Chipotle Case Study: Financial Objectives, Strategy, and Analysis

This case study analyzes Chipotle's business strategy, financial objectives, and competitive advantages within the fast-casual restaurant industry. The study examines Chipotle's financial performance, focusing on revenue, profit margins, and strategic objectives, including differentiation through product quality and its 'Food with Integrity' mission. The analysis explores the company's business strategy, emphasizing differentiation and the value chain, highlighting operational efficiency, customer experience, and marketing efforts. It assesses the effectiveness of Chipotle's current strategy, identifies industry trends like increasing commoditization and consolidation, and evaluates the impact of new entrants. The study concludes by relating financial and strategic performance metrics to the company's objectives, providing a comprehensive overview of Chipotle's position in the market and its challenges.

Running head: CHIPOTLE CASE STUDY 1
Chipotle Case Study
Name
Institutional Affiliation

CHIPOTLE CASE STUDY 2
CHIPOTLE CASE STUDY
 What is a financial objective of the company?
The main financial objective of Chipotle is to increase revenue and profit margins.
Increasing Chipotle’s revenue remained the basic and fundamental of its financial objective and
this explains its emphasis on highly differentiated fast-casual food concept. This is demonstrated
by revenue figures below:
Internal analysis- Chipotle in the thousands
Net Revenue 498214
Net Income 22938
Operating Costs 34567
Income from
Operations 22938
Beta 0.21
Current Ratio 1.850%
Debt to Equity Ratio 0.690%
 What is a strategic objective of the company?
Chipotle’s growth strategy focusses on the fast-casual restaurant concept that
distinguished itself from conventional fast-food restaurants. The Company has a distinct business
model as well as built itself since the year 1993-a positive brand perception. It bets on both local
and organic products hence targeting a segment market of client capable of paying for quality
products.

CHIPOTLE CASE STUDY 3
 What is the business strategy (considering how they are seeking to create a
competitive advantage) and a related functional strategy of the company?
Based on the CMG study case (2015), the present business strategy employed by
Chipotle is focusing on differentiation which is observed via its emphasis on product quality.
Chipotle has engaged in the provision of sustainable, organic, local sourcing ingredient as well as
has in its matter animal welfare which include hormone-free and free-range. This is specifically
evident via the Chipotle’s mission statement: Food with integrity and its vision statement: to
change the way people think about and eat fast food.
According to the above Porter’s Generic Competitive strategic matrix, it is clear that
Chipotle has chosen on differentiation focus as its main source of competitive edge. The
differentiation intervene further into the Chipotle’s restaurant design, affable employee or the
manner this Company is focusing on music as part of its program for marketing (Grant, 2015).
Furthermore, Chipotle differentiates itself via being healthy alternative amongst the fast-food
restaurants and having high-quality ingredients. Such are manifested in Chipotle’s brand image.

CHIPOTLE CASE STUDY 4
Differentiation means that CMG accepts a greater production cost for additional value added for
its clientele. Therefore, Chipotle practices are narrowed focus on customers within a niche
market. A close examination of strategic planning cycle for Chipotle below reveals that CMG
emphasized on business model adaptation (Kurian & Muzumdar, 2017).
Chipotle’s strategy continually evolved over the years as shown by the brand size
expansion. The business strategies preferences of Chipotle stressed exclusively on deepening and
expanding its sustainable initiatives by tightening suppliers’ requirements. Chipotle recently
emphasized on expanding CMG’s scope concept via the development of two spinoff chains in
the year 2011. The ShopHouse Southwest Asian Kitchen remains a straight expansion of CMG
brand which utilizes same processes and concept though with a dissimilar kind of cuisine.
Moreover, Chipotle began collaboration with two additional firms to open Pizzeria Locale as a
means of fighting standards war. Chipotle has further focused on the vision (to change the way

CHIPOTLE CASE STUDY 5
people think about and eat food) of the Company on the end of its strategic priorities by
concentrating on product quality improvement. Therefore, local products remain preferred, and
vegetables stay organic and consequently, non-GMO and the meat remains as natural as feasible
(hormone-free and free-range).
The business strategy of Chipotle can also be analyzed via Value Chain Analysis which
helps understand Chipotle’s competitve edge throughout the Value Chain Analysis Tool
presented below:
According VCA, the primary activities of Chipotle which creates competitive
edge include operation (restaurant), and services provided in the restaurant. According to
operations; Chipotle assembly line remains built for efficiency in time with two special
posts “linebacker” and “expeditor.” The distribution system disposition stays functional,
simple and interactive, with workers who make food before the clients. Chipotle is a
fastest restaurant which makes up to 350 transaction an hour. Therefore, efficiency in
transforming its ingredients and distribution in its restaurants remains a unique feature
which creates a competitive edge for Chipotle (McLaughlin & Dicken, 2016).

