Chipotle Mexican Grill
Chipotle Mexican Grill Restaurant Case Analysis
Problem statement: In order to secure and promote Chipotle’s market share in the restaurant industry, kate is in the position of seeking competitive strategies with feasible implementations.
Analysis:
* External Environment: 1. General environment: Having global economic downturn, most of the businesses performed declining. 2. Industry environment: However, QSR outperformed and even expanded in USA. Obviously, consumers are heading for lower costs but higher quality dining which entail somewhat ethnic cuisine choices. 3. Competitor environment: Although ranked as fastest growing US restaurant chains, Chipotle’s market share in restaurant is quite slight. Moreover, the business
model is not costly to imitate, any existing or new entrants could be a threat for Chipotle’s success in gaining above average returns.
* Internal Environment: 1. Steve Ells, founder of Chipotle, embraces a very “hands-on” corporate culture and great concept. 2. Per restaurant sales are growing; Investors expect the company to expand. 3. The company’s current growth strategy is focussed on slower approach which ensures quality, management, and operation level. 4. Employee morale and internal control system is boosted with their “hire from within” program. 5. Chipotle would rather use its own cash flow to finance growth as opposed to debt or franchising. 6. Mexican cuisine not as popular overseas though this could change with globalization
Strategic Alternatives with Pro’s and Con’s: leverage Chipotle’s unique bundle of resources and capabilities to reduce potential risk and achieve better marketplace opportunities. A. Conservative Managements: maintain/ continue what is doing now for one to three years. a) Continue to use cash to finance growth; limits risk b) Maintain a focus on quality rather than quantity with regards to opening new locations. c) Compensates investors for limited growth with generous dividends. d) Consistent with corporate culture that appears to be working as evidenced by per store sales. * No competitive advantage is permanent or guaranteed. B. Aggressive Managements 1. Supply Chains Acquisition: ensure quality and price in organic food supplies. 2. Increasing The Expanding Speed in US: market Mexican food to new consumers 3. Merging Global Markets: such as Europe, China and Taiwan 4. High leverage of debt, equity investments to fund growth 5. Do not pay dividends, as investors will expect to be compensated in the form of share growth * Not consistent with corporate culture and imply considerable risks. C. Moderate management (Recommended) 6. Product Innovation: develop more “taste” in choices and even cross culture recipes. 7. Expanding in Canada major metropolitans: similar geographic zone/culture, less risk and expenses. 8. Do not change main restaurant concept; however, in high-density city neighborhoods, add breakfast / delivery /drive-through services. 9. Use a mixture of debt, equity, and cash to fund growth. * Implementation: with associated timeline and costs for each project.
Problem statement: In order to secure and promote Chipotle’s market share in the restaurant industry, kate is in the position of seeking competitive strategies with feasible implementations.
Analysis:
* External Environment: 1. General environment: Having global economic downturn, most of the businesses performed declining. 2. Industry environment: However, QSR outperformed and even expanded in USA. Obviously, consumers are heading for lower costs but higher quality dining which entail somewhat ethnic cuisine choices. 3. Competitor environment: Although ranked as fastest growing US restaurant chains, Chipotle’s market share in restaurant is quite slight. Moreover, the business
model is not costly to imitate, any existing or new entrants could be a threat for Chipotle’s success in gaining above average returns.
* Internal Environment: 1. Steve Ells, founder of Chipotle, embraces a very “hands-on” corporate culture and great concept. 2. Per restaurant sales are growing; Investors expect the company to expand. 3. The company’s current growth strategy is focussed on slower approach which ensures quality, management, and operation level. 4. Employee morale and internal control system is boosted with their “hire from within” program. 5. Chipotle would rather use its own cash flow to finance growth as opposed to debt or franchising. 6. Mexican cuisine not as popular overseas though this could change with globalization
Strategic Alternatives with Pro’s and Con’s: leverage Chipotle’s unique bundle of resources and capabilities to reduce potential risk and achieve better marketplace opportunities. A. Conservative Managements: maintain/ continue what is doing now for one to three years. a) Continue to use cash to finance growth; limits risk b) Maintain a focus on quality rather than quantity with regards to opening new locations. c) Compensates investors for limited growth with generous dividends. d) Consistent with corporate culture that appears to be working as evidenced by per store sales. * No competitive advantage is permanent or guaranteed. B. Aggressive Managements 1. Supply Chains Acquisition: ensure quality and price in organic food supplies. 2. Increasing The Expanding Speed in US: market Mexican food to new consumers 3. Merging Global Markets: such as Europe, China and Taiwan 4. High leverage of debt, equity investments to fund growth 5. Do not pay dividends, as investors will expect to be compensated in the form of share growth * Not consistent with corporate culture and imply considerable risks. C. Moderate management (Recommended) 6. Product Innovation: develop more “taste” in choices and even cross culture recipes. 7. Expanding in Canada major metropolitans: similar geographic zone/culture, less risk and expenses. 8. Do not change main restaurant concept; however, in high-density city neighborhoods, add breakfast / delivery /drive-through services. 9. Use a mixture of debt, equity, and cash to fund growth. * Implementation: with associated timeline and costs for each project.