Case Study Description of Chipotle Mexican Grill: Food with Integrity?
By any measure, Chipotle Mexican Grill was a success story in the restaurant business. It grew from one location in 1993 to over 2,000 locations by 2016 and essentially created the fast casual dining category. Its stock appreciated more than 1,000% in the ten years following its 2006 IPO. However, after more than 20 years without a major reported food safety incident, Chipotle was revealed as the source of multiple outbreaks of illness from norovirus, salmonella, and E. coli that sickened nearly 600 people in 13 states in 2015. The company closed stores, spent several months under investigation by the U.S. Centers for Disease Control and Prevention (CDC) and other health organizations, and faced a criminal investigation in connection with the incidents. After a much-publicized closing of all of its stores on February 8, 2016, and numerous changes to its food sourcing and preparation practices, Chipotle tried to win back customers with dramatically increased advertising and free food promotions. However, on April 26, the chain announced its first-ever quarterly loss as a public company. Same-store sales for the first quarter were 29.7% lower than in the previous year. Operating margins fell from 27.5% to 6.8% over the same period, and the company's share price was down 41% from its summer 2015 high.
Authors :: Russell Walker, Greg Merkley
Topics :: Sales & Marketing
Tags :: Competitive strategy, Crisis management, Public relations, Risk management, Social responsibility, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis
Swot Analysis of "Chipotle Mexican Grill: Food with Integrity?" written by Russell Walker, Greg Merkley includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Chipotle Grill facing as an external strategic factors. Some of the topics covered in Chipotle Mexican Grill: Food with Integrity? case study are - Strategic Management Strategies, Competitive strategy, Crisis management, Public relations, Risk management, Social responsibility and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Chipotle Mexican Grill: Food with Integrity? casestudy better are - – increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, there is increasing trade war between United States & China, increasing transportation and logistics costs, technology disruption,
increasing energy prices, geopolitical disruptions, etc
Introduction to SWOT Analysis of Chipotle Mexican Grill: Food with Integrity?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Chipotle Mexican Grill: Food with Integrity? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Chipotle Grill, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Chipotle Grill operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Chipotle Mexican Grill: Food with Integrity? can be done for the following purposes –
1. Strategic planning using facts provided in Chipotle Mexican Grill: Food with Integrity? case study
2. Improving business portfolio management of Chipotle Grill
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Chipotle Grill
Strengths Chipotle Mexican Grill: Food with Integrity? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Chipotle Grill in Chipotle Mexican Grill: Food with Integrity? Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Chipotle Grill in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Chipotle Grill has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Chipotle Grill has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Ability to lead change in Sales & Marketing field
– Chipotle Grill is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Chipotle Grill in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Chipotle Grill has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Chipotle Mexican Grill: Food with Integrity? Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Analytics focus
– Chipotle Grill is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Russell Walker, Greg Merkley can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Chipotle Grill has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Learning organization
- Chipotle Grill is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Chipotle Grill is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Chipotle Mexican Grill: Food with Integrity? Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Chipotle Grill is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Chipotle Mexican Grill: Food with Integrity? Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High brand equity
– Chipotle Grill has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Chipotle Grill to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Chipotle Grill is present in almost all the verticals within the industry. This has provided firm in Chipotle Mexican Grill: Food with Integrity? case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Innovation driven organization
– Chipotle Grill is one of the most innovative firm in sector. Manager in Chipotle Mexican Grill: Food with Integrity? Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Chipotle Mexican Grill: Food with Integrity? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Chipotle Mexican Grill: Food with Integrity? are -
Interest costs
– Compare to the competition, Chipotle Grill has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Chipotle Grill supply chain. Even after few cautionary changes mentioned in the HBR case study - Chipotle Mexican Grill: Food with Integrity?, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Chipotle Grill vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study Chipotle Mexican Grill: Food with Integrity? has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Chipotle Grill 's lucrative customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Chipotle Mexican Grill: Food with Integrity?, it seems that the employees of Chipotle Grill don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Low market penetration in new markets
– Outside its home market of Chipotle Grill, firm in the HBR case study Chipotle Mexican Grill: Food with Integrity? needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Chipotle Grill is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Chipotle Mexican Grill: Food with Integrity? can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Chipotle Grill needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Chipotle Mexican Grill: Food with Integrity?, in the dynamic environment Chipotle Grill has struggled to respond to the nimble upstart competition. Chipotle Grill has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Chipotle Grill is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Chipotle Grill needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Chipotle Grill to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Chipotle Grill has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow to strategic competitive environment developments
– As Chipotle Mexican Grill: Food with Integrity? HBR case study mentions - Chipotle Grill takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities Chipotle Mexican Grill: Food with Integrity? | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Chipotle Mexican Grill: Food with Integrity? are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Chipotle Grill can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Chipotle Grill to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Chipotle Grill in the consumer business. Now Chipotle Grill can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Chipotle Grill is facing challenges because of the dominance of functional experts in the organization. Chipotle Mexican Grill: Food with Integrity? case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Chipotle Grill has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Chipotle Mexican Grill: Food with Integrity? - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Chipotle Grill to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Chipotle Grill can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Creating value in data economy
– The success of analytics program of Chipotle Grill has opened avenues for new revenue streams for the organization in the industry. This can help Chipotle Grill to build a more holistic ecosystem as suggested in the Chipotle Mexican Grill: Food with Integrity? case study. Chipotle Grill can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Chipotle Grill can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Chipotle Mexican Grill: Food with Integrity?, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Chipotle Grill can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Loyalty marketing
– Chipotle Grill has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Chipotle Grill can use these opportunities to build new business models that can help the communities that Chipotle Grill operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Chipotle Grill can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Chipotle Grill can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Chipotle Grill can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Chipotle Mexican Grill: Food with Integrity? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Chipotle Mexican Grill: Food with Integrity? are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Chipotle Grill with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Chipotle Grill in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Chipotle Grill business can come under increasing regulations regarding data privacy, data security, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Chipotle Grill
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Chipotle Grill.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Chipotle Grill in the Sales & Marketing sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Chipotle Grill is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Chipotle Mexican Grill: Food with Integrity?, Chipotle Grill may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Regulatory challenges
– Chipotle Grill needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Chipotle Grill can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Chipotle Mexican Grill: Food with Integrity? .
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Chipotle Grill.
High dependence on third party suppliers
– Chipotle Grill high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Chipotle Grill can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Chipotle Mexican Grill: Food with Integrity? Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Chipotle Mexican Grill: Food with Integrity? needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Chipotle Mexican Grill: Food with Integrity? is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Chipotle Mexican Grill: Food with Integrity? is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Chipotle Mexican Grill: Food with Integrity? is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Chipotle Grill needs to make to build a sustainable competitive advantage.