Chipotle Mexican Grill, Inc.: Business Strategy Case Study Analysis

This case study analyzes Chipotle Mexican Grill, Inc.'s business strategies, challenges, and current situation within the fast-food industry. It discusses issues related to human resource management, such as the lack of fresh talent due to internal promotions, and marketing, particularly Chipotle's limited social media presence compared to competitors. The study highlights challenges from competitors like Taco Bell and examines Chipotle's strong financial performance and growth, placing it in the growth stage of the industry life cycle. Strategies such as cost leadership and enhanced promotion, especially through social media, are explored as potential solutions. The analysis also considers resource capabilities and strategic issues like maintaining customer service quality while managing costs. The document provides a comprehensive overview of Chipotle's strategic positioning and potential paths forward.

BUSINESS STRATEGY
Chipotle Mexican Grill, Inc.: Disrupting the Fast-food Business

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Contents
Introduction...........................................................................................................................................2
Issues.....................................................................................................................................................2
Human Resource Management..........................................................................................................2
Marketing..........................................................................................................................................3
Challenges.........................................................................................................................................3
Current situation....................................................................................................................................4
Strategies...............................................................................................................................................7
Issues face by Chipotle Mexican Grill, Inc............................................................................................9
Analysis...............................................................................................................................................10
Conclusion...........................................................................................................................................11
References...........................................................................................................................................12

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Introduction
Business Strategy is the means from which the organisation can easily achieve their
desired goals. It can be described as a long-term business planning to achieve the success in
the market for long-term survival. Strategies also help to reduce the issues which are faced by
the company during the achievement of success in the market. The same has been seen in the
case of “Chipotle Mexican Grill, Inc.: Disrupting the Fast-food Business”. In this report, the
Chipotle case study has been taken into consideration to analyse the business strategies and
issues which are face by the restaurant. Chipotle Mexican Grill is an American chain of fast
food restaurants in the United States, Canada, Germany and France. It is the first chain of fast
casual dining establishment which was founded in July 1993. It earned a net income of US
$475.6 million with the help of 45000 employees (Chipotle, 2018).
In the starting of report, the issues faced by the restaurant will be discussed which is
mentioned in the case study. After that, current situation of the restaurant will be analysed
with the strategies that are followed by the restaurant to reduce the issues. In the end of
report, issues faced by the restaurant due to adopting the changes in strategy will be analysed.
Issues
Human Resource Management
Lack of Fresh Talent
In this case, it has been analysed that the employees of the restaurant interact with the
customer to entertain them during the preparation of the order. Chipotle gives the training to
employees for providing better services to the customer. It provides the opportunity to
employees to run the business as a manager. It did not hire the person from outside the

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organisation (Rothaermel, 2015). There are many restaurants who hire the professional
managers to run the restaurants but Chipotle promote the employees for the post of general
manager. Although it motivates the existing employees when they are given additional
responsibilities but there are drawbacks of this Human Resource Management Strategy. The
company can get new ideas of management and client servicing if it is hiring professional
from outside the organization. While promoting the existing employees; it can face the issue
of lack of fresh talent and skill. The existing employees have the old ideas which are used by
the restaurant. Fresh talent is necessary for the organisation to achieve the higher growth in
the market. Existing employees have existing and old ideas of marketing which seems to be
common for the customer. Customer attracts towards the attractive ideas of promotion, this
needs to be implemented in Chipotle (Jogaratnam, 2017).
Marketing
Social media
As per the case study, the restaurant faced the issue of traditional marketing. Chipotle
follows traditional marketing to promote the product and services. Its presence on social
media is less as compare to the other competitors (Ruths, and Pfeffer, 2014). Nowadays,
social media is a source which is used by the people at a greater extent. The customer whom
Chipotle targets that is the target segment of Chipotle is Social Media friendly. Youth of age
between 18 – 24 years spent too much time on social media and hence Chipotle needs to be
more active on Social Media. It has been seen that the organisations also uses the social
media to expand or to promote the product in the market, but in this case, the restaurant
believes on traditional marketing which affects the sale of the restaurant. Less presence on
social media is an issue of the organisation (Blau, 2017).

