In order to communicate the new strategy that relates to the organisations vision, students are required to prepare:
- A visual illustration (an A4 poster supported by texts and images) following the guide below:
- The content of the poster should be appealing to both internal and external stakeholders (i.e. employees as well as customers).
- The content must include Image/s and brief written message/s that communicate the proposed strategy and capture the attention of the intended audience.
- A rational to support the communication campaign (the poster) which should:
- Include an explanation of how the promotional mix theory can generally be used to decide selection of a communication channel.
- Describe the target audience and the response sought in relation to the new strategy.
- Apply / use a marketing theory such as ‘AIDA’ (Attention, Interest, Desire, Action) or ‘DRIP’ (Differentiate, Reinforce, Inform, Persuade) to explain how the poster created will achieve the objectives set.
- Academic references must be included in the rational
Overview of the company:
Chipotle Mexican Grill is a chain of unusual fast food restaurant sector and has gained a lot of popularity in the current years . It has increased its revenue in leaps and bounds over the decade with a large amount of growth and expansion of its services. The company had started with a dream of creation of a gourmet burrito in the year 1993 and after a few years, the expansion occurred in several states. The company aims and focuses on serving the best foods sourced from the sustainable practices of farming for the best taste, nutrition and great value. Chipotle has also focused on supporting and sustaining the farmers and using the meat, which does not have a usage of added hormones and antibiotics (Hitt, Ireland and Hoskisson).
Chipotle considers the philosophy and has a slogan, which says “Food with Integrity,” and proved in making a unique and effective campaign for the marketing plans. The company’s campaign has attracted many potential customers and it has attained a vast majority of the sales though Burrito, the most recognized product of the company. The company has an aim of adding a lot more to its menu and provision of experience with higher quality and convenience than the other restaurants involved in the fast-casual sector.
The factor is not of so much relevance for Chipotle as they rely purely on the products of the organic nature. In cases of the approval of the FDA for more intensive regulations in relation to the fast food sector, the products of Chipotle will not change.
As the company is a restaurant, the changes in the economy will lead to larger effects on the profits and revenue of the company. The volatility in the food industry is both advantageous and vice versa. In case of inflation, if the prices of beef increase then the customers will shift towards the substitutes available and in case of the decrease, there will be heavy profits as sales would increase. The other factors also include the rate of interest, employment levels and the stability in the prices (Grant 2016).
The factors consider and include the norms of the society, which affect the various segments of the markets. With the passage of time, the customers are becoming conscious about their health and hence the factor is positive for Chipotle, as it contains healthier fast food. The company mainly focuses on serving the delicious food along with higher quality and experience.
The modern world has a dominance of the technology and Chipotle has maintained the same with advancements in several aspects of technology for improving their model of business. The company has invested around $10 million in the designing of the technology network and the mobile app in relation to the payments and ordering of the services, among other improvements of the company. On the other hand, Chipotle has taken steps in adding tortilla grills for reduction of the time taken for warming by 100%. Therefore, the above steps describe the operational proficiency and technological efficiency of the company (Grill 2015).
The company is based on the provision of pure organic products to the customers, which represents environmental friendly approach of Chipotle.
The zoning laws, licenses and permits and other regulations of government comes to play after the opening up of restaurants in a country. Chipotle is one among such restaurants, which are tethered towards the guidelines and regulations of a country. The organizations like the National Cattlemen's Beef Association, the American Meat Institute and the National Meat Association represent most of the companies, which are involved in the meat business. Furthermore, few legal restrictions and FDA prove to be harmful for the organizations due to unavailability of the products (Kim, Njite and Hancer 2013).
- Threat of Entry: HIGH
The market is already been saturated with many alternatives to Chipotle and is including new entries with the passage of time. The entry can be easy as no expertise is required, there are lower sunk costs and startup capital is modest in comparison to the other business plans. The new competitors include Yum Brands among which the Taco Bell is offered with the higher quality of services. The other major competitors include the Qdoba and McDonalds also look forward towards the success of the organic food and entering the market.
- Power of Suppliers: HIGH
There exist various channels through, which the company Chipotle can receive the products but there are only few suppliers of organic nature. Therefore, the suppliers will get power of providing more services to such restaurants providing organic products. There are a broad range of multiple suppliers and the power being high, automatically it increase the forces explained by Porter. Chipotle has higher standards due to the organic approach and thus the power of the suppliers is also too high.
