Chipotle Mexican Grill Swot Analysis
Chipotle Mexican Grill
Introduction
When Steve Ells decided to create a restaurant concept that combined the quick-serve experience with exceptional quality food, he didn’t know it would be an instant hit (Thompson, Peteraf, Gamble, & Strickland III, 2015). He was looking for a way to use his culinary training and restaurant experience to elevate the fast-food concept. This transformed the way people thought about fast-food. His concept centered on a focused menu serving only high-quality, fresh ingredients using traditional cooking methods and made-to-order preparation in a restaurant interior that was aesthetically pleasing but still prepared in under 2-3 minutes. And Chipotle Mexican Grill was born! Within six years of being open, Chipotle Mexican Grill went public on the New York Stock Exchange, doubling its stock price the first day (Thompson et al., 2015). Year after year, Chipotle has been able to grow revenue from $3.2 billion to $4.1 billion ("CHIPOTLE MEXICAN GRILL INC (CMG:New York): Financial Statements - BusinessWeek," n.d.). See Exhibit 2 for Chipotle’s Financial Statement. In 2011, Chipotle expanded their …show more content…
concept into the Asian and Italian cuisine by opening ShopHouse Asian Kitchen and Pizza Locale (Thompson et al., 2015). These restaurants developed from the same belief by Steve Ells that finding the very best sustainable ingredients, preparing and cooking, using classical methods in front of the customer, and having the food served in an interactive format by special peopled dedicated to providing exceptional dining experience could be adapted to other cuisines. Both restaurants have refined their menus and adapted to their markets but continue to serve on the freshest of sustainable ingredients and responsibly raised products. And both concepts have shown great potential to be just as successful as Chipotle (Thompson et al., 2015). Mission, Vision & Value
Chipotle Mexican Grill’s mission is to change the way people think about fast food. They strive to use high quality ingredients and traditional cooking techniques to make great tasting food at reasonable prices (Irving, 2014). Chipotle has remained true to this vision since 1993; however they recently refined it because being fresh isn’t simply not enough anymore (Chipotle, 2014). Three new concepts have been added to their vision, Food with Integrity:
• “Serving the very best sustainably-raised food possible with an eye to great taste, great nutrition, and great value.
• Support and sustain family farmers who respect the land and the animals in their care.
• Whenever possible we use meat from animals raised without the use of antibiotics or added hormones. (Chipotle, 2014)”
In order to see such a bold vision to fruition, Chipotle needs employees dedicated to their high standards and willing to go the extra step to research every ingredient. Chipotle has created quite a reputation for promoting from within and developing just such top performers (Chipotle, 2014).
Marketing
Chipotle Mexican Grill focuses their marketing on individuals aged 18-34 years old. This group in particular is known to understand and recognize the “Food with Integrity” philosophy. Chipotle uses a differentiation strategy of premium priced organic ingredients places them in direct competition with Qdoba, Panera Bread and Moe’s Southwest Grill. They all believe that customers are willing to pay slightly more for quality food and healthier options. This requires a great deal of attention to eating trends. In 2003, Chipotle incorporated the burrito bowl into their menu in response to the surging demand for “low carb” options; and two years later included fresh salads (Chipotle, 2014). With their flexibility and willingness to adapt to the current health trends has set Chipotle a part from their competitors and a leader in their industry.
Supply
Chipotle Mexican Grill has spent a great deal of time and money to develop relationships with their suppliers. There are currently 23 independently owned and operated regional distribution centers. Each of these centers works directly with suppliers that have been carefully vetted and are required to agree to maintain certain standards to remain a part of the Chipotle supply chain. There must be a clear understanding of the Chipotle mission and interest in a mutually beneficial long-term relationship. Chipotle has also developed a pricing strategy that alleviates pricing instability and possible supply shortages. Ingredient’s prices are forecasted by following “trade issues, weather, exchange rates, foreign demand, crises, and other world events” to ensure that Chipotle is well prepared for anything (Chipotle, 2014).
SWOT
Chipotle’s SWOT analysis reveals that there is a strong brand image and a loyal customer following among its strengths.
Chipotle capitalizes on this by word of mouth marketing. Chipotle released “The Scarecrow” video marketing campaign and associated mobile game targeting GMO companies. In less than two weeks after release, the video had attracted 3.1 million views on YouTube, 2,000 likes and more than 4,000 comments. This truly exhibits the strength of Chipotle’s viral marketing (Handley, 2013). Other strengths include the use of all-natural ingredients, higher salaries for managers and employees, and online ordering with delivery in certain areas. Chipotle certainly has areas of weakness in their menu options, authentic Mexican food, advertising, and availability of sustainable products. See exhibit 1 for the full SWOT
analysis.
