Comparison of Chipotle to the Fast Food or Quick Service Industry

Comparisonof Chipotle to the Fast Food or Quick Service Industry

ExternalAnalysis

ChipotleMexican Grill, Inc. is an American fast food restaurant that islocated in the United States with branches all over the world such asin the United Kingdom, Canada, Germany, and France. Chipotle mainlyspecializes in the sale of Tacos and Burritos (Plesničar,&amp Zaletel-Kragelj,n.d.). The Corporation is traded in the securities exchange marketthat is on the New York Stock Exchange with a ticker symbol of CMG.Its industry is the fast food industry or the quick service industry.Chipotle Mexican Grill was founded by Steve Ells in 1993 with amission to provide food with integrity. The corporation has been ableto fulfill this mission since it serves more naturally raised meatthan any other meat in the world. During the period when it wasformed it has only 16 restaurants with McDonald`s being its primaryinvestor (Plesničar,&amp Zaletel-Kragelj,n.d.). Currently, the corporation has grown to over 2,000 locationsworldwide with a net income of US $ 475.6 million and 45,000employees as at 2015. This analysis or research paper evaluatesChipotle Mexican Grill as compared to the fast food or the quickservice industry.

Theexternal analysis involves performing a PESTEL analysis on thecompany at hand. It majorly includes determining the politicalfactors facing Chipotle, the environmental factors it encounters, thesocio-cultural factors, the technology factors, the economic factorsand the legal factors (Reeve,&amp Barnes, 2014).The main aim of an external analysis is to be able to determinewhether Chipotle can be able to survive the industry and whether ithas a high competitive edge as compared to other companies in theindustry (Reeve,&amp Barnes, 2014).One also performs an external analysis to determine what Chipotlecould do to gain a greater market share as compared to itscompetitors.

BasicIndustry Information

ChipotleMexican Grill Inc. is in the fast food or quick service industry(Radojevic,&amp Bashkin, 2006).This industry mainly deals with fast food joints. Fast foods arefoods that are prepared and served very quickly. These foods aremostly packed with taking always. The SIC or industry code of thefast food industry is 5812.

IndustryGrowth

Thefast food industry has grown rapidly over the past years. In 2011,the growth was around $ 32 billion, which increased to $ 35 billionin 2012 as displayed by the graph below. This later grew to $ 38billion in 2013 and $ 43 billion in 2014 as seen in the figure below(Reeve,2012).This growth of the fast food industry shows an upward trend. Anyinvestor willing to invest in this industry would be recommended toinvest in this industry, as it is one of the most growing industriesso far.

IndustryProfits

Thegraph below analyzes the profitability growth of the fast foodindustry. According to the chart, the fast food industry had a steadyincrease from 2011 to 2014 (Plesničar,&amp Zaletel-Kragelj,n.d.). Despite the revenues growing as stated above, the profits ofthe fast food industry were constant as seen in the chart below. Thisimplies that the sector incurred more expenses each year, which madethe profit growth rate to be constant.

IndustrySegments

Thefast food industry is segmented into large scale, middle scale, andsmall-scale restaurants. On this research analysis, I will befocusing on the large-scale restaurants since Chipotle Mexican GrillInc. is a large restaurant (Reeve,&amp Barnes, 2014).The main reason why it is considered as a large restaurant is that ithas many branches worldwide, which realize high revenues.

External/General Environment

Thegeneral environment would consist of factors such as general economicconditions, political, legal, and regulatory frameworks,socio-cultural and demographic factors, and the natural environment(Radojevic,&amp Bashkin, 2006).

GeneralEconomic Conditions

Thissection of the analysis looks at the opportunities and threats thatthe fast food industry faces. On the possibilities, the fast foodindustry can be able to take advantage of technology (Reeve,2012).The second opportunity available to the fast food industry is thevast spread of the sector can make it target new potentialindustries. Despite these possibilities, there are also threats thatthe industry faces. These risks include startup companies that offerlow-quality products making the consumers lose trust in the industry.The second threat is the rising prices of raw materials. Over theyears, the fast food industry has experienced a rise in the prices ofraw materials used to make the food. This has led to reduced profitmargins for the industry.Political,Legal and Regulatory

Thepolitical, legal, and regulatory framework is another element of theexternal environment that the fast food industry is exposed to.Companies within that industry are required to provide a work permitbefore they begin operations (Plesničar,&amp Zaletel-Kragelj,n.d.). They are also obliged to adhere to certain legal frameworkssuch as regular inspections by the health board and such. This factorwill make them incur huge expenditures about licensing and keepingthe businesses as per the health standards.

Socio-cultural

Socio-culturalfactors relate to what is widely acceptable to the society. Manypeople (Reeve, &amp Barnes, 2014) do not readily accept someproducts such as pork. This is because the Muslims consider eatingpork a sin as pigs are considered the dirtiest animals in the world.This environmental factor would limit the operations of the fast foodindustry, as they would be restricted to dealing with only productsthat are accepted by the society.

NaturalEnvironment

Thenatural environment related to the economic and the environmentalconditions affecting the fast food industry. Economic factors mayinclude the rise in the prices of raw materials, the high cost oflabor and so forth (Radojevic,&amp Bashkin, 2006).Environmental factors, on the other hand, may include pollution,waste management and so forth. The fast food industry is required asper the health board to conserve the environment and manage wastes inways that would not harm plants, animals, and human beings. They havean obligation to observe the three R`s that is reduced, reuse andrecycle. Concerning economic factors, the fast food industry isexpected to look for ways that would minimize costs such as insteadof going for grade A the companies could go for grade B that wouldbe cheaper.

Technological

Inthis section of the analysis, one considers the technologicalenvironmental factors affecting the fast food and the quick serviceindustry. Technology has rapidly advanced over the years. Companiesin this industry have made an attempt to advance its technology sothat it can be at par in the industry (Reeve,&amp Barnes, 2014).For example, the fast food industry has tried to ensure that thehotel reservations are done online or via a tech device. If thisindustry advances its technology, it will be able to have a highercompetitive edge as compared to other industries.

of Analyses and Impact

Whenperforming this analysis, the significant findings were complexregulatory frameworks. The important consequences of this are thatthe industry would incur enormous costs to enable it to adhere tothese standards. Another finding is environmental factors such aspollution (Reeve,2012).The impact of this is that if the industry pollutes the environment,many consumers will not remain with them, as they would not trustthem anymore. Lastly, socio-culture is another finding that Iencountered. The fast food industry is mandated to ensure that theyproduce foods that are readily accepted by the society.

References

Plesničar,A. &amp Zaletel-Kragelj, L. SWOTanalysis.New York: John Wiley. Retrieved on 26 October 2016.

Reeve,R. &amp Barnes, J. (2014). Environmentalanalysis.Chichester: Published on behalf of ACOL (University of Greenwich) byJ. Wiley. Retrieved on 26 October 2016.

Radojevic,M. &amp Bashkin, V. (2006). Practicalenvironmental analysis.Cambridge, UK: Royal Society of Chemistry. Retrieved on 26 October2016.

Reeve,R. (2012). Introductionto environmental analysis.New York: Wiley. Retrieved on 26 October 2016.