Write 2 pages with APA style on How Can Chipotle enter Chinese Market. How Can Chipotle enter Chinese Market?
Entry into new market prospects requires strategic decisions that will enable the firm to realize sales and generate maximum earnings. Chipotle Mexican Grill Company wishes to enter the Chinese fast-food industry, having established branches across America and Europe. It is apparent the Chinese market is different since it has many consumers and rival firms that run a similar chain of restaurants. As a result, Chipotle must conduct a marketing survey with the view of identifying opportunities and trends evident in the country. The correct entry strategy or method is through the joint venture by collaborating with the local firms.
Chipotle should embrace the joint venture strategy to access the Chinese market since it allows more time for the establishment and launch of products. It involves identifying an established firm in China and increasing investment through the sharing of resources. The joint venture strategy is appropriate since it will enable Chipotle to gain knowledge of the local market. This takes place through the host firm’s ability to analyze competitive conditions, culture, language and political systems (Trost, 2011). Considering these aspects, it becomes easy to understand the preferences of the host clients and the competitive trends in the country. Another advantage of Chipotle using the joint venture entry strategy is that the costs and risks experienced in starting up a foreign market are shared between the partners. This is viable, especially if the host nation charges high duties on foreign firms or if the business will take longer to adapt to the new situations. Similarly, through joint venture strategy, Chipotle can avoid the threats of nationalization or other unfavorable government hindrance that may arise (Trost, 2011). This implies that a government policy that may affect the entry of foreign firms is avoided through the collaboration with the local firms. However, this entry strategy may also attract challenges to Chipotle if appropriate measures are not put in place. For instance, the use of the joint venture may enable the host firm to control the production technology. It is also apparent that a firm may lose the tight control over subsidiaries, which it might require to actualize the location economies. This reduces the potential of the firm to expand to other markets across the host nation. There are also instances where joint ventures might lead to conflicts due to losses or control of resources (Trost, 2011).
The correct timing of the entry mode should be as a second mover in order to benefit from the experience curve. This might involve the avoidance of pioneering costs associated with new entrants for launching products, administrative or setting up expenses. As a second mover, Chipotle will be capable of using the infrastructure already set up by the first movers in the market. However, the disadvantage of being second movers is that Chipotle may fail to build up sales volume after the strong presence of the first movers (Trost, 2011). Another demerit is that the firm may not be capable of forming switching costs that bind customers into their products. This implies that the penetration of the market might not be easy, making it expensive in terms of promotions.
Trost, T. (2011). Joint Ventures: The benefits and perils – why some are successful and others
Fail. München: GRIN Verlag GmbH.