PESTLE
When completing a PESTLE analysis, several factors were of potential concern for Chipotle. Politically, unless the FDA approves more intense regulations regarding the fast food industry, this is not much of an issue at this time since Chipotle relies on organic products. Economically, the economy impacts the profit of Chipotle. The fast food industry is volatile. Scarcity and inflation can impact the cost of food and require an adjustment to the menu pricing. The same could be said if the cost of ingredients drops, increasing profits. Other economic factors to consider are current employment levels, interest rates and price stability. Socioculturally, with the rise of health conscious trends, this is a positive for Chipotle and their healthier, organic, fast food options. This increases the likeliness that consumers will chose Chipotle over competitors like Qdoba or Moe’s. Technologically, Chipotle is faring well with online ordering and delivery, great social media presence and viral word of mouth advertising. However, Chipotle could benefit from looking into detail at technology options for improving supply chain management. On the ecological front, Chipotle is leading their industry. They are environmentally friendly that provide organic products to their consumers. Legally, Chipotle should be aware of FDA changes in fast food regulations to ensure they are compliant. This can also apply to FDA changes in supplier regulations or product restrictions that might harm supply.
Five Forces
Of Porter’s Five Forces, three are high when reviewing the case of Chipotle Mexican Grill; power of buyers, threat of substitutes, and rivalry. While buyers do not directly drive prices down, they do have the power to eat elsewhere which affect revenue and decreases profits. Consumers have many options available to them when choosing what to eat, so the threat of substitutions is high. This applies to eating at home as well as other restaurant options. The threat of entry and power of suppliers are moderate.
Key Strategies
Chipotle Mexican Grill is breaking the rules when it comes to casual fast food. Yet they remain successful and continue to grow as the leader in their industry (Chipotle, 2014). The following strategies should be considered to increase their competitive advantage.
Strategy 1
Seek out additional suppliers of ethically grown and raised products. This would also include strengthening relationships with current suppliers and defining long-term contracts. This would raise barriers to entry into Chipotle’s niche.
Strategy 2
Home delivery should be pursued in all major markets and expanded once perfected. Convenience of service offers one more barrier to competition. Their current rivals do not offer delivery to any market. Two-thirds of customers are taking food out of the store (Rainey, 2014). Meeting the consumer and delivering instead will benefit both the company and the consumer.
Strategy 3
Ramp up the introduction of the ShopHouse Southeast Asian Kitchen & Pizza Locale to thriving Chipotle markets and high traffic business districts. Utilizing the same product suppliers will ensure the same quality and brand known to Chipotle. The ShopHouse & Pizza Local ventures have already been proving successful. This process of expanding should be ramped up within the next five years, starting with the New York and Chicago areas. If Chipotle considers entering mall markets to increase their store count, this will allow for save money to be put towards expanding ShopHouse and Pizza Locale. If all goes well, this could be expanded into many other cuisines.
Strategy 4
Catering services should be pushed in all major markets. Delivery and offering servers at party events over 200 people adds to the Chipotle experience. Offering a free catering to a local business quarterly can also be great marketing without increasing marketing costs. This can be accomplished through word of mouth advertising. If revenue increases to 5%, Chipotle should expand into catering at conferences, reunions, and other large business meetings.
Strategy 5
Customer rewards are long overdue. Chipotle should offer a rewards program similar to Panera Breads. As each transaction is complete, points are added to a customer’s loyalty card to earn them free food or incentives to drive business back into the store. This can be tracked through a punch card, electronic card, iPhone application, online application or another method related to the order number form the consumer’s receipt.
Conclusion
Chipotle Mexican Grill’s implementation of the above strategic plans assumes that Chipotle will continue to increase revenue while opening more locations. These strategies will strengthen their brand loyalty, increase customer loyalty, and increase competitive advantage. Chipotle will be able to continue to develop and maintain exceptional supplier relationships, thereby offering exceptional organic ingredients catering to the health conscious consumer. This is exactly in line with Chipotle’s vision of “Food with Integrity (Chipotle, 2014)”. A part of this vision is making food enjoyable without exploiting farmers, animals or the environment. “With every burrito we roll or bowl we fill, we're working to cultivate a better world (Chipotle, n.d.).”
