CHIPOTLE CASE

ANALYSIS
Business Strategy
Dr Dean Pham

GROUP 6:

1. Dinh Thanh Tra – 11174738 – No.31

2. Nguyen Trong Hieu – 11171672 – No.9
3. Pham Thi Ngoc Minh – 11173134 – No.20
4. Pham My Hanh – 11171524 – No.7
5. Nguyen Thu Ngan – 1117 – No.21
6. Nguyen Trang Nhung – ID: 11173627 – No.23
7. Hoang Thi Thu Huyen – ID: 11172165 – No.14
8. Bui Thi Dien An – ID: 11170003 – No.1
9. Vuong Thanh Tung – ID: 11175173 – No.39

CLASS: Advance Accounting 59A

AEP

NEU, HANOI | STRATEGY 425 – SUMMER 19

Table of Contents

EXECUTIVE SUMMARY ............................................................................... 2

COMPANY’S BACKGROUND ........................................................................ 3
COMPANY’S CHALLENGES ......................................................................... 3

CASE ASSIGNMENT QUESTIONS..................................................................

Question 1 .......................................................................................................... 5
Question 2 .......................................................................................................... 7
Question 3 .......................................................................................................... 8
Question 4 ........................................................................................................ 10
Question 5 ........................................................................................................ 12
Question 6 ........................................................................................................ 14
Question 7 ........................................................................................................ 15
Question 8 ........................................................................................................ 17
Question 9 ........................................................................................................ 19

Question 10 ...................................................................................................... 21
Question 11 ...................................................................................................... 24

CONCLUSION.................................................................................................. 25

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 EXECUTIVE SUMMARY

Headed into August 2015, Chipotle Mexican Grill’s future looked rosy. Sales and
profits in the six months of 2015 would be the company’s best year ever. But a
series of events occurred over the next five months that alarmed customers, drove
down sales at Chipotle restaurants, and proved frustrating for Chipotle top
executives to fix.

Chipotle management worked in close Consultation and collaboration with state

and federal health and food safety officials throughout their investigation of the
incident and also launched a massive internal effort review of the company's food
preparation and food safety procedures.

Meanwhile, the Federal Drug Administration sought to identify a cause for the
outbreak. The FDA’s investigation revealed no ingredient-related cause and no
evidence that particular suppliers were the source of the outbreak. Ultimately, no
food item was identified as causing the outbreak and no food item was ruled out
as a cause, although fresh produce was suspected as the likely cause.

After health officials concluded it was safe to do, all 43 restaurants in the Portland
and Seattle markets reopened in late November 2015, roughly 6 weeks after the
incident occurred.

Extensive reports of the last three incidents in the national media took a toll on
customer traffic at most all Chipotle locations. The average decline in sales at
Chipotle locations open at least 12 months was a stunning 14.6 percent in the
fourth quarter of 2015, causing Chipotle's revenues in Q4 2015 to be 6.8 percent
lower than in the fourth quarter of 2014. The company's stock price crashed from
an all-time high of $758 in early August 2015 to $400 heading into 2016.

2
 COMPANY’S BACKGROUND

Chipotle Mexican Grill is located in 41 states in USA and Canada specializing in

offering burritos, tacos and Salads from organic natural vegetables and meat from
animals that have not experienced hormonal injections. It was founded by Steve
Ells in 1993 with its initial branch in Denver, Colorado.

Chipotle chain of restaurants is a well-established brand known for its food

quality. However, in the recent years it has been experiencing stiff competition
from both direct and indirect competitors. The direct competitors constitute rival
companies that offer similar servings such as Moe’s Southwest Grill, Qdoba,
Taco Bell. Indirect competitors do not offer similar servings to that of Chipotle
but are competing for the same clients. These firms are but not limited to,
Starbucks, McDonald and Taco Bell.

