CLASS 15 INDIVIDUAL POST-ASSIGNMENT
Chipotle’s Industry
Chipotle operates in the fast casual segment of the restaurant industry; offering freshly
prepared Mexican food at reasonable prices. Chipotle uses only naturally-grown and,
where possible, locally raised ingredients in order to serve food of a higher quality than
fast food restaurants. They also present a more upscale dining environment, with high
quality service and ambiance. By offering food that is fresh and healthier than its fast
food competitors, Chipotle is able to operate at a higher price point. Overall, Chipotle
offers an entirely different dining experience.
Chipotle’s Strategy Statement
To increase the gross profit margin by 10% in the next 12 months by offering fast, fresh,
customizable, and high quality Mexican food to educated millennials at prices that are
above those of its fast food competitors, but remain reasonable.
Which Generic Strategy is Chipotle Pursuing?
Chipotle is pursuing a differentiation strategy because their healthy, fresh, and high
quality Mexican food is a unique offering. These natural and often locally grown
ingredients are more expensive and thus Chipotle charges a higher prices than most other
fast food restaurants. Chipotle is able to purse a differentiation strategy in this way
because their target market, educated millenials, are not as price sensitive and are willing
to pay for the higher quality food offered, especially because Chipotle is serving an
unmet need. This need is healthy and customizable meals that are delivered in a time
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conscious manner, making chipotle’s dining experience comfortable but also easy and
convenient.
Does Chipotle Have a Sustainable Strategic Advantage?
I would argue that Chipotle does, in fact, have a sustainable strategic advantage. Firstly,
they have successfully defined their distinctive value proposition as healthy, fast and
customizable Mexican food, made with natural ingredients. They serve millenials who
value healthy and organic food to the point where they are willing to pay a premium for
it. In this way Chipotle’s dining experience is unique because no other firm in the
marketplace offers a product with all these qualities. Secondly, Chipotle’s distinctive
value proposition has been immensely successful in creating a following. Chipotle has
stayed strong with their ‘small menu, big choice’ idea1; customers choose between a
burrito, a burrito bowl, a taco, and a salad, and from there they can add what they wish.
The company also has a consistent culture throughout the stores, with largely metal and
wood materials creating a sophisticated and modern ambiance. Furthermore, Chipotle
adds to the value chain by making each customer’s meal fast and efficiently right in front
of them. This form of service is immensely accurate and easy, and consumers seem to
love it.
Chipotle’s tradeoffs have also been widely successful. Chipotle uses more
expensive, natural, and healthy ingredients, instead of cheaper, mass-produced
ingredients. This is a strategic move because society is getting increasingly health
conscious and people seem to be willing to pay a higher and higher price for good
http://www.investopedia.com/articles/active-trading/041315/why-chipotle-sosuccessful-popular.asp
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quality, organic foodstuffs. Another tradeoff Chipotle makes is serving a limited choice
of meals quickly rather than having a more expansive menu that requires more time to
prepare. Consumers are increasingly requiring convenience, so I think this tradeoff will
continue to pay off. There is, however, a questionable tradeoff of food freshness for food
safety. Some argue that the E. coli breakout associated with chipotle was due to the
numerous providers all around the country not being as easily regulated.2 I don’t think
this makes Chipotle’s strategic advantage unsustainable because it is an easily
addressable issue.
Lastly, Chipotle has an incredibly successful fit across the value chain. Chipotle
has a consistent theme across its food and service of healthy, modern, and high quality.
Chipotle fresh ingredients fit with the idea of preparing the food directly in front of the
customer – they see their food being made fresh right as they are about to eat it. Also
their idea of being natural carries through with their lack of advertising and emphasis on
marketing. Chipotle’s brand is an important focus for them and consumers view them as
reliable.
Factors Affecting SlackLifestyleUSA’s Competitive Position
1. The first biggest factor affecting Slack’s competitive position is the little intellectual
property involved. There is much about Slack’s chairs that are susceptible to imitation,
such as the idea of lumbar support or the small high-density filling beans. Although
currently original, these chairs could be produced by other companies fairly easily, which
is a serious threat.
http://www.thedenverchannel.com/thenow/is-there-a-trade-off-between-freshfood-and-food-safety
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2. High storage costs are a threat because each firm will attempt to unload their products
at the same time and competition for customers intensifies. This is applicable to this
product because the filled chairs take up a large volume.
3. The third threat is the lack of product differentiation. Without experiencing these
chairs, it is difficult for consumers to differentiate high quality bean chairs. Slack’s
product and those of its rivals, Fat Boy, largely cater to the same needs – a seat to relax
in.
Generic Strategy of SlackLifestyleUSA
SlackLifestyleUSA operates by a differentiation strategy, because they market
themselves as offering a comfort level above all competitors, but for a comparatively
very high price. SlackLifestyleUSA markets their product as more functional, durable,
and comfortable and therefore unique in the industry.
I don’t necessarily agree with SlackLifestyleUSA’s strategic positioning because I
believe the chair industry doesn’t allow for enough differentiation to warrant the prices
Slack is offering. Chairs are fairly basic items without room for extreme improvement,
short of adding electrical components to make it a smart chair, a massage chair etc.
SlackLifestyleUSA is offering a comfortable sitting experience, but most people don’t
see their current couches or armchairs so uncomfortable as to warrant spending $300 on a
new, super comfy bean bag chair. The fact the chair is made out of small ‘beans’ makes it
seem even less of a reasonable investment, because typically bean bags are very easy and
cheap to produce, and act as a very casual cheap form of support.
SlackLifestyleUSA is aligned with this differentiation strategy in a number of
ways because they do use high quality, extra comfortable fabrics, such as high tech
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stretchable spandex or easy to clean high weave Oxford poly fabric. They also follow a
modern and chic theme in the shapes of their products, which should appeal to those
consumers willing to spend more on their furniture. SlackLifestyleUSA does not,
however, align with this differentiation strategy in that some of their products, such as the
Trapezoid or the TallGuy look very similar to the products of their competitors,
especially because SlackLifestyleUSA offers these products in bright garish colors. It is
difficult to visibly see how different these products are, and why they are worth this
reasonably large investment.
SlackLifestyleUSA Tall Guy
$239
http://www.slacklifestyleusa.com/tal
lguy.html
Hi-Bagz Gaming Bean Bag Chair,
$56.79
https://www.amazon.co.uk/HiBagZ®-Gaming-Beanbag-LeatherBLACK/dp/B003DVDY8I
BizChair Small Solid Red Bean
Bag Chair
$39.99
http://www.bizchair.com/dg-beansmall-solid-red-gg.html
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