Introduction
When Steve Ells decided to create a restaurant concept that combined the quick-serve experience with exceptional quality food, he didn’t know it would be an instant hit (Thompson, Peteraf, Gamble, & Strickland III, 2015). He was looking for a way to use his culinary training and restaurant experience to elevate the fast-food concept. This transformed the way people thought about fast-food. His concept centered on a focused menu serving only high-quality, fresh ingredients using traditional cooking methods and made-to-order preparation in a restaurant interior that was aesthetically pleasing but still prepared in under 2-3 minutes. And Chipotle Mexican Grill was born! Within six years of being open, Chipotle Mexican Grill went public on the New York Stock Exchange, doubling its stock price the first day (Thompson et al., 2015). Year after year, Chipotle has been able to grow revenue from $3.2 billion to $4.1 billion ("CHIPOTLE MEXICAN GRILL INC (CMG:New York): Financial Statements - BusinessWeek," n.d.). See Exhibit 2 for Chipotle’s Financial Statement. In 2011, Chipotle expanded their …show more content…
concept into the Asian and Italian cuisine by opening ShopHouse Asian Kitchen and Pizza Locale (Thompson et al., 2015). These restaurants developed from the same belief by Steve Ells that finding the very best sustainable ingredients, preparing and cooking, using classical methods in front of the customer, and having the food served in an interactive format by special peopled dedicated to providing exceptional dining experience could be adapted to other cuisines. Both restaurants have refined their menus and adapted to their markets but continue to serve on the freshest of sustainable ingredients and responsibly raised products. And both concepts have shown great potential to be just as successful as Chipotle (Thompson et al., 2015). Mission, Vision & Value
Chipotle Mexican Grill’s mission is to change the way people think about fast food. They strive to use high quality ingredients and traditional cooking techniques to make great tasting food at reasonable prices (Irving, 2014). Chipotle has remained true to this vision since 1993; however they recently refined it because being fresh isn’t simply not enough anymore (Chipotle, 2014). Three new concepts have been added to their vision, Food with Integrity:
• “Serving the very best sustainably-raised food possible with an eye to great taste, great nutrition, and great value.
• Support and sustain family farmers who respect the land and the animals in their care.
• Whenever possible we use meat from animals raised without the use of antibiotics or added hormones. (Chipotle, 2014)”
In order to see such a bold vision to fruition, Chipotle needs employees dedicated to their high standards and willing to go the extra step to research every ingredient. Chipotle has created quite a reputation for promoting from within and developing just such top performers (Chipotle, 2014).
Marketing
Chipotle Mexican Grill focuses their marketing on individuals aged 18-34 years old. This group in particular is known to understand and recognize the “Food with Integrity” philosophy. Chipotle uses a differentiation strategy of premium priced organic ingredients places them in direct competition with Qdoba, Panera Bread and Moe’s Southwest Grill. They all believe that customers are willing to pay slightly more for quality food and healthier options. This requires a great deal of attention to eating trends. In 2003, Chipotle incorporated the burrito bowl into their menu in response to the surging demand for “low carb” options; and two years later included fresh salads (Chipotle, 2014). With their flexibility and willingness to adapt to the current health trends has set Chipotle a part from their competitors and a leader in their industry.
Supply
Chipotle Mexican Grill has spent a great deal of time and money to develop relationships with their suppliers. There are currently 23 independently owned and operated regional distribution centers. Each of these centers works directly with suppliers that have been carefully vetted and are required to agree to maintain certain standards to remain a part of the Chipotle supply chain. There must be a clear understanding of the Chipotle mission and interest in a mutually beneficial long-term relationship. Chipotle has also developed a pricing strategy that alleviates pricing instability and possible supply shortages. Ingredient’s prices are forecasted by following “trade issues, weather, exchange rates, foreign demand, crises, and other world events” to ensure that Chipotle is well prepared for anything (Chipotle, 2014).
SWOT
Chipotle’s SWOT analysis reveals that there is a strong brand image and a loyal customer following among its strengths.
Chipotle capitalizes on this by word of mouth marketing. Chipotle released “The Scarecrow” video marketing campaign and associated mobile game targeting GMO companies. In less than two weeks after release, the video had attracted 3.1 million views on YouTube, 2,000 likes and more than 4,000 comments. This truly exhibits the strength of Chipotle’s viral marketing (Handley, 2013). Other strengths include the use of all-natural ingredients, higher salaries for managers and employees, and online ordering with delivery in certain areas. Chipotle certainly has areas of weakness in their menu options, authentic Mexican food, advertising, and availability of sustainable products. See exhibit 1 for the full SWOT
analysis.
