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Chipotle: An International Business Strategy

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Julie Sherbill

on 31 May 2014

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Transcript of Chipotle: An International Business Strategy

An International Business Strategy for
Why an
International Strategy
?

Our biggest strength is we are different--we will capitalize on things our foreign competitors lack.

We are centralized in the U.S. but will
franchise
for spreading to other countries.

Information about
Founded in 1993 with the mission of
"Food with Integrity"
Originally McDonald's Corporation was a major investor (1998)
Then it fully divested in 2006.
2013: 1,600 locations
2013 Net Income: US$327.4 million
Staff: over 45,000 employees
Area served: USA, Canada, England, Germany, France
SWOT Analysis
We will use local materials for local markets,
and make this part of our branding efforts as well.

Our uniqueness is our strength, so we will not have to change much based on local preferences.

Our International Strategy: Broken Down
Create value by transferring valuable core competencies to foreign markets that indigenous competitors lack

Mexican food is not common outside North America--we will be unique
However, the ingredients are familiar to both Eastern and Western palates (bread, cheese, meat, rice)
Centralize product development functions at home
Chipotle has a very strong base in the U.S., and can receive a lot of support from its corporate headquarters in Denver, Colorado.

While in real life, Chipotle does not franchise, we will change this. We will franchise so as to provide local jobs and positive relationships with communities.

We will advertise working with Chipotle as being part of a more sustainable global community.
Limit customization of product offering and market strategy
Limited customization makes it easier to have a central office

We want to stand out in contrast to other fast-food moguls, so variation would defeat this purpose
Establish manufacturing and marketing functions in local country but head office exercises tight control over it
Our entire brand is based off local ingredients, health, and sustainability
Marketing will play on customer emotions and cause-based advertising, but in local languages
We will form partnerships with local farms to get all ingredients in-country
In this way we are also supporting the local economy
Simplicity for people unfamiliar with
Mexican food
Strengths
Well-known, highly-regarded brand recognition in USA, UK, Germany, Canada
Customers know the meat is safe and naturally raised, and ingredients are organic
In U.S. many branch locations are all popular
High customer loyalty
Innovative marketing strategy. In tune with trends towards health and taste
Environmentally-friendly construction contributes to "healthy" and "good" feel and look of the place
Centrally-run branch allows for predictability and similarity, fostering loyalty
Online ordering, easy to eat in the restaurant or at home.
Apps for smartphones (ordering, games, etc)
Weaknesses
Natural and organic ingredients raise costs and therefore prices, making us a relatively expensive fast food option
As a Mexican chain, we have limited variety
Not a global company, so we have only been tested on Western, English-speaking markets
Some ingredients are hard to attain year-round
Availability of local ingredients
Limited locations in the USA (maybe franchising will fix this?)
Limited advertising budget and strategy, compared to other fast food restaurants in urban areas
Threats

Religious dietary restrictions (pork, halal meat, for example)
Competition from other cheaper fast food restaurants
People not responding well to new cuisines
Unpredictability of prices and accessibility of raw materials around the world
Unstable financial currency market
Activism movements that promote only local companies
Lack of control over franchisees and their actions
Opportunities
Untapped countries, especially in Europe, where the "Mexican fast food craze" has not hit, but the trend towards healthier eating has started
Adding new types of food to the menu
Tendency to care more about food being healthy
Popularity of South/Central American culture, viewing it as festive and exotic
People being tired of local take-away foods (such as doner in Turkey)
Trends towards sustainability and caring about the environment
The rapid spread of technology (social media, word of mouth)
Stakeholders
Internal stakeholders
Employees
-creating a positive, fun working environment and culture. English learning programs
Farmers and Breeders
-High value on local, organic farms
Partnership firms
-Assign U.S. specialized managers to work with various countries
Stakeholders-
make big announcement about decision to go global-will spark a sharp rise in investment

External stakeholders
Government
- become involved in cases to eliminate antibiotics/hormones
Media, advertising companies
Other fast food restaurants