By 2017, Chipotle was operating more than 2,400 restaurants. Chipotle does not
franchise its business, considering retaining ownership of all its locations central
to its ability to set the tone for employee culture, as well as to maintain its
commitment to sustainable ingredients.

In a list of fastest- growing restaurants chains in 2009, Chipotle was ranked 8 th,
in 2010, ranked 3rd. “Consumer Reports” ranked Chipotle as the best Mexican
fast-food chain in 2011, serves 750,000 customers per day

In August 2015, Chipotle’s future looked rosy. Sales and profits in the first 6
months of 2015 were at record-setting levels.

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 COMPANY’S CHALLENGES

The company mission statement, “Food with Integrity”, is out of the company’s
practice to offer food that is made from organic raw ingredients and served with
a dinner like setting. The company has more than 1100 locations with a net
income of $178 million in 2010 and a staff of over 26,500.

 Increasing costs of food and labor: the specialty in dealing with organic
foods proves a challenge in getting reliable supplies all year. The produce
that is available retails at a high cost hence acting as an inhibiting factor.
Labor costs are also generally on the rise.
 Chipotle success factor is not firm: the success of the company is based
on the organic quality foods. Customers have opted for the burritos than
the fast food options. However, as the business expands the perception of
the customers in regard to organic foods might not stretch as well.
 Chipotle risks saturation: the company has many branches hence the
customers might opt for one Chipotle to the other hence may close
businesses for other outlets.
 A series of food-poisoning incidents occurred over the next 5 months,
included: salmonella, norovirus and E.coli bacteria outbreak.
 Alarmed customers, drove down sales, top executives had to fix: In Jan
2016, the food safety issues at Chipotle were over. Lots of effort had been
done to get customers back into its stores. However, the results in 2016
were disappointing. The average sales dropped 22,9% below the 2015
average, despite the opening of 240 new restaurants. In 2017, with 400
more restaurants in operation than in 2015, its performance didn’t reach
top management’s expectations, still 20% below the 2015 average

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 CASE ASSIGNMENT QUESTIONS

Question 1. What is your assessment of the ways in which Chipotle

responded to the food poisoning incidents in some of its restaurants?

In my opinion, Chipotle had already made the best effort to deal with these food
poisoning incidents in some of its restaurants. In August 2015, after food
poisoning incidents in Southern California, the restaurant voluntarily closed,
threw out all remaining food products, and sent home the affected employees. In
October 2015, Chipotle management voluntarily closed all 43 Chipotle locations
in the Portland and Seattle markets after the incident of 55 people becoming ill
after eating at 11 Chipotle locations. Chipotle management worked in close
consultation and collaboration with state and federal health and food safety
officials (including personnel from the Centers for Disease Control and
Prevention, the U.S Department of Agriculture’s Food Safety and Inspection
Service, and the U.S Food and Drug Administration) through out the
investigation. These food poisoning incidents were taken into investigation with
the revelation that none of the ingredients at the 11 Chipotle restaurant was
contaminated with E.Coli bacteria. Also, only after health officials concluded it
was safe did all 43 restaurants in the Portland and Seattle markets reopen
(roughly 6 weeks after the incident occurred). After that, Chipotle also launched
a massive internal effort review of the company’s food preparation and food
safety procedures.

Later in 2017, there were two more incidents of food poisoning at Chipotle
restaurants. One happened in July which made Chipotle promptly close the
restaurant for a “throughout sanitization”. The other happened in December
which Chipotle later alerted local health officials, held employees out of work,
and instituted heightened preventative procedures. One again, the food
poisoning happened affected 600 customers at a restaurant just outside
Columbus, Ohio. This cause was attributed to the problem of bacteria that
formed when certain food items were left out at unsafe temperatures. Upon

5
learning the cause, Chipotle top management launched retraining of all its
workers nationwide the following week. In conclusion, Chipotle could not stop
the food poisoning incidents from happening in some of its restaurants.
However, Chipotle had been able to deal with the situations quickly by
conducting immediate examination and proving its safety and standard food
operations.

