What is “Business Model Design and Innovation”? Business model design is a problem-solving process that focuses on how to create value for customers through a unique, sustainable business structure (Wei, Yang, Sun, & Gu, 2014; Esslinger, 2011). Business model innovation has been defined more specifically as the “discovery of a fundamentally different business model in an existing business” (Eichen, Freiling, & Matzler, 2015). There are four objectives to a business model design or innovation process: (1) satisfy an existing but unanswered need, (2) bring new technologies, products, or services to market, (3) improve, disrupt, or transform an existing business market with a better business model, or (4) create an entirely new market (Osterwalder, …show more content…
Pigneur, & Clark, 2010). The first objective of business model design or innovation is to fulfill an unanswered need in the market. A perfect example of the implementation of this objective can be found in the automobile company Tesla. Before the company began producing its cars, the market for electric cars was undeveloped and contained only cars that were not visually appealing and had low driving ranges. Tesla introduced its Roadster and Model S to the world in an effort to capture the consumer demand for a quality electric vehicle that they could enjoy driving. By meeting this consumer demand the company was projected to sell 55,000 cars in 2015 and these sales figures will only increase as it begins to introduce more models that can be purchased by those in the middle class (Moseman, 2016; DeBord, 2015). Bringing to market new technologies, products, and services is another objective of business model design. Apple sought to achieve this objective with the introduction of the iPhone in 2007. This new product completely revolutionized the cell phone market and shaped how it would develop in the future (Warren, 2014). The company went on to sell 1.4 million of the original iPhone within 11 months and the company still holds a solid lead in the smartphone market in the United States (A&E Television Networks, 2016; Whitney, 2015). The company was able to successfully convince consumers that its new technology combining internet access, cell phone features, and an iPod in one device was a something they could not live without and its many competitors are only seeking to perfect an imitation. Chipotle was able to disrupt and transform the future of the restaurant industry by bringing together many different characteristics present in the market to popularize the “fast casual” segment.
Chipotle capitalized on a new generation that was seeking better meals that they could receive on a convenient basis. Chipotle is a company combining high-quality food, speeds almost comparable to fast food, and fresher ingredients (Mcqueeney, 2015; Chipotle Mexican Grill, Inc., 2014; Kaplan, 2011). The company’s success has caused both the fast food industry and casual restaurants to scramble for ways to attempt to reinvent themselves into something more appealing to the “Chipotle” …show more content…
generation. The last objective of business model creation or innovation is to create a completely new market or product category.
Keurig and its K-cup concept revolutionized a market that had been around for over five hundred years to allow consumers to brew an excellent cup of coffee in their own home. Before the K-cup concept was introduced by the company, consumers had to measure the desired amount of coffee themselves and were largely constrained to coffee makers that would brew only multiple cups of coffee. Everyone in America has heard of Keurig but not many people know the history of the company behind bringing this product to the market. Green Mountain Coffee was a largely regional coffee company with loyal customers throughout the Northeast United States but not much market penetration elsewhere. It was not until the company purchased the Keurig concept from its creator John Sylvan that it was able to propel itself to the international company it is today. This new product revolutionized the coffee market and can now be found in thirteen percent of American workplaces and account for twenty-five percent of the coffee makers sold in the United States (Sozzi, 2015; McGinn, 2011; Ingram,
2006).
New restaurant openings and comparable restaurant sales increases are important factors contributing to Chipotle’s increase in revenues in recent years.
The founders of Keurig Inc. created the company to develop an innovative technique which allows customers to brew one perfect cup of gourmet coffee at a time. In this case, the CEO Nick Lazaris along with the other leaders of Keurig Inc. must determine how to successfully enter the at-home-market for use at customers’ homes, while maintaining a healthy relationship with Green Mountain Coffee Roasters, Inc. (GMCR) and Van Houtte. GMCR and Van Houtte are two of the company’s main roaster partners that own a 70% stake in Keurig, so they want the business to succeed but are a little apprehensive about the company’s marketing and pricing strategies.
Chipotle is my favorite place to eat. As I am sure it is for other people. Chipotle is a fast food Mexican grill. They are most known for how big they make your burritos. Now it is fast food but it isn’t actually fast, they’re like a restaurant but without the wait. They serve all naturally raised meat and organic beans. So there food is pretty healthy and worth eating. The employees are always nice and it just a great place to eat over all. Chipotle is a great choice for a quick fast food stop because it gives great service, atmosphere, food and value. My experience there is always a good one.
With a unique appeal, a healthy and delicious product, and a powerful social message that made our target customers feel great about eating Chipotle over more traditional fast food, we have pioneered the fast-casual restaurant model our customers admire. Furthermore, our food sourcing is a rewardable effort and it is what we and our customers respect.
