Strategic And Marketing Analysis Of Chipotle Mexican Grill

Strategic/Situation Analysis

Marketing planning and analysis are important activities for most of the firms in today’s competitive business environment (Chernev, 2018). The major objective of this report is to apply different concepts and frameworks of marketing on chosen organization i.e. Chipotle Mexican Grill. Chipotle Mexican Grill is an American fast casual restaurant chains that has its operations in United States, Germany, Canada, United Kingdom and France. It specializes in mission style burritos and tacos. It was founded by Steve Ells in 1993 in Colorado with the goal of providing excellent quality foods which are prepared using fresh and organic ingredients. The name of this organization has been derived from chipotle, Nahuati name for dried and smoked jalapeno chili pepper. It trades on New York Stock Exchange using the ticker symbol CMG. Chipotle is one of the first fast casual dining chains. Currently, it has its operations in over 2000 locations and it has the income of 475.6$ million with over 45,000 employees till 2016 (Chipotle, 2018).

The mission statement of this company is “food with integrity” and its vision statement is “to nurture a better world with each burrito it makes”. The major values of this company are higher quality, innovation, learning by doing approach, customer loyalty and enhancing popularity and continuous introduction of broader menu. To prepare the food, the organization uses quality, natural and locally produced ingredients. It is using innovative assembly line method that assists the firm in meal creation and rapid services (Ragas, 2009).

As one of the largest chain of fast casual dining, Chipotle is engaged in offering a wide range of food products to its customers. The organization offers naturally grown meat, ingredients and dishes produced by hand in its food outlets. It is a fast casual dining chain among Mexican restaurants which offers Mexican products like burritos, chips, crispy corn tacos, guacamole and salads. Apart from these products, it provides a different menu for kids segment that includes kid’s meal with seasonal fruits or chips and organic milk and juice. Thus, these are the major product offerings of Chipotle which make up its brand portfolio. Currently, the company is operating its business by having different strategic business units in different countries (Stevens, 2014).

For this discussion, the Chipotle’s strategic business unit of United States is taken into consideration. Its internal and external analysis is given below:

Strengths

Focused food menu with customization:

Chipotle Mexican Grill is offering a focused food menu with only 4 entrée items like tacos, salads, burrito and burrito bowls. This is the biggest strength of Chipotle US to provide with customization options with different types of beans, meats, tofu and a range of extras like cheese, lettuce, salsas and guacamole.

Innovation and differentiated marketing and advertisement:

This strategic business unit of Chipotle has differentiated itself in its advertising and marketing efforts. It is promoting its brand not only through traditional modes like print media and Television but also via digital media, content programs that consist of ‘Cultivate’ festivals of food, ideas and music. These marketing initiatives assisted the organization to create a word-of-mouth and thus organic promotion about Chipotle’s food items (Walker & Merkley, 2017).

Internal Analysis

Weaknesses

Higher priced food menu:

One of the biggest weaknesses of Chipotle is its higher priced food menu as its competing brands are selling the food items half its price. The company offers its products on comparatively higher prices as it uses natural and organic ingredients in their food. It has an adverse impact on the purchase behavior of customers in United States.

Limited Food menu:

In United States, the outlets of Chipotle serve a range of tacos and burritos but this menu is limited to these two product categories mainly and hence it lacks a wide variety of food products. While compared to Chipotle’s biggest competing brands Panera bread and Qdoba Mexican Grill serve variety of food items. This is the reason that customer spending is higher at these restaurants.

Opportunities

Industry growth and market trends

The Food service and restaurant industry in United States showed a development of more than 11% in the year 2016 over the past year. In this market, the growth can be endorsed to the robust economic development in this country. It provides various business opportunities to the business of Chipotle. In US, there is a growing trend of health consciousness among population that can be profitable for the future growth of Chipotle as it serves food items by using natural and organic ingredients (Welford, 2016).

Business expansion in untapped countries and regions

It is the most significant opportunity for the business operations of Chipotle US. In past 10 years, it has expanded its business very fast and it has made its entry into European market. It provides it various opportunities to spread in Europe and other nations also (Hessamoddin, Libaers & Burkemper, 2015).

Technological factors

In this country, technological factors are very important for Chipotle as the company can upgrade its operations and food preparation activities by using advanced technologies. Modern technology will help the company to promote its products by using online and social media marketing. Moreover, it can use this factor in making its supply chain operations smoother.  Thus, this external factor can provide the opportunity to enhance its business operations and activities effectively.