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Question 2. Do you agree with Steve Ells’s decision to relinquish his position
as CEO? Do you approve of the choice of Brian Nicol to become Chipotle’s
new CEO? Are you surprised by the choice of Brian Nicol?

Even though I find Steve Ells was still doing a great work as CEO especially
during these food poisoning incidents, I respect his decision of relinquishing his
position as CEO. He himself had already mentioned the reason for that action.
He said that decision would allow him to focus on his strengths, which include
bringing innovation to the way sourcing and preparing food.

In my opinion, it was not a surprise that Brian Nicol became the new CEO of
Chipotle.

Firstly, Nicol had been Taco Bell since 2011, served as president in 2013 and
2014 and became Taco Bell’s CEO in January 2015. That means he both had
the experience in the food industry and being a great CEO with incredible
management skill.

Secondly, Nicol was credited with being the driving force behind boosting
average sales at Taco Bell restaurants which was Chipotle’s priority at the time
after the food poisoning incidents happened.

Third, Nicol was the one who transformed Taco Bell into a leader in using
social media and mobile ordering/payment. This was exactly what Chipotle
needed as Chipotle created the app with such features as quick reorder of favorite
meals, streamlined payment options, and the ability to receive, store, and redeem
Chipotle offers.

For these reasons, I could not agree more at the choice of Brian Nicol as
Chipotle’s new CEO and I have no doubt that Nicol will do a great work with
his position in Chipotle.

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Question 3. Does Chipotle Mexican Grill have any core competencies and, if
so, what are they?

Core competency can be defined as “a harmonized combination of multiple

resources and skills that distinguish a firm in the marketplace” and therefore are
the foundation of companies' competitiveness. In that case, Chipotle Mexican
Grill also has three core competencies, which make they become different with
other Mexican fast food restaurants.

Chipotle’s limited, focused menu is one of their core competencies because it

is central to its operations and provides a unique value to the customer. Customers
were attracted by the experience of getting better-quality food served fast and
dining in a restaurant setting that was more upscale and appealing than those of
traditional fast-food enterprises. Chipotle’s competitors have a difficult time
competing against or imitating this competency because the times on Chipotle’s
menu are tested and proven. Competitors don’t have the time or ability to test this
concept or perfect their menu items.

Another core competency is their dedication to high-quality fresh ingredients

with reasonable price. They use organically grown local produce, organic beans,
organic dairy products, and meat from animals that were raised in accordance
with animal welfare standards and were never given feeds containing non-
therapeutic antibiotics and growth hormones to speed weight gain. Chipotle
meets high customer expectations with their ‘Food with Integrity’ campaign.
None of Chipotle’s competitors have taken as strong of a stance, nor have they
moved as quickly to increase their efforts for sustainable, humane cultivation of
their ingredients. Chipotle has and continues to lead the way in this area of fast-
casual dining.

Last key factor to the success of Chipotle is the speed and effectiveness at which
their friendly and multi-skilled crew members serve customers. Most
employees were cross-trained to work at a variety of skills and to boost labor
efficiency during busy periods. Crew members are employees who had a strong

8
work ethic, take pride in preparing food items correctly, enjoyed interacting with
other people, exhibited enthusiasm in serving customers, and were team players
in striving to operate the restaurant in accordance with the high standards
expected by top management. The crew members, along with the serving style
maximize efficiency because the crew is energized and motivated to move
customers through the line while working as a team. Competitors have a difficult
time imitating this largely in part due to the distance between their associates.

9
Question 4. What does a SWOT analysis reveal about the attractiveness of
Chipotle Mexican Grill's situation and future prospects, as of mid-2018?