When Chipotle first opened in 1993, the goal was to serve quality food fast, but not be considered “fast food.” To avoid falling under the fast food stigma, Chipotle strives to find the best ingredients with respect to animals, farmers, and the environment. In order to achieve these goals, Chipotle has created a matrix organizational structure that is divisional by location and functional by authority. Chipotle recently expanded internationally to the United Kingdom, Germany, and France, each following strict guidelines assigned by corporate employees from their headquarters in Denver, Colorado. Similarly, each location is functionally organized according to authority: regional manager, district manager, store manager, assistant manager, and
Simple product lines: Chipotle has a really focused, limited menu. In the menu, it can be categorized into 4 parts: burritos, tacos, salads and beverages. The restaurant never offers limited-time or promotional items. A focus and limited menu not only helps Chipotle to maintain an average taste, but also prevents Chipotle to waste money: (1) the company don’t have to spend too much on advertising if there are no new items. (2) the company don’t have to teach the staff how to prepare the new items.
Since Chipotle has determined the attractiveness of the industry, the restaurant formulates a strategy in view of Porter’s three generic strategies. In my assessment, Chipotle falls under the differentiation strategies. The elements that applies to differentiation strategies is a broad market and high cost. From their business philosophy that features “Food with Integrity” competes by offering a broad range of differentiation products at high prices. As a frequent customer I generally do not mind spending a little extra money on natural meats and fresh vegetables since I know their purpose is to know where all their sources are coming from and how it is maintained. They have a special pride to make sure the food is flavorful as possible and
Green Mountain Coffee Roasters initially got started in 1981 as a small café in Waitsfield Vermont and united with Keurig later in 2006. The company produces specialty coffee as well as coffee makers with the help of Keurig whom produces single-cup coffee and tea makers; it is now among their product list. The company roasts 100% Arabica type of coffee transforming it into more than a hundred different coffee products available for selection. Green Mountain Coffee Roasters and Keurig coffee no longer retains ownership of the original café. However, the company still has its headquarters situated in Waitsfield Vermont on a vase land of about 90,000 square feet. (8,400 square meters). The company also prides on having other regional centers which are located in various cities including: Upstate New York, Washington, Maine, Massachusetts and Connecticut. According to the case study, “Exhibit 6 shows the net sales and growth in reference to the year 2008, 2009 and 2010” (C36 in the book, [Dess et al, 2012]). From that data, we can see how the company has developed. The rest of the 2010 annual report also helps in examining the performance of the company which can be seen in Exhibits 3, 4 and 5.
Chipotle created a new niche of fast food restaurants reclassified as fast casual, bringing fresh food made with raw ingredients to the masses in a short amount of time. On an initial 85,000 dollars family investment, Chipotle has evolved into multi-billion dollar corporation. In 1998, McDonald’s made minority investment $ 360 Million dollars in the company and by 2001 they had grown to be the Chipotle’s largest investor. McDonald’s investment had allowed Chipotle to take advantage of its market and significantly expand. In 2006, Chipotle went public setting stock market records, gaining capital for growth, therefore paving the way for McDonald’s to divest and opt out with $1.5 billion dollars. Over the past 20 years, Chipotle’s market power has increased despite conventional barriers of entry. For instance, particular challenges that include barriers like regulatory rules and regulations (i.e. Licensing) can affect the operation of an organization. Chipotle is company owned and does not franchise. As per Chipotle, "keeping in good faith with their mission of Food with Integrity." (Chipotle, 2017) The company abides by the set guidelines of the government regulation of treatment of animals and the use of drugs in the food, which are essential input barriers on meat, dairy, and fresh produce products. The overall controls of these necessary
Chipotle set a goal to adopt proactive approach to go beyond the industry norms and make a change to the food source, to be 100% natural, meaning that animals are free of hormones and antibiotics and their diet is vegetarian. It was almost unprofitable to switch Chipotles entire menu to 100% natural overnight. Chipotle adopted a “moving money” approach, which enabled the company to make a profit and at the same time improve the quality of the food that customers would value. From 1999 until 2007 the company was able to source 60% of the beef from naturally raised supplier, and it reached to 100% in 2013. Similarly, for chicken supply, it took Chipotle 11 years (from 2002 until 2013) to reach to 100% natural. Another effort for green marketing was to eliminate trans fats and purchase black beans from certified organic suppliers. With tremendous efforts and dedication in 2010 the company was already able to purchase 60% of the black beans from organic
Chipotle Mexican Grill, has been desperately trying to recover from the loss of customers due to its recent E-coli outbreak in a few of its restaurants. In an effort to win back customer confidence and trust, Chipotle has been allowing customers to receive free burritos through a recent promotion. Chipotle has recently forecast its first ever quarterly net loss, which shows just how devastating the outbreak affected the value of the restaurant. In addition, Chipotle’s stock has fallen a third since the outbreak, crushing the value of the company. In addition, Chipotle recently closed all of its stores temporarily to inform employees about food safety and the prevention of outbreaks.
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When the buzzword of business model was very active and reactive during the internet boom, many individuals did not understand the concept of the proper business model for the proper business (Magretta, 2002). When not utilizing the right type of model for the organization, the model will be misused and distorted (Magretta, 2002). Understanding the traditional organization and learning organization, will allow an organization to determine which time of organization they desire the most.
By definition, there are at least three types of actors involved in disruption, the applicants, the officials and the customers. A business model approach to innovation considers all aspects of innovation processes and business activities for developing or responding to disruptive innovation, as opposed to a technology solution alone.