External Environment of Company
Chipotles external environment contains many opportunities, threats, uncertainty, and resource availability. According to Richard Daft, “Theory and Design”, these “external elements exist outside the boundary of the organization and has the potential to affect all or part of the organization” (148). These elements can be direct or indirect. For chipotle they face tremendous competition in the Mexican “fast-casual” food industry. Competitors who compete on a similar level as Chipotle are their direct competition, such as Rubio’s Coastal Grill and Baja Fresh Mexican Grill (Investopedia). Their indirect competitor is Taco Bell, whom is similar but competes at a much lower price point and uses lower grade ingredients. In order for Chipotle to run a successful company they can use “simple-complex framework” to deal with uncertainty in their external environment.
Simple-Complex Framework
According to the Simple-complex framework, Chipotle’s external environment is most likely “unstable” and complex”.
Unstable. Richard Daft explains unstable as follows, where “external elements change frequently and are unpredictable” (157). Although Chipotle's food chain brings an element of stability, but due to their tragic experience with the E. Coli breakout have caused them to lose customers. The breakout occurred at multiple locations in 11 different states (FDA). Causing Chipotle’s brand image to be tarnished severely. This element of loss trust makes Chipotle, as a business, very unstable because they don’t know whether it might happen again and if customers will return.
Complex. Richard Daft explains complex as follows, where there are a “large number of external elements that are dissimilar” (157). Chipotle’s supply chain may be simple but their contracts with their vendors and distributors are very complex. Since Chipotle has high demands of quality requirements it creates complexity in their external environment. Especially after the E. Coli breakout, there have been intensive investigations by the Federal Drug Administration (FDA) in order to discover the source of the outbreak. The cause of the outbreak is still unsettled, which brings about uncertainty because it could happen again.
External Environment Conclusion. Since Chipotle is unstable and complex, they are involved with “high uncertainty” in their external environment. Thus Chipotle requires extensive planning and need to respond to uncertainties at high-speeds. Therefore, food safety standards and procedures have intensified to decrease the likelihood of another incident with E. Coli.