Strengths Weaknesses

Internal
Good brand reputation of A limited menu (only
Origins
service quality burritos, burritos bowls,
tacos and salads with milk,
soft drinks and fruit juice)

Personally optional menu Too rely on word of mouth

publicity for marketing
purpose

Wide range of restaurants Food prices are

operating in the US, Canada comparatively higher than
and some other Europe that of its rivals
countries

A close long-term Ingredients quality after the

partnership with suppliers E. coli outbreak incidents

Opportunities Threats

External
Diversifying menu for The future possibility of
Origins
customers food safety incidents

Store international Competing with other

expansion brands (Taco Bell, Moe's
Southwest Grill and Qdoba
Mexican Grill)

Adequate sustainable
supplies to rising demand

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The attractiveness and future prospects of Chipotle Mexican Grill are directly
related to the strengths and opportunities in the SWOT analysis as shown above.
As a beginning strategy of Ell for Chipotle, the restaurants served a focused menu
of burritos, burritos bowls, tacos and salads with the commitment of using
organically fresh ingredients and with the short serving time after ordering by
high-performed employees. Hence, Chipotle successfully attracted many
customers and then rapidly had a strong reputation of service quality. Moreover,
it was not until 2016 did the company open 2,010 restaurants in total in the US,
Canada and some other countries such as England, France, and Germany.

Despite of the fact that Chipotle opened over 20 restaurants in other countries, it
not literally merged into the international market because the company has not
fully exploited Canadian and Europe market. As a result, the company can
possibly expand more stores all over the world, for instance, it could take part in
the Asia fast food market, in which Mexican foods are still quite new and
attractive. Even though there was a limitation in menu, the company gave people
the right to select their favorable ingredients in each dish by direct
communication to the staff on the serving line able to attract people. Nevertheless,
the limited menu is still seemed to be the weakness of the company compared to
other competitors so it is necessary for Chipotle to diversify menu to appeal more
type of customers. In order not only to satisfy the increasing demand of customers
but also not to break the commitment of the ingredients quality, Steve Ell
company incessantly found appropriate suppliers to make a strong, close and
long-lasting relationship with them.

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Question 5: What are the primary and secondary components of Chipotle’s
value chain?

5.1. Primary components

The first primary components of Chipotle’s value chain were its Supply Chain
Management. They built a strong long-term relationship with reliable suppliers
who agreed to their forward, fixed and formula pricing method. Rather than
purchasing food products from farmers or restaurant supplies from
manufacturers, Chipotle has built up strong long-term relationships with reliable
food industry suppliers. Chipotle keeps a list of approved suppliers, which
contains ones that can meet their quality specifications and guidelines. Chipotle
utilized the services of 24 independently owned and operated regional
distribution centers to purchase and deliver ingredients and other supplies to
Chipotle restaurants. These distribution centers were required to make all
purchases from Chipotle's list of approved suppliers in accordance with the
agreed-upon pricing guidelines protocols.

Secondly is the Operations team which set the quality standards for their
processed right from the suppliers they purchase from right till the food that is
served. Chipotle has employed a Quality Assurance department that monitors
quality and food safety. This department sets Chipotle's standards for everything
from the suppliers they buy from, the distribution centers they control, and the
food they serve.

Thirdly, Service is an important value chain component where they strived to

prepare the customer order as soon as possible and also interact directly with them
so that their demands and wishes can be met. Chipotle's biggest goal with service
is to have a customer's order ready as quickly as possible. They do this by using
a service line that the employee and customer can move through efficiently as the
customer tells the employee what they want. This not only helps the customer
have an easy and quick experience with ordering food, but it also lets the customer
see the fresh food and ingredients that are used to create it.

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Fourth, Sales and marketing: Prior to the scares over food safety in 2015,

Chipotle marketing efforts were focused on introducing the Chipotle brand to

new customers and emphasizing what the Chipotle experience was all about and
what differentiated Chipotle from other fast-food competitors. Chipotle’s
advertising mix typically included print, outdoor, transit, theaters, radio and
online ads. The company ran its first-ever national TV commercial during the
broadcast of the 2012 Grammy Awards and ran a second campaign in 2013
featuring its new catering program. The marketing and promotional blitz was
continuing in early 2018. In January, Chipotle announced continuation of its
Reading Rewards program that included free kid’s meal cards for younger readers
and buy-one get-one free entree cards for teen readers.

