Chipotle Mexican grill

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Summary

The main macro-environmental factors, which directly affect the global fast food industry, include demographic, economic, natural, technological, political, technological and socio-cultural factors. The demographic factors help in the determination of the demand for the fast food across the world. The internal environment of Chipotle Mexican Grill entails the company’s weaknesses and strengths. The company specialises in unique offers such as burritos, tacos, burrito bowls and salads. The food is usually spiced with fresh ingredients, which makes the products appealing to many customers. The fast food industry in China is vibrant than in any other country. The fast food industry in Singapore is doing fairly given the tough economic conditions in the country (Teo, Teik-Jin Goon, Siang, Lin, & Koh, 2009). India is a fast food market, which is growing at a considerably high rate. The Japanese fast food industry has a continuous growth rate of 5%, and its revenues have always exceeded 4871B Japanese Yen, hence the country accounts for the second largest global market share of fast food after the US given that the country accounts for $94,218 revenue from the fast food industry (Wylie, 2013: 45). The most appropriate Chinese market entry strategy is merging with Beijing McDonalds Foods Co., Ltd. The merger market entry strategy is good because of many reasons. First, the method enhances the utilisation of economies of scale because both companies will pool resources together to realise efficiency. China is a potential market for Chipotle Mexican Grill because it is large and receptive of fast foods despite the cultural element. China’s social and cultural factors influence the consumption of fast food, which is considered a Western food.

Analyse the macro and competitive factors that impact global Fast food Industry

The demographic analysis with regard to the fast food industry is important because it provides information on the new market needs. For instance, fast foods are common in the Western world unlike in Asia whereby the fast foods are being introduced. The demographics also help the major market players to undertake informed decision making on the production and the distribution of the fast foods to their customers. The populace of a region also determines the level of business a company can have in the region with regard to the distribution of the fast foods. The economic forces are also crucial macro factors in the fast food industry. According to Krier (2015: 91), the economic status of a region determines the fast food demand in the region. For instance, the Western countries are well-endowed with adequate economic resources, hence the consumption of fast foods is at peak unlike in the Asian region whereby most places are deserts and economically deprived. The competitiveness of the fast food industry in a country is a determinant of good prospect for the fast food business in such a country. Japan, Singapore, India, and China are the emerging markets for fast food in the world given the growth in the fast food industry, especially in China. The disposable income of the citizenry also determines the likelihood of vibrancy of the fast food business in the region. The natural forces are another macro factor, which influences the fast food business. The natural calamities such as Earthquakes and Landslides wreak havoc in various parts of the world, especially Japan and China, hence market players must consider the natural forces factor in strategic decision making in managing investments in various regions (Talwar, 2014: 111). The technological forces are also a macro factor, which must be considered subject to globalisation. Technological application in the fast food industry is crucial in determining the best market niches across the world. For instance, the technological advancement in China and India has attracted the fast food industry into the countries. Technology enhances efficiency and effectiveness in the production and the distribution of the fast food. The political forces are also macro aspects, which are inevitable in any industry. The fast food industry success is influenced by the political environment in any region of operation. The political environment guarantees goodwill, which is indispensable to the success of the industry. Nestle (2017: 87) asserts that a favourable political environment guarantees incentives and waivers of taxation on the concerned companies, which enhance revenue generation, hence the profitability of the fast food firms. The culture of a country is also a determinant of the success of the industry. According to Schlosser (2010 a: 23), Asians have various reservations pertaining to the fast foods. For this reason, the fact that food industry has not been vibrant in the Middle East as is the case in the Western countries. Competitive factors are also crucial in the fast food industry. Market leadership, favourable pricing, branding and the ease of producing the fast food are some of the company’s competitive factors, and marketing efficiency is also crucial in the fast food industry (Schlosser, 2012 b: 54). The ease of getting raw materials is also one of the competitive factors, which enhance the competitiveness of any player in the fast food market. Additionally, the accessibility to the food materials influences the strategic positioning of a company participating in the industry. According to Wylie (2013: 65), the industrialisation and technological level of an organisation determine the ability of an organisation to produce its fast food. The income levels of the populace in a particular region also determine the ability of a fast food company to succeed in the fast food business. However, skim pricing is sometimes adopted by the companies in new market niches to stimulate sales.