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Challenges
Threat from competitors
In this case, it has been seen that the restaurant face the competition in the market.
The restaurants established itself among the leading fast food chains in the US; it has good
brand image in the market due to which the restaurant faces the competition in the market.
Taco Bell’s introduced the new upscale menu to beat the Chipotle. It also launched the new
chain of casual dining restaurant with the name of Taco Company. Due to this the share price
of Chipotle fell down by 7%. The sale and brand image of Chipotle is affected due to high
competition in the market (Bierbach, Sommer-Trembo, Hanisch, Wolf, and Plath, 2015).
Current situation
Chipotle Mexican Grill is the most successful restaurant chain with the strong top-line
and bottom line growth rate. It earned the high amount of revenue with the growth rate of
22% annually and net income by 26% annually (Robert, 2016). The high revenue makes
Chipotle the best-performing stock in its food sector. It has been seen that the Chipotle is still
a small player as compare to the other popular industry leader such as McDonald and yum
Brands. The other brands such as Pizza Hut, KFC and Taco Bell generating sale $34 billion
in a year but the Chipotle market capitalisation was $ 21 billion (Doz, 2017). It comes in the
leading companies of US but as compare to the other restaurants, it comes in the last in the
context of total outlet. Below image presents the exact current situation of the company in the
US Market. The data shown in the table is for the year 2015.

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In this scenario, it has been seen that the restaurant is continuously growing in the
market with the increasing rate of sale. Due to increasing sale and net income of the
restaurant; the shareholders are attracted towards the restaurant and holding the shares of the
company. The share price of restaurant is high due to high dividend pay by the restaurant to
the shareholders. Although, the restaurant achieves success but as compare to the other
restaurant it has less brand value. Nowadays, it has around 2000 restaurants in the market
which is less as compare to the Yum Brands Inc. and Taco Bell (Gilliard, Hoffman, and
Baalbaki, 2017). Below image presents the financial performance of the company and its
standing in terms of number of restaurant in USA in the year 2014. The statistics clearly says
that Chipotle is far behind Yum! Brands.

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Industry Life Cycle
In order to understand the current situation of the restaurant in the market, the concept
of industry life cycle can be used. Below diagram present the current situation of the
company on the curve of industry life cycle:
Chipotle

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According to this diagram, the restaurant is in the growth stage because it is
continuously developing its techniques to improve the performance in the market. It is
observed that the restaurant achieved success in the market but due to high competition in the
market; the brand image goes down (Simpson, 2015). The sale of restaurant is increasing
with good growth rate which states that the company will grow in a continuous manner. The
sale of the restaurant is increased due to increasing demand of customer for the best quality of
services and food. The restaurant maintains their brand image by developing the new
techniques and strategies which help in enhancing the performance of the restaurant. That is
why the Chipotle is in the position of growth in the market (Mihailović, 2017).
Chipotle Mexican Grill, Inc.
In this scenario, it has been seen that the restaurant learns from its mistakes. The
restaurant improves the strategies to improve the performance. From the table A 1 it has been
seen that the revenue is increasing with the increasing rate due to decreasing the operating
expenses. The restaurant has higher output with the lower cost per unit. The experience curve
of the restaurant is rising that means the restaurant has high output at low cost (Peppers, and
Rogers, 2016).
Strategies
Cost leadership strategy
Chipotle

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The restaurant can use the cost leadership strategy to attract the large number of
customers towards the services of the restaurant. From the above analysis, it has been seen
that the cost per unit is decreasing due to strong relations with the supplier. As discussed in
the case, the restaurant learns from doing due to which the cost per unit is decreasing and the
output is increasing. Due to decreasing cost, the restaurant can offer the services and food in
low prices to attracts the customer towards there services. This low cost strategy will help the
restaurant in competing with the competitors. Increasing demand of the restaurant has a
positive impact on the brand image in the market. The challenge faced by the restaurant is
reduced with this strategy. This strategy helps in taking the competitive advantage and
increasing the sale of the restaurant (Wheelen, Hunger, Hoffman, and Bamford, 2017).
Promotion strategy
As discussed above the restaurant needs to utilise the potential of social media. It is
already active on social media but it needs to make its presence stronger. Earlier, the
restaurant uses the traditional marketing but now it increases its presence in social media to
promote the services. Nowadays, people use the social sites for their entertainment and there
are many organisations that start their business on Social Media. The use of promotion
strategy through social media by the restaurant will help the restaurant to improve their image
in the market. The restaurant can post the videos, and music on the social sites; it also take
participation in the festivals and music programs to promote the services. Social media is
stronger advertisement as compare to the traditional marketing. It can help the company in
making the emotional connection with the customer. With developing the presence of social
media, Chipotle will be widely considered as the most engaged and responsive of fast food
companies (Allegranzi, and Pittet, 2017).