5.2. Secondary components

The secondary components of Chipotle’s value chain are the Product R&D team
where they came up with the food with integrity campaign, where they researched
ways to use organically grown ingredients. Chipotle started their "Food With
Integrity" campaign. This campaign involves Chipotle researching ways to use
organically grown ingredients. They researched farming companies who
practiced animal ethics and cared about the environment. This effort was to
ensure that they receive fresh and pure products that are healthy for their
customers.

The next department is the Human Resource department which works at hiring
enthusiastic and build a people-oriented, performance-based culture. The
general managers hire these employees to standards that they have good work
ethic, take pride in preparing food items correctly, enjoy interacting with other
people, exhibit enthusiasm in serving customers. The employee is expected to be
a hard worker who is driven, enthusiastic and is team players on all fronts of the
store.

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Question 6. What were the chief components of Chipotle’s strategy prior to
the food poisoning episodes? What further strategy adjustments are needed
now that Chipotle has (seemingly) gotten through the worst of the fallout of

the food poisoning incidents?

Taking the inspiration from features widely found in many fine-dining

restaurants, the Chipotle’s strategy prior to the food poisoning episodes was
predicated on six elements:

1. Serving customers a focused menu of burritos, tacos, burrito bowls (a

burrito without the tortilla) and salads.
2. Using high-quality raw and fresh ingredients with classic methods of
cooking to create great tasting, reasonable price prepared to order and
ready to be served 1-2 minutes after customers ordered.
3. Enabling customers to select the ingredients they wanted in each dish by
ordering directly to the waiter on the serving line
4. Creating operationally efficient restaurants with aesthetically pleasing
interior.
5. Building a special people culture consists of friendly, proactive people
motivated to take good care of each customer and empowered to achieve
high standards.
6. Increasing awareness and respect for the environment and by using
organically grown fresh produce and meats raised in a humane manner
without hormones and antibiotics.

After many the food poisoning incidents, Health officials attributed that the
problem to bacteria that formed when certain food items were left out at unsafe
temperatures. So, further strategy adjustments that Chipotle needed now is
more focusing on the source of food, storage temperatures, the process of
preliminary treatment then cooking to ensure about the food safety and the
poisoning incidents won’t happen again. Moreover, not only focus on food,
Chipotle should retrain of all its restaurant workers nationwide to make
sure that the compulsory process will be followed exactly.

14
Question 7. Which one of the five generic competitive strategies discussed
in Chapter 5 most closely approximates the competitive approach that
Chipotle Mexican Grill is employing?

Among five generic competitive strategies in Chapter 5, the most closely

approximate competitive approach which the Chipotle Mexican Grill is
employing is the broad differentiation strategy. It seeks to differentiate the
company’s product offering from rivals’ with attributes that will appeal to a
broad spectrum of buyers. In Cost Leadership strategy, the industry focuses on
producing low-cost products and differentiation strategy involves creating an
edge over the competition by making the products and services different in a
better way from that of the competitors. When we focus these any of these two
strategies for a segment of product, market or consumer section it becomes the
other two types of competitive strategy.

Chipotle is also a fast food chain that serves fast food that is freshly cooked for
the customers shortly after the order being placed. There are many other big and
small players in this category in the same market, such as McDonald's and
Qdoba Mexican Grills etc., but Chipotle still remains the first choice among
Mexican fast food lovers because Chipotle’s menu and food in that are different
than that offered by the others.

Firstly, Chipotle strives to stay different from the others at root level by creating
the favorite food of its customers with a difference. Menu variety was achieved
by enabling customers to customize their meal of their different ways.

