Internal and External Environmental Analysis of Chipotle Mexican Grill

This report deals with the internal and external environmental analysis of Chipotle Mexican Grill. It includes the PESTLE model, elements of the internal environment, marketing strategy, customer service experience, and recommendations. The document type is a report and the subject is management. The course code and college/university details are not mentioned.

MANAGMENT

Contents
Introduction...........................................................................................................................................2
PESTLE model......................................................................................................................................3
Elements of internal environment..........................................................................................................5
Marketing strategy...............................................................................................................................12
Customer service experience...............................................................................................................14
Recommendation................................................................................................................................15
References...........................................................................................................................................17

Introduction
Chipotle Mexican Grill is a renowned chain of fast food restaurants in U.S., U.K.,
Germany, France, and Canada. Chipotle Mexican Grill was established in 1993. This
company serves a menu of salads, burrito bowls, soft flour salad, kid`s menu, bottled drinks
and beer, margaritas, Crispy Corn Tacos, and burrito by using fresh ingredients. Company`s
CEO claims that he has unbeatable start in his tenure and the company have earned (Cole,
2014). This report aims to deal in internal and external environmental analysis of Chipotle
Mexican Grill. The organisation is struggling to regain the customer confidence and sustain
the supply chain of organic ingredients (Petersonoct, 2015). Although, there are many
problems faced by the company such as food safety, supply chain, tightened labour market,
and increasing competition but mainly the report focuses on food safety issues in the CMG.
To evaluate the financial performance, it is important to consider the stock prices of at
least 5 years and it is given below-
Year Share price Percent change
2019 513.24 18.86%
2018 431.58 49.39%
2017 377.79 -23.39%
2016 428.56 -21.37%

2015 659.13 -29.9%
When referring to the company`s resources, Chipotle owns approximately 2400
restaurants at different places such as in-line or end-cap locations in properly arranged rows.
The company holds outlet at various centres such as food courts, airports, malls, train
stations, and freestanding buildings. The restaurant structure is based on point of system that
provides several applications including training, financial tools, scheduling, and data
protection services. Point of system is integrated with other important functions and
operations. It records transactions, authorises, and enables credit transactions.
PESTLE model
Political factors- these factors play a significant role in determining the impact on
chipotle Mexican grill. The company is exposed to different types of political system and
environment because the company operates in different countries (Aithal, 2016). As company
rely purely on organic products and if the FDA approves strong regulations for the fast food
chains then chipotle`s product offering would change accordingly. Undoubtedly, the
company will face legal and political interruption due to outbreak of regulation made by FDA
for food safety. As the company has lost its trust in the eyes of government, it will not
provide any subsidies. The government will impose penalty on the CMG because of
negativity impact on health of the public. Strong trade groups, which include American meat
institute, US food and drug administration, and testing procedure of deadly bacteria will
affect the company`s operations.
Economic factors- Economic changes affect the financial performance of the chipotle
Mexican grill. As the industry is volatile and instable, it has many pros and cons such as beef
or other raw material prices may increase due to inflation, unavailability, and scarcity. This

will lead to increase in the price of dishes and food products, which may influence the
customers to buy it from somewhere else. The threat can be shifting of loyal customers
(Khan, Alam, & Alam, 2015).
Social factors- these factors is inclusive of norms and certain trends that include
stereotype of different segments in the market. For instance- US customers have become
more health conscious especially about what they intake. This can be opportunity for health-
concerned restaurants such as chipotle. This company appeals and targets younger generation
“Millennial “rather than focusing on baby boomers or the “X” generation (Sridhar et al.,
2016). Due to outbreak of quality products and services, CMG has created a negative image
among its stakeholders especially customers. customer dissatisfaction in regards to.
Technological factors- over the last five years, the industry is transforming at high
pace. This factor is not much concerned with chipotle, as a food-based company rely more on
face-to-face interaction rather than depending only on online marketing and advertisement
(Vigna, Bianco, Goia, & Serra, 2018).
Legal factors- As discussed before, the company is struggling to maintain food safety
and when dealing with new suppliers, it proves to be very difficult situation for chipotle to
comply with food safety regulations.
Ecological factors- the company operates in a friendly environment, which is based
on availing organic products to the customers.