- Power of Buyers: MODERATE
The buyers have a power of choosing other restaurants at anytime as per their requirements. Chipotle has been efficient in providing organic and required products to the customers, which have lead in attraction of greater number of customers over time. Hence, the customer’s threat is moderate. The inclusion of the organic products is not so easy and the buyers will prefer the same from Chipotle rather the other inorganic products supplied by the competitors.
- Threat of Substitutes: HIGH
The customers have many options available for having food i.e. at restaurants or at home. The substitutes include Odoba, Panera Bread which are too cost effective and tastier as compared to the meals provided by Chipotle. The home cooked meals for the same price is much more preferred by the health conscious and cost effective consumers. The Muscle Maker Grill is also a major substitute which is proved to be a threat. Therefore, the company can chose for many options, which is a major threat for the company.
- Rivalry: HIGH
There are many alternatives available to the company, which is a major threat, and hence it is high. The major rivals or the competitors include Panera, McDonalds, Yum Brands and Jack In the Box’s. There are rivals within the industry i.e. Burger King, In & Out, Wendy’s etc. Celebrity endorsements and monopolistic competitors like McGriddle are becoming major rivals in the field of innovations and variations. The online presence related to the information of the company provided on the websites and other media publications with links to the charity works have become a major part of the rivalry essence in the market.
Chipotle has been growing over the years in a faster pace. Even after the disastrous end of the year 2015, which was about the issues in the safety of the food, the company managed to grow the revenue and earnings of the company (Oliver et al. 2014). The company has a balance sheet, which is strong as it has no debt and generates greater cash flows. Chipotle has a strong earning per share, which is again an ingredient of a good financial strength of a company.
The major strengths of the company include:
- The number of the restaurants has quadrupled from a rough number of 510 restaurants from the year 2006 and even after facing the year 2015, the annual revenue and the growth of earnings had been 10% and 7% approximately and respectively. Thus, the company further aims at opening roughly about 220 and 235 new restaurants to remove the weakness of the core stores as discussed below (Appendix 3).
- The cash and investments approximated to an amount of $1 billion in 2016 and as a result it can carry on its business smoothly even in the lesser favorable conditions and situations.
The outbreak of E.Coli has led to the decrease in the quality and freshness of the ingredients used in preparation of the food. Chipotle has a major dependence on the supply chain, which has made the monitoring of the safety and quality process difficult and ineffective. The company is taking steps in removal of the harmful bacteria’s by effective identification of the same (Centers for Disease Control and Prevention (CDC), 2015).
The company has a heavy dependence on the US market, which is again a weakness as the results are sensitive to the movement of the products. The major weaknesses of the company include:
- The company has been focusing on the improvement of the practices related to the safety of the food but the strength of quality and safety had become a major weakness of the company. The company thus has to strengthen its quality and safety measures by proper training to the crew and farmers in meeting up the food and safety standards.
Chipotle has a major opportunity of expanding the stores and the company has planned up to open a great number of stores in the near future. However, the company has a long way to go before attaining the position of McDonald’s.
Chipotle offers four categories of product, which include burritos, tacos, burrito bowls and salads. It can thus, introduce other categories of products to the menu and have a focus on the other offers of the Mexican servings, which would expand the sales. Chipotle can also expand through the offerings of a non-Mexican nature through expansion of major number of restaurants (Fedenia and Hirschey 2015).
The major opportunities of the company include:
- Chipotle has also not until now strike into the international markets, apart from a minority restaurants in Canada and Europe. The restaurants in both Canada and Europe propose a large, habitually untapped market with a higher percentage of customers having a high disposable income. The company has an opportunity of expanding into the promising markets, chiefly in Asia, where the options of Mexican dining are few and outlying in nature. McDonald’s and KFC have had great success in international markets and thus Chipotle can follow the same path for the increased efficiency.
- The company can introduce the new categories of products and also grow its non-Mexican offerings all the way through its ShopHouse Southeast Asian Kitchenand Pizzeria Locale It presently has fewer than twenty of such restaurants, and could significantly increase these if they carry on executing well.
Chipotle has lost trust from among the customers due to the allegations of unhealthy and unsafe food provided by the company. The same is a major threat as it is not easy to change the perception or regain the trust of the customers (Lee and Jay 2015).
Furthermore, Chipotle is also facing high competition, with the advent of new competitive forces in the market and thus, being a major threat for the company. The major threats of the company include:
- Although it will probably take time for Chipotle to recover the trust of customers, any further cases related to the food-borne disease could significantly, and maybe enduringly, demolish customer sensitivity of the quality of the food items of Chipotle. Management has taken noteworthy steps to progress through its food safety, beyond the standards of industry. As a consequence, there is a lower anticipation of any more troubles in the future. Even if it is impracticable to prevent every occurrence of food-borne sickness, we think the business is doing the whole thing in its authority to prevent additional deterioration in safety and quality.
