Chipolet

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Chipotle Mexican Grill

Chipotle Mexican Grill is a famous restaurant in the United States. Restaurant industry is considered to be unattractive field based on Porter’s five forces. Foremost, the threat of entry is high in restaurant industry because the customer switching costs is low and it does not require intensive capital investment as auto industry does. Most restaurants purchase raw food materials in bulk, which creates supply-side economies of scale. Though some restaurants have suppliers that provide organic food or special sauces, considering the restaurant industry as a whole, the power of suppliers is moderately low. The reasons are that the number of suppliers is as many as the restaurants and the switching costs are low for buyers. The power of buyers is relatively high because the survival of the restaurants depends on how frequent the customers visit. If a restaurant does not have some royal customers, it will eventually be squeezed out of the business. Moreover, the threat of substitutes is high since customers have other options to get foods besides going to a restaurant. For example, some people prefer homemade meals while other people would like to consume frozen pizza or premade salads from grocery stores. The last force is rivalry and it is intensive among all restaurants. Different restaurants take different strategies to attract customers, such as new food innovation, services improvement and customer royalty program.

Although Chipotle is in an unattractive industry, it outperforms its competitors for several reasons. Chipotle captures the value by participating in a differentiation strategy. In the first place, Chipotle uses naturally raised pork, chicken, and beef as their main products. They also use zero trans fat frying oil. These convey an idea of healthy eating to people and thus adding value to the company and its products. In the second place, it is rare for a fast food restaurant to provide organic meat for their...
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