(Source: Slidemodel, 2019)
Some of the direct competitors are Qdoba restaurant corporation, Mswg LLC, MTY
Food group, Rubio’s coastal grill. Whereas, this company face indirect competition from
Burger king, checkers, and KFC. As per the industry report of nation`s Restaurant News, the
traffic for fast casual eateries has exceeded any other segment in last five years. On the other
hand, American based woodpecker restaurant has some features such as patented saltage
prime meat, craft beers, artisanal cocktail in a whimsical style. Whereas, CMG`s menu has
only 2 percent of beer offerings. Although there are many barriers to new entrants such as
economies of scale, location, encroached competitors, legal problems, and highly perishable
goods. The threat of new entrants is moderate to high as the fast-casual industry is rapidly
growing which set many challenges for the chipotle. As new entrants plan to bring innovative
products that, can bring new customers and build barriers from the existing restaurant
(Leiber, Stensaker, & Harvey, 2018).
Some of the basic needs that a customer expects are greeting them, positive and fresh
environment, good quality food, hospitality, a fine dining, and quick service. A fine dining
includes steak houses, celebrity-owned, themed restaurant, good ambience, and gourmet. To
excite the customer, a restaurant should offer innovative dishes, services, and interior. The

decision making process of customer can get affected by customer behaviour such as location
of the restaurant, neighbour restaurant, excellent services, ambience, music and art in the
restaurant, and cooking trends. Customers chose a restaurant, which can give them value for
they have paid. Apart from these, some customer behaviour is driven by Veblen theory where
in the customers are attracted in the name of luxurious services. The theory of demand
reverses in this case, as the demand increases and the price of the service also increases.
Elements of internal environment
Business strategy
The mission, vision, objectives, and values revolve around food integrity and
changing customer behaviour for people`s eating fast food habits. As company provides
highly natural raised pork, beef, and chicken. This company plans to keep the menu simple
but a combination of fresh ingredients create countless meal varieties to provide to the
customers.
Mission
To change the pattern of how people think and eat the fast food. The company in
interest in providing restaurant jobs or for other corporate things. The company focuses on
using high-quality ingredients to make great food that can have greater access to everyone at
a reasonable price.
Vision
The company has to build vision to consider the future of fast food to bring its
services and food philosophy to the culinary traditions of Italy, Naples, and Asia. This
company ensures that whether the company is able to promote the efforts of local farmers in a
sustainable way-

Serving the best naturally raised food product with greater taste, greater value, and
great nutrition. The company support the family farmers who take care of their animals.
Moreover, the company uses meat without the use of added hormones and antibiotics.
(Source: Tutorialspoint, 2019)
Strengths and weaknesses
A glimpse of weakness and issues in chipotle has been given introduction. The
mission statement “food with integrity” was among the major strength of the company but it
has turned to its main weakness. This has led to reduction in company sales by 13.3 percent
in 2016. Customers started questioning the so-called integrity which they food should have
possessed. Continuous shortage of quality in food will create a very bad impression on
customers if not treated on time. Moreover, another major issues faced by Chipotle Mexican
Grill is food unsafety that have affected the revenue and growth (Vigna, Bianco, Goia, &
Serra, 2018). This unsafe food outbreak has led to negative publicity that has caused lack of
loyal customers. It has been assumed that company is unable and is not capable for delivering
clean food since last two years. Company can strive to turn its weakness to its strength again
by keeping its food of high quality (Bull et al., 2016).

Exploiting the strength
After the outbreak of E.coli (bacteria), which was highly opposing the use of
antibiotics became a reason in causing kidney damage. The company has used its strength to
plan addition of new things in the menu to build an attractive restaurant. This restaurant has
decided to offer certain facilitates such as “testing” so that customers will be able to see and
give their suggestion (Cole, 2014).
Managing the staff
In order to manage the staff at the restaurant, so that the company can be prosperous.
This company has to build successful teams spirit to improve the quality of food again.
Teamwork is more effective than individual work because human relations are very
important. The effect of establishing a quality testing team is much greater than individual
efforts of only the expert. Two working approaches should be mixed-up to become effective
in restaurant business (Phadermrod, Crowder, & Wills, 2019). Especially when staff should
know about their duties and this is possible in an organised team. Although, it is necessary to
understand that working individually is much simpler rather than conveying and discussing
each decision with a group. It needs the changing of the actions and various working methods
as per the demand of the goal. While analysing the team, it is to undertake how staff respond
under high stress, how they are concerned about the work, and how the sense of humour is,
which is important when dealing with the uncertain situation. A good team can hold the
people together when time become difficult.
On the basis of organisation principles, a achieved organisational objective does not
ensure that there is a good relationship between the restaurant workers. After sometime,
interaction among waiters and bartenders is more work-based, and the interpersonal
connection becomes weak. The more they work successfully together; they can grow in the

