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Porter's Five Forces Analysis Of Chipotle

911 Words4 Pages

Chipotle’s rise as a leader in the restaurant market is mainly due to the firm’s ability to attract McDonald’s Corporation to fully divest its holdings for a value of 1.5 billion. Chipotle has managed Michael Porter’s Five Forces model with addition of compliments, game theory and competing resources in the fast-causal segment of the restaurant business extremely well, which has kept them ahead of their competitors. Chipotle’s current success suggests that Chipotle will remain effective in addressing these key attributes in overcoming related issues in their future. Overview: Chipotle’s Five Forces Analysis Using Porter’s Five Forces analysis, Chipotle encounters the effects of external factors depending on each factors level of power or …show more content…

Most medium and large firms heavily invest in marketing their products. In addition, Chipotle customers experience low switching costs. This is highlighted with 23% of Chipotle customers had already tried Taco Bell’s Cantina Bell menu. (Thus, this element of the Five Forces analysis of Chipotle shows that competition is among the most significant external forces on the business. Bargaining Power of Buyers (High) Chipotle must address the significant power of customers. This element of the Five Forces analysis deals with the influence and demands of consumers. In Chipotle case, the following are the external factors that contribute to the strong bargaining power of buyers: • Low switching costs (High Power) • Large number of providers (High Power) • High availability of substitutes (High …show more content…

The impact of suppliers in Chipotle case is that they have weak bargaining power based on the following external factors: • Large number of suppliers (Low) • Low forward vertical integration (Low) • High overall supply (Low) The large population of suppliers is tied to Chipotles “Food with Integrity” mission which accounts for 22 independently owned and operated distribution centers. (Subramanian, 6) By 2012 they had grown locally sourced farm produce to 10 million pounds. (Subramanian, 6) it weakens the effect of individual suppliers on Chipotle. Thus, this element of the Five Forces analysis shows that supplier power is a minimal issue for Chipotle. Threat of Substitutes or Substitution (High) Substitutes are a significant concern for Chipotle. The following external factors for Chipotle make the threat of substitution a high force: • High substitute availability (High) • Low switching costs (High) • High performance-to-cost ratio

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