Threats

Competitive Analysis

Competition is one of the biggest threats for the business of Chipotle in United States. There are various players which are posing intense competition on Chipotle US. Some of them are such as Qdoba Mexican Grill, Moe Southwest Grill, Panchero’s Mexican Grill and California Tortilla etc. Among them, Qdoba Mexican Grill is biggest competitor of Chipotle that is operating its business as fast casual restaurant and it has more than 600 locations across the world. The prices of its products are lower as compared to the prices of Chipotle. This is the reason that it generates more customer base than Chipotle in US. In this industry, these players are competing on the basis of quality and unique taste, food integrity and comfortable dining areas. However, this organization is facing competitive pressure but it can overcome this by offering healthy and organic food products (Pen, 2015).

External Analysis

Economic Factors

In United States, there is economic instability that may affect the business of Chipotle Mexican Grill. The frequent changes in economy have affected the disposable income of American households. For this organization, it is very important to change its pricing strategy and lower the prices of food products. Moreover, there is a price inflation and product’s scarcity which can enhance the food prices and imply potential loss of customers (Miles, Gilmore, Harrigan, Lewis & Sethna, 2015).

Legal Factors

Chipotle’s industry needs to comply with various food and safety regulations. It enhances the compliance costs for the company and impacts its operating margins. Moreover, changes in wages law in United States have an impact on operating margin of Chipotle.

Lower Entry Barriers

In this industry, entry barriers are low as cost of entry is comparatively lower than other sectors. It is not very difficult for the brands to penetrate the market. Considering this threat, it is very important for Chipotle to use innovative methods to deal with this challenge (Yu, Ramanathan, & Nath, 2017).

SWOT MATRIX	Strengths · Focused food menu with customization · Innovation and differentiated marketing and advertisement	Weaknesses · Higher priced food menu · Limited Food menu
Internal Factors
External Factors	Opportunities · Industry growth and market trends · Business expansion in untapped countries and regions · Technological factors	Threats · Intense Competition · Economic Instability · Food and safety regulations · Lower Entry Barriers
Impact	Positive	Negative

Demographic Segmentation

Under demographic segmentation, Chipotle Mexican Grill is focusing on customers on the basis of different variables like age, income and occupation. The major focus of the company is on the people between 18 to 55 years old. By using the income variable, Chipotle is aiming its products and services on the people from middle and higher income level as prices of its food items are higher. Its food services can be customized which entice the students and young customers (Simpson, 2015).

Geographic Segmentation

Using geographic segmentation, this organization is focused on both urban and rural customers in United States. As mentioned above, the food and restaurant industry is significantly growing in this country. It is focused on major cities of this nation.

Psychographic Segmentation

Under psychographic segmentation, Chipotle restaurant is targeting its customers on the basis of their lifestyle and interests towards Mexican food items. As this organization is an offering food item by using organic and natural ingredients so it is emphasizing on health conscious people (Grant, 2016).

On the basis of segmentation characteristics and variables, Chipotle is targeting most appropriate customers which are given below:

In Demographic segmentation, the company is using three variables i.e. age, profession and income. This allows the company to target all customer segments like youth, adults and old age people. Primarily, it targets the millennial segment of customers in United States (Goworek, McGoldrick & McGoldrick, 2015).

The products’ prices are very high so it targets rich population of Australia. Under geographic, the primary target market of Chipotle is Austin, Bellingham, San Francisco and various other cities. The company has opened its stores in the areas which are more populated and approachable for shopping purpose. By considering the psychographic characteristics, Chipotle targets the people who prefer to eat food that is prepared from organic and natural ingredients (Lantos, 2015).

Chipotle Mexican Grill has positioned itself as casual dining restaurant chain that is engaged in serving Mexican cuisine that made of using organic and natural ingredients. While promoting its products and services among American customers, the major focus of the company is on the health concerned people. Their philosophy is “Food with Integrity” that is very hard to avoid. Thus, the company positions itself as a restaurant that has integrity for farms, animals and environment (Möller & Parvinen, 2-15).