Secondly, they give quality ingredients for their respective campaign that is
“Food with Integrity”. That difference comes from the ingredients that are used
and the environment they are served in. Chipotle acquires a large section of its
raw material from organic resources, meat from farms where the animals,
environment and the people involved are respected.

Thus, Chipotle becomes different from others by using healthy and environment-
friendly fast food producer. It does not seem to use the cost strategy as its food

15
is relatively high prices because of the higher cost involved in the use of organic
raw materials. This will give Chipotle a competitive advantage in the industry
and continue to stand out from typical fast food chains.

16
Question 8. What chief difference(s) do you see between Chipotle’s strategy
and the strategy being employed at Moe’s Southwest Grill?

8.1. Rival with Strongest Resources & Capabilities

Of all Chipotle’s competitors, Moe’s poses the largest threat. Although Moe’s is
newer and has a smaller presence, there were more than 700 fast-casual Moe's
Southwest Grill locations in 40 states and the District of Columbia.

- Moe's also offers a diversified and plentiful menu. For example, it provides
quesadillas, fajitas, nachos, rice bowls, and desserts in addition to the same
items Chipotle offers.
- It also has a kids' menu and vegetarian, gluten-free, and low-calorie
options, as well as a selection of five salsas, four varieties of queso,
guacamole, chips, cookies, brownies, cinnamon chips, soft drinks, iced tea,
and bottle water.
- Food quality, efficiency and customer service is the most comparable as
well.

8.2. Chief Differences Between Chipotle’s & Moe’s Strategies

One of chief differences between these competitors’ strategies is that Moe’s

Southwest Grill is franchises restaurants, whereas Chipotle does not offer
Franchises. All Moe's locations in 40 states and the District of Columbia were
franchised.

Moreover, as stated earlier, Moe’s has a more diversified and plentiful menu
than Chipotle. The menu at Moe's featured burritos, quesadillas, tacos, nachos,
burrito bowls (with meat selections of chicken, pork, or tofu), and salads with
choice of two homemade dressings, whereas the menu at Chipotle restaurants was
quite limited-burritos, burrito bowls, tacos, and salads; does not have many
toppings either, limited to fajita veggies, sour cream, lettuce and cheese.
However, it results Moe's in a longer working line and often needs a separate

17
room kitchen altogether. This large distance makes communication difficult and
as a result of this efficiency decreases.

Another chief difference is Moe's Southwest Grill provides the free chips,
cheese sauce, salsa for extra along with the meals whereas Chipotle does not
provide. That's why some customers may view Moe’s as the best-cost option.

Additionally, although Moe’s utilizes high quality ingredients and classic

cooking methods, it does not use marketing campaign in order to attract
customer as much as Chipotle. Rather than that Moe's uses frequent promotions
such as introduce a "Rockin' Rewards" mobile app that not permitted mobile
ordering at all locations, but also rewarded users with points on each order. For
each 1,000 points earned, the user received a $10 Moe's credit. At the 6,000-point
plateau level, users were automatically entered into a Rockin' prize sweepstakes
and gained more such entries for each additional 1,000 points earned.

In addition to high food quality, Moe's provides more friendly hospitable

atmosphere than Chipotle. The company and its franchisees emphasized
friendly hospitable service. When customers entered a Moe's location, it was
standard practice for employees to do a "Welcome to Moe's!" shout-out.

Lately, one of Chipotle's biggest innovations had been creating the ability to
have a customer's order ready quickly. The attention to serving orders quickly
was motivated by management's belief that while customers returned because of
the great-tasting food they also liked their orders served fast without having a
"fast-food" experience (even when they were not in a hurry). It makes increase
high customer satisfaction.

