A Case Study Chipotle Mexican Grill

Introduction

Chipotle Mexican Grill (CMG) was found in 1993 with a mission to service good quality food with inputs sourced using sustainable farming practices. Since its IPO in 2006 it has been attractive to investors due to fast growth and sizeable profit margins. However, in 2012, faced with domestic competition, rising food cost, and a slowdown in key performance metrics, with additional negative remark from a hedge fund manager, its stock price declined sharply.

In this case study, CMG’s business strategy and its core competencies are discussed. Also, recommendations on how it can use international strategy and cooperative strategy, as well as how it can use corporate governance as a source of competitive advantage are included.

Analysis

According to Trefis, a research company, organic and healthier food are gaining importance in the U.S. Consumers have become more health conscious and there is an increase in demand for natural and healthier food. Using its 'Food with Integrity' campaign, Chipotle has aggressively marketed itself as a restaurant using only naturally raised meat (“Chipotle Mexican Grill,” 2017). Taking cues from Chipotle, an increasing number of restaurant chains are adding all-natural products to their menu. Wendy's started offering upscaled items on its menu last year. Moreover, its restaurant remodeling initiative is inspired by Chipotle. Similarly, McDonald's commercial campaign launched in December 2011 boasted the use of quality ingredients in its supply chain. An increasing number of restaurants now tout the quality and the freshness of their ingredients to portray a healthy image of themselves (“Chipotle Mexican Grill,”

Chipotle's business is fully dependent on company-operated restaurants which explains the significance of this division to its stock. Chipotle enjoys higher average spend per customer than most of its competitors, given its high quality of food. For example, in McDonald's, the average spend per customer is around $4 whereas the corresponding figure in Chipotle is around $11-12. The company has successfully marketed itself as a restaurant serving natural, hygienic, and organic food in an upscaled ambiance, for which the consumers are often ready to pay a slight premium (“Chipotle Mexican Grill,” 2017). Another reason why the company enjoys a higher average spend per customer is because it has restaurants only in developed countries, where the average spend is usually higher than developing countries. Most of the fast food restaurant chains have a mix of restaurants in developed and developing countries, which has a lowering effect on the overall spend per customer (“Chipotle Mexican Grill,”