Diversification Analysis

Chelsea Alexander

Marketing 3300 Mark Cunningham 5/02/2013

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ackground! "n 1##3$ Chi%otle &%ronounced chi'()A*'lay+ o%ened its first store in Denver$ Colorado ,ith the goal of %roviding fast food that ,asn-t categori.ed under the /fast'food0 ex%erience$ 1ut rather /2ood ,ith "ntegrity30 4nder 5teve 6lls$ the founder of Chi%otle$ they have kee% u% ,ith their motto and strive to make their ingredients and %roducts friendly and healthy for the ,orld3 "n the 1eginning$ 6lls ,as told that /the food ,as too ex%ensive and the menu ,as too limited70 ho,ever$ since then Chi%otle has gro,n to 1e extremely successful ,ith stores having travelled to the 48 in 20103 A 9um%start from McDonald-s investments in 1##: seemed to 1e the element that %ro%elled them into ex%ansion and allo,ed them to gro, so effectively3 5o$ in 2011$ Chi%otle ,as ranked 1est Mexican fast food restaurant ,ith a%%roximately ;50$000 customers %er day3 *oday$ Chi%otle already sells clothing and accessories$ as ,ell as their food through their ,e1site ,hich %rovides easy access to information a1out their com%any and ,hat is going on in the Chi%otle community3 *hey ena1le customers to %reorder their food online$ and %ick it u% at an assigned time to 9um% the line as ,ell as save other customers- time in line3 Also$ they %rovide catering$ have an interactive nutrition calculator$ and s%ecial diet information for %eo%le ,ith allergies3 <ight no,$ their menu includes a 1urrito$ 1urrito 1o,l$ taco$ or salad$ ,hich the consumer may customi.e and add chi%s and/or a drink3 Chi%otle has an interesting niche in the market as they have created a %o%ular food through ease of customer service$ interaction ,ith the community and health conscious and tasteful food3 *hey are a com%any that has made their entrance into the market and have the o%%ortunity to gro, as their restaurants are a customer favorite3

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5=)* Analysis! Strengths rand <ecognition o *hey have gro,n so much$ and their name is easily recogni.ed no, 1y most consumers3 *his allo,s them to 1e in the line of sight for consumer dinners3 /2ood ,ith "ntegrity0 Com%any o *heir goal of ingredients made in an environmentally sustaina1le ,ay gains green friendly customers and makes increases their re%utation 1y their involvement in 1ettering the community and interacting ,ith consumers Customer access o Chi%otle has many different ,ays to %ut in an order3 *here is online$ %hone$ or in store7 these also have divisions ,ithin them that allo, the customer %ick u% or delivery$ as ,ell as catering3 Weaknesses' >ot much variation in %roducts o *heir 1urritos and taco 1o,ls are their signature dishes$ 1ut %ast that there is very little diversification3 *heir interest in kee%ing it sim%le can also s,ay customers that don-t %refer that ty%e of food3 ?igher %rices o =hile these %rices call to a certain market$ it also excludes certain classes of consumers3 *heir ina1ility to have a variety of %rices and %roducts makes their customer 1ase more s%ecific and could make it harder to ex%and to %oorer areas3

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Opportunities' Middle and 4%%er Class Consumers o *hey are %riced more highly than McDonalds or /real0 fast food restaurants$ ,hich creates an aim for higher @uality and customer relations im%rovements that can maintain loyalty and increase their re%utation Consumer interest in healthier meals o y making their nutritional facts a large %art of the organi.ation they o%en themselves u% to the consumers ,ho ,ant food from a com%any that is trying to cut do,n the chemicals %ut into %roduction3 Threats' 6ntrance of other urrito focused Com%anies o Ado1a$ 2ree1irds$ Costa Bida$ and even local 1urrito restaurants create com%etition to maintain and receive ne, customers3 *hey must kee% a distance that makes their restaurant 1etter than the com%etition3 Consumers interest in healthier meals o 6ven though they are trying to make their meals made ,ith less chemicals$ their 1urritos still come to around :00 calories3 *his s,ays customers from eating there as often as something that is faster and has healthier o%tions3