Analyse internal business environment of Chipotle Mexican Grill, Inc. using Porter’s Value Chain. [LO1, LO2]

According to Watson (2016: 54), Chipotle Mexican Grill has diversified to various markets given that it operates more than 1971 restaurants in the US besides in restaurants in Canada. Additionally, the company operates restaurants in France, Germany, and England, which means that the company has diversified its operations, hence reducing risks. The company has expanded to the Asian markets whereby it has established many restaurants, which specifically offer Asian cuisines. The company has also grown rapidly because of the efficiency in the operations of the company. The internal controls of the company are strong and effective. The company’s revenues are high and the earnings per share are having an upward growth trend. According to Johansen (2012: 32), Chipotle Mexican Grill overcame food safety concerns and retained its quality product and service delivery in all its subsidiaries. The company also enjoys a good financial strength, which promotes its productivity. The financial stability of the company is enabling it to expand its operations including operating in harsh business conditions. The company’s ingredients are the most desirable because of the ingredients’ freshness and high quality. Additionally, the company utilises complex and large supplier chains, which enhance its productivity and elimination of unnecessary production stalls. Chipotle Mexican Grill is also focused on the continuous improvement of its services and products to the clientele. This has enhanced the retention of its customers. The principle has enhanced the company’s ability to prevent food safety concerns for the clientele. According to Villavisencio (2010: 21), Chipotle Mexican Grill is committed to quality and safety of the fast food to an extent the company undertakes DNA testing of all its ingredients to eliminate any harmful bacteria. The company also runs a food safety programs, which prevents the compromise of safety within the company. Chipotle Mexican Grill is an overdependence on the US market given that more than 1971 of its subsidiaries operate in the US (Ritzer, 2010: 48). This means that the company has not fully diversified its risks. The company’s fast-casual chain has had a substantial drop in its stock price. The Massachusetts restaurant was also negatively affected by the fall in its share price. According to Hitt & Hoskisson (2013: 33), negative publicity has also negatively affected the company as manifest in the reduction in the 36%.  The value chain management of the company is also good because there is efficient management of the supply chain process. For instance, the focus on the value of each process within the company’s operations underscores the fact that the company is committed to total quality management and continuous improvement. The company also guarantees the safety of its food because it invests in its small suppliers to enhance the safety of its fast foods. Chipotle Mexican Grill’s collaboration power is also a strength for the company because it enhances corporate social responsibility. The company is currently poorly performing in the US because it depends on the customer’s discretionary power to purchase it fast food. Chipotle Mexican Grill performance is pegged on the macroeconomic conditions given the sensitivity of the company productivity to the global macro-environmental dynamics (Bunte, 2013: 72). The training of the company’s employees on food safety has created a safety culture within the organisation, and this enhances the responsibility and accountability of the employees in their respective operations. The initiative underscores value-chain management in the Chipotle Mexican Grill.

Evaluate the potential target markets of Japan, India, Singapore, and China using the 12 Cs framework and then select ONE of the target markets and justify choice

China

The high obesity rates in China are a manifestation of the vibrant market of the Fast food industry. There is a close relationship between fast food consumption and obesity, and China has more than two million facilities for fast food production (Cheng, 2003). According to Havas (2015: 43), China fast food industry generates revenue amounting to $94,218. The market’s vibrancy is attributed to the high disposable income for the Chinese people and the swift customer service. Additionally, the assurance of food safety and the development of new brands enhance the demand for the fast food in China. According to Corne (2016: 127), the Chinese are industrious people, hence their consumption rate of fast food is equally high, which leads to the fast food industry productivity. The restaurants are not concentrated at one place, customers have many choices, employees are committed, there is effective control of the operations, and customers have the capacity to pay for the foods. However, the caveats are yet to be introduced through necessary contractual agreements. The channels of distribution are efficient, the Chinese culture is accommodative, and there is efficient communication within the industry.