organisation as friends. When deciding and recognising certain symptoms, it is not a good
sign when colleagues give attention to other`s mistakes. Moreover, one should stay away
from people who make useless interpretation about people`s actions. This does not lead to
productive business effect but it eliminates self-centeredness. Frequent absence on the
workplace is a good sign of bad relationships among the team members. Gossips and intrigue
can be disturbing elements and should be treated.
Therefore, informal communication is established with an aim to eliminate the reason
of this symptom. Proper information is a way to eliminate and every gossip is a result of
deficient information. Apart from this, in order to control above situations, manager uses
“management diplomacy.” Moreover, responsibilities of a restaurant manager are huge such
as to manage the staff members, control the finance, and finally serve best quality services to
customer. A good team manager should be a cultured person, who have nice manners, taste,
must respect each team member, treat staff with due respect. A manager should not be
stubborn or take credits only for oneself. Or else no member will work effectively and
efficiently even not a good hardworking candidate if manager is self-centred jerk who always
think of success and earnings. A manager must reward his team members because every
individual wants to work in positive work environment that finally enhances profit.
Leadership in chipotle Mexican Grill
Over the last few years, sales and revenue declined drastically due to well-published
cases of consumers become ill. Food-borne illness was not only the case of leadership failure.
Chipotle have not recognised the damage of relationship with the customers and investor. The
company have noticed fall nine points in its stock. Due to negative perception created due to
food safety issues, chipotle leadership not only failed to protect the customers, it had led to
fail the brand and continued to look less trustable in eyes of consumers (McMillan, 2017).

Moreover, the spotlight of dissatisfaction will remain on chipotle and its leadership
unless it shows care for its customers. Communication problems need to be solved as it not
only have food safety issues but also trust issues (McMillan, 2017). Mostly, a company
operates and follows a particular leadership style either it can be authoritative or democratic.
An authoritative leader orders and undertakes policies to decide how goals has to be
achieved. This leader directs and controls all the business activities without allowing the team
members to participate in decision-making. This leader has full control over the team.
Whereas, democratic leadership is also recognized as shared or participative leadership. In
this leadership, members in the group take more active participative role in decision-making
process (McMillan, 2017).
In order to manage the subordinates in the restaurant, autocratic leaders who take
decision by taking the responsibility on oneself rather than delegating it into the team. For
instance- a democratic leader in restaurant allow the waiter staff to undertake some of the
own decisions especially on to how to handle the disgruntled customers and allow them to
work on their own system during the order and delivering the food. When waiter has the
power to handle the situations of their own and finally come up with a sense of
accomplishment in the work. On the other hand, it also empowers the employees
(Meiannwang, 2017). By following g the democratic style properly and attract the customers,
a manager should be consistent, manage the work proactively, learn the operation with the
help of doing the work by yourself, prioritising the staff retention, keep an eye on customer
satisfaction by improving their experience. In order to create a favourable environment and
run the restaurant efficiently, there are some ways to manage the restaurant effectively-
A democratic leader Listens to the employee` advice and feedback (Norton, 2018).
Align the menu.

