Presented by:

Sundeep Bhatti, Poonam Kaur Billing, Jason Macwan,

Arjun Pisharody, Neha Randhawa, Charlene Tcheong

About Chipotle

About Chipotle

About Chipotle

About Chipotle
Business concept (business-level strategy)
Vision/Mission:
change the way people think about and eat fast food
High quality ingredients, classic cooking methods, affordable prices, distinctive interior design,
friendly employees
Food with integrity

1595+ store locations across US, Canada, France,

UK and Germany
2013 Revenues of $3.21B
17.7% increase over 2012

Chipotle Pursues Differentiation Strategy

Pursuing a differentiation strategy providing unique and superior value to
customers, for which they are willing to pay a premium given acceptable level of
cost
Credited with creating the fast-casual dining experience
Dimensions of differentiation:
BRAND: Brand image
PRODUCT QUALITY: Organic, sustainable, healthy food
SERVICE: Exceptional customer service

Industry Fast Facts

Industry definition: Fast-casual food business in North America

Fast-casual is positioned as fast food (convenience) but with focus on food quality & service
Trend to move away from fast-food consumption to fast-casual
Consumers becoming increasingly health conscious (reduced sugar, sodium)
Seeking sustainable options, Millennials love ethnic options (Mexican)

Profitability

Chipotle

Taco Bell

Qdoba

Industry

Net Profit Margin

0.104

0.083

0.034

0.078

ROE

0.240

0.489

0.108

0.255

ROA

0.186

0.125

0.038

0.086

ROIC

0.240

0.217

0.074

0.130

Chipotle has a competitive advantage!

General/Macro Environment
Demographic: Aging population.
Sociocultural: Trend towards healthy, sustainable food (avoidance of
sugar, sodium, trans fats).
Technological: Increased social marketing campaigns via social media
(good health, good earth).
Political/legal: Increased food safety regulations in North America.
Changing government regulations when considering foreign operations.
Macroeconomic: Increasing labour costs.
Global environment: Sustainable development, natural resource and
energy conservation, carbon footprint reduction.

Porters 5 Forces Fast-casual food in N.A.

Brand loyalty
increases
switching costs
Differentiated
taste and
quality
Low relative
concentration
of organic
suppliers
(differentiated)

Power of
Buyers
Moderate

Power of
Suppliers
High

Threat from
Rivalry
High
Numerous competitors
Competition based on
price, quality, service

High threats are sources of competition that destroy profitability

Low potential for profit unattractive industry

Threat of
New Entrants
High

Threat of
Substitutes
High

Relative low
capital reqts
Low barriers to
entry
No expected
retaliation
Many other
products with
similar price
/performance
trade-offs
Similar function
limits prices

Chipotle SWOT
Strengths

Weaknesses

High quality food made with ingredients from

sustainable sources
Marketing programs
Fast growth (revenue, expansion)

High food costs

Limited menu items
Upward pressure on labour
costs

Opportunities

Threats

International expansion
Growing foodservice market

Intense competition
Increasing labour costs
Increase food safety regulations

Value Chain

SUPERIOR

SUPERIOR

SUPERIOR

Sustainable Competitive Advantage - VRIO

Value
Chain
Activity

Core Competence
/ Activity

Superior value
(premium) or low
cost?

Valuable?

Rare?

Costly to
imitate?

Organized to
be exploited?

YES

YES

YES

YES

YES

YES

YES

YES

Primary

Inbound logistics

Primary

Operations

Primary

Sales & Marketing

YES

YES

YES

YES

Procurement

YES

YES

YES

YES

YES

YES

YES

YES

Secondary

premium

cost

Secondary

Human Resource
Management

Effective Leadership
Steve Ells, Chairman and co-CEO
Ells is founder of Chipotle
Classically trained chef who once held aspirations of
opening a fine-dining restaurant
Well-known face among Chipotle employees due to
store visits conducted

Montgomery F. Moran, co-CEO

High school friend of Ells
Previously worked as a lawyer before joining Chipotle as
COO and then co-CEO
Instrumental in establishing the Restaurateur program

Common Career Path

Montgomery F. Moran established the 13
characteristics essential to Chipotles career
advancement:

conscientious
respectful
hospitable
high energy
infectiously enthusiastic
happy

presentable
smart
polite
motivated
ambitious
curious
honest

The career path can seem like many steps, but

qualified candidates can excel through in a rapid

manner

Behavioural Control Mechanisms

RULES
o Chipotles only steadfast rule is to work hard to try to change the
way people think about and eat fast food
REWARDS
o Employees are encouraged with financial incentives in the form of
cash bonuses and stock options to progress through the ranks to
reach the significant goal of Restaurateur, with 98% of new roles
being filled with internal promotions
CULTURE
o Employees wholeheartedly embrace the concept of Food with
Integrity, internalizing the values associated with the company and
operating to the high standards set forth by management

Recommendations
Be prepared to tackle food ingredients price volatility:

o Purchase options & futures in addition to forward price contracts to ensure

pricing over time
o Hedge against food price fluctuations to mitigate this risk

Be prepared to address upward pressures of labour costs by strengthening reward

mechanisms to compensate for lower wage levels
enforce culture throughout the firm - appoint a Chief Culture Officer
Celebrate a Chipotle Culture Day to reinforce group identity and pride

Thank you!
Any questions?