CHIPOTLE CASE STUDY 6
Services Provided: Chipotle focuses on customer experience in the restaurants
and view this as key success factor. The mission of the employees is to remain enthusiast
and inspire loyalty vie the engagement with customers at every preparation step.
Therefore, the system of operation permits employees to make experience for customer
interactive. Food customization thanks to, “A Few Things, Thousands of Ways” principle
remains an integral part of services offered and is a direct added-value source hence
competitive edge. Besides primary activity, support activities which include marketing
and sales (brand equity), procurement and human resource management are also sources
of competitve edge for Chipotle.
Brand Equity: The digital strategy of Chipotle’s sales and marketing remains an
effort to differentiate its brand from the rest of fast-food chains. Chipotle emphasizes its
marketing on “fast-casual” kind of restaurant. It further develops its “owned media,
which include new music and video programs.” An example is “Black to the star” video
that was extremely famous in the course of 2011. Chipotle further interacts straight on
social sites including Facebook, Tweeter and also target 18 to 24 demographic which
remains significantly influenced by healthy habit trends such as vegan, non-processed
food and vegetarian (Vivica Ingrid Kraak PhD, 2018).
Procurement: the product selection remains stringent at Chipotle. Selected
suppliers solely responding to mission statement, “Food with Integrity” get contracts to
supply a range of restaurants. The product remain significantly non GMO, organic,
suitable, hormone-free, and free-range unlike its competitors’ products. Chipotle
emphasizes on getting significantly natural raw products with all ingredients being fresh.

CHIPOTLE CASE STUDY 7
HR Management: The organizations design remains a mechanistic type with
recruitment system being opened to inexperienced applicants as posited by their website
“no experience preferred.” Chipotle believes in training its novel workforce to their
culture and image. Chipotle is training its workforce with its “restaurateur programs” for
its managers. Moreover, the employees get motivated via the likelihood of fast evolution
and opportunities for growth (promotion intrinsically) in restaurants and also Chipotle’s
reward system. For example, bonus system alongside stop option for managers who have
successfully motivated employee to be managers.
In summary, VCA analysis permits to highlight how Chipotle is creating
competitive edge not only via operations alongside service provision in restaurants, but
also through sales and marketing and HR management at the level of the firm. Such
aspects pinpoint the Chipotle’s quality to make every step of its process fit for purposes.
The Chipotle customers remain inspired to come to the restaurants by through a targeted
marketing supporting sustainability alongside product quality. Consumers are able to
watch Chipotle’s food getting prepared when insider the restaurants according to desired
customization, with quality ingredients offered by local farmers rapidly. Nonetheless, the
procurement support activity, though appropriate for purpose, weakens Chipotle. In fact,
as the Company is growing but still staying stringent on criteria for quality of its
products, it is to anticipate that getting supply sources will become increasing daunting,
hence it remains a potential weakness (Ryu, Han & Jang, 2010).
 Relate a financial performance metric from the financial analysis to the financial
objective and a strategic performance metric from the case to the strategic objective

CHIPOTLE CASE STUDY 8
The financial performance metric was based on increase in revenue and increase
in profit margins whereas the financial objective was to increase revenue and profit
margins. The strategic performance metric was creation of competitive edge through
differentiated product and services and the strategic objective was to have a distinguished
fast-casual restaurant. This metric worked together as the financial analysis showed that
revenue and profits increased due to the creation of differentiated fast-causal restaurants
hence meeting the strategic objective of creating sustained competitive edge.
 How well is the company’s present strategy working and why?
The present strategy is no longer working well as the concept has become easily imitable
and lacks novelty hence allowing many new entrants to copy, enter and compete with Chipotle.
This is because the mission statement (Food with Integrity) never evolved since year 2001 and
stood merely affirmed in the year 2015. This case pinpoints towards the rising stiff competition
that is attributable to the lack of adaptation alongside change in Chipotle’s strategic plan. Indeed,
no evolution was developed notwithstanding the blossoming of identical restaurants concept. In
fact, inertia sources stay observable in the organization of Chipotle. Organizational routines exist
in the Chipotle’s operating activities and service provision in its restaurants which halted the
novel capabilities’ development. However, it is evident that Chipotle continue to suffer from its
success as it tends to conform to competitors and hence, in 2015, it remains subject to
institutional isomorphism (Nejati & Parakhodi Moghaddam, 2013).
 Identify a significant trend that is changing the industry’s structure
Based on the cases study, the analysis of Chipotle indicates that the success of Chipotle
culminated or triggered a change in industry structure whereby many rivals firms easily imitated
the idea or concept of fast-casual restaurants and hence shifting from the conventional fast-food

