GE Group5 ChipotleMexicanGril Report Final

Strategic Management
Case 7
Chipotle Mexican Grill, Inc
34º EDITION (May 2018)
Group Nr. 5
Gustavo Dantas (23711)

Isabel Ferreira (24157)
Liu Da (23696)
Luis Vaz (24155)
Marta Bento (23559)
Ricardo Araújo (24469)
Index
Introduction 4
Current Situation 4
Mission 4
Vision 4
Objectives 5
Strategies 5
Policies 5
Corporate Governance 6
Board of Directors 6
Top Management 6
External Factor Analysis 7
Natural Environment - sustainability issue 7
Societal Environment 7
Economic 7
Technological 7
Polical-legal 7
Sociocultural 7
Differences in other regions of the world 7
Task Environment 8
External Factor Analysis Summary (EFAS) 9
Internal Factor Analysis 10
Corporate Structure 10
Business Model 10
Corporate Culture 10
Corporate Resources 10
Marketing 11
Financial Operations 11
Operations and Logistics 15
Operations objectives, strategies, policies, and programs: 15
Research and Development 16
Competitive Analysis 16
Human Resources 16
Information Technology 17
Internal Factor Analysis Summary (IFAS) 18
Strategic Factor Analysis 19
SWOT Analysis 19
Strengths Opportunities Strategies 19
Weaknesses Opportunities Strategies 20
Strengths Threats Strategies 20
Weaknesses Threats Strategies 20
Strategic Factor Analysis Summary (SFAS) 21
Review of Current Mission and Objectives 22
Alternatives and Recommendations 23
Strategic Alternatives (Advantages and Disadvantages) 23
Recommended Strategy 24
Conclusions 25
Annexes 26
Glossary 29
Bibliography 29
2
Group 5 Case 7 - Chipotle Mexican Grill, Inc
Institutional 29
Media 29
3
Introduction
Chipotle Mexican Grill (Chipotle or GMC) is a restaurant chain in the fast-casual sector,
focusing on food service sourced from sustainable farming practices. The company only uses
meat that is sustainable raised, in human way without antibiotics or hormones, or vegetables
from high quality that are sourced from farms that does not use transgenic crop. Chipotle
includes in their menu burritos, tacos, bowls and salads. And includes four different kinds of
meat, and even tofu as source of protein, two types of beans and great variety of extras making
more than 65.000 thousand combinations. The company operates more than 1,700 fully own
operated in 44 USA states, plus Canada, United Kingdom, France and Germany.
Current Situation
2013 fiscal year, Chipotle made U$3.2bn in revenue and net income was U$327m.
Revenue and net income had a big increase by 18% compared from 2012. The results were
manly driven by opening new stores leading more sales and increased on already opened stores.
Moreover, this sustainable growth was the result of return from customer visits, new menu
items and price increases. Comparing five-year growth rate Chipotle and industry average grow
shows how well the company is going. Chipotle average growth was 19.86% against 0.81%.
Chipotle drive financial strategies are simple:
● No long-term debt
● Grow organically, growth funded by retained earnings
● Maintain an operating margin of at least 10%
● Exceed organic growth of occupant safety market
To understand strength from Chipotle business, comparing to industry competitors and
S&P 500 index, Chipotle outperformed 6 times industry revenue growth rate and 12 times
higher than S&P 500 index.
Mission
Chipotle mission is a very simple and direct one “Food with integrity”. Chipotle wants to
prove they can sell high quality ingredients in sustainable and integrity way.
“Chipotle’s mission is to change the way people think about and eat fast food.”
From Chipotle Website:

“At Chipotle, we aim to do a few things but do them exceptionally well. When Chipotle
first opened its doors in 1993, the goal was simple: to serve high quality, delicious food quickly
with an experience that not only exceeded, but also redefined the fast food experience. To that
end, we focus on sourcing the best possible ingredients, serving the tastiest food, and growing
the most capable team, we can. Good food IS good business. (Chipotle Mexican Grill)”
Vision
“Its vision was to serve delicious food made with fresh ingredients from sustainable
resources and sell it for a reasonable price.”
4
Objectives
Chipotle objectives was to sell food that was environmentally safe produced and
responsibility to slaughtered animals for meats, so they can build company reputation that they
were not only showing themselves as sustainable corporate but really are a sustainable
company. Knowing their suppliers and visiting their operations is important to understand the
environmental impact of their business.
Strategies
Chipotle has four main strategies for it business: Backward integration, market
penetration, development, and diversification.
The mutually beneficial relationship with their supplier created a vertical integration in a
backward direction. This ensure them adequate suppliers while farmers can depend on
guarantee sales for their product.
Chipotle has an average on 180 opening stores per year and it shows the strategy of
their market penetration strategy, sustained by their healthy revenue increase. Using
propaganda to educate their public about food processing has also been an effective method of
converting traditional fast-food customers to Chipotle enthusiasts.
Another strategy is market growth, especially in international markets. Chipotle has
restaurants in Canada (7), England (6), France (2) and Germany (1). These international locations
have had limited success due to poor brand recognition.
Chipotle also develop a diversification strategy opening two different concepts: a
Southeast Asian Kitchen restaurant called ShopHouse, and a fast casual pizza restaurant called
Pizzeria Locale. The company uses Chipotle principles and practices to serve different cuisines,
therefore expanding the product offerings while maintaining its core competencies.
Policies
Sustainability is not only marketing, but also a value that permeates the business.
Chipotle encourages the employees to excel their work and compensate higher than industry
norms, amplifying not only the integrity with environment and customer but also to employees.
To keep control under quality, Chipotle does not use franchising as a method to expand
their business differentiating themselves against Mexican casual food.
5
Corporate Governance
Board of Directors
The Board of Directors consists of the following members:
Internal
● Steve Ells, Chairman and co-CEO
● Montgomery F. Moran, Co-CEO Patrick J. Flynn, Director
External:
Neil W. Flanzraich, Lead Patrick J. Flynn, Darlene J. Friedman, Director
Director Director
Albert S. Baldocchi, Director Kimbal Musk, Director John S. Charlesworth,