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Question 9. What does an analysis of the data in case Exhibit 1 reveal about
Chipotle Mexican Grill’s financial and operating performance? Use the
financial ratios in Table 4.1 of Chapter 4 as a guide in doing the calculations

needed to arrive at an analysis-based answer to your assessment of

Chipotle’s financial performance. In addition to the ratios in Table 4.1,
there are occasions when you will also need to calculate compound average

growth rates (CAGR) for certain financial measures. The formula for
calculating CAGR (in percentage terms) is as follows:

CAGR % = [ending value ÷ beginning value] 1/n – 1 x 100

(where n = the number of year-to-year or period-to-period changes)

2011 2014 2015 2016 2017

Gross profit margin 0.675 0.654 0.666 0.651 0.657

Operating profit margin 0.154 0.173 0.1696 0.136 0.060

Net profit margin 0.094 0.108 0.105 0.006 0.039

Total return on assets 0.15 0.178 0.177 0.013 0.089

Net return on total assets- ROA 0.15 0.176 0.175 0.011 0.086

Return on stockholders’ equity - ROE 0.21 0.221 0.223 0.016 0.129

Table 1 Financial ratios

Chipotle’s Gross profit margin: In 2017: was 65.7%, in 2016 was 65.1%, and in
2015 was 66.6%.

Operating profit margin fluctuated from 6% to 15.4%.

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The net profit margin in 2015, 2016 and 2017: 10.5%, 0.6% and 3.9%.) a
dramatically decrease

Total return on assets fluctuated dramatically. In period 2011-2015, it increased

gradually but 2016-2017 return on asset decrease significant

20
Question 10. How does Chipotle Mexican Grill’s competitive strength
compare against that of Taco Bell, Qdoba Mexican Eats, and Moe’s
Southwest Grill as of mid-2018? Do a weighted competitive strength
assessment using the methodology presented in Table 4.4 in Chapter 4 to
support your answer. Based on your assessment and calculations, does
Chipotle have a net competitive advantage over some or all of these rivals?
Which rival—Chipotle Mexican Grill or Moe’s Southwest Grill or Qdoba
Mexican Eats—seems to have the strongest set of resource strengths and
competitive capabilities and is most likely to achieve the best financial
performance? Does Chipotle have a good enough strategy and adequate
resource strengths and competitive capabilities to compete effectively against
Taco Bell? Your assessment should most definitely take into account the
extent to which Chipotle’s food poisoning problems have cut into its
competitive capabilities and performance prospects.

Qdoba

Strengths Weaknesses Vision Pricing Financial Info

(2017)

1. Wide 1. Fewer 1. High 1. Average 1. Sales

variety of locations & Quality Menu Price Revenues
menu stores Mexican approx. averaged
options Cuisine $8.00 $1,156,000
2. Is a
served
2. Serves franchise 2. Changed 2. 23 new
quickly
Breakfast (lowers pricing company-
& some 24 flexibility & 2. Fresh Strategy in owned and 19
hour Originality) ingredients 2014 using franchised in
locations bundling 2017 , 2000
3. Located
options for new locations
3.Lower Strictly in the
main dishes expected this
menu USA
year.
prices

21
- Strong
internet
Presence
(Can order
online)

Tacobell

Strengths Weaknesses Vision Pricing Financial

Info (2017)

1. popular 1.High fat and 1.grow into Prices 1. Sales

brand name high calorie the largest ranged from Revenues
with high food not good fastfood $1.69 to averaged $2.1
brand loyalty for health
conscious provider in $6.69, party million (
2. healthy Mexican packs of grew 5% in
trans-fat free people
style in tacos 2017)
formula 2.High
market. ranged from
3. Hygeneic competition $12.99 to
2.6,849
food means limited 2. established company
preparation market share $16.99
growth presence in onwned,
and quick Asia, South franchised,
service for Taco Bell
America and and liscensed
4. Good Africa, top restaurant
advertising 25 major locations
and
marketing of cities in these
the brand continents