CHIPOTLE CASE STUDY 9
restaurant concept. This led increase in competition with Chipotle and among other new entrants
that had imitated the concept. The business model of Chipotle lacks novelty in the present state
of market because “Food with Integrity” seems to be inadequate to differentiate Chipotle like
previously. Furthermore the concept of Chipotle is no longer rare and easily imitable by novel
entrants or rivaling chains. Chipotle is currently in a Red Ocean amongst imitators as well as
rival that raise question of Chipotle’s sustainability in the long run (DiPietro & Bufquin, 2018).
 Is the industry consolidating?
Yes. There is a growing trend of industry consolidation. Specifically, this has been
witnessed when Chipotle collaborated with other two additional firms to open Pizzeria Locale as
a means of fighting standards war. This consolidation has been witnessed in other firms that want
to come together to create competitive advantage to outdo other rivals as the industry is
increasingly being flooded with similar products due to ease with which initially differentiated
products become commoditized (Dixon, Miscuraca & Koutroumanis, 2018).
 Are new players seeking to enter?
Even though Chipotle remained the first chain to work in fast-casual segment, in the year
2015, the occurrence in this segment continue to grow. The concept of Chipotle remains easy to
copy for small business and because of a low entry barrier in fast-casual segment, various
competitors are presently entering the market. Based on the industry structure evolution,
Chipotle remains in the phase of growth of its lifecycle. The demand is expanding as evident
from Chipotle’s financial data. The revenue of Chipotle never stopped rising from 2010 through
2014 as this ranged between $1836m to $4108m. Furthermore, the fast-casual idea/concept along
with food quality which accompanied the concept is currently standardized as this segment
increasingly becomes famous and appeal to several competitions.

CHIPOTLE CASE STUDY 10
 Are the industry’s products becoming more differentiated or more commoditized?
The industry’s products are increasingly being commoditized. This can be supported by
the fact that many news entrants entered the fast-causal food industry by imitating this idea or
concept from Chipotle which made Chipotle to lose its competitive advantage (Canziani,
Almanza, Frash Jr, McKeig & Sullivan-Reid, 2016). This can be understood through
competitors’ analysis.
Chipotle:
Qdoba
Strengths Weaknesses Vision Pricing Financial Info
(2014)
-Serves
Breakfast &
some 24 hour
locations
-Fewer locations
& stores
-Is a franchise
(lowers
- Fresh
ingredients
- High Quality
Mexican Cuisine
-Average Menu
Price approx.
$8.00
-Changed
-Company
Restaurant Sales:
$82.6 M
- Announced 50
Strengths
No Franchise
Organic Foods
Innovative
advertising
Brand loyality
Weakness
Small business
High cost of
supply
Higher prices
Limited
advertising
Opportunities
Increased menu
choices
Health consious
consumers
Global
expansion
Digital
Social
responsibility
Threats
Copetitor lower
costs of menu
pricing
More
competition
Change in
economics
Limited menu
choices

CHIPOTLE CASE STUDY 11
-Wide variety of
menu options
-Lower menu
prices
- Strong internet
Presence (Can
order online)
flexibility &
Originality)
- Located
Strictly in the
USA
served quickly pricing Strategy
in 2014 using
bundling options
for main dishes
-60 new
locations
expected this
year
- Same store
Sales expected
to increase 8-
10% this year
Boloco
Strengths Weaknesses Vision Pricing Financial Info
- Localized
Presence in
Boston
-Dietary Menu
Options (Gluten
Free, vegan,
etc.)
-Green
Initiatives
-Quality of
Ingredients
-Few Store
Locations
-Small menu
variety
-Weak Brand
Awareness
-Provide
Delicious
burritos to fit the
dietary needs of
the customer
-Wholesome &
socially
responsible
ingredients
- Average menu
price approx.
$7.00
-56% Growth in
the past 3 years
-Net Revenue
(2013) $25M

CHIPOTLE CASE STUDY 12
-Social Media
Presence
References
Canziani, B. F., Almanza, B., Frash Jr, R. E., McKeig, M. J., & Sullivan-Reid, C. (2016).
Classifying restaurants to improve usability of restaurant research. International Journal
of Contemporary Hospitality Management, 28(7), 1467-1483.
DiPietro, R., & Bufquin, D. (2018). Effects of work status congruence and perceived
management concern for employees on turnover intentions in a fast casual restaurant
chain. Journal of Human Resources in Hospitality & Tourism, 17(1), 38-59.
Dixon, D. P., Miscuraca, J. A., & Koutroumanis, D. A. (2018). Looking Strategically to the
Future of Restaurants: Casual Dining or Fast Casual?. Entrepreneurship Education and
Pedagogy, 1(1), 102-117.
Grant, R.M. (2015). Contemporary Strategy Analysis. 9th edn. John Wiley & Sons, Inc.
Kurian, G., & Muzumdar, P. M. (2017). Restaurant formality and customer service dimensions
in the restaurant industry: An empirical study. Atlantic Marketing Journal, 6(1), 6.
McLaughlin, P., & Dicken, C. (2016). Evolution of the Food-Away-From-Home Industry:
Recent and Emerging Trends (No. 333-2016-14263).
Nejati, M., & Parakhodi Moghaddam, P. (2013). The effect of hedonic and utilitarian values on
satisfaction and behavioural intentions for dining in fast-casual restaurants in Iran. British
Food Journal, 115(11), 1583-1596.