Analyzing Chipotle's Competitive Advantages: A Case Study Solution

This case study examines the factors that enable Chipotle Mexican Grill (CMG) to sustain its competitive advantages. CMG distinguishes itself through its distinctive product offerings, emphasizing organic, sustainable, and fresh ingredients, which contrasts with competitors like McDonald's. The company's strong people culture, with a focus on employee training and development, attracts a loyal millennial customer base. CMG's marketing strategy positions it as a "fast casual" brand, utilizing owned media and social media for consumer engagement. Financially, CMG demonstrates strong performance, with a high return on equity and operating margins, and a healthy cash conversion cycle. Key advantages include high-quality ingredients, a diverse menu, a strong brand, effective marketing, skilled employees, consumer loyalty, and economies of scale. The company's financial health, including no outstanding debts and efficient cash management, further supports its sustainable competitive advantage. Despite operating on a smaller scale than some competitors, CMG's comprehensive approach drives its success in the competitive market.

CASE STUDY

Table of Contents
QUESTION 2..................................................................................................................................1
Factors that enable Chiltole Mexican Grill to sustain competitive advantages...........................1
REFERENCES................................................................................................................................3

QUESTION 2
Factors that enable Chiltole Mexican Grill to sustain competitive advantages
Chiptole Mexican Grill (CMG) operates in restaurant industry and serving a large number
of audiences with great quality, healthy and organic dining services to the consumers. There are
many factors which enable business to sustain in the competitive market place. One of the key
elements that strengthen CMG’s competitive position is distinctive product offerings as it uses
organic, sustainable, fresh and authentic ingredients allowed business to provide maximum
choices under the limited menu items. This business model, “Limited things with thousand of
ways” is totally different from the competitors operating in the fast-food ingredients such as
McDonald, Pizza hut, KFC, Yum! Brands and others.
Besides this, employees are the core strength of the CMG’s success and growth.
Restaurant pays focus on hiring advanced, skills and multi-talented workforce within the
business unit. Under the HRM practices, it takes enough time on hiring, motivating, training and
promoting the personnel (Chilptole Mexican Grill, 2015). Every member provides individual
attention to the people and also it do not need experienced workers as fresher are being trained
by the restaurant regularly to enhance their skills so as to serve best consumer services even in
the busiest period. Thus, strong people culture is the factor that enables CMG to attract
millennial audience base and make them loyal towards its brand for the competitive success.
It’s marketing campaign also build distinctive brand position from that of competitors. It
has positioned its business profile as “fast casual” not the “fast food” that give distinct corporate
image in the mind of consumers. In the marketing functions, CMG focuses on using sustainable,
locally produced and organic food ingredients. It helps to match up shifting consumer demand
regarding qualitative food products and services. Owned media promotional strategies through
video, music programs and social media sites promote better consumer engagement. CMG has
been considered as actively engaged with the consumers due to fast responsiveness, quick
frequency of tweets and consumer responses on its Facebook pages. It enable restaurant to
satisfy consumers through one-to-one engagement, more importantly, target customers under the
age group of 18-24 years.
1

Despite of this, it gained a strong return on their shareholders equity as it stands at 2 nd
position with 19.6% ROE after Starbucks as it generated a ROE of 22.2%. It clearly indicates
that CMG is obtaining good return on their equity so as to fulfil their commitment towards
stakeholders. Stock analysts in the market also have trust upon CMG’s potential to generate
continuing rising return for the investors. It can be evident from the business results in March
2015, in which, out of 30, 18 analyst respondents restaurant stock as “Buy” or “strong buy”
whereas remaining 12 replied that current shareholdings must be hold. It clearly indicates that it
is delivering good return to their investors. It generates high operating margin of 17.3% in
comparison to the Yum!brand whose OM has been reported to 11.7%. Moreover, its operating
return on total assets is reported to 31.2% in the year 2014 which is approximately twice to that
of industry average of 17%. Further, it does not excessively stock inventory items and services
are offered to the consumers on cash which helps company to manage effectively its cash
conversion cycle (CCC).
In addition to this, consumer captivity is the competitive advantage of it, however, in
supply; larger production helps to drive benefits of economies of scale and maximizes return per
unit. With this, it became possible for the company to charge low prices from the customers even
with profitable operations. It helps company to gain high return on their total assets in the
competitive market environment and enable firm to sustain in the market. Furthermore, looking
to the financials, it can be seen that company has no outstanding debts and fully financed through
its own capital without any loans (Chilptole Mexican Grill, 2015). It’s success encourage the
business to use venture capital as a long-term source of funds to finance their operations.
Although CMG is operating at a lower scale in comparison to Yum!brands still, it is generating
slightly lower return to that of competitor as in 2014, it has acquired a gross margin of 65.4%
whilst rivalry has gathered a return of 72.3%. Thus, it becomes clear that high-quality
ingredients, large variety of offerings, strong brand and marketing strategies, qualified and
talented people, consumer captivity and economies of scale are the factors that drive sustainable
competitive advantages to the Chitole Mexica Grill and enable firm to sustain in the competitive
market.
2

REFERENCES
Online
Chilptole Mexican Grill, 2015. [PDF]. Available through: <
http://192.168.1.18/projectfiles/internal_cust_document/Case10ChipotleMexicanGrillTex
tPages533541_1498882402.pdf>. [Accessed on 8th July 2017].
3