Chipotle Mexican Grill | Report

RUNNING HEAD: CHIPOTLE MEXICAN GRILL
0
Chipotle Mexican Grill

Chipotle Mexican Grill
1
Table of Contents
Introduction......................................................................................................................................2
Analysis and Evaluation..................................................................................................................2
Recommendations............................................................................................................................6
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

Chipotle Mexican Grill
2
Introduction
Chipotle Mexican grill is an American fast food chain was founded by Steve Ells in 1993
and has presence in 2491 locations. The company showed a net income of $176.6 million in
2018 and had 45,000 employees in 2018 (Chipotle, 2018). The company has presence in
Canada, United Kingdom, France and Germany and in Asian countries. The unique selling
proposition for the company is its use of natural ingredients and organic ingredients in its food
products. Chipotle offers Mexican flavored food products to its customers that include Tacos,
Burrito, Salad, and organic juice and milk. This report includes evaluation and analysis of
Chipotle Mexican grill position in the market and growth and generic strategies used by the
company. Further, considering porter five forces for food industry in America, analysis of how
these market characteristics affect Chipotle growth and generic strategies is given. After that
recommendation and conclusion is given.
Analysis and Evaluation
Chipotle is known as one of the food restaurants chain with no franchises, high quality
food products, limited menu and its committed employees. The company face many challenges
but able to survive in the market because of its different and changing strategies according to the
business environment.
Food with integrity
This concept was started by the company and included that all the products that are used
in food production should be fresh and for that the company decided to source its meat from
open range suppliers and its food ingredients from loyal and quality suppliers. Chipotle mission

Chipotle Mexican Grill
3
was to produce and offer “Food with integrity”, and to provide quality food that is produced with
fresh ingredients and using sustainable agriculture practices. The company integrated its supply
chain with its “Food with integrity” mission and due to that opened 22 independently operation
distribution centers. Chipotle focused on food integrity leads to the competitive advantage to the
company as the mission of Chipotle was “to serve the very best sustainably raised food products
with an eye to great taste, great nutrition and great value” (Walker & Merkley,2017).
Competitors
The competitors in the restaurant industry for Chipotle are Taco Bell and Qdoba. In order
to compete with these players the company position itself as the sustainable food and best quality
food provider with fast services. Whereas Taco Bell competed on the basis of price ($5) and by
adding more verities in its menu called “Cantina Bell”. Due to these changes sales of Taco Bell
increased by 7 percent in 2012. Qdoba was established in 1995 and had 600 restaurants in the
US; the company was competing with others on the basis of quality and differentiation in food
products. Further Qdoba was the biggest competitor of Chipotle as in terms of fast, friendly and
fresh food products. Because of stiff competition in food industry Chipotle see themselves as
focused towards providing sustainable food products and fast casual service provider (Hitt,
Ireland & Hoskisson,2012).
Grand Strategies
Chipotle grand strategy is expanding in the existing market rather than expanding in other
countries as the company focus on providing differentiated products to existing target market
that are Canada, UK, France and Germany. The company focuses on increasing its market share
by acquiring new customers, attracting competitor’s customers and by influencing non users to

Chipotle Mexican Grill
4
use the product (Drogen,2015). On that basis the company had concentrated strategy as Chipotle
activities were focused on only increasing market share in the US, UK, Canada and Germany not
in other countries. Further, Chipotle reduced its advertising budget in 2012 to $5.8 million and
totally dependent on word of mouth publicity. In order to attract more customers the company
started advertises its products using loyalty programs such as Farm team, cultivate, and Back to
the start, and attracted millennial and made them aware about fresh and health food products in
order to solidifying its brand image in the existing market. All these efforts by Chipotle were
made to increase its market share in the existing market and the company was successful in
competing with its competitors and gaining market share (Hitt, Ireland & Hoskisson,2012).
Generic strategies
Generic strategies include product differentiation and cost leadership strategy, Chipotle
used product differentiation strategy to compete in the market. The strategy of the company was
to cater to the ever growing health conscious community that desire for natural ingredients and
fresh products. Chipotle differentiated its products by providing great tasting food, sustainable
products using fresh ingredients or natural ingredients. Further, the company offer fast casual
services to customers and option of customization at the restaurants to create a unique meal
according to their preferences and taste (Gilliard, Hoffman & Baalbaki, 2017). As the company
mission was food with integrity that linked the company’s differentiation strategy as Chipotle
formed network of 25 local suppliers of green bell peppers, romaine lettuce, jalapeno peepers,
oregano and reed onions and this led to sourcing 10 million pounds of fresh ingredients in 2012.
Chipotle Mexican Grill raw materials were classified as naturally raised as 100 percent pork, 50
percent of beef and 80 percent of chicken were defined as natural raised ingredients, antibiotic
free and fed with vegetarian diet. Chipotle organic products were well established in the US and