Democratic leader put efforts to create an employee manual (Norton, 2018).
An effective inventory system should be established.
An democratic cares of employee`s development and invest in the staff such as training and
development sessions (Norton, 2018).
Create sub-stations in the kitchen to work
Apart from this, an improved managerial skilled will help the restaurant to be
effective such as consistency, manage proactively, learning the operations by working,
prioritizing the staff retention, keep an eye on customer satisfaction, improving the customer
experience, and necessarily invest in advertising (Norton, 2018).
Organisational structure
While considering the organised structure of chipotle, a systematic structure need to
be established according to business operations such as purchases, Kitchen, Service, Cleaning
etc. Although, there are many types of organisational structure such as line organisational
structure, functional organisational structure, divisional organisational structure, matrix
organisational structure, and project organisational structure (Robertson, 2018). Therefore,
centralised organisational structure depends on one individual to take decisions to provide
direction to the company. Whereas, decentralised organisational structure engage several
individuals who are responsible to make decisions and run the business. Most importantly
for chipotle Mexican grill, centralised organisational structure is more favourable as a single
department procures controls and purchases the material for the whole organisation. A
manager ideally purchases all the raw material for the entire material group. Each material
group has raw material of products to be manufactured (Robertson, 2018).

(Source: COMFORI MALAYSIA, 2017)
The choice of organisational structure depends on several factors that are based on centralised
or decentralised purchasing, Kitchen, Service, Cleaning -
(Source: COMFORI MALAYSIA, 2017)

Marketing strategy
While undertaking the elements of marketing strategies to render the target market, the
company can add attractive and innovative dishes and offer special discounts. On the basis of
demographic and geographical segmentation, the ideal target market includes college
students, and young professional people.
Product-
CMG has managed to deliver a great amount of sophistication in Mexican food and the
entire dining experience, which it offers, to the customers. The company`s mission for
manufacturing the products is “integrity with quality”. The company has successfully infused
the fine dining with the fast casual style food as a part of marketing strategy. Variety in MCG
has limited menu, which mainly feature six dishes such as burrito, salad, bowl, soft flour
tacos, and crispy corn tacos. The company also offers guac and dips, margaritas and soft
drinks as its side. Company has a menu for kids and toddlers. The company tie-up with the
local farmers and the suppliers who supply raw material every day. Apart from these, the
menu also includes toppings and add-ons such as sour cream, Queso, monetary Jack cheese,
roasted chilli-corn, tomatillo red chilli sauce, and salsa.
Price
CMG uses high quality organic items in the dishes and these dishes are priced more
than their counterparts. The prices lay and range similar dishes. The bowls and burrito re
priced between $6.5 and $7. The salad is priced between $6.5 and $7.5 and tacos are priced
as per the number of pieces they offer, which is around $6.5 and 7.5. The restaurant also
provides and offers dips and chips between $1.5 to $3.5. Whereas, Margaritas are generally
priced on higher side which is $7.5. The restaurant charges higher prices than the competitors
do because it continues to charge to maintain its brand image. Restaurants maintain a

premium pricing policy due to its quality. Discounts on certain dishes are offered to students
to render larger customer base.
Placement
The company is an international chain of fast food headquartered in US and is
extended in Canada, UK, Germany, and France. It is planning to expand Paris, Germany,
Burnaby, Langley in Canada, and London in UK. The company has its outlets in around
2,250 locations. To deliver food in the restaurant, a combination of self-service and waiters
can be good enough. Self-service includes the ordering of burritos through application rather
than using third-party app. As the company does not operate in franchise system and it
includes self-owned outlets. The digital upgradation will be more convenient for the
customers. The efficient staff manages the outlets include 64,570 employees by 2017 (Shaw,
2014). Moreover, the restaurants allows the customers to see the processing of dishes. Each
ingredient is available for display and customer can choose for himself or herself. Chipotle
restaurant offers quick services because the food served should match the sophistication of
fine dining.
Promotion
CMG is aggressive in its promotional strategies and uses billboards, newspaper, and
television. The company has its own website that gives information for all the various dishes,
which they offer (Christ, 2017). The company uses every possible advertisement tool to
improve its brand visibility. Display billboards, radio, newspaper, and television should
ensure again in its advertisement campaign should promote product quality and ensure
product safety. Most importantly, it relies on word of mouth publicity that ensures that the
goods and services are of high quality. For fitness freak people, the company also provides
nutritious content. The brand takes the help of social platform such as Facebook, YouTube,

and instagram. The company also sponsors teams in matches and events such as international
cycling union. Moreover, the company is an official partner of Boston bruins and Boston
Celtics.
Customer service experience
In order to render best services, there are basic principle that focus on its customer
service such as setting the expectation carefully, providing consistent products and services,
manage the waiting time properly, and train the employees on the basis of communication.
Reservation- chipotle offers table reservation rather than arriving at the restaurant and
standing in long queues. This helps the company to maintain a high demand. The company is
benefited as it guarantees a seat to a customer. Table reservation is a tool to stand in a
competitive market. Apart from this, table reservation makes it possible to steal a good
market share. The company offers online reservation system. Customers will have good
experience once they make online reservation because it is a quick process and these services
are available 24*7.