Singapore

The company has distributed its restaurants to various parts of the country, and it provides customers with choices of fast foods given that the country leads in flavour profiles. The industry players are committed to creativity and innovation, and there are adequate control and coordination of the workforce. According to Yu (2010: 119), the Singaporean consumers have high disposable income, and the culture of the country is not a hindrance to the fast food industry success. The company also cautions its customers against the side-effects of the fast foods, and there is the effective distribution of the fast foods across the country. The country is also committed to the food safety, hence there are contractual agreements between the industry players and the Singapore government. According to Smith (2012: 34), the industry enhances customisation of its products, which provides a wide array of products for the customer. The industry players have also heavily invested in technology although they have also ventured into the local markets whereby they have provided the local people with palates in food kiosks. This has boosted the sales revenue for the companies such as the McDonalds and Popeye.  The high productivity of the industry has considerably reduced the costs due to the economies of scale.  The incorporation of technology has also considerably reduced overdependence on the workforce and reduction of cost of production.

India

The country also has a reservation with regard to the use of fast food. Their distribution of the fast food retail units is not evenly distributed across the country. However, the country is committed to making the business vibrant in the Indian market (Aloia, Gasevic, Yusuf, Teo, Chockalingam, Patro, & Lear, 2013). However, there is coordination pertaining to the operations of the fast food business in India. According to Schlosser (2012 b: 113), most fast food customers are capable of paying for the fast foods regardless of the cultural reservations. The country has not established a comprehensive distribution network for the fast food products. The Indian Rupee is the currency used for the transactions, and there is efficient communication between the company and the clientele, although the country has not undertaken customisation of the fast foods to offer the customers many choices of products. The growth rate of the fast food industry in India is desirable and the industry size is likely to double in three years’ time. The market is unexplored for the fast food business, hence it offers an opportunity for more industry players. According to Dagevos (2014: 54), India’s population of 1.2M people provides a good market for any entrant interested in the business. Additionally, India has the largest number of youth in the world, which is a good indication of the prospects for the fast food industry for any entrant. Although McDonald had entered the Indian market in 1996, the fast food industry has had a slow growth rate (Association of food scientists & Technologists, 2012: 83).

Japan

The transaction increase is also high just like the outlet numbers. The branding of the fast food industry players in the market is also impressive. For instance, the Yum Brands are performing well in the market. There is a considerable even distribution of the fast food restaurants across the country (Noguchi, 1994). The industry players have also specialised in the fast food customisation to offer many choices to the customers. There is also a control and coordination of the employees within the various fast food restaurants. According to Dwoskin (2013: 42), Japanese fast food industry is vibrant because it constitutes of 19,000 outlets of fast food across the country including 7-Elevekn, Family Mart, and Lawson. In fact, 7-Eleven has a strong selling power, which is enhancing the industry’s performance power. The major brands account for more than 51% of the industry’s market share, which is a manifestation of the significance of economies of scale in the fast food industry in Japan. According to Ireland (2011: 93), the other unique aspect of the Japanese fast food industry is the incorporation of the lifestyles of people into its fast food offers, which apparently encourages customers to make more purchases of the fast food.