Beneficiaries
Customers, food courts
Positioning
Recognizing that there is value in reaching out to its customer in a meaningful and creative way
Cause-oriented marketing speaks to millenials
Advertising that focuses on innovative idea that it is possible to have large-scale food change without negative social impact
Shedding the bad fast food connotation
Good burrito, and "good" burrito concept;
delicious food that promotes fairness, equity,
nature, environmental friendliness
Focus on their food's healthiness, positive
sourcing of ingredients, positive impact on
local farms and farmers

quality and good food that is socially conscious
Competitor: McDonalds
Summary
Began in 1940
The world's largest chain
68 million customers per day
Over 34,000 restaurants
Over 1.7 million employees
119 countries
Headquarters: Oak Brook, Illinois
Franchising
Owned majority stake in Chipotle until 2006
Countries with McDonalds, showing first year with first restaurant
Franchising
-premier example of the business model
Consistency
-

no matter which McDonalds you go to, you can expect the same quality.
Vision was "quality, service, cleanliness, and value"
Innovation
-works with consistency and maintaining core components while adapting to local preferences. Encouraging creativity among franchisers
Resiliency
-Acknowledging customer concerns and negative press, dedicating resources to staying on top of the matter
Example> In reaction to a Greenpeace campaign, McDonalds established a Global Environmental Commitment in 1990 that outlines the steps they have taken to reduce solid waste, conserve and protect natural resources
SWOT Analysis
Strengths
Dominates the world's fast food industry
High amount of brand recognition; everyone knows it
Large advertising budget
Ability to cater food menu to local preferences and climates
Strategic business partnerships that allow them to dominate many markets
Not a centralized business structure, each restaurant has different owners
Good at appealing to all ages, including both children and the working class
Strategic locations
Weaknesses
Campaigns on how McDonalds is unhealthy and unclean, What's wrong with McDonalds
High calories
Stigma of working at a McDonalds, which contributes to high employee turnover
Lack of variety
Opportunities
An easy marketing opportunity that caters to increasing demand for healthier food
Popularity of fast, reliable home delivery, especially in urban areas where McDonalds is already popular
Easily adaptable and can change marketing strategies quickly
New demographics all over the world, globalization in general
Threats
Many competitors with newer products and "fresher" looks
Stigma of McDonalds as distinctly unhealthy, combined with the trend of healthy eating and the fear of becoming fat
Anti-globalization trends that favor local chains and organic, home-grown, local franchises
An unstable financial currency market
Lawsuits against McDonalds
Combined Impact
Chance
Combined Impact
Government
Porter's Diamond--Determinants of National Competitive Advantage
Firm strategy:
Our product is different than direct competitors in the fast food industry, so we have a strong advantage against new entrants. We hope that by extending operations, Chipotle will become recognizable internationally among fast food competitors.

Structure:
Franchising with central headquarters in USA, operating within the framework of free market competition and capitalism

Rivalry:
Differentiating ourselves from current and future competitors, offering a healthy, clean, safe, fast option
Demand Conditions
South America-Easily fits within South American preferences given the food is inspired by Mexican cuisine

Europe- High demand for fast, filling, easy food. Ingredients not very different from what Europeans are used to

Africa- Only would be in urban centers, where people are eager to try international flavors already.

Middle East- Will cater to the desire of people in urban areas who are eager to try "Western" cuisine associated with high status

Asia- The quick and neatly packaged nature of product appeals to Asians in highly urbanized areas. The product is not SO different from traditional Asian demands.

Australia- Australians have been demanding Mexican food given the influence of American culture there already.



Related and supporting industries
Chipotle will be supporting the local economies by partnering with major farm-based industries in the local country

In areas where youth unemployment is high, Chipotle can seek to attract new talent. Its focus on sustainability and innovation can attract educated millennials looking to make a positive impact in the world through corporate social responsibility.

Chipotle can also be big in the "home delivery" industry, offering campaigns and discounts through food conglomerate websites such as "yemeksepeti"
Factor Conditions
Employees not required to have special skills, so unlimited workforce available

Ingredients (rice, meat, vegetables, cheese) are fairly basic and well-known, so should be easily translatable and available

In urban areas there will be sufficient human capital and infrastructure resources to support Chipotle's employment and supply needs.
Four Ps for Chipotle
Product
Food with Integrity
Completely organic
Livestock free-range
Food with integrity
Price
Do not utilize distribution centers
Materials delivered directly to each individual stores
Eliminates any and all storing costs
Taken directly to restaurant where it will be prepared, cooked, consumed
Promotion
Place (Distribution)
Interior Design
Architecturally all Chipotles are similar
plywood, corrugated metal, stainless stail, exposed ductwork
white ceramic tile instead of stainless steel, because it is easier to recycle
Partners
Work with many different partners to provide high quality ingredients and materials
High quality, sustainable ingredients