Director
Together, the board has corporate executive experience, legal expertise, multi-unit
restaurant management, investment and international business backgrounds. There are three
formal committees charged with specific functions: The Audit Committee, which oversees
financial and legal affairs; the Compensation Committee, which recommends financial
compensation for the company’s executive officers and non-employee directors; and the
Nominating and Corporate Governance Committee, which recommends issues related to
corporate governance and new board members.
The Board selects the Chief Executive Officers who are in charge with overall
responsibility for managing Chipotle. The primary function of the Board is oversight company
performance– ensuring standards are on level of the interests of shareholders. Responsibilities
for Board include evaluating management performance, reviewing strategic plans and
objectives, providing advice and counsel to management, assisting in compliance with
applicable laws and regulations, appointing the members and overseeing duties of the
committees, establishing board and executive compensation packages, and evaluating the
overall effectiveness of itself.
Top Management
Top Management consists of four people, each with a different skill set and background.
Steve Ells, Chairman and Co-Chief Executive Officer, has the culinary expertise as well as the
drive to make Chipotle a socially responsible company. Montgomery F. Moran, Co-Chief
Executive Officer, has a law degree and is experienced with operations. John R. Hartung, Chief
Financial Officer, came from McDonald’s where he held various management positions on the
finance side. Finally, Mark Crumpacker, Chief Marketing and Development Officer, comes from a
background of strategic design and marketing consulting. Aside from Ells, the founder, the
others have been with the company for nine, 12, and 5 years, respectively.
Chipotle has a well-developed, systematic growth strategy. As the leader in the fast-
casual segment, the company has differentiated itself as a higher quality, ethical alternative to
its competitors. The growth strategy is undertaken by all business divisions, and clearly stated in
various company publications.
6
External Factor Analysis
Natural Environment - sustainability issue
We must consider that the natural environment because the suppliers mainly are
farmers. The material of food is good or not depends on weather a lot. If weather is bad, the
cost of food will increase a lot.
Societal Environment
Economic
Chipotle on one side considers the high level customers which pay more attention to
quality, and also should cover the low-end price points of the full-service market. About the
background, the fast-casual restaurants strengthened from 4 percent growth in sales in 2009 to
9 percent growth in sales in 2012 and 8 percent in 2013.
Fluctuations in the commodities market could cut profits. Food truck sales got 5 billion
in 2013, $5 billion because of the convenience level increased a lot.
Technological
The technological things can be changed to suit the modern payment system, such as
barcode, it can attract more young generation and saving the cost of human resources. The
more important is using new technology could help to collect the big data and know their
customer better.
Polical-legal
In 2009, Steve Ells testified before Congress to try to eliminate antibiotics completely
from farming. By 2007, all of the beef served in Chipotle restaurants was naturally raised. All
pork and chicken products were also naturally raised by 2010 and 2014, respectfully. In 2007, 40
percent of its black beans were organically grown (O/T).
Sociocultural
Chipotle use of organically grown beans, refusing to use genetically modified corn,
sourcing lettuce from local farms during the growing season, etc.
Differences in other regions of the world
Different markets have different needs. Organically grown ingredients and health-
conscious food options are not as important to all regions in the world. Improved technology
systems are also not available in all areas in the world.
7
Task Environment
Threat of new entrants (moderate)
In recent years, double-digit revenue growth created a high threat of new entrants in
the market. By 2014, the fast-casual market was increasingly competitive and crowded with
many new entrants. However, the fast, casual segment has begun to reach saturation and the
industry life cycle has moved from a high growth phase towards maturity.
Chipotle thinks the customers will accept to pay a little more to high quality and bio
food. But the price will lead some questions.
Bargaining power of buyers (moderate)
Customers were willing to pay higher prices for better quality food from sustainable
sources. However, the product was very easy to imitate and the switching cost of going to a
competitor or substitute is very low.
Threat of substitute products or services (high)
The biggest substitution threat is supermarkets because they offer a wide variety of
options, such as prepared meals and frozen food at lower prices.
Bargaining power of suppliers (moderate)
Chipotle’s restaurants are company-owned and supplied by independently owned and

