Market Analysis for Chipotle entering Australia

Posted: February 03, 2017

Chipotle is an American-based firm that operates in the food industry. Chipotle deals mainly with the production of burritos, which is a Mexican specialty. The headquarters of this firm is located in Denver, Colorado. The successes of the firm are attested by the fact that the firm has been able to set up numerous local eateries across the home country. The successes that have been experienced thus far have been because of the unique strategy adopted by the management team that tends to differentiate it from its competition. While other eateries have embraced and adopted contemporary forms of promotion, Chipotle has appreciated and adopted the traditional understanding of promotion. One of the most potent promotional strategies that have been adopted is price discounting. As such, the firm has been able to drive sales via the use of this traditional approach to promotion and subsequently the approach management. Over the years, this firm has been characterized with significant growth (Australia, 17). Such a realization might be culminated from the sales growth rates that have characterized the firm’s operations thus far. One of the most potent markets that can be exploited by Chipotle is Australia. With this being said, this paper will endeavor to analyze the Australia market as a potential expansion region for Chipotle.

Chipotle has become successful mainly because of its unique approach to business in the contemporary setting. While its competitors have adopted the contemporary means of doing businesses, Chipotle has embraced the fast-casual approach. It has to be understood that Chipotle has been able to cultivate a culture fast-casual outlet while still being able to provide quality food products. The fast-casual quality is synonymous with other big name food outlets. On the other hand, the quality of food that has been maintained thus far is synonymous with small, family owned food outlets. As such, the firm has been able to create a link between fast casual and good quality food products.  Such an approach is in line with the vision of the founder of the chain. The goal was to provide authentic Mexican food-product. Despite the size of the firm, the management team strives to maintain the aspect of quality that has aided in the success of the business in the American market. Given this approach to business operation, Australia can be a successful expansion location for the company. The dynamics of the country are such that the probability for success is quite considerable. 

Macro-environment

By analyzing the macro-environment, this paper will be able to provide an understanding of the nature of the Australian market as far as it pertain to the food industry.  As such, focus will be in regard to the food industry.

Political/Legal structure

Australia is characterized with two main political parties. A change in regimes will often mean a change in the business environment. A potential change in rules of conduct is one of the things that foreign businesses ought to give high regard. It is essential to ensure that there will be a continuity of the current laws and codes of conduct in relation to business irrespective of the particular regime that is in power. An additional element that ought to be appreciated is the fact that Australia use common law approach to their adopted legal system. It is essential to point out that America also uses this approach. With this being said, Chipotle will not have the problem of readjusting to the principles of the law given its resemblance to the approach adopted in the home country of America.

Economic segment

The success of Chipotle is largely dependent on the level of consumer spending in the country. Such a capability is especially critical during the initial years of operating in the country. In addition to this, there is also the factor of consumer confidence in the economy. The aforementioned has been found to significantly impact the willingness of consumers to purchase products (Australia, 9). As such, the performance of the Australian economy is a significant factor towards the success of the business upon entry into Australia (Katz and Weaver, 24). From the period of 2003, Australia has been characterized by a poor performing economy in relation to its potential.  Despite being able to position itself well after the 2008 financial meltdown, the potential for the economy is still quite high. As such, Chipotle ought to ensure that it has adequate understanding of the economic trend at the time of entering the country. On a positive note, the economy has been characterized by a decline in the overall unemployment rates. This trend has been perpetuated for about a decade. With these declining rates of unemployment, it is factual to assert that the population will be able to increase its overall ability to spend on fast foods.

Socio-cultural segment

The country has about 20 million people. Estimations of population growth rate by the Australian bureau of statistics have shown that by the year 2031, the population would have grown to 25 million (Royle and Towers, 41). Such a fact alone assures for the potential market base in Australia. With the growth of the population, the market becomes more conducive for multi-corporations. The food is expected to benefit from this significant growth rate.

Technological segment

The technological environment in the country is such that it creates an enabling environment for the success of the business. The Australian government has invested significantly to create a technological environment that is conducive for the success of businesses that depend on the internet. It has to be understood that the presence of quality technological environment, which is in the form of the quality of internet connection, new businesses are able to operate in an environment conducive for success. Chipotle will be able to use this internet to undertake a successful launching of the business model. It has to be understood that e-commerce has become a pertinent component for business success in the contemporary environment. As such, Chipotle will be able to complete most of the business needs via the online platform. In addition, the business will be able to create awareness by advertising via the internet.

Competitive environment

The Australian market is such that it has started to focus on organic food. The growth in the organic industry has been such that it has experienced a 50% growth rate in recent times (Australia, 14). Such a growth rate is in reference to both production and consumption of organic products. In the recent years, there has been about 10 to 30% in the market for organic products. As such, food outlets have tended to realign their businesses so that they meet this market demand. The food service sector has experienced a growth rate of 5.5% in the period between the year 2009 and 2014. Such a growth rate is significant motivator for why Chipotle ought to tap onto this industry potential. The extent to which Australian consumers have placed high regard on authentic organic foods is attested by the actuality that 90% of the food that is consumed in the country has been produced within the borders (Australia, 22).

A critical point to factor into this analysis is that the Australian food industry is comprised largely of private labels. The private labels in the country have been able to tap into the consumer trends of favoring organic products much to the detriment of the demand of the inorganic products. The successes of these private labels are attested by the fact that they have been able to withstand the test of time. However, these set-ups are not expected to provide stiff competition to Chipotle mainly because the firm has proven to be successful because of its authenticity in the manner in which they source their ingredients.

Synthesis

Chipotle has been using organic authentic ingredients since its inception. The campaign for organic ingredients has been amplified during the last decade. Given that its success in the American market has been partly because of its focus on organic products, the firm is expected to experience some level of success in the Australia. For one, the trends in the consumer behavior are in line with the adopted business model. As such, it would be easy for the firm to bring its expertise to the American market thus being able to succeed in the long run.

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