Chipotle Mexican Grill
Chipotle Mexican Grill was founded in 1993 by Steve Elis in Denver, Colorado with one store and an idea to make fast food better. From that one location, Steve was able to grow his company into a multinational organization that consists of 1230 restaurants throughout the United States, District of Columbia, Canada, and the United Kingdom. Chipotle’s reported revenues for the year of 2011 were $2.3 billion with a net income of $214.9 million. Starting in the 2007 to 2011, Chipotle Mexican Grill realized constant growth that exceeded 30% annually. How was Steve Elis and Chipotle Grill able to grow so rapidly in a market that has so much competition? Mr. Elis was keen to recognize a need in the fast food market that wasn’t being met. He believed that just because it was fast food that it doesn’t have to be done with low quality ingredients. Talking from his background on the culinary arts, Steve developed a best-cost strategy that would allow Chipotle to gain a competitive advantage over market leader, Taco Bell and create a whole new market in the fast food industry. As Steve crafted his strategic vision, he developed a set of core values that Chipotle would use as the foundation of their mission statement.
Chipotle would provide higher-quality ingredients in conjunction to using improved cooking techniques, and all presented in a fine dining environment. This new product offering would allow customers to have access to superior quality food at reasonable prices. Because Chipotle was competing in the fast food market, they understood that their customer typically has a value conscious first buying habits. The basis of their competitive strategy would be solely focused on their ability to offer better goods at attractive prices. In order to do so, Chipotle would utilize an expertise in supply chain management that had been adopted from a short partnership with industry leader McDonalds. By improving value chain activities the company developed long term relationships with local reputable food suppliers to provide high quality fresh ingredients. These vendors would also work with executives to meet Chipotle’s quality standards and develop formula pricing protocols for certain products that were key ingredients of their distinctive competence. However, vendors pricing and quality was not the only external environmental factor Chipotle would need to contend with. They would also need to account for future restaurant locations, the development costs that are required for these new locations and industry competitors like Taco Bell, Moe’s and Qdoba Grill.
In 2012, a survey conducted by the National Restaurant Association indicated that 75% of consumers would visit a restaurant that offered locally produced food items also the consumers indicated that they were trying to eat healthy as well. This happens to be right in line with one of Chipotle’s strategic objectives and is a contributing factor as they continue to meet their financial objectives. As Chipotle’s capabilities continue to deliver lower cost/high quality products, this competitive strategy will continue to maintain a competitive edge over rival firms.