operated distribution centers, whose suppliers are assessed based on the quality of their
product and alignment with Chipotle’s mission.
In 2008, Chipotle sought to increase local sourcing to 35 percent in order to cut down on
fossil fuel consumption in produce transportation, support local farms, and use ingredients
during their peak season in order to improve the taste of the food.
Chipotle uses more local suppliers than competitors, which allows for a higher quality
product at a comparable price.
Rivalry among competing firms (High)
The competitors include Taco Bell, Qdoba Mexican Grill, Panda Restaurant Group,
Panera Bread Co., Baja Fresh Mexican Grill, El Pollo Loco Holdings, Inc., Panchero’s Franchise
Corporation, Moe’s Southwest Grill, Olive Garden, Boloco, Red Lobster, and food trucks.
Relative power of unions, governments, special interest groups, etc. (Moderate):
● Potential for store stuffs to form a union and demand for higher wages, thus
affecting Chipotle’s costs.
● Potential for U.S. government to require that antibiotics be completely removed
from farming.
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External Factor Analysis Summary (EFAS)
1 2 3 4 6
Weighted
Weight Rating Comments
External Factors Score
Opportunities
O1 Continued Fast-Casual Sector CMG is transforming this
0.15 5 0.75
Growth area.
Taking big advantage
O2 Growing health trends among 0.15 5 0.75 from the people
consumers awareness
Using these to make
O3 Growth of organic food 0.1 4 0.4 great network of
ingredients suppliers
O4 Technological advances for Mobile payments and big
0.07 3 0.21
ordering food data
Once again, able to read
0.07 3 0.21 the market needs and
O5 Home delivery wants
Threats
Even here, their
T1 Insufficient sustainable suppliers 0.15 4 0.6 communication was
to cover demand transparent
T2 Loss of trust if “Integrity” Communite clear the
0.07 2 0.14
message is violated plan and path ahead
Taking advatage of
0.08 4 0.32
T3 Rising food prices trends
CMG business model; “a
T4 Changes in consumer tastes and 0.09 3 0.27 few things a thousand
preferences times”
T5 Impact of inclement weather and Using the best
0.07 3 0.21
natural disasters technology offered
TOTALs 1 3.86
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Internal Factor Analysis
However, for the organization to thrive, the senior leadership team must look within the
firm itself to identify internal strategic factors—critical strengths and weaknesses that are likely
to determine whether a firm will be able to take advantage of opportunities while avoiding
threats. This internal scanning, often referred to as organizational analysis, is concerned with
identifying, developing, and taking advantage of an organization’s resources and competencies.
Lets now look for the Resourses and Capabilities shown in the Case related to CMG firm.
Corporate Structure
Business Model
Business model was “a few things a thousand ways.”, redefining “Fast Food”. Its menu
was designed to offer a relatively limited number of menu items (burritos, burrito bowls, tacos,
and salads), but with a large variety of extras such as beans, salads, and guacamole such that
through extensive recombination of ingredients, customers could create unique and exciting
food selections each time they visited, enhancing their overall Chipotle experience.
Operations and restaurants managed based on seven regions. (S)

Focus on identifying, hiring, and empowering top performing employees: (S)
1. 85% of salaried management and about 96 percent of hourly management
internally promoted
2. General managers promoted to “Restaurateur”
a. Mentoring system
b. Can be further promoted to “apprentice team leader”
3. Field support system that includes apprentice team leaders, team leaders or
area managers, team directors, executive team directors or regional directors,
and restaurant support officers. (S)
Corporate Culture
“Food with Integrity:” (S)

- Supply chain and corporate culture closely integrated.
Socially responsible: (S)
- Helping make the world a better place.
- Internal promotion system results in high-quality employees and low
turnover.
Corporate Resources
To maintain quality, Chipotle invested heavily in its staff. In many cases, the company
mentored future leaders internally, fostering continuity amongst its management team to
sustain its explosive growth.
Assuring quality and food safety promoted customer loyalty and ongoing engagement.
Ultimately, Chipotle’s main objective was profitability achieved through staff and
operational efficiencies designed to offset the higher than average cost of its organic
ingredients.
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Marketing
The basis of Chipotle’s marketing reflects their company mission “to change the way
people think about and eat fast food.”
Offered higher quality food at a slightly higher price which created “premium image.”
Location and size were part of their marketing strategy; smaller locations meant lower
rents than competitors.
Healthy and sustainable ingredients.
Advertising is done in house:
1. Did not use traditional media “sustainable effort.” (W)
2. Focus on brand experience and drive to create a loyal customer base. (S)
3. Word of mouth branding. (S)
4. Marketing efforts are clearly stated by CMG and essential to building out its
brand.
5. CMG’s marketing efforts reflect their overall mission to promote a healthy and
sustainable company that offers a premium product at a slightly higher price
point. (S)
Marketing Performance:
A “cool brand” - Chipotle has made their brand a household name and is known to be
edgy, trendy, and cool. (S)
Their brand not only represents their high-quality product, but also a way of life. (S)
Efficient supply chain management allowed CMG to use sustainable outsourcing and
maintain low inventory and accurate forecasting, contributed to their competitive advantage.
(S)
Branding, efficient supply chain with sustainable sourcing, socially responsible culture
were consistent and supported the company’s mission, and created a competitive advantage at
the same time. (S)
Marketing performance compared to similar corporations:

