Analyzing Chipotle's Strategy: A Comprehensive Case Study & Review

This case study provides a strategic analysis of Chipotle Mexican Grill, a prominent player in the fast-casual food industry. It examines the industry's competitive landscape, highlighting the threats of substitutes, the bargaining power of suppliers and buyers, and the rivalry among competitors. The analysis assesses Chipotle's competitive advantages, particularly its "food with integrity" philosophy and its focus on customer satisfaction through customizable, fresh food. The study also explores the impact of laws, regulations, and technological advancements on Chipotle's business operations. Furthermore, it identifies core competencies, mid-term and long-term challenges, including market competition, rising costs, and international expansion. The case study concludes with recommendations for managing operating costs, enhancing product quality, and addressing cultural and organizational challenges in new locations. Desklib offers a wide range of similar solved assignments and resources for students.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student
Name of the University
Author Note

1STRATEGIC MANAGEMENT
The global food industry is significantly developing with each day passing. The
organizations in the concerned industry are observed to try their level best in order to cope up
with the changing preferences of their customers so that they be able to survive in the
industry for a longer period of time. The fast casual concept is significantly important for
those organizations as it ensures the organizations get proper and sufficient worth for the high
quality foods and services that they offer to their customers. The focus of his paper is to
analyse the business operation of one such organization which follows the fast casual concept
in a significant manner. The chosen organization for the case is Chipotle Mexican Grill.
1.
The chosen industry sector is significantly full of opportunities for the organization.
The analysis of the threat of the substitutes will show that the business model that the chosen
organization is following in the mentioned industry, is followed by very large number of
organizations. The organizations like Baja Fresh, Panera Bread, Qdoba and Pei Wei is
producing tough competition to the chosen organization. However the Panera Bread is the
closest rival for Chipotle with an annual sales of 1.54 billion US dollars compared to
Chipotle’s 1.83 billion US dollar in the year 2010.
The chosen organization will face very low threat of the suppliers as it is associated
with considerable number of suppliers Niman Ranch, Meister Cheese Company along with
The Chef’s Garden. Apart from this the organization was observed to receive ingredients
from 22 regional operators who are independently owned. Hence the bargaining power of the
suppliers and the distributors are significantly low for the organization as it only purchases
from the agencies which are able to satisfy the quality specifications. Apart from that the
organization purchases in accordance to the pricing guidelines and the protocols, it has

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established with the relevant parties. Hence any sort discrepancy is not able to pose
significant amount of impact on the operations of the organization.
The power of the buyers in the concerned industry is significant as the organization
faces considerable amount of competition from the above mentioned competitors. Hence the
option for the customers is high. But the fast casual method of the chosen organization is
observed to create notable customer satisfaction and that is instrumental in the growth of the
organization which is evident with the largest amount of sales for the organization in the year
2010.
The threat of the new entrants is also low as the model of business that the chosen
organization follows requires considerable number of suppliers and distributors who are able
to produce quality ingredients. Any new organization will find it significantly difficult to
cope up with these sort requirements. Apart from that the industry largely observes 4 above
mentioned organization to be conducting the business in an effective manner.
Industry rivalry among the market competitors is high as all the organizations are
striving towards the achievement of such a business operation which will be able to guarantee
the customer satisfaction and their repetitive purchases.
The financial statistics will be a valid proof of the fact that the concerned industry is
significantly attractive for the business organizations compared to the other food sectors and
along with the intense market competition is sufficient to acknowledge the attractiveness of
the mentioned industry.
2.
The overall assessment of the facts and the figures of the financial statement of the
organization justifies that the value system is a source of the competitive advantage for them.
Chipotle’s “food with integrity” philosophy was significant step from the part of the

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organization in making sure that they offer high quality food with quality ingredients that are
sourced without any sort of adverse impact to the environmental balance. The fast casual
segment of the organization was dedicated to look for a better quality food than the fast food.
Along with this, the main objective of the organization was to satisfy their customers with
customisable, quick and fresh food that was to be prepared in front of their customers. The
organization largely believed that the sustainably raised products was able to make the taste
of its food better and that was instrumental in production of a competitive advantage over the
other organizations. However the organization’s belief of sourcing healthful product is
significantly controversial as it is observed that even if the organization provides quality and
sustainable ingredients, the menu options of it is packed with calories.
3.
The business conduction of the organization was not significantly affected by strict
laws and regulations or the political preferences. The organization only had the liability to
make sure that their products satisfy the health standards of the concerned nation’s
legislation.
The organization was a part of a market that registered annual sales of 3.85 billion US
dollars with a 25 million US dollar marketing expenses. The organization significantly
observed a rise in the generated revenue as it jumped from 1.33 billion US dollar of 2008 to
1.51 billion US dollar of 2009 and then in the year 2010 it reached 1.83 billion US dollars.
Hence the organization had a viable market opportunity to create significant revenue.
The organization was delivering high quality food products to the customers with a
quick and cost effective manner. The organization was observed to source the best quality
ingredients for their food products and along with that the organization largely believed that
the food products were significantly healthy for their customers.

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The organization used the presence of technology for the customization of the orders
of their customers and along with that the preferences of their customers regarding the
ingredients were assessed and reported by the application of technology.
4.
The core competency that the organization can continue to leverage is their quality in
the services and the products which enabled them to create a customer loyalty among their
customers. The formation of the customer loyalty was incredibly used by the organization in
the generation of the profit with the introduction of the fan engagement activity and the social
media connection. The organization had much better social media penetration than its
competitors with its representation in the Facebook. Apart from that the organization was
able to achieve the word-of-mouth marketing of its loyal customers which ensured that the
service and the products of the organization get better highlighted among a larger number of
probable customers.
5.
The mid-term challenges for the organization will be the severe market competition
among the market leaders of the concerned industry and the chosen organization. Along with
this, another major concern for the organization will be the increment of the cost due to the
sourcing of the high quality ingredients and the increment in the operating cost of the
business.
The long-term challenges for the organization lies in the plan of the market expansion
in domestic and international format. The major issue in this case is the cultural and
organizational challenges. The organizational structure of Chipotle is pretty simple with one
main office monitoring all the business operations and that creates significant difficulty as it
is difficult to manage the organization and effectively communicate to all the relevant parties

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from one single space. It creates significant problem in the proper understanding of the
cultural and local differences in the new locations. The finding of the appropriate location is a
major challenge domestically and in case of the international business expansion, the main
issue is the absence of the proper brand awareness among the people of the new locations.
6.
The organization needs to effectively manage operating cost by introducing
centralised purchasing department which will be instrumental in reducing the transportation
cost as well. Apart from that the organization must focus in increasing the quality of the food
products along with making the products more cost effective.
For the long term issues, the organization must open a branch at every new location so
that they do not face significant in monitoring from some other country or state. Along with
this, the cultural differences will be reduced as well by following this format. The
organization needs to use the social media platforms in a more frequent manner in order to
promote their services and the products as that will make sure that the company be able to
achieve a proper brand in the international market.

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Bibliography:
Chipotle.com. (2018). The only ingredient that’s hard to pronounce at Chipotle is
“Chipotle.”. [online] Available at: https://www.chipotle.com/#
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), pp.32-45.
Foodstandards.gov.au. (2018). Food safety standards (Australia only). [online] Available at:
http://www.foodstandards.gov.au/industry/safetystandards/pages/default.aspx