5 Top Management Team Steve Ellis: Chairman & Co-CEO Montgomery F. Moran: Co-CEOJohn R. Hartung: Chief Financial OfficerRobert Blessing: Chief Development OfficerMark Crumpacker: Chief Marketing Officer
6 Chipotle's Story 1993- First Chipotle opened at a former Dolly Madison ice cream location.1995- Added second and third Chipotle locations.1996- Opened five more Denver area restaurants. 1998- Chipotle brings on outside investors.1999- First Chipotle's opened outside of Colorado: Minneapolis, MN and Columbus, OH.
7 Chipotle's Story (contd.) 1999- Steve Ells learns about the way most pork is raised in the US. Decides to do things in a different way. 2000- Started serving naturally raised pork. As of % of pork is naturally raised.2002- Started serving naturally raised chicken. Now, 100% of chicken is naturally raised.2004- Ahead of the curve, Chipotle starts using zero trans fat frying oil.
8 Chipotle's Story (contd.) 2006- Chipotle goes public on NYSE.2007- Over 60% of our beef is naturally raised. As of % of beef is naturally raised.2007- Stopped using cheese and sour cream with rBGH for Chipotle.2008- As of 2010, 40% of our black beans are certified organic.2009- Steve Ells testifies before Congress to try to eliminate the use of antibiotics in ranching.
9 Chipotle & McDonald's 1993: Chipotle is founded by Steve Ells 1998: McDonald's enters the picture, purely as an investment partner2001: McDonald's becomes the majority owner of the firm, making Chipotle a fully-owned subsidiary of McDonald's: Chipotle expands from under 100 locations to 466, expanding into more than 30 states2006: McDonald's says goodbye to Chipotle, spinning off the company in an IPO on the NYSE (CMG)
10 Mission StatementChipotle has re-vamped their mission statement to a simple but effective, “Food with Integrity.” This embodies Chipotle’s position on the importance of using animals that are naturally raised in “happy” environments.Chipotle believes it is important for people to know where their food comes fromSteve Ells is working to create a business in which all of their animal byproducts are naturally raised (free from steroids and chemicals)
11 Mission Statement (cont.) They receive 100% of their pork from naturally raised pigs from those producers who can meet their strict guidelines.85% of their beef comes from farms held with the same criteria35% of their dairy comes from cows that are pastured raised.100% of their dairy comes from cows that have never received the rBGH hormone.Trying to get their chicken from farmers who do not use antibioticsThey believe that happy animals produce better tasting food Chipotle's Fast Food Facelift
12 Mission Statement Analysis Who: A man or woman living life on the run, but does not want to sacrifice quality for convenience. Mid 20s to late 30s. Most are successful, urban and trendy. What: Mexican cuisine, specializing in burritos, tacos, bowls and salads. All of which are made with the highest quality products (naturally raised). How: An assembly line style, where the food is cooked and prepared in front of the customer and served with the highest possible customer service. Why: "Food with Integrity" is their commitment to finding the very best ingredients, raised with respect for the animals, the environment and the farmers.
16 ObjectivesServe 100% of naturally raised animal meat and dairy products at all Chipotle stores (Food with Integrity).The demand for pasture-raised animals has increased, thus the supply has also seen an increase.An attempt to take control of the healthier (organic) food consumer.
17 Current Company Strategies Provide the highest quality raw materials (naturally raised beef, chicken, and pork)Figure out the best recipe and provide our customers with a high quality experience (fast-casual dining)Focus on cooking techniques while providing customers with reasonable pricesMaintain a trendy culture inside the storeMusicChipotle RadioArchitectureFriendly employeesServe food quickly and efficiently
18 Chipotle Goes GreenChipotle is working closely with farmers and ranchers to ensure their operations create as small an impact as possible on the environmentThus they realize the importance of ensuring that all Chipotle restaurants are as Green as possibleTheir restaurants in Gurnee, IL and in Minnetonka, MN are registered with the United States Green Building CouncilThe nations first ever Platinum LEED certified restaurantThe highest level- in the Leadership in Energy and Environmental Design (LEED) rating system
19 Nick's Chipotle Visit architecture music culture menu easy to read architecturemusicculturemenu easy to readfriendlyquick
20 Macro Analysis Economic Market is rebounding (Chipotle stock is climbing)"Going Global" movementUnemployment rate at 9.2%3 year consistent decrease in median household income ( )Decline in spending moneyFranchised stores are gaining popularity
21 Macro Analysis Cultural/Social Trendy stores are gaining popularity (casual dining)People are demanding healthier foodPeople are eating out moreMore people are living by themselves or with unknown roommates"Going Green" movement Rise in Hispanic population in the U.S.