PESTLE
When completing a PESTLE analysis, several factors were of potential concern for Chipotle. Politically, unless the FDA approves more intense regulations regarding the fast food industry, this is not much of an issue at this time since Chipotle relies on organic products. Economically, the economy impacts the profit of Chipotle. The fast food industry is volatile. Scarcity and inflation can impact the cost of food and require an adjustment to the menu pricing. The same could be said if the cost of ingredients drops, increasing profits. Other economic factors to consider are current employment levels, interest rates and price stability. Socioculturally, with the rise of health conscious trends, this is a positive for Chipotle and their healthier, organic, fast food options. This increases the likeliness that consumers will chose Chipotle over competitors like Qdoba or Moe’s. Technologically, Chipotle is faring well with online ordering and delivery, great social media presence and viral word of mouth advertising. However, Chipotle could benefit from looking into detail at technology options for improving supply chain management. On the ecological front, Chipotle is leading their industry. They are environmentally friendly that provide organic products to their consumers. Legally, Chipotle should be aware of FDA changes in fast food regulations to ensure they are compliant. This can also apply to FDA changes in supplier regulations or product restrictions that might harm supply.
Five Forces
Of Porter’s Five Forces, three are high when reviewing the case of Chipotle Mexican Grill; power of buyers, threat of substitutes, and rivalry. While buyers do not directly drive prices down, they do have the power to eat elsewhere which affect revenue and decreases profits. Consumers have many options available to them when choosing what to eat, so the threat of substitutions is high. This applies to eating at home as well as other restaurant options. The threat of entry and power of suppliers are moderate.
Key Strategies
Chipotle Mexican Grill is breaking the rules when it comes to casual fast food. Yet they remain successful and continue to grow as the leader in their industry (Chipotle, 2014). The following strategies should be considered to increase their competitive advantage.
Strategy 1
Seek out additional suppliers of ethically grown and raised products. This would also include strengthening relationships with current suppliers and defining long-term contracts. This would raise barriers to entry into Chipotle’s niche.
Strategy 2
Home delivery should be pursued in all major markets and expanded once perfected. Convenience of service offers one more barrier to competition. Their current rivals do not offer delivery to any market. Two-thirds of customers are taking food out of the store (Rainey, 2014). Meeting the consumer and delivering instead will benefit both the company and the consumer.
Strategy 3
Ramp up the introduction of the ShopHouse Southeast Asian Kitchen & Pizza Locale to thriving Chipotle markets and high traffic business districts. Utilizing the same product suppliers will ensure the same quality and brand known to Chipotle. The ShopHouse & Pizza Local ventures have already been proving successful. This process of expanding should be ramped up within the next five years, starting with the New York and Chicago areas. If Chipotle considers entering mall markets to increase their store count, this will allow for save money to be put towards expanding ShopHouse and Pizza Locale. If all goes well, this could be expanded into many other cuisines.
Strategy 4
Catering services should be pushed in all major markets. Delivery and offering servers at party events over 200 people adds to the Chipotle experience. Offering a free catering to a local business quarterly can also be great marketing without increasing marketing costs. This can be accomplished through word of mouth advertising. If revenue increases to 5%, Chipotle should expand into catering at conferences, reunions, and other large business meetings.
Strategy 5
Customer rewards are long overdue. Chipotle should offer a rewards program similar to Panera Breads. As each transaction is complete, points are added to a customer’s loyalty card to earn them free food or incentives to drive business back into the store. This can be tracked through a punch card, electronic card, iPhone application, online application or another method related to the order number form the consumer’s receipt.
Conclusion
Chipotle Mexican Grill’s implementation of the above strategic plans assumes that Chipotle will continue to increase revenue while opening more locations. These strategies will strengthen their brand loyalty, increase customer loyalty, and increase competitive advantage. Chipotle will be able to continue to develop and maintain exceptional supplier relationships, thereby offering exceptional organic ingredients catering to the health conscious consumer. This is exactly in line with Chipotle’s vision of “Food with Integrity (Chipotle, 2014)”. A part of this vision is making food enjoyable without exploiting farmers, animals or the environment. “With every burrito we roll or bowl we fill, we're working to cultivate a better world (Chipotle, n.d.).”