Chipotle Mexican Grill

Threat of Substitute Products

The threat of substitute in restaurant industry is high due to the high number of restaurants in India.  Customers have many options including eating at home or other restaurants. Restaurants are available in large quantities. The major substitutes for Chipotle’s products include homemade food; take away foods and fast food restaurants. The threat is high as the cost of switching to substitute products and services is very low.  Additionally, there is little differentiation in the restaurant industry. Currently, restaurants are focusing on offering healthy choices owing to health consciousness. 

Today, customers have become increasingly health conscious and demand foods with additional health benefits in order to manage health concerns such as high cholesterol and weight (Grill, 2007).  Fast food substitutes consist of other forms of foods both retailed and homemade.  The different restaurant provides food services like ready-to-eat meals and frozen foods for home cooking. Substitutes do not present a big challenge as the main purpose, and the price of fast food does not comply with substitutes given the convenience factor in fast food

Threat of new Entrants

There is a moderate threat to new entrants due to various industrial factors. In most cases, the entry of new entrant depends on entry and exit barriers that characterize a particular industry. The main barriers to entry for entrants in this industry are a capital requirement to start a business, regulatory and government policies and brand equity. The barriers to entry are a considerably moderate due to a range of factors (Chipotle, 2014). One such factor is the rules and regulations that place barriers to entry.  Some limitations implied by the local authority include regulation on the number of restaurants of a particular type that can be operated within a particular location.  These types of barriers are limited to an extent. This makes it difficult for a new entrant in the industry due to the barriers to entry in the fast food industry. Secondly, new entrants find it difficult to make profits as there is low customer loyalty in the initial stage. New entrants may also experience problems with getting into prime places and locations which are busy like high streets. Some established fast food chains may get into a location by leasing or buying to prevent entrance of rivals into the same location. On the other hand, the cost of setting up a new chain has relatively decreased as recent years have seen various new entrants in the fast food market (Jones 2014). There is relative ease of entering the market and expanding as been demonstrated by different chains. Therefore, there exist serious threats which are more serious to smaller chains.  All these factors combined result in a moderate threat of new entrants.

Threat of rivalry

Often, the Intensity of rivalry is dependent on the number of existing competitors, their potential and competencies. The intensity of rivalry is very high despite many restaurants operating in the industry. However, the intensity is high as there are a number of equal competitors who lack differentiation as well as the existence of high exit barriers (Abeling et al., 2010). There is a huge competition in the food industry in which Chipotle Mexican Grill operates. Other competitors in the market include small independent fish and chip outlets, burger shops and kebab corners. The dominant firms control a larger share of the restaurant industry, and they are able to hold this share due to the high amount of marketing done. The location of the fast food restaurant acts as an important key in the rivalry of the food industry.

Bargaining Power of Suppliers

Supplier power is an important force within the Five Forces model.  In the restaurant industry, there are numerous suppliers.  There are numerous channels through which Chipotle could receive its products; however, there are fewer organic suppliers. When there are many suppliers, they may wield significantly low power (Ali & Nath, 2013). Given that suppliers have no special knowledge and strengths, then they acquire low bargaining power in the industry. Accordingly, one vital input in the fast food industry is food.  Food suppliers have low dependence on the restaurant industry as they have different sources of profit foodservice and cost foodservice customers. These factors ensure that the power of suppliers is high and strong.

Bargaining Power of Buyers

The buying power is moderate in the food industry due to various factors. First, not every customer enjoys particular food offered by restaurants in the industry. This weakens the buying power of customers in the industry. There are also low incentives of switching to other brands due to less differentiation and uniqueness with products.  Restaurants are likely to have less differentiation to keep them differentiated from each other (Krishna, 2014).  Even though many restaurants invest heavily in brand building through advertising activities and keeping a uniform and unique style of their restaurants, their products are relatively similar. For this reason, consumer loyalty is strengthened, and the buyer’s power is weakened. However, factors such as quantity of price sensitivity and insignificant costs of switching relatively strengthen buyers power to an extent. The combination of these factors results in moderate buying power.

References

Grill, C. M. (2007). Food with integrity. Chipotle Mexican Grill.

Ali, J., & Nath, T. (2013). Factors affecting consumers' eating-out choices in India: implications for the restaurant industry. Journal of Foodservice Business Research, 16(2), 197-209.

Krishna, K. (2014). Analysing Competition in the Quick Service Restaurant Industry. Browser Download This Paper.

Abeling, F., Rivera, M., & Schneider, B. (2010). INDIA’S CHANGING HOSPITALITY INDUSTRY. Winning Strategies for the Indian Market, 137.

Chipotle (2014) External Analysis of Chipotle: Porter's Five Forces. 

Jones Haley (2014). Chipotle Mexican Grill: Porter's Five Forces. 

Sherry Roberts is the author of this paper. A senior editor at MeldaResearch.Com in online nursing papers if you need a similar paper you can place your order from medical essay writing service online.