Chipotle Mexican Grill is a fast casual restaurant chain pursuing a differentiation strategy through high quality, organic ingredients, classic cooking methods, and friendly service. It has over 1500 locations across North America and Europe, with $3.21 billion in revenues in 2013. Chipotle aims to change perceptions of fast food through its "Food with Integrity" philosophy. Strengths include its brand image and sustainable food sourcing, while weaknesses include high food costs and limited menus. Opportunities for growth include international expansion and a growing market for fast casual dining. Threats include intense competition and increasing costs. Chipotle achieves competitive advantage through its valuable supply chain and operations focused on premium ingredients. Effective leadership from founders Steve Ells and Montgomery

1. Presented by:
Sundeep Bhatti, Poonam Kaur Billing, Jason Macwan,
Arjun Pisharody, Neha Randhawa, Charlene Tcheong

2. About Chipotle

3. About Chipotle

4. About Chipotle

5. About Chipotle
• Business concept (business-level strategy)
• Vision/Mission:
• “… change the way people think about and eat fast food”
• High quality ingredients, classic cooking methods, affordable prices, distinctive interior design,
friendly employees
• Food with integrity
• 1595+ store locations across US, Canada, France,
UK and Germany
• 2013 Revenues of $3.21B
• 17.7% increase over 2012

6. • Pursuing a differentiation strategy… providing unique and superior value to
customers, for which they are willing to pay a premium… given acceptable level of
cost
• Credited with creating the “fast-casual” dining experience
• Dimensions of differentiation:
✓ BRAND: Brand image
✓ PRODUCT QUALITY: Organic, sustainable, healthy food
✓ SERVICE: Exceptional customer service
Chipotle Pursues Differentiation Strategy

7. ✓ Chipotle has a competitive advantage!
Industry Fast Facts
• Industry definition: Fast-casual food business in North America
• Fast-casual is positioned as fast food (convenience) but with focus on food quality & service
• Trend to move away from fast-food consumption to fast-casual
• Consumers becoming increasingly health conscious (reduced sugar, sodium)
• Seeking sustainable options, Millennials love ethnic options (Mexican)
Profitability Chipotle Taco Bell Qdoba Industry
Net Profit Margin 0.104 0.083 0.034 0.078
ROE 0.240 0.489 0.108 0.255
ROA 0.186 0.125 0.038 0.086
ROIC 0.240 0.217 0.074 0.130

8. General/Macro Environment
• Demographic: Aging population.
• Sociocultural: Trend towards healthy, sustainable food (avoidance of
sugar, sodium, trans fats).
• Technological: Increased social marketing campaigns via social media
(good health, good earth).
• Political/legal: Increased food safety regulations in North America.
Changing government regulations when considering foreign operations.
• Macroeconomic: Increasing labour costs.
• Global environment: Sustainable development, natural resource and
energy conservation, carbon footprint reduction.

9. × High threats are sources of competition that destroy profitability
× Low potential for profit… unattractive industry
Porter’s 5 Forces… Fast-casual food in N.A.
Power of
Buyers
Moderate
Threat of
New Entrants
High
Threat from
Rivalry
High
• Brand loyalty
increases
switching costs
• Differentiated
taste and
quality
• Low relative
concentration
of organic
suppliers
(differentiated)
• Relative low
capital req’ts
• Low barriers to
entry
• No expected
retaliation
• Many other
products with
similar price
/performance
trade-offs
• Similar function
limits prices
• Numerous competitors
• Competition based on
price, quality, service
Power of
Suppliers
High
Threat of
Substitutes
High

10. Strengths Weaknesses
• High quality food made with ingredients from
sustainable sources
• Marketing programs
• Fast growth (revenue, expansion)
• High food costs
• Limited menu items
• Upward pressure on labour
costs
Chipotle SWOT
Opportunities Threats
• International expansion
• Growing foodservice market
• Intense competition
• Increasing labour costs
• Increase food safety regulations

11. Value Chain
SUPERIOR
SUPERIOR SUPERIOR

12. Sustainable Competitive Advantage - VRIO
Value
Chain
Activity
Core Competence
/ Activity
Superior value
(premium) or low
cost?
Valuable? Rare? Costly to
imitate?
Organized to
be exploited?
Primary Inbound logistics YES YES YES YES
Primary Operations YES YES YES YES
Primary Sales & Marketing YES YES YES YES
Secondary Procurement YES YES YES YES
Secondary Human Resource
Management
YES YES YES YES
premium
cost

13. Effective Leadership
● Steve Ells, Chairman and co-CEO
○ Ells is founder of Chipotle
○ Classically trained chef who once held aspirations of
opening a fine-dining restaurant
○ Well-known face among Chipotle employees due to
store visits conducted
● Montgomery F. Moran, co-CEO
○ High school friend of Ells
○ Previously worked as a lawyer before joining Chipotle as
COO and then co-CEO
○ Instrumental in establishing the Restaurateur program

14. ● Montgomery F. Moran established the 13
characteristics essential to Chipotle’s career
advancement:
○ conscientious
○ respectful
○ hospitable
○ high energy
○ infectiously enthusiastic
○ happy
● The career path can seem like many steps, but
qualified candidates can excel through in a rapid
manner
○ presentable
○ smart
○ polite
○ motivated
○ ambitious
○ curious
○ honest
Common Career Path

15. Behavioural Control Mechanisms
• RULES
o Chipotle’s only steadfast rule is to work hard to try to change the
way people think about and eat fast food
• REWARDS
o Employees are encouraged with financial incentives in the form of
cash bonuses and stock options to progress through the ranks to
reach the significant goal of Restaurateur, with 98% of new roles
being filled with internal promotions
• CULTURE
o Employees wholeheartedly embrace the concept of “Food with
Integrity”, internalizing the values associated with the company and
operating to the high standards set forth by management

16. Recommendations
• Be prepared to tackle food ingredients price volatility:
o Purchase options & futures in addition to forward price contracts to ensure
pricing over time
o Hedge against food price fluctuations to mitigate this risk
● Be prepared to address upward pressures of labour costs by strengthening reward
mechanisms to compensate for lower wage levels
○ enforce culture throughout the firm - appoint a “Chief Culture Officer”
○ Celebrate a “Chipotle Culture Day” to reinforce group identity and pride

17. Thank you!
Any questions?