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Diversification Analysis! Possible choices that arent in Chipotles best interest at this time: o 2ranchising 2ranchising is a strong and successful move for some com%anies to hel% them ex%and and 1ecome more %rominent3 ?o,ever$ in the case of Chi%otle$ they hold a uni@ue 1rand and motto that holds u% to a @uality that franchising doesn-t usually gras% for the long term3 Chi%otle-s founder is very involved in the com%any and making it 1etter$ and doing this on an individual 1ases ,ith strategically %laced restaurants and 1usiness is the key to their success in the future3 o Diversification Chi%otle could do as 5tar1ucks and other com%anies have done$ and that is creating something that can 1e in local grocery stores and %artner to sell %roducts3 Although this ,ould gro, their 1rand$ their food %roducts are more luxury than necessity as coffee has 1ecome to the American %eo%le right no,3 May1e one day ,hen they have reached all areas of the 4353 they ,ould 1e a1le to have a market that ,ants to make their o,n Chi%otle 1urrito at home for the family3 Definitely something to think for the future3 o Customer enefit (rograms 5ince Chi%otle is usually 1usy and very successful in the markets they have introduced themselves to$ they don-t really have a need to go over and a1ove on customer %erks3 2or exam%le$ customer loyalty cards that kee% track of %urchases or student discount days3 *heir success hasn-t

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made them interested in %ursuing marketing ,ays to get the customer to 1uy3 ?o,ever$ as a customer " feel more inclined to 1e attached to a restaurant or store that allo,s me %erks for coming to them3 5o$ even though this might not 1e entirely financially su%%orted$ it ,ould 1e a nice gesture from the customer stand%oint3 o Advertising *heir current re%utation suggests that they are %o%ular enough ,ithout commercials on a regular 1asis or other marketing techni@ues3 Advertising ,ould allo, them to reach customers that may not have sam%led them$ as ,ell as set them a%art3 *heir com%etition doesn-t rely heavily on advertising either7 ho,ever$ it is a cost that is not necessary at this time3 Also$ if they ,ere to start the trend of commercials$ they may 1e forced to stick ,ith it as it 1ecomes a /stay in the game0 varia1le rather than one that sets them a%art$ as their com%etition meets the challenge and %artici%ates3 *hey do %artici%ate in small ads$ such as those that a%%ear on face1ook at this time3 Chi%otle must 1e careful ,ith these solutions$ 1ecause of the im%act they could make on the com%any3 *here are many different o%tions of ,ays to gro, a com%any and 1e successful$ and ho%efully Chi%otle ,ill make the correct decisions in the future3

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Diversification Anal sis !escribing m recommen!ations: (roducts Current >e, (roduct Develo%ment Chi%otle could add a ne, %roduct$ like @ueso or nachos$ in the same markets to com%ete ,ith other 1urrito restaurants3 *hey already have clothing on their ,e1site and some other goods3 Diversification Chi%otle could sell a ne, %roduct$ like @ueso or Asian 1urritos$ in a ne, market$ like China or more countries in 6uro%e to ex%and their customer 1ase and %o%ularity3 Chi%otle ,ould have to modify their menu more for Asian countries than 6uro%ean3

Markets

Current

Market (enetration Chi%otle could sell its current %roducts in the same market 1y lo,ering %rices$ for exam%le making their guacamole com%limentary3

>e,

Market Develo%ment Chi%otle could sell the same %roducts in a ne, market$ like 2rance and other 6uro%ean countries3 *heir current success in ritain suggests that other 6uro%ean countries could 1e interested in Chi%otle3

Chi%otle has the o%%ortunity to utili.e any of the four %arts of the diversification analysis! market %enetration$ %roduct develo%ment$ market develo%ment$ and diversification3 6ach offers its o,n 1enefits and allo,s the future of Chi%otle to 1e more innovated3 Market %enetration allo,s for current customers in current markets to 1e re,arded 1y their loyalty$ as ,ell as interest ne, customers 1y their ne, %rices3 Cuacamole holds its o,n markets ,ithin the community$ 1ut some customers look for restaurants that don-t have that extra charge3 *his ne, %romotion ,ould