Recommendation

Chipotle Mexican Grill ought to enter the Chinese market because the Chinese fast food market offers more benefits and promises good prospects than any other markets, Singapore, India, and Japan. The Chinese market has a large population besides having a developed fast good industry. Additionally, the intake of the fast food is high compared to any of the markets. The prevalence of obesity in the country is attributed to the high intake of the fast foods. Additionally, the Chinese fast food industry players are global leaders in fast food. For this reason, the country has much to offer to Chipotle than any the other markets.  China is expansive, hence there are opportunities for the establishment of more fast food restaurants. According to Wee (2016: 119), China has more than 2M facilities for fast food, which means that the company will have prospects for success because the market is already established and the demand for the products is equally high. The culture of the Chinese is swift service delivery because every person is busy, which also provides an opportunity for ready-made food companies such as Chipotle Mexican Grill (Luo, 2010: 29) There is an assurance of food safety because of the government strict rules on food safety and the safety of its populace. For this reason, the entrant company will have a good environment for doing its business. By and large, China is an economic giant, hence the company will have easy access to financial credit to sustain its business activities, unlike other markets. China has also abandoned cultural reservations on fast foods, thus it is an appropriate market for the company to enter.

Recommend to Chipotle Mexican Grill, Inc. an appropriate mode of entering the chosen country and justify your choice based on your analysis and theory

The strategy enhances international competition because both Chipotle Mexican Grill and Beijing McDonalds Foods Co., Ltd are big brands, hence the merger will boost their market status. According to Ritzer (2011: 98), a merger provides an opportunity and adequate resources to undertake research and development activities. The initiative will lead to quality service delivery and product delivery. The method also enhances efficiency besides protecting the industry from closing. Moreover, the initiative will enable the merger to diversify because the new company will be operating in a new market niche. There is also an exchange of information and knowledge between the management of the two firms, which will boost the productivity of the merger. Additionally, the strengths of Beijing McDonalds Foods Co., Ltd are crucial in the Chipotle Mexican Grill decision- making the process of merging. According to Watson (2016: 34), McDonald is an established brand, which heavily relies on customisation of its products, hence providing its customers with a wide range of choices. Additionally, Beijing McDonalds Foods Co., Ltd is an appropriate Chinese company for the merger because of its market share in the fast food industry. Additionally, the company utilises skim pricing given that it endeavours to provide new products at all times. Additionally, the company offers high-quality customer service, which meets the needs of the elite in the Chinese market. McDonald is also good in the promotion of its products and services, which enhances its services and products. The other strategic benefit that the Chipotle Canadian Grill considered is the strategic placement of products. This will enhance the scalability of the fast food given that good product positioning guarantees high sales.

Analyse the targeted country’s socio-cultural factors. Develop appropriate marketing mix for Chipotle Mexican Grill, Inc. to succeed in your selected target market.

The consumption of fast food in China is interesting because the consumption of the food, especially among children is influenced by a mother’s education, the accessibility to the fast food, and the caregiver’s knowledge of fast food. This means that the country’s culture directly influences the fast food industry’s success. The mother’s education on fast foods directly influences the purchase of the fast foods by their children. According to Schlosser (2010 a: 67), the Chinese caregivers are informed of the benefits of the fast food before they can allow the children to take the fast food. The education level of a mother also determines her judgment on the consumption of fast foods. According to Davis (2010: 82), the urban Chinese children and youth are likely to consume the fast food compared to their rural counterparts because the local populace harbours certain reservations against the intake of the fast foods. The level of education of the mother liberates the mother from clinging unto culture and beliefs on the intake of fast foods, hence enabling them to give their children and youth’s fast foods. This saves them time and boosts their health. The caregivers must be sensitised on the need for fast food to enhance their embrace of fast food.  According to Song, Goto & Wolff (2015: 45), the child development and socio-cultural factors directly influence the consumption of the fats foods. The marketing mix appropriate in this market encompasses place, price, and promotion. The place of marketing is important because China is expansive. For this reason, the marketing team must undertake a comprehensive market survey to identify the most appropriate market segment. Pricing is also important because favourable pricing will guarantee adequate revenue. Aggressive promotion of the fast food in new market niches in China will enhance the profitability of the company.

Appendix

Figure: 12 Cs framework:

12 Cs framework

Source: https://www.slideshare.net/GiancarloPolenghi/ch4-5440287

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