Chipotle is a company with a defined vision that, however, needs further refinement and readjustment. The current strategic analysis suggests that the company focuses on meeting larger goals of the communities that it serves such as health, safety, and prosperity. Strategy analysis allowed us to develop at least four strategic plans that stem from the EFE, IFE, and SWOT matrices (David, 2013). The four strategic plans are titled SO (strengths and opportunities), ST (strengths and threats), WO (weaknesses and opportunities), and WT (weaknesses and threats), based on which parts of the matrices they take into consideration.
The SO plan implies that Chipotle remains in the position of power under favorable market conditions. In accordance with its strengths and opportunities, the company might want to discover