1. Although their price was slightly higher than other fast food alternatives,
Chipotle hoped that customers would pay the premium for higher quality food.
(S)
2. Didn’t use traditional marketing such as McDonalds or Wendy’s, but they did put
out a TV ad and a radio ad. (W)
Chipotle has a dominating presence in the US and is starting to expand its global
footprint with stores open in Canada, the UK, and France.
Financial Operations
Current financial objectives, strategies, policies, and programs:
1. CMG’s main objective was profitability achieved through staff and operational
efficiencies, designed to offset the higher than average cost of its organic
ingredients.
2. No long-term debt (S).
3. Grow organically, growth funded by retained earnings (S).
4. Maintain an operating margin of at least 10 percent (S).
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5. Exceed organic growth of occupant safety market.
6. Showed steady growth in terms of revenue and margin from 2004 to 2013 (S).
7. Outperformed industry average and S&P 500 (S).
8. Subject to commodities risk. (W)
9. Stock price up to $500. (S)
Finance objectives are clearly stated and also reflected by performance and strategy.
Finance goals are in line with Chipotle’s overall mission, CMG’s main objective was profitability
achieved through staff and operational efficiencies, designed to offset the higher than average
cost of its organic ingredients.
Financial Analysis
1. Revenue and operating margin have steadily increased from 2004–2013 (S).
2. Revenue growth rate was 24.41 percent (S).
3. Chipotle’s operating margin was less than that of half the industry average (S).
4. Strong balance sheet allowed the company to deal favorably with economic
cycle and focus fully on expansion (S).
5. Cash reserves increased steadily from 2003–2013, allowed CMG to open forty
new restaurants each quarter without adding any debt to the balance sheet (S).
12
13
Chipotle is considered a growth company and uses most of its retained earnings to
reinvest into the company.
CMG uses financial strategies to enhance their performance.
Chipotle’s finance objectives are maintained throughout all their global locations.
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Operations and Logistics
Operations objectives, strategies, policies, and programs:

1. The supply chain is closely integrated with the corporate mission and strategy of
serving “food with integrity” and practicing “conscious capitalism” (S).
This included the entire process, right from the time the ingredients were farmed,
raised, or harvested till the finished product is given to a customer. This philosophy
is thoroughly embedded in every aspect of the organization’s operations and it is not
just implied, but it is in practice.
The type and extend of operations capabilities:
1. The operations of the organization include ingredient sourcing (meat, poultry,

