Based on various researches at Oak Spring University , Chipotle Mexican Grill is operating in a macro-environment that has been destablized by – technology disruption, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , wage bills are increasing, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China,
increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Chipotle Mexican Grill
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Chipotle Mexican Grill can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Chipotle Mexican Grill, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Chipotle Mexican 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 can be done for the following purposes –
1. Strategic planning of Chipotle Mexican Grill
2. Improving business portfolio management of Chipotle Mexican Grill
3. Assessing feasibility of the new initiative in United States
4. Making a Restaurants sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Chipotle Mexican Grill
Strengths of Chipotle Mexican Grill | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Chipotle Mexican Grill are -
Training and development
– Chipotle Mexican Grill has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Analytics focus
– Chipotle Mexican 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 Restaurants industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to recruit top talent
– Chipotle Mexican Grill is one of the leading players in the Restaurants industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Chipotle Mexican Grill has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Chipotle Mexican 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.
Innovation driven organization
– Chipotle Mexican Grill is one of the most innovative firm in Restaurants sector.
Highly skilled collaborators
– Chipotle Mexican Grill has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Restaurants industry. Secondly the value chain collaborators of Chipotle Mexican Grill have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Chipotle Mexican 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 Mexican Grill is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Chipotle Mexican Grill emphasize – knowledge, initiative, and innovation.
High brand equity
– Chipotle Mexican Grill has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Chipotle Mexican Grill to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Chipotle Mexican Grill are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Restaurants industry
- digital transformation varies from industry to industry. For Chipotle Mexican Grill digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Chipotle Mexican Grill has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Strong track record of project management in the Restaurants industry
– Chipotle Mexican 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.
Superior customer experience
– The customer experience strategy of Chipotle Mexican Grill in Restaurants industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Chipotle Mexican Grill | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Chipotle Mexican Grill are -
No frontier risks strategy
– From the 10K / annual statement of Chipotle Mexican Grill, it seems that company is thinking out the frontier risks that can impact Restaurants industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High cash cycle compare to competitors
Chipotle Mexican Grill has a high cash cycle compare to other players in the Restaurants industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Chipotle Mexican 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Chipotle Mexican Grill is slow explore the new channels of communication. These new channels of communication can help Chipotle Mexican Grill to provide better information regarding Restaurants products and services. It can also build an online community to further reach out to potential customers.
Employees’ less understanding of Chipotle Mexican Grill strategy
– From the outside it seems that the employees of Chipotle Mexican 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.
Aligning sales with marketing
– From the outside it seems that Chipotle Mexican Grill needs to have more collaboration between its sales team and marketing team. Sales professionals in the Restaurants industry have deep experience in developing customer relationships. Marketing department at Chipotle Mexican Grill can leverage the sales team experience to cultivate customer relationships as Chipotle Mexican Grill is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of Chipotle Mexican Grill is just above the Restaurants industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Capital Spending Reduction
– Even during the low interest decade, Chipotle Mexican Grill has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Restaurants industry using digital technology.
High operating costs
– Compare to the competitors, Chipotle Mexican Grill has high operating costs in the Restaurants industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Chipotle Mexican Grill lucrative customers.
Slow to strategic competitive environment developments
– As Chipotle Mexican Grill is one of the leading players in the Restaurants industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Restaurants industry in last five years.
Products dominated business model
– Even though Chipotle Mexican Grill has some of the most successful models in the Restaurants industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Chipotle Mexican Grill should strive to include more intangible value offerings along with its core products and services.
Chipotle Mexican Grill Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Chipotle Mexican Grill are -
Using analytics as competitive advantage
– Chipotle Mexican Grill has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Restaurants sector. This continuous investment in analytics has enabled Chipotle Mexican Grill to build a competitive advantage using analytics. The analytics driven competitive advantage can help Chipotle Mexican Grill to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Chipotle Mexican Grill can improve the customer journey of consumers in the Restaurants industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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 Mexican Grill can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Chipotle Mexican Grill in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Restaurants industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– Chipotle Mexican Grill can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Chipotle Mexican Grill can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Chipotle Mexican 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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Chipotle Mexican Grill to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Low interest rates
– Even though inflation is raising its head in most developed economies, Chipotle Mexican 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.
Manufacturing automation
– Chipotle Mexican Grill can use the latest technology developments to improve its manufacturing and designing process in Restaurants sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Better consumer reach
– The expansion of the 5G network will help Chipotle Mexican Grill to increase its market reach. Chipotle Mexican Grill will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Use of Bitcoin and other crypto currencies for transactions in Restaurants industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Chipotle Mexican Grill in the Restaurants industry. Now Chipotle Mexican Grill can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Restaurants industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Chipotle Mexican 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 Mexican 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 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Chipotle Mexican Grill are -
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.
Technology acceleration in Forth Industrial Revolution
– Chipotle Mexican Grill has witnessed rapid integration of technology during Covid-19 in the Restaurants industry. As one of the leading players in the industry, Chipotle Mexican Grill needs to keep up with the evolution of technology in the Restaurants sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Stagnating economy with rate increase
– Chipotle Mexican Grill can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Restaurants industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Chipotle Mexican 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 Chipotle Mexican Grill prominent markets.
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 Mexican Grill.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Restaurants industry are lowering. It can presents Chipotle Mexican Grill with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Restaurants sector.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Chipotle Mexican Grill needs to understand the core reasons impacting the Restaurants industry. This will help it in building a better workplace.
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 Mexican Grill business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Chipotle Mexican Grill needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Chipotle Mexican Grill can take advantage of this fund but it will also bring new competitors in the Restaurants industry.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Chipotle Mexican Grill will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Chipotle Mexican 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 Restaurants sector.
Regulatory challenges
– Chipotle Mexican 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 Restaurants industry regulations.
Weighted SWOT Analysis of Chipotle Mexican Grill Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Chipotle Mexican Grill 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 Chipotle Mexican Grill 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 Chipotle Mexican Grill 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 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 Mexican Grill needs to make to build a sustainable competitive advantage.