Inventory at each store is low, ensuring freshness for customers
Even-odd pricing -
for example we can make a burrito cost 12.95 instead of 13 lira.
Prestige pricing
- setting prices higher than competitors which indicates better quality, extra cost due to nutritional value and extra quality
Chipotle's promotion strategy will make it unique
Advertising focusing on
today's problems with food industry
Growing
brand equity
through
customer loyalty
and connecting to people's emotions.
Issues that we care about
.
To grow
brand familiarity
, we will offer free burritos to customers coming in on opening day. The more customers trying the food, the more our product will spread through
word-of-mouth
Phone applications
are an easy way to reach millions of customers--in the current application you can view your closest Chipotle, the full menu, order from there, and
schedule a pick-up time.
Wrapping burritos in
gold foil packaging
draws attention, and it is made of
100% recycled materials
Prizes to customers who wrap products in gold foil. We can spread this competition through social media sites such as
On average, lettuce of competitor will travel over 1500 miles to reach a customer's place
When seasonally available Chipotle sources local produce within 350 miles of each restaurant
Keeps monetary and environmental transport costs at a minimum
Ensures quality of food
Headquarters will be in the USA.
We will really focus on highly-concentrated urban areas, to cater to young professionals and fast-paced lives. Chipotle stands out in this setting, as it can be easily eaten on-the-go (in burrito form), but customers can also sit comfortably and talk with one another (and maybe order a burrito bowl)
For a company to go global it must:

a.
Assess and adjust core strategy

(market/competitive analysis--internal analysis)

b.
Formulate a global strategy
(choice of target countries, segments, and competitive strategy)

c.
Develop of global marketing program

d.
Implement
(organizational structure, control)

Assess and adjust core strategy

(market/competitive analysis--internal analysis)
Formulate a global strategy
(choice of target countries, segments, and competitive strategy)
Develop of global marketing program

Implement
People with "no time, more money" (urban areas, health conscious, active, successful)
This allows room for growth, status
Loyal customer base who buys based on quality and price.
Chipotle spokesman Chris Arnold stated
"When you order at Chipotle, you're in contact with a lot of people...it's an experience where customers are very involved, and that creates more of an opportunity to make an impression."
Internal Analysis
Healthy food commitment
connects
with strong supplier relationships with organic producers
Chipotle management meets regularly with organic farmers, ensuring that the farmers and the restaurant remain on the same page with each other’s agreement
EMPLOYMENT: The restaurant actively seeks out and trains employees that share a passion for food and Chipotle’s mission and vision.
Must consider not only hourly wage, but also benefits. This can be handled by independent franchisers so it can be based off living standards and government policies
Focus on
URBAN AREAS
and
MILLENIALS

Use
WORD-OF-MOUTH
and
SOCIAL MEDIA
for advertising

High-profile
TASTING EVENTS
(if you try it you'll come back)



Let's see if we are right...
"Food with integrity"
Built on customer loyalty
Expand options slowly slowly
(breakfast burritos for example)
(vegetarian options for example)

Simple messaging, simple
strategy: real food.
A breath of fresh air from city life and other typical urban fast food companies
Who:
Urban people who want food that is quality, convenient, and not terribly expensive.
What:
High quality, on-the-go Mexican cuisine, a trend that is wildly popular in the U.S. but has yet to hit other countries. 
How:
An assembly line style, where the food is cooked and prepared in front of the customer. The customer gets to feel in control of their food. This food is served with the highest possible customer service. 
Why:
People like food. People like feeling good about themselves. Chipotle allows for both by showing a commitment to good ingredients, respect for animals/environment/farmers
Mission
Successfully enter new markets (internationally) while remaining faithful to the already established Chipotle name of quality (Food with Integrity), exceptional customer service and an ambiance of a sophisticated and trendy dining experience,

by introducing franchising and

implementing a short term marketing strategy

Thank you for your attention.

Now we'll tell you the
real deal
, since our presentation is technically over.
first to get you pumped:
Full transcript