The major objectives as per the discussions include:
- New food safety set of rules: the aim of the company is to become the leader of the industry and the set of rules will majorly include the staffs in the preparation of new and proteins containing products. There will be introduction of the bar codes for every item of food for allowing the traceability of the ingredients and the source of the diseases outbreaks can be easily traced. The cooperation between the delivery personnel, growers, staffs of the kitchen and the management is required with the systems and they also require the approach of balance and check approach.
- Enlarged store audits by in-house administration and third party superintendent: Chipotle said it has paced up the internal audits, which within the company now comes on a weekly basis. Self-governing restaurants across the U.S. already stand by this guiding principle. The company has also hired a third party assessor to examine restaurants every quarter.
- A $50 million marketing and promotion campaign: The Company aims at spending the amount to gain the trust of the customers and maintain a healthy relationship with the public by focusing on the new procedures of safety. The major project is the Bowl presentation requiring highly qualified staff and policies of the management.
- Continuity in the expansion:
Chipotle's real estate associates are still inspecting fresh sites and plan to continue the opening of the stores all through the year. The decision-makers nevertheless, say they are certain resurgence will occur in the upcoming years and have no strategies to slow down.
- Aggressive funding in the staff and administration: The executives have decided in the aggressive funding of the staffs at every restaurant for the speedy recovery procedures. Chipotle wants the old ones to come back and the newer ones to stroll into the stores for the great services to customers.
The above can be summed up as follows:
Specific: The focus of the company is to create brand awareness through proper advertising and use of other social media.
Measurable: The objectives can be measured in terms of the revenue and profits growth, which the company would earn through the proper awareness created by the company.
Attainable: The Company can easily attain the creation of brand awareness through proper advertising and efforts.
Relevant: The creation of brand awareness will result in greater profits, thus making the same as relevant objective for the company.
Time bound: The Company has to complete the awareness program within a span of few years as with passage of time it will lose the growth of the revenue and earnings (Rowell 2016).
The strategy considers the product burrito to be entered into the restaurants so that the customers have greater experience and the strategy includes the implementation of serving fresh food for the eaters who are health conscious and cost effective in nature. Chipotle will try to promote the products by giveaway of the product free. It is also willing to offer new combinations, which would increase the customer experience and satisfaction by giving them free of charge (R. Brenes et al. 2014).
Chipotle aims at creating a brand, which would have the greatest value, and having a long-term commitment towards the serving of better and higher food quality at considerable prices. The company aims at diversifying its products by increasing the products and creating more and more number of restaurants.
Chipotle will use new mix of promotional strategies to get into the market initially. To penetrate, the company have to manage the initial losses as the future will prove to be worthy in nature. Use of traditional and non-traditional advertisements will help Chipotle in gaining the attention of the public (Graff 2014).
The development of the market will be done by reminding and reinforcing its consumers through proper communication. The communication with social media will help in effectiveness in the procedure by attaining a consensus (Ghobadian and O’Regan 2014).
As per the company’s objectives and strategy, the STP is discussed as follows:
Segment: Chipotle aims at the people who like Mexican food and especially the millennial category as they have a major concentration on the health and safety of the food. It wants to develop a range of restaurants across the globe (Stevens and Lunsford 2014).
Target Group: The major target is the millennial category and ones who have a preference on the food prepared from the ingredients, which are natural and organic in nature.
Positioning: Chipotle aims at positioning through a casual chain of dining restaurants, which would serve Mexican cuisine prepared with the organic ingredients.
Product: The product burrito will be, fully customized as per the requirement of the consumers and Chipotle aims at providing and serving fresh products made from ingredients of healthy and safe nature. It also aims at giving away the products for free to gain awareness and trust from the experience (Prentice 2015).
Price: Chipotle aims at penetrating into the market slowly and steadily i.e. after proper awareness programs and trust gained from the customers. It is expected to increase the prices in smaller increments and by following the strategy of long-term pricing.
Promotion: It takes into consideration strategies undertaking promotions like prize distributions by giving away free burritos. The use of traditional and non-traditional advertisements will help in gaining the attention and trust of the public.
Positioning: It has offered a long-term commitment towards serving of the higher and better quality food for better prices.