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Resource and Capabilities
It has been seen that the restaurant can use more resources to improve the services.
The restaurant uses the high quality ingredients due to which the services of the restaurant are
improved which is highly attractive for the consumers. As discussed above, the Taco Bell
introduced the new upscale menu to compete the restaurant and the result is the share price of
the restaurant fell down in the market. Due to which the restaurant started using the variety of
ingredients that is selected by the restaurant very carefully. It purchases the ingredients with
the selected supplier from which the restaurants get discounts on the ingredients. It also helps
in decreasing the cost per unit (Sykes, Comley, and Kelly, 2016). By increasing the variety
of ingredients the consumer can have many options in choosing the fast food. The restaurant
can also target the health conscious consumers by using the natural and organic ingredients.
The restaurant always plans to keep the simple menu with the sensible additions. This
strategy of the restaurant helps to attract the customer towards the variety of product which
has positive impact on the sale of the restaurant (Camisón, et al., 2016).
Strategic Issues face by Chipotle Mexican Grill, Inc.
Customer Service
From the above analysis, it has been seen that the restaurant get the services at the
lower cost. It is beneficial for the restaurant but sometimes it becomes a big risk for the
restaurant. It is necessary for the restaurant to deliver the best quality of services to
consumers but it consumes the high cost. If the services are bad then the consumer will
remember the mistakes and give the negative feedback which is not good for the restaurant’s
brand image. The way the restaurant handles the customer or the every step of dining
experience has a positive impact on the brand image of the restaurant. It is difficult for the

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restaurant to provide the quality of services to the customer in low cost (Hyun, and Perdue,
2017).
It has been seen that the high quality of services is essential for the restaurant because
the customer is main component for the restaurant. That is why; it is the responsibility of the
restaurants to satisfy the consumer needs and demand and makes them happy. To provide the
best services; the restaurants has to train the employees. Training is the cost and time
consuming process which directly impact on the performance of the restaurant. It will change
the curve due the high cost and less output.
Capitalisation
It has been seen that the restaurant can face the issue of the capital due to high cost of
services. To satisfy the consumer needs and demand the restaurant requires the high cost to
deliver the high quality of services. There are many restaurants that face the issues of the
capital which is a big problem. Restaurants require the enough capital to run their business so
that it can fully establish itself and can easily provide the quality of services to customer. As
discussed, the restaurant has strong relation with the suppliers so that the cost of ingredients
is reduces but the other expenses is high. The restaurant has to maintain the tables, floor and
seating arrangement which consume high cost. Promotion and resources strategy of the
restaurant consumes high cost which is difficult for the restaurant to afford all the expenses
with the quality of services. The restaurant requires the enough capital to cope with the
unexpected cost (Bartsch, Asti, Nyathi, Spiker, and Lee, 2018).
Analysis
It has been analysed that the restaurant has to adopt the new strategies to overcome
the above mentioned challenges. The restaurant has to take care of the customer services

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which are the main component to improve the brand image in the market. Promotion, cost
leadership and availability of variety of resources strategy will help the restaurant to improve
the quality of customer services but to provide the services it requires the high cost (Trusov,
Bucklin, and Pauwels, 2009). Capitalisation and customer service are the issues which are
faced by the restaurant while adopting the strategies. But adoption of strategy is the right
decision for the restaurant to earn the high revenue and increase the brand value. Brand value
of services will be enhanced due to its cost leadership strategy and promotion strategy. The
restaurant should carry out these strategies to achieve the high growth in the market (Jiang,
and Ma, 2018).
Conclusion
From the above analysis, it has been concluded that Chipotle Mexican Grill, Inc. is a
restaurant which is in the stage of development. In this stage, the restaurant faced many
issues such as lack of fresh talent, high competition and social media. The restaurant
encourages the employees towards the work by appreciating them for their performance. The
restaurant gives the promotion to employees due to which it has lack of fresh talent. The
restaurant has high threat of competition in the market because competitors beat the
restaurant which has negative impact on brand image. To reduce these issues the restaurant
can take the steps such as promoting the services through social media, cost leadership
strategy and many others. The restaurant can use the low cost strategy to attract the customer
towards the services as compare to the other competitors. The restaurant uses the variety of
ingredients to increase the sale and enhance the brand value. The strategies adopted by the
restaurant is beneficial but due to adopting these strategies it can suffer with some issues such
as high capital requirements, high cost, and many others. Although the restaurant is reducing
there issues by developing the new techniques and procedure but it has to take care about the