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have to take in to account their costs$ 1ut it could 1e 1eneficial to make this change if it ,ouldn-t cost a financial 1urden on the restaurant3 )ne of their ,eaknesses is their higher %rices$ so this could decrease the 1urden ,hen Chi%otle restaurants are in %oorer areas3 (roduct develo%ment could 1e a %ositive change as they 1ring in a ne, %roduct$ such as @ueso3 Many %eo%le associate @ueso ,ith Mexican food and some of Chi%otle-s com%etition have already added @ueso to their menu-s addition list3 *his could s,ay more customers to favorite Chi%otle 1urritos if Chi%otle could create a com%etitive @ueso reci%e3 Middle class consumers en9oy ne, %roducts to try and love3 *his ,ould re@uire advertising$ 1ut also ,ord of mouth ,ould ex%and the ne,s and dra, in interested %eo%le3 Market develo%ment could hold the key to their next success as they have already ex%anded to Dondon successfully3 *he rest of 6uro%e could hold the same results as long as Chi%otle kee%s the same @uality and customer ex%erience3 *hey have also ex%anded to Canada successfully$ so ,ith this ex%erience they should 1e a1le to create a model that ,ould create %ositive im%lementation3 *his develo%ment could also 1e used to transfer Chi%otle restaurants into areas of countries already develo%ed that haven-t 1een introduced to Chi%otle3 Diversification could hold the key as it allo,s Chi%otle to create ne, %roducts$ like @ueso or Asian 1urritos$ ,hile also ex%anding to 6uro%e or Asia3 *heir restaurants hold the %otential to ex%and to 6uro%e$ ,hile also creating a ne, %roduct for already esta1lished 1usiness3 *his could 1e the safest$ most %roductive solution7 1ut they also could create a ne, model that adheres to the Asian cultures

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and allo,s them to ex%and across the ,orld3 *heir com%any holds that %otential and could em1ody this model ,ith the right a%%roach3 "t ,ould 1e recommended that Chi%otle use the diversification a%%roach$ so that they can attack %roduct develo%ment and market %enetration at the same time3 *his a%%roach ,ould create even more 1rand recognition$ as ,ell as revenue ,hen their ex%ansion is com%lete and successful3 *he ,orld is 1ecoming ever more diverse and as a result$ Chi%otle-s %roducts could easily 1e acce%ted into ne, %arts of the ,orld ,ith the right strategy and time3 Chi%otle is a gro,ing 1rand that has the %otential to 1e ,orld,ide and kee% gro,ing3

=orks Cited

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arnes$ 5teve3 E"ntegrity "s 8ey to Chi%otle rand3E Times"nion#com3 *imes 4nion$ 05 >ov3 200#3 =e13 0# A%r3 20133 Fhtt%!//,,,3timesunion3com/living/article/"ntegrity'is'key'to'Chi%otle'1rand'5G;HH23%h%I3 rand$ <achel3 EChi%otle 2ounder ?ad ig Dreams3E : $ore %usiness : The &ock $ountain 'e(s3 <ocky Mountain >e,s$ 23 Dec3 200H3 =e13 0# A%r3 20133 Fhtt%!//,,,3rockymountainne,s3com/ne,s/200H/dec/23/chi%otle'founder'had'1ig'dreams/I3 EChi%otle! A1out 4s3E Chipotle: About "s3 Chi%otle$ n3d3 =e13 01 A%r3 20133 Fhtt%!//,,,3chi%otle3com/en' 45/com%any/a1outJus3as%xI3 EChi%otle Chalks u% 5uccess1y Defying 2ast'food Cos%el3E Tampa %a Times3 *am%a ay *imes$ 2G >ov3 200;3 =e13 1 A%r3 20133 Fhtt%!//,,,3s%times3com/200;/11/2G/ usiness/Chi%otleJchalksJu%Jsu3shtmlI3 EChi%otle Mexican Crill3E Wikipe!ia3 =ikimedia 2oundation$ 0G 5e%t3 20133 =e13 0# A%r3 20133 Fhtt%!//en3,iki%edia3org/,iki/Chi%otleJMexicanJCrillI3 EChi%otle )%ens <estaurant in Dondon$ "ts 1st in 643E Denver %usiness )ournal3 usiness Kournal >et,ork$ 10 May 20103 =e13 0# A%r3 20133 Fhtt%!//,,,31i.9ournals3com/denver/stories/2010/05/10/dailyG3htmlI3 EChi%otle )rdering3E *Tunes3 A%%le$ 0H Mar3 20133 =e13 0# A%r3 20133 Fhtt%s!//itunes3a%%le3com/a%%/chi%otle' ordering/id32;22:G55LmtM:I3 5ham1ora$ Kessica3 EChi%otle! <ise of a 2ast'food 6m%ire3E C''$one 3 Ca1le >e,s >et,ork$ ; )ct3 20103 =e13 0# A%r3 20133 Fhtt%!//money3cnn3com/2010/10/0H/small1usiness/chi%otleJstarted3fortune/index3htmI3