Place: Chipotle aims at spreading its branches to a major part of the country and then on a global basis like McDonalds.
Packaging: The quality of the food is necessary but the packaging quality is equally important. Therefore, it aims at making the presentation much better and effective.
People: Chipotle aims at gaining the trust of the customers and communicating with them so that a better and effective position of the company is achieved.
The budget is around 29 million dollars, which is divided into the following spending procedures:
Figure 1: Budget on the media procedures
(Source: Hitt et al. 2012)
The media is responsible for awareness creation of the brand, so the company will focus on the same.
The expected costs are further distributed as under:
- The KPI for the business is related to advertisements, which would be attracting a lot of new and old customers and thus increase the performance of the sales. The KPIs thus include the cost per lead, sales conversion rate and the lead source analysis(Conservancy-Environmental et al. 2012).
- The progress can have a measuring and monitoring by the evaluation of the investments of the company in the sales and marketing activities. It will help a company in checking the return on investment and the calculation of the generated sales lead by the expenditures on the sales and marketing.
- Efficient and continuous management and control of the indicators of key performance for advertising and sales performance of the company can recognize the achievement of the objectives of the company (Simpson 2015).
Chipotle has a balance sheet, which is strong as it has no debt and generates greater cash flows. It has an efficient earning per share, which is again an ingredient of a good financial strength of a company. Chipotle has a major opportunity of expanding the stores and the company has planned up to open a great number of stores in the near future. However, the company has a long way to go before attaining the position of McDonald’s. Chipotle also aims at creating a brand, which would have the greatest value, and having a long-term commitment towards the serving of better and higher food quality at considerable prices.
The company aims at diversifying its products by increasing the products and creating more and more number of restaurants. Thus, with the efficient monitoring and control of the performance of the company, Chipotle can gain the required position in the market, all across the globe.
The aim of the company is to create promotional strategies to gain the trust and confidence among both the old and new customers. It wants to communicate through advertising, promoting the sales, marketing and selling personally.
The company has a theory of having promotions through advertisements, relationships with the public, promotion of sales, direct marketing and through personal sales. Chipotle also foresees a promotional behavior of giving away free burritos through distribution of prize and using both traditional and non-traditional types of advertisements, which will help in gaining the attention and trust of the public (Erani 2012).
The company must take the necessary steps in improving the competitive position:
- Strengthening of the relationship with the customers, creating long-term contracts with the suppliers in existing market, growing, and raising the products through ethical methods
- Sourcing the new suppliers for the Company to grow ethically and meeting the demands and ethical source of the entire menu.
- Raising the standards and bars of the expectation of the market for sustainable restaurants to deepen the loyalty of the customers and align with the values of the targeted consumers.
- Home delivery and other considerations with giant structures like Amazon and having the ability of influencing the perceptions of the convenience of services for the customers
- Opening of media channel and division for focusing on the targeted consumers for the change in the perceptions of the living in sustainability
Chipotle has a careful crafted culture of people, which has an emphasis on the hiring and training of the employees for effective performance. The training, promotion from within, helps in the development of empowered and strong teams. The food is prepared in fresh and small batches and the menu, which is focused in providing the efficiency of penetration of time. It also focuses on effective communication and feedback procedures (Consensus 2016).
There is a process of internal development, which helps in the management of the transaction of the order in a timely manner. The process is termed to be as “Four Pillars of Great Throughput” and the same helps in providing the operational efficiencies, which are difficult for the other competitors to match. They are discussed as below:
- It acts as a top server in the chart of the sector
- It helps in the replenishment of the food and supports Aces
- It acts as an expediter i.e. bundling the orders and preparing the chips and drinks
- It keeps everything in place i.e. all the ingredients and utensils are available and ready for usage (Stashwick and Kaplan 2016).
The differentiation strategy used by Chipotle helps the company in generation of rents from the consumers of the willingness to pay, which had been evidenced from the recent hike in the prices, which did not have an impact on the record earnings. The other suggestions for the competitive position for Chipotle being sustainable are:
- Pricing of the product in a differentiated manner
- Efficiencies in the operational capability of the company
- Culture of the people, based on the performance and experience
- Growth of the company in the manner which outpaces the fast casual sector and the general industry of restaurant
- The growth of the sector with larger audience and targeted customers (Carr and Sinclair 2016)
Centers for Disease Control and Prevention (CDC), 2015. Multistate Outbreak of Shiga Toxin-Producing Escherichia coli O26 Infections Linked to Chipotle Mexican Grill Restaurants.
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