Marketing Strategy Analysis

Product

Chipotle is a leading food organization that is based in United States and many other countries. Under its current product strategy, it has managed to bring sophistication in its Mexican food and dining experience which it provides to its customers. It is focused on offering only 6 dishes like crispy corn tacos, burrito, salad, bowl, soft flour tacos etc. The products are made of fresh and quality ingredients which are received from suppliers and farmers on daily basis. The current strategy of this organization is appropriate for its target markets. It is using organic and natural ingredients in its products that reinforces its positioning strategy and develop positive perception among customers towards its food items (Chipotle, 2018).  

Price

As mentioned above, the company is using high quality materials in its dishes so the prices of products are higher than competing brands. For instance, bowls and burritos are priced between $6.5 and $7. However, it is using a right pricing strategy but it is not that much attractive to entice youth segment and students as they cannot afford its dishes. It is providing discounted offers to its regular customers (Yu, Ramanathan, & Nath, 2017). The good part of its higher pricing strategy is that it is able to earn higher profit margins in United States.

Place

Under its place strategy, Chipotle has established an extensive distribution network. The food products can be ordered by using their website that has store tracker so that people can locate the food outlet nearby to their locations (Baker, 2014). It has situated its stores in the most crowded areas of US’s cities. Its restaurants offer quick services but food served meets the sophistication that is attained in fine dining. It has 1800 locations in United States itself.

Promotion

Chipotle is using different online and offline modes to reach the customers. It is promoting its products and services through television ads, newspaper, billboards etc. It is posting the pictures and videos on social media sites like Facebook, Instagram and Twitter.

The current ad campaign of this company is the “Chipotle for Real”. It highlights its ingredients and processes which are used in food preparation at Chipotle’s kitchen (Edwards, 2012). In United States, the SBU is engaged in providing different discounts and offers so that it can attract more customers.

After conducting above marketing strategy analysis of Chipotle, it can be recommended that this strategic business unit should make changes in its pricing strategy. Recently, the company is using premium pricing technique for its all product categories. In the future, it should offer some of the products on mid-ranged prices so that middle income level and lower level people can afford them. It has been seen that youth segment and students like to eat the food outside so company should set the prices considering their buying behavior. Under product strategy, it should continue to offer its food items and dishes using natural and organic products which will assist the organization to retain its current customers and create new customer base. It should improve its cooking process and manage its operational costs so that it can reduce the prices of products. These changes will assist to better attain their stated positioning in the minds of above-mentioned targeted audiences (Cowan, 2016).

Marketing Strategy Recommendations

The current marketing ad campaign of Chipotle is totally based on promoting the quality of products. The company should focus on increasing its range of products so that it can have diversified customer base. Currently, it has limited dishes in its food menu that affects its customer base and sales adversely. It should provide home delivery services in the nearby areas of restaurants so people can enjoy the dishes of Chipotle at their home. It will be easier and convenient for them. However, organization’s promotion should be same but it should enhance these practices by introducing new dishes in menu. In this way, Chipotle US will be able to meet its positioning statement in customers’ minds.

Currently, this strategic business unit of Chipotle is in growth stage as its products are started to sell at faster rate. In United States, people are very much aware about its healthy and organic dishes. The people are promoting its products through word of mouth. The customers in United States are able to analyze the capabilities of Chipotle. The promotion strategies of company are very effective which are helping it in gaining a larger customer base and generating more profits. In order to avoid the drastic declines, the company has started to become healthy fast casual option for American customers. For this, it has begun to provide non-GMO products, responsibly raised animals, domestically produced raw materials, home style cooking and natural and organic ingredients which are of the excellent quality (Gilliard, Hoffman & Baalbaki, 2017). To overcome the decline stage, Chipotle has acquired smaller food chains in US and continues to grow through this. In the future, the company should adopt product development strategy and make some changes in its food menu. It should add some more variety in its food menu like happy hours to attract more customers. In order to revamp its brand, it should plan to close its underperforming food outlets. It can update their locations. It should implement effective changes so that it can regain the trust of customers. In this way, it will be able to revitalize the brand.

Conclusion 

From the above analysis, it can be concluded that US business unit of Chipotle is operating its business operations successfully. By using effective strategies and techniques, the company is able to attain a larger customer’s base and generate more revenues in US restaurant industry. It is found that external and internal environments of business are very supportive and positive for the future growth of organization. It is using effective marketing strategies which are helping it in attracting a larger population. In the future, the company can make some changes in its processes and products so that it can gain sustainable competitive advantage against other competing Mexican restaurants in United States.

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