beans, corn, lettuce, etc.) and service.
2. Since the vision of the organization was oriented around sustainability and
healthier food options, it had to go right to the supply chain to make sure that
majority of the ingredients were organically grown. By 2007, all beef served, by
2010 all pork served, and by 2014 all chicken served at CMG was naturally raised.
3. All Chipotle’s restaurants were supplied by its independently owned and
operated distribution centers and their suppliers were evaluated based on the
quality of ingredients (S).
4. All Chipotle restaurants are also wholly owned by the organization, as compared
to the franchise route which most competitors take. This allowed for CMG to
have complete control over the look, design, and management (S).
5. Efficiency: simple and customizable menu meant extremely efficient assembly
line for the customers, resulting in high throughputs—despite the use of
conventional cooking methods (S).
6. Inventory management: CMG was able to maintain low inventories through its
accurate forecasting mechanisms, which resulted in locally grown, fresher
ingredients to reach the customer (S).
7. Local sourcing was increased, starting in 2008, to reduce the organization's
carbon footprint.
8. Growth and inclusion: CMG used its growth as an opportunity to include more
farmers to its exclusive supplier network. (E.g. the farmers growing naturally
raised pork could join Niman Ranch network for every 2 new CMG locations.) (S).
Some of the vulnerabilities:
1. CMG has higher than average cost of ingredients compared to its competitors
due to its use of organic ingredients but was able to maintain profitability
through staff and operational efficiencies (W).
2. CMG is always exposed to price fluctuations of the agricultural products, which
are typically more than the CPI for urban consumers by almost three percentage
points (W).
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3. CMG can maintain low operating costs through economic recessions and booms,
but at the same time, it faced the risk of fluctuations in commodities market and
is always restricted to organically grown goods because of company’s mission.
Research and Development
Operational efficiencies, yielding record high restaurant throughput rates, with data
analytics that correlated throughput and repeat purchases (S).
In 2014 Chipotle spent $10 million on mobile payments (S)
Research proved that fast service and fast casual markets speed of delivery was essential
for customer retention. Mobile payments would allow Chipotle to maintain records of orders,
analyze the data, and customize promotions to encourage repeat purchases.
R&D is helping facilitate repeat customers and expand the current customer base (S).
Competitive Analysis
Regarding this area we were able to find the following from the case:
1. CMG’s strategy has been very effective and most of its competitors try to imitate
them to earn those levels of growth.
2. Inventory management is one aspect in which CMG was ahead of its
competitors. Due to their accurate forecasting, they were always able to have a
highly efficient supply chain, which resulted in fresher ingredients.
3. Throughout rates: Much higher compared to the competitors and a very efficient
assembly line even at peak capacity (S).
4. Company-owned restaurants rather than the franchising strategy (S).
5. Leaders of the fast-casual dining (including Mexican restaurants) and appealed to
audiences from multiple segments.
6. Healthy foods fast were their mantra. While competitors put organically grown
ingredients and calories as the last item on their agenda, CMG excelled in
appealing to customers for the same reasons (S).
7. From this analysis, it is quite clear that CMG has always been ahead of their
competitors and will most likely be able to stave off the competition if it
continues its practices that are aligned with the company strategy.
Human Resources
Human Resources objectives, strategies, policies, and programs:
1. The company strategically decided to pay its employees above minimum wage to
offset the high cost of ingredients. In addition to that, they leveraged its positive
brand image to attract and retain quality employees which yielded greater value
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for the company despite the premium of higher than average wages that
competitors did not pay (S).
2. They also promoted 80 percent of the store managers from within the
organization which cultivated a sense of loyalty amongst the employees. To
sustain its explosive growth, CMG invested heavily in its staff and fostered
continuity in its management team by giving front-line employees the
opportunity to grow.
3. CMG instilled people culture which was evident from the success stories on their
website. This was an approach very different from its competitors.
4. CMG had one of the highest retention figures in the industry and that was a clear
metric which set them apart from their competitors (S).
Information Technology
Information Systems objectives, strategies, policies, and programs:
1. CMG did rely on Data Analytics to find out expected throughput rates and
correlate them with repeat purchases (S).
2. They have a dynamic website that they used to showcase the companies people,
culture, and success stories.
3. Using the power of the internet: they did rely on creative marketing techniques
like the scarecrow YouTube video to showcase CMG’s sourcing, quality, and
integrity.
4. CMG invested heavily on network improvements in 2014 to enable future
improvements.
5. They plan to introduce mobile payments, via barcode, to increase efficiency at
payment counters, result in customer retention, and increase its customer base.
This approach could also help CMG to analyze customer data and customize
promotions in future.
Internal Factor Analysis Summary (IFAS)
17
1 2 3 4 6
Weighted
Weight Rating Comments
Internal Factors Score
Strengths
This will allow them to act
S1 Company maintains ownership 0.07 4 0.28 and build the brand
over all restaurants independent
Partnership in start and
0.09 5 0.45 efficient savings and
S2 Extremely strong financials investing plan
Brand communication top
0.15 5 0.75
S3 Strong customer loyalty from the market
Vision, Misison,
communication clear and
0.09 5 0.45
S4 Commitment to providing healthy actions transparent with
menu items integrity
Remeber they are "changing
S5 Strong supplier relationships with 0.15 5 0.75 the world". "Going back to
organic producers the start".
Weaknesses
“A few things a thousand
W1 Expanding into markets with a 0.09 3 0.27 times” - increase client
diversified tastes experience.
Employee satisfisfaction -
build strong teams -
0.05 3 0.15
Branding inside the
W2 Rising labor costs organization.
W3 Higher costs associated with Risky, but communicate
0.15 5 0.75
sustainable ingredients truth and increase trust
W4 High investment solar energy Why not, when you can
0.08 4 0.32
system change it all.
This will make them able to
W5 High investment buying 0.08 4 0.32 go further - install solar
restaurants system was a start
TOTALs 1 4.49
Strategic Factor Analysis
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SWOT Analysis
Strengths Weaknesses
• Brand loyalty • Limited menu
• Strong customer loyalty • Not authentic Mexican food
• Menu personalization options • Expanding into markets with diversified
• Commitment to providing healthy menu tastes
itens • Higher costs associated with sustainable
• Extremely strong financials ingredients
• High margins • Rising labor costs
• Social & content marketing mastery • High investment solar energy system
• Strong Marketing Program • High investment buying restaurants
• Minimal expenses accrued for marketing
• Performance based culture
• Career incentives
• Close supplier relationships / Strong
supplier relationships with organic
producers
• Sustainability in Line with Market Trends
• Company maintains ownership over all
restaurants
Opportunities Threats
• Growing health trends among consumers • Insufficient sustainable suppliers to
• Growth of organic food ingredients cover demand
• Technological advances for ordering food • Relatively low barriers to entry for new
• Network upgrades such as payment via entrants with strong stories
barcode • Loss of trust if “Integrity” message is
• Capitalize on “Fast-Casual” sector growth violated
• Sustainable restaurant design is • Rising food prices
increasingly popular • Ease of entry into the market
• Home delivery • Impact of inclement weather and
• Menu diversification natural disasters
• Diversification of food concepts • Changes in consumer tastes and
• New restaurant categories preferences
• Raise the bar to bolster a stronger “green” •
message
Strengths Opportunities Strategies
● Maintaining healthy menu choices allows customers to be responsible when

ordering;
● Maintaining “Food with Integrity” mission proves a proactive movement;
● Innovations such as apps and online ordering systems for ease of acquiring food;
● Chipotle was the first chain within industry to acquire LEED permits for new
restaurant designs.
Weaknesses Opportunities Strategies
● Foreign expansion may inhibit some use of organic ingredients;