22
Within the restaurant industry, there are many factors directly influencing a firm
and its competitive actions and competitive responses. These factors include the
threat of new entrants, power of suppliers, power of buyers, the threat of
product substitutes, and the intensity of rivalry among competitors. Since
Chipotle was opened in 1990, they have already become a well-established
company within the industry. Companies like Taco Bell which has more recently
entered into the Mexican food industry, pose a threat to the Chipotle locations
more closely found in their respective areas. For example, Taco Bell is a Boston
based company, therefore they will compete with Chipotle most aggressively in
this area. The power of buyers is so vital to a business like Chipotle because they
have many options. In order for Chipotle to maintain a competitive edge in the
market, they must compete strongly with companies or restaurants such as
Qdoba that offer a wider variety of menu options for lower prices. Chipotle only
directly negotiates with suppliers, usually in local areas, in order to warrant more
competitive prices to buy their products. Since Chipotle focuses so greatly on
product quality, the supplier’s power plays an enormous role in Chipotle’s
ability to obtain their raw ingredients.

Substitutes always pose problems for any type of product in any industry.
Customers may be looking for either a cheaper type of fast food other than
Chipotle, for example, Taco Bell, and McDonalds. Additionally, they may be
looking for fast food in a segment in segments equal to or above Chipotle such
as Panera Bread, Five Guys Burgers and Fries, or sit-down chain restaurants.
With that being said, it is necessary for Chipotle to continue differentiating from
these other businesses using their already impressive initiatives for social
responsibility and brand image. Although the food industry is very competitive
as a whole, Chipotle has done a fine job in setting themselves apart from rival
companies. Their products and ingredients are of superior quality to others
within the fast-casual segment. With that being said however, the entrance of
new competitors and the ability of other existing companies to modify their
business strategies to compete using a similar high quality approach could cause
segment rivalries to intensify.

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Question 11. What action recommendations would you make to CMG's new
CEO, Brian Nicol, to help rejuvenate the company's growth and profitability
in the remainder of 2018 and on into 2019?

Here are six of my recommendation to the new CEO of CMG - Brian Niccol to
help rejuvenate the company’s growth and profitability:
1. New menu items which create more choices for the customers
2. Develop digital approach for the customers such as website and app on
the mobile phone. → resulted in them committing more and more to this
easier access approach through the digital channel.
3. Improve delivery system by giving free delivery to the customers. Not only
the mobile/online order to improve the orders quantity.
4. Add new membership program, add more values to the customers, make
them feel cherished and happy to return to CMG
5. Improve the marketing, bring out the new features of delivery and on app
interaction or the membership, draw people’s attention to the remake of
the CMG
6. Lastly, building better HR team → better training → better employees →
better experience for the customers. It all comes to how the customers feel
about the CMG themselves and even if the other features interesting but
the experience is bad, it is not likely that customers will comeback.

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 CONCLUSION

Chipotle is a company that prides itself on delivering fresh and healthy food to
customers. Within a few months, the restaurant suffered greatly as they were
plagued with an outbreak of E. coli and norovirus. Chipotle executives
immediately and voluntarily searched to understand what happened, how it
happened, and directed their focus on developing new practices to prevent the
outbreak from happening again. Overall, I feel Chipotle is working hard and safe
to provide to consumers they are committed to making Chipotle the leader in
providing safe, fresh food in a fast food setting has always been consistent in its
mission, vision, and the way it brings values to its customers.

Chipotle under the lead of the new CEO Brian Nicol will continue to be able to
rebuild customer trust and revive sales growth of Chipotle and go a long way with
new challenges and new competitors. According to the current situation and
prediction for the near future, Brian Nicol should focus on the food hygiene and
safety issues of the company and creating long-term value for its customers as
well as its shareholders. In details, Chipotle had better concentrate on creating
new diversified and plentiful menu and develop digital approach for the
customers such as website and app on the mobile phone around the world. Also,
improving delivery system by giving free delivery to the customers. All these will
eventually lead to increase in loyalty customers as well as regaining customers
trust.

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