Chipotle Mexican Grill
5
led the country towards organic agriculture and with gaining advantage of this opportunity the
company sold a burrito at $17. The company was successful in differentiated its products as one
of the best quality and sustainable, and natural products (Hitt, Ireland & Hoskisson,2012).
Five forces analysis and effect on strategies
In the US for the year 2012, the food industry was represented 4 percent of the country’s
GDP. There were 970,000 restaurants and employed 12.9 million people. The restaurant or food
industry share in the US market was 48 percent in 2012. Chipotle Mexican Grill operated in fast
casual segment and that was the smallest segments in the restaurant industry. Operators in this
segment focus on providing portable convenient food with fresh healthier ingredients and the
average price of checks in this segment was $7-$10 (Czaplewski, Olson & McNulty,2014).
On the basis of five forces model for food industry in the US market it was known that
the customers in this segment have the power to set price as any change in prices leads to low
market share. Entry of barriers in this industry is low as any other firm can enter in the market
this leads to strong competition in food industry. Further food industry has multiple replacement
products and highly fragmented. All these markets characteristics can affect strategies of
Chipotle Mexican Grill. As the industry is customer driven that means the company need to offer
quality food products as per the industry standard and high prices might leads to decrease in sale
of Chipotle. The company is facing this challenge as because of higher operation cost, Chipotle
products are higher than its competitors that are Taco Bell and Qdoba. Further, the food industry
is highly fragmented due to that it is difficult for Chipotle to dominate the existing market as
frequent changes in the industry affect the companies in food industry (David & David,2013).

Chipotle Mexican Grill
6
From the analysis it is commented that Chipotle Mexican Grill is not able to continue
with its concentrated growth strategies because of highly fragmented industry as Chipotle
follows concentrated grand strategy which is not suitable as it is difficult to dominate food
industry and to gain market share fully in existing market. Due to that market characteristics
Chipotle strategies can be affected and the company need to change it in near future and can
focus on product development strategy.
Recommendations
Chipotle compete in the food industry with its product differentiation strategy and
concentrated growth strategy. But from the analysis it is known that because of high
fragmentation in the industry and tough competition the company needs to change its
concentrated growth strategy. But on the other side the company needs to focus on reducing its
prices and boosting its sales. As its major competitors are also offering fresh and sustainable
food products and differentiated products in low prices. In order to reduce its price, Chipotle
need to reduce its margin and spend more on advertising its products to capture larger market
share. The company has some products that are not easy to imitate such as Burrito assembly line
that makes the company successful in the market. By analyzing food industry market and
strategies used by Chipotle it is recommended that the company can survive and compete in the
market if it focuses on reducing its cost and creating more awareness in the market as at present
Chipotle depends on word of mouth strategy the company need to build its brand through
advertising in order to increase its sales then only the company is able to continue its product
differentiation strategy otherwise changing business environment and increasing competition

Chipotle Mexican Grill
7
can affect negatively on marketing strategies of the company and can also reduce its market
share and profitability.
Conclusion
It is concluded from the analysis of Chipotle Mexican Grill that the company is doing
better in food industry as the company focus on offering differentiated products by using fresh or
natural ingredients and organic products. The company positioned itself as the food casual
services and fresh and healthy food provider by focusing on its mission “Food with integrity”.
Further, it is identified that the company use concentrated strategy and differentiation strategy in
order to compete with its competitors that are Taco Bell and Qdoba. Its competitors are
competing on the basis of cost leadership and quality products at low prices. Qdoba offer
products same as Chipotle that are produced using Fresh and natural ingredients. From this it is
recommended that Chipotle both the strategies can only be successful if the company focuses on
reducing its cost and bringing awareness in the market through investing in advertising its
products to boost the sales. Hence, in order to compete and survive in the food industry the
company needs to change its marketing strategies to product development and focus on
advertising and bringing efficiency in its production to reduce cost and offer its product to
customers at reasonable prices with high quality.

Chipotle Mexican Grill
8
References
Chipotle (2018). About us. Retrieved From: https://www.chipotle.com/
Czaplewski, A., Olson, E. M., & McNulty, P. (2014). Going green puts Chipotle in the
black. Marketing News, 31-37.
David, F. R., & David, F. R. (2013). Strategic management: Concepts and cases: A competitive
advantage approach. Pearson.
Drogen, L. (2015). Will Chipotle Mexican Grill, Inc. Continue Dominating the Fast Casual
Segment?(CMG). Smarter Analyst, 21.
Gilliard, D. J., Hoffman, D. L., & Baalbaki, S. (2017). Is Chipotle Mexican Grill Successfully
Recovering from Its Food-Related Incidents?. Journal of Marketing Development and
Competitiveness, 11(4), 34-48.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2012). Strategic management cases:
competitiveness and globalization. Cengage Learning.
Walker, R., & Merkley, G. (2017). Chipotle Mexican Grill: Food with Integrity?. Sage
Publications.