22 Macro Analysis Political/Legal Government regulations on food products (possible fat tax)Increased pressure on unethical businesses (treatment of farm animals)
23 Macro Analysis Technological New social media technology available Businesses embracing technologyRise in online food orderingIncrease in smart phone devicesNewer and faster ways to prepare foodChipotle introduced new heating machines that heat tortillas faster and more evenly, (NO MORE RIPPING!)
24 Macro Analysis Competition Increase in casual dining Increase in Mexican grill chain restaurants (Moes, Qdoba)Very competitive marketMany big business to compete with (Taco Bell, McDonald's, Wendy's)Low pricesGreat brand namesHuge growth potential Possible price war
25 Moe's Southwest GrillRun their business a unique way, they have out of the world name for their food menus(Homewrecker, Fat Sam, Joey Bag of Donuts)The atmosphere at Moe's is also different, they only play music from dead musicians to get people’s attentionFocus heavily on customer serviceThe way they welcome you is different from any other restaurant, "WELCOME TO MOE'S."Offer healthier food products which has helped attract new customers
26 Qdoba Mexican Grill Very similar business and food options Much deeper menuCannot customize burritosDon't use all natural and organic food items Actually have cooks in the back cooking food in pansSimilar trendy style, play music inside the storeHuge burritos at a bit cheaper of a priceNot as fast
27 McDonald's Fast-Food Industry Leader Generate new products more aggressively than in the pastCreate new selections that are tried out in one market for several weeks to see how the sales, costs, and margins grow and how easy they are to prepare by the company's constantly-changing staffCurrent trend focuses more heavily on social responsibilityAttempting to create healthier options for their consumers like salads, apple slices or milk instead of fries and soda
28 Wendy's/Arby's Group Their number 1 focus is quality All Wendy’s restaurant guarantee the highest qualityPrices are higher than other fast-food competitors because they want to be seen as a higher end fast food restaurantThey are willing to sacrifice quality for a price increase The Late Night Window is open until 1am or laterAn advertising campaign designed around it proves its importanceIncreasing their menu options to help attract more customers(Baked Potatoes, Chili, Boneless Wings and Salads)
29 YUM Brands (Taco Bell/KFC) Focus many of their strategies around marketing(example: iPhone app “why pay more” )Fast-food restaurant that focuses heavily on customer service Try to make service as fast as they can, so they can get more money, and more customersCater towards families by offering bulk dinner packages
30 Porter 5 Force Model Rivalry Among Competing Firms: (high) Entry of New Competitors: (low)Potential Development of Substitute Products: (medium)Bargaining Power of Suppliers: (medium)Bargaining Power of Consumers: (high)
31 Rivalry Among Competing Firms: (high) This is usually the most powerful of the 5 competitive forcesRivals (Direct Competitors)Moe’s Southwest Grill and Qdoba Mexican Grill are both widely known and similar fast casual dining establishments They create a threat to Chipotle because they serve the same kind of productsSubstitutes (Indirect Competitors)Other fast food companies (MCD, YUM, WEN)
32 Entry of New Competitors: (low) Hard to successfully enter the industry (very high failure rate)Already fierce competitionVery difficult to compete with such big companies (Chipotle, MCD, Wendys/Arbys, Yum Brands)
33 Potential Development of Substitute Products: (medium) Rather than eating at Chipotle, one could opt to:Stay home and make a burrito or taco Go to another fast-food restaurant Substitutes are not limited to our rival competitors of places such as Moe’s, Taco Bell and Qdoba but also include other fast food chains such as McDonalds, and Wendy’s/Arby’s Group. Seek a more “authentic” Mexican experience(example: Allegany’s Don Luchos)
34 Bargaining Power of Suppliers: (medium) The ingredients that they use for their products is not low in supply (chicken, pork)However since Chipotle uses the best raw materials, they often have to pay a premium to stay consistent with their "Food with Integrity" missionAdditionally, there are fewer farms that Chipotle views as acceptable for their purchasing needs Chipotle products also require a large amount of fresh produce, which are all seasonal products (tomatoes, onions, lettuce, etc). As a result the prices for these products may be higher due to seasonality factorsRising prices in oil also affect Chipotle
35 Bargaining Power of Consumers (high) This force will be high because the consumers are what runs Chipotle’s businessIf people do not enjoy the service and products that the business is producing, Chipotle's profits will decline and may lead to eventual closing of locations Chipotle will need to ensure that there prices remain competitive to their competitors within the market placeWe believe this is a place where Chipotle will need to seek improvement as their prices are currently higher than their competitors on average
40 Core CompetenceSome of the value chain activities that Chipotle performs especially well are:High quality products with the best raw materials(naturally raised beef, pork and chicken)Healthy ingredientsGood, clean and friendly environment(decor, music)Provide customers with a fast-casual dining experience at an affordable priceFast-serviceServe alcohol
41 Distinctive Competence The firm's strenghts that cannot easily be matched by competitors are:High quality products with the best raw materials (Moe's vs Chipotle)Healthier ingredients compared to other fast food establishments (compare a Chipotle burrito with a McDonalds hamburger)Serve alcohol
