Based on various researches at Oak Spring University , Chipotle Mexican Grill is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption,
there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, 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 -
Organizational Resilience of Chipotle Mexican Grill
– The covid-19 pandemic has put organizational resilience at the centre of everthing Chipotle Mexican Grill does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
Innovation driven organization
– Chipotle Mexican Grill is one of the most innovative firm in Restaurants sector.
Operational resilience
– The operational resilience strategy of Chipotle Mexican Grill comprises – understanding the underlying the factors in the Restaurants 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.
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.
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.
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.
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.
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.
Effective Research and Development (R&D)
– Chipotle Mexican Grill has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Chipotle Mexican Grill staying ahead in the Restaurants industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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 -
Slow decision making process
– As mentioned earlier in the report, Chipotle Mexican Grill has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Restaurants industry over the last five years. Chipotle Mexican Grill even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
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.
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.
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.
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.
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.
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.
Low market penetration in new markets
– Outside its home market of United States, Chipotle Mexican Grill needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Skills based hiring in Restaurants industry
– The stress on hiring functional specialists at Chipotle Mexican 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.
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 -
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 Mexican Grill can use these opportunities to build new business models that can help the communities that Chipotle Mexican Grill operates in. Secondly it can use opportunities from government spending in Restaurants sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Chipotle Mexican Grill to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Chipotle Mexican Grill to hire the very best people irrespective of their geographical location.
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.
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.
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.
Building a culture of innovation
– managers at Chipotle Mexican 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 Restaurants industry.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Restaurants industry, but it has also influenced the consumer preferences. Chipotle Mexican Grill can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Chipotle Mexican Grill has opened avenues for new revenue streams for the organization in Restaurants industry. This can help Chipotle Mexican Grill to build a more holistic ecosystem for Chipotle Mexican Grill products in the Restaurants industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Chipotle Mexican Grill is facing challenges because of the dominance of functional experts in the organization. Chipotle Mexican Grill can utilize new technology in the field of Restaurants industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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 -
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.
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.
High dependence on third party suppliers
– Chipotle Mexican 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.
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.
Consumer confidence and its impact on Chipotle Mexican Grill demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Restaurants industry and other sectors.
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.
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 Mexican Grill in the Restaurants sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Chipotle Mexican Grill in Restaurants industry. The Restaurants 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.
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.
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.
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.
Increasing wage structure of Chipotle Mexican 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 Mexican Grill.
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.