Welcoming and sitting- welcoming refers to door wishes, which a customer gets when
he/she enters. The subordinate who stand on door should know to greet the customers. As the
company has a brand name and provides a fine dining by offering sophisticated sitting
arrangement. Undoubtedly, chipotle fulfils its welcoming and sitting arrangement features
within the renowned name of its brand.
Ordering and delivery- this can become a disadvantage for chipotle as it`s delivery is not
cheap. The Chipotle offers its products on Postmates and it is also available on its own app.
The company deliver through DOORDASH and Postmates is on-demand logistics. Even if
the company delivers fast, the public image of the company is not at all favourable due to
food safety issues (Whitten, 2018).
Billing and customer feedback- due to quality and safety issues, the company was not
accepted much due to negative feedback on social media. The chipotle noticed that the
company`s share price has been falling with a drastic changes. But before the company`s
billing and customer services has built a brand image. Moreover, postmates generally charges
a variables fee on the basis of distance. On some days, companies also offer free delivery for
instance- to redeem the offer by placing a delivery order through mobile app of chipotle.
While leaving the restaurant, customers should be offered with a sweet dish or mouth
freshener (Barba et al., 2016).
Recommendation
Recently, the company has faced issues related to food safety. As a recommendation,
the company has to overcome new emerging challenges faced by chipotle due to increasing
competition and negative feedback due to poor food quality in fast casual segment. Although,
chipotle was the first organisation to open the restaurant that uses the fast casual concept. As
chipotle was the first mover in the industry, the company should offer cheap delivery to its
customers, which it is not offering through postmates and its own app. The company already

possess a mission of maintaining the food quality and so-called “integrity of food” but recent
outbreaks lead to loss of many loyal customers and investors.
While maintaining the higher food quality, it can generate a considerable cash flow
through sales; a company has to improve its portfolio of products, which it offer by targeting
more customers on the basis of demographic and geographic segmentation. As company
already offers healthy food then it can increase its customer base by targeting people of “X”
generation. The idea of providing fresh products to the millennial come up with more quality
issues as perishable goods has to be taken care of and served as soon as possible. If company
focus and emphasize on positive aspects, it will be able to solve its main issues of safety,
sanitary supply chain and finally it will prosper. As company can use its competitive
advantage such as sophistication and fine dining to attract the high-income customers more.
Moreover, the company faces penetrating competition that have reduced market shares. It can
recommended that the company have to reposition them to full-service restaurant and it
should reduce its pace of expansion so that it can focus on food safety issues.
After recommending, it is important to know the effect of customer dissatisfaction
affects the goodwill of the company. Company can apply various tools to maintain the food
quality such as mostly the products are agricultural products and they too can win
competitive advantage if they are of higher qualities, GAP, Six-sigma, and total quality
management. Company should connect to a group of high quality producing farmers rather
than choosing local suppliers just to save cost and transportation time. It has been noticed that
the company has opened 50-60 new restaurants each quarter. By reducing the pace of
expansion, there are some possible consequences such as difficult to maintain the cash flows.
As opportunity, profit will decrease due to limited expansion. Company needs to make strong
promotional advertisements to encourage and foster the demand by offering discounts, faster
delivery services, and enhance the limited menu. While undertaking the analysis of chipotle

and comparing it with direct and indirect competitors, woodpecker restaurant which is a small
restaurant by has some advantage such as interior and its beer offerings that chipotle lacks. It
is seen that the company has 2 percent of alcoholic drinks. In order to enhance its menu, the
company can add more alcoholic and flavoured drinks & beverages. Moreover, it is noticed
in the elements of marketing-mix stated in the heading of marketing strategies that company
does not provide food beyond lunch and dinner so while targeting “millennial”, the company
can also involve breakfast and starters in the menu.

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