42 Competitive Advantage Chipotle provides high quality Mexican food at a reasonable price, with a short weighting periodThey use naturally raised animals for their meat and place great emphasis on quality in the production of all their products and servicesThe main competitive advantages that seperate them from competition are:Naturally raised meat in food (healthy)Unique flavor of high quality products
43 Value Chain Analysis Inbound Logistics: (high) Their high quality raw materials add a lot of value to the final productThey use naturally raised animals for almost all their meatBetter vegetables than competitorsOperations: (low)This stage doesn't add that much value to the product compared to their competitorsA lot of competitors use a similar type assembly line to make their productsThey are considered a fast-casual restaurant rather than traditional fast food so they are not known for their speediness
44 Value Chain Analysis (cont.) Distribution: (very low)Chipotle's distribution is inexistent They do not deliver their products.Sales and Marketing: (low)Chipotle spends 1% of their total revenues on ads compared to their larger rivals that spend 4% or more. They spend less in a year than MCD in 48 hours. They need to increase their market campaigns in order to compete with their larger competitors.Advertise with Billboards and radio adsTake advantage of word of mouths campaignsGive-a-waysThey sponsor teams (cycling)
45 Value Chain Analysis (cont.) Service: (Medium)They rank among the top in fast food customer services based on price, environment, meal, and service.`Conclusion:Most value is added in the raw materials stage by getting the best ingredients available. Additional value is added during the actual process of making the burrito delicious (and fast).The Finally value is added with great service in a well kept, and highly enjoyable store. Chipotle's key to success
46 Corporate Culture Take social responsibility seriously Use natural wholesome ingredients and promote responsible farmingTrendy- Management establishes a positive work experience and also a enjoyable place to eat. Chipotle serves beer, plays music, has unique furniture decor (very modern), and maintains an exceptionally clean dining spaceLove what they doChipotle tries to establish a loyal customer base through taking great pride their work. This leads to great customer service Workforce valuesValue workers to establish a positive working envirnment"Promote from within" Line workers can be promoted to store managers at new locations
48 Further Evaluation of Strategy CONSA lot of money, time and research to successfully enter international marketsLanguage barriersDifferent law systemsExchange ratesPolitical instabilityMoney spend in training new employees to meet Chipotle's valuesPROSIncrease total revenueswill increase the amount of money to be spent of advertising Increase the overall size of the company (so they can compete with their larger competitors)High acceptance rate in European countries (different style of life, more healthy, socially responsible)Increase in sales
49 Strategy #2: Implement a Short Term Mass Marketing Strategy Start clever television ads that are consistent with Chipotles culture by advertising:Social responsibilityHealthTaste Magazine ads, sponsorships, and product placementBoost brand imageHelp boost company growthKeep advertising short termGain awareness then revert back to W.O.M. campaignSudden surge of advertising to seperate them from direct competition (Moes, Qdoba)
50 Further Evaluation of Strategy PROSBoost brand awarenessIncrease salesGenerate greater revenueAllow for easier growth into new marketsCONSMay not be consistent with Chipotle's valuesExpensiveMay deter current investors due to high initial expense
53 The 7-S Framework Structure The division of tasks as shown on the organization chartThe management teams will play a crucial role in the implementation of both of these strategies (CMO Mark Crumpacker and CEO Steve Ells)Additionally the lower level employees will need to adapt to the new environment and continue the firms core values Responsibility for actions must be strictly enforcedDeadlinesStrategyThe coherent set of actions selected as a course of actionThe set of actions for each of our two strategies have been presented previouslyIncrease Growth PlanShort Term and Aggressive Marketing Strategy
54 The 7-S Framework Systems The processes and flows that show how an organization gets things doneChipotle heavily relies on their top management teams interaction with lower level employeesImplementation will start with the top and trickle down within the organizationIt is crucial for management to set the toneStyleHow management behavesManagement needs to tackle the proposed strategies head on if they are going to be successful Completet strategy formulation, implementation and evaluation are crucial
55 The 7-S Framework Staff The players in the organization Skills The players in the organization are the employeesIt is vital for all levels of the organization to understand the goal of the proposed strategiesSuccess starts with understandingA strategy is essentially a short-term missionSkillsCapabilities possessed by the organizationThe managers at Chipotle are highly capable of executing the proposed strategiesThey have a strong passion and desire for the firm and work to ensure that success is a constant within the organizationManagers from all departments must work together Collaboration is Key
56 The 7-S Framework Subordinate Goals The values shared by all in the organizationThe mission is to successfully enter new markets (internationally) while remaining faithful to the already established Chipotle name of quality (Food with Integrity), exceptional customer service and an ambiance of a sophisticated and trendy dining experience,by introducing franchising andimplementing a short term marketing strategy
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