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● The company is inexperienced in different food concepts and would need to
develop a sound plan before starting a new concept.
Strengths Threats Strategies
● Backward integration would alleviate rising costs;
● Maintaining customer loyalty would maintain sales.
Weaknesses Threats Strategies
● Expanding operations creates the need for more produce;
● Varying supplier geographic areas would prevent a complete loss of supplies.
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Strategic Factor Analysis Summary (SFAS)
Strategic Factor Analysis Summary (SFAS) Matrix

SA (Strategic Alternative) = Opportunities / (Strenghts - Weknesses)
1 2 3 4 Duration - 5 6
ic Factors Weight Rating Weighted Score SHORT INTERMEDIATE LONG Commen
Average annua
0.15 5 0.75 x x x
ntinued Fast-Casual Sector Growth growth: 17%
Increased awa
0.15 5 0.75 x x x of health issue
wing health trends among consumers refarming
wth of organic food ingredients 0.07 4 0.28 x x Build new supp
Chipotle alread
0.11 4 0.44 x x difficulty findin
fficient sustainable suppliers to cover demand suppliers
Same-store sal
0.15 5 0.75 x x
ng customer loyalty consistently he
Bring new hea
0.07 5 0.35 x x
mmitment to providing healthy menu items items to menu
ng supplier relationships with organic Suppliers will o
0.15 5 0.75 x x x
ers respond to dem
her costs associated with sustainable Develop abroa
0.15 5 0.75 x x x
ents suppliers
1 4.82
NOTES:
List strengths and weaknesses (8–10) in Column 1.
Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2 based on that
…(for more information, please, consult EXCEL file annexes SFAS Matrix).
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Review of Current Mission and Objectives
The current mission and objectives are appropriate for Chipotle considering the key
strategic factors and problems and firm’s mission and objectives. No change is necessary for
Chipotle’s mission or objectives.
So, no changes are recommended.
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Alternatives and Recommendations
Strategic Alternatives (Advantages and Disadvantages)
Cost leadership via company-owned farms or joint venture with local suppliers:
● Advantages: reduced pricing will allow firm to compete on both product quality
and price
● Disadvantages: additional capital requirement for farm ownership, operations,
and sustainability
Growth through the entrance into the food truck market:
● Advantages: eliminates competitive advantage that competitors have obtained
by entering the food truck business
● Disadvantages: Formation of new business arm required
Growth through global expansion - CMG only has 11 restaurants internationally in 2014.
Yum brand, which includes Taco Bell, has a presence in more than 100 countries. Just India and
China alone are expected to generate $1 billion in annual sales for Yum brands.
Targeting all 100 countries for expansion of operations at the same time is an uphill task
for any organization, but CMG can look at some of the top revenue generating countries for
Taco Bell, and open locations in those countries as it is known that a market exists for Mexican
fast food. This corporate level strategy around expansion globally will yield high returns for CMG
and make them an internationally recognized brand:
● Advantages: increased brand awareness internationally, revenue growth.
● Disadvantages:
o International supply chain per CMGs sustainability and food with
integrity model in each new country can be difficult.
o Operation costs can be higher due to the social, political, or legal
environment in each country.
o Huge upfront investment that can eat into the cash reserves and pose a
financial
o Tastes may not appeal to local audience and customizations to menu and
ingredients may have to be made.
Delivery Service: not currently employed:

● Advantages:
o A delivery service would allow Chipotle to reach an expanded group of
people and increase sales during peak hours.
o Increase brand awareness
o Better customer service
● Disadvantages:
o Could be costly to implement
o Could slow down already efficient preparation system
o Delivery of food by car is against their environmental or sustainable
philosophy
23
Ordering Kiosks: not currently employed:
● Advantages:
o Decreased wait time for customers as you have more kiosks than
employees taking orders (ordering tablets could also be located at tables
in eat in locations).
o Increased customization, as customers will be more aware of the options
available to them.
o Decreased staffing expense, as Chipotle will be able to decrease the
number of staff due to eliminating or reducing the need for order taking
employees.
o The necessary ordering system already exists (the mobile app has an
ordering component), so the expense of developing such a system is
largely avoided.
● Disadvantages:
o Increased costs as installing the necessary components will be expensive.
o Increased training costs or time for employees, as employees will have to
be able to interact with the system, fix the system, and operate without
the system in the event it fails.
o Such a system could confuse customers that are not familiar with how to
operate such technology.
Recommended Strategy
Growth through entrance into the food truck market:

1. Chipotle aims to “to change the way people think about and eat fast food.” The
food truck market can successfully compliment Chipotle’s mission while
continuing to offer higher quality food at a slightly higher price. Food trucks also
align with Chipotle’s utilization of smaller retail locations, meaning lower rent
than competitors. Growth will be obtained through Chipotle’s entrance into the
new food truck market.
2. Through entrance into the food truck market, Chipotle will be able to continue
to compete with cheaper fast food
Options. Loyal customers will recognize the brand and continue to be willing to pay a
premium for higher quality products, even off a food truck.
Additional marketing policies should be implemented so that customers are aware that
Chipotle has entered the food truck market.
Increased efficiency through the implementation of ordering kiosks:

1. Ordering kiosks equipped with Squares (or another pay application) located at the
front counter or at each table will reduce customer wait time. This will increase the
number of customers that are able to order at any one time, reduce the potential for
error (as you are eliminating the cashier “middleman” from the ordering equation),
and frees up (or eliminates staff, saving money) more staff to work on the assembly
line, and thus further decrease the time it takes for an order to be prepared. This
time reduction is important as research has shown “in the fast service and fast
casual markets speed of delivery was vital to customer retention.” This reduction in
time also will give them a competitive advantage over their competitors, as they will
be able to serve a greater number of customers in the same amount of time.
24
2. The greatest benefit that Chipotle will reap from the implementation of mobile
kiosks in the long term will be the increased amount of data that Chipotle will have
access to about their customers. Once a sufficient amount of data has been
achieved, Chipotle will be able to construct models that will allow the company to
understand its customer base, but also on a regional, and maybe even a store by
store basis. This type of understanding will allow for Chipotle to create targeted
marketing campaigns and new products targeted to a segment of consumer tastes.
It will also allow for Chipotle to measure its stores with new metrics, and it will
better be able to gauge the success of a new product, marketing campaign, or policy.
Chipotle prides itself on its hip and trendy brand image, and right now we live in a world
that is increasingly more obsessed with IPhone, IPad, and apps. The implementation of such
kiosks will appeal to this sort of craze and is consistent with Chipotle being hip and trendy. It
appeals to the younger or middle-aged crowd that is their target market.
Conclusions
The CMG or Chipotle, both names used during elaboration of presented resport, has
become a solid company and is breaking barrers and making history in the restaurant business,
because it took advantage of a high awareness of the population for environment trends. And
all its achievements are based on the moves made to offer “peace of mind” to theis customers.
It is being first in many aspects of the way they do business. And eventhou it looks that the path
they have chosen is more expensive or onerous in a great list of aspects, respect for
environment, respect for employes and respect for the world where we all live is paying off
great deal with high earning for the company.
From this case, in general terms, we took this major insight; there are three major
cornerstone all organizations must build upon to push their businesses forward which are:
● Globalization
● Innovation
● And sustainability
CMG firm deals graciously with all those three pillars, specially with an important lesson, letting
the examples to us all, related to the way they design, applied and are follow-up every minite,
their Global Strategy.
25
Annexes
STRATEGIC AUDIT SHEET

Analysis
Strategic Audit Heading Factors (+) Factors (-) Comments
I. Current Situation
A. Past Corporate Performance Indexes
B. Strategic Posture:
Current Mission
Current Objectives
Current Strategies
Current Policies
SWOT Analysis Begins:
II. Corporate Governance
A. Board of Directors
B. Top Management
III. External Factor Analysis Summary (EFAS):
Opportunities and Threads (SWOT)
A. Natural Environment
B. Societal Environment
C. Task Environment (Industry Analysis)
IV. Internal Factor Analysis Summary (IFAS):
Strenghts and Weaknesses (SWOT)
A. Corporate Structure
B. Corporate Culture
C. Corporate Resources
1. Marketing
2. Finance
3. R&D (Research and Development)
4. Operations and Logistics
5. Human Resources
6. Information Technology
V. Strategic Factor Analysis Summary (SFAS):

A. Key Internal and External Strategic Factors (SWOT)
B. Review of Mission and Objectives
SWOT Analysis Ends. Recommendation Begins:
VI. Alternatives and Recommendations
A. Strategic Alternatives - pros and cons
B. Recommended Strategy
VII. Implementation
VIII. Evaluation and Control
26
SFAS MATRIX
Strategic Factor Analysis Summary (SFAS) Matrix

SA (Strategic Alternative) = Opportunities / (Strenghts - Weknesses)
1 2 3 4 Duration - 5
Weighted
Weight Rating SHORT INTERMEDIATE LONG
External Factors Score
Opportunities
O1 Continued Fast-Casual Sector Growth 0.15 5 0.75 CMG
O2 Growing health trends among consumers 0.15 5 0.75 Takin
O3 Growth of organic food ingredients 0.1 4 0.4 Using
O4 Technological advances for ordering food 0.07 3 0.21 Mobi
Once
0.07 3 0.21
O5 Home delivery want
Threats
T1 Insufficient sustainable suppliers to cover
0.15 4 0.6 Even
demand
T2 Loss of trust if “Integrity” message is violated 0.07 2 0.14 Comm
T3 Rising food prices 0.08 4 0.32 Takin
CMG
0.09 3 0.27
T4 Changes in consumer tastes and preferences times
T5 Impact of inclement weather and natural
0.07 3 0.21 Using
disasters
TOTALs 1 3.86
Internal Factors
Strengths
S1 Company maintains ownership over all This w
0.07 4 0.28
restaurants indep
Partn
0.09 5 0.45
S2 Extremely strong financials inves
S3 Strong customer loyalty 0.15 5 0.75 Brand
S4 Commitment to providing healthy menu Vision
0.09 5 0.45
items trans
S5 Strong supplier relationships with organic Reme
0.15 5 0.75
producers back
Weaknesses
W1 Expanding into markets with a diversified “A fe
0.09 3 0.27
tastes exper
Empl
0.05 3 0.15
W2 Rising labor costs Brand
W3 Higher costs associated with sustainable
0.15 5 0.75 Risky
ingredients
W4 High investment solar energy system 0.08 4 0.32 Why
This w
0.08 4 0.32
W5 High investment buying restaurants syste
TOTALs 1 4.49
Strategic Factors
27
O1 Continued Fast-Casual Sector Growth 0.15 5 0.75 x x x Avera
O2 Growing health trends among consumers 0.15 5 0.75 x x x Incre
O3 Growth of organic food ingredients 0.07 4 0.28 x x Build
T1 Insufficient sustainable suppliers to cover
0.11 4 0.44 x x
demand Chipo
S3 Strong customer loyalty 0.15 5 0.75 x x Same
S4 Commitment to providing healthy menu
0.07 5 0.35 x x Bring
items
S5 Strong supplier relationships with organic
0.15 5 0.75 x x x
producers Supp
W3 Higher costs associated with sustainable
0.15 5 0.75 x x x Deve
ingredients
TOTALs 1 4.82
28
Glossary
Term Description
Fast food Fast food is a mass-produced food that is typically prepared and served quicker than
traditional foods.
Full Service Restaurants where waiters take food orders from customers seated at tables
Quick Service A fast food restaurant, also known as a quick service restaurant (QSR) within the
industry, is a specific type of restaurant that serves fast food cuisine and has
minimal table service.
Fast-Casual A fast-casual restaurant, found primarily in the United States, does not offer full table
service, but advertises higher quality food than fast food restaurants, with
fewer frozen or processed ingredients.
Sustainability In general terms, sustainability is presented in the case as a sustainable development,

which includes the four interconnected domains: ecology, economics,
politics and culture.
Marketplace A market, or marketplace, is a location where people regularly gather for the purchase
and sale of provisions, livestock, and other goods.
EFAS External Factor Analisys Summary
IFAS Intrnal Factor Analisys Summary
SFAS Strategic Factor Analisys Summary
SFAS Matrix Strategic Factor Analisys Summary Matrix
Bibliography
In this area we will record all the references that were consulted and that served as a
base of knowledge to develop this paper. They may be found below organized by areas:
Institutional
1. Book referenced by the professor; Syllabus - Strategic Management and Business Policy
Globalization, Innovation and Sustainability and Study materials given by the professor
a. Specially the Information related to the Case Study nr. 07
2. The internet site of the company was the source simple information; specially the pages
below:
a. https://www.chipotle.com/
Media
3. Wikipedia for general definitions - https://en.wikipedia.org/wiki/Main_Page
29

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Strategic Management

34º EDITION (May 2018)

Gustavo Dantas (23711)

From Chipotle Website:

The Board of Directors consists of the following members:

Albert S. Baldocchi, Director Kimbal Musk, Director John S. Charlesworth,

Natural Environment - sustainability issue

Differences in other regions of the world

Threat of new entrants (moderate)

Bargaining power of buyers (moderate)

Threat of substitute products or services (high)

Bargaining power of suppliers (moderate)

Chipotle’s restaurants are company-owned and supplied by independently owned and

Rivalry among competing firms (High)

Operations and restaurants managed based on seven regions. (S)

“Food with Integrity:” (S)

Marketing performance compared to similar corporations:

Current financial objectives, strategies, policies, and programs:

CMG uses financial strategies to enhance their performance.

Operations objectives, strategies, policies, and programs:

The type and extend of operations capabilities:

1. The operations of the organization include ingredient sourcing (meat, poultry,

Research and Development

In 2014 Chipotle spent $10 million on mobile payments (S)

Human Resources objectives, strategies, policies, and programs:

Information Systems objectives, strategies, policies, and programs:

Internal Factor Analysis Summary (IFAS)

Strategic Factor Analysis

Strengths Opportunities Strategies

● Maintaining healthy menu choices allows customers to be responsible when

● Maintaining “Food with Integrity” mission proves a proactive movement;

Weaknesses Opportunities Strategies

● Foreign expansion may inhibit some use of organic ingredients;

Strengths Threats Strategies

● Backward integration would alleviate rising costs;

● Maintaining customer loyalty would maintain sales.

Weaknesses Threats Strategies

● Expanding operations creates the need for more produce;

● Varying supplier geographic areas would prevent a complete loss of supplies.

Strategic Factor Analysis Summary (SFAS) Matrix

Strategic Alternatives (Advantages and Disadvantages)

Delivery Service: not currently employed:

Growth through entrance into the food truck market:

Increased efficiency through the implementation of ordering kiosks:

STRATEGIC AUDIT SHEET

V. Strategic Factor Analysis Summary (SFAS):

Strategic Factor Analysis Summary (SFAS) Matrix

Sustainability In general terms, sustainability is presented in the case as a sustainable development,

EFAS External Factor Analisys Summary

IFAS Intrnal Factor Analisys Summary

SFAS Strategic Factor Analisys Summary

SFAS Matrix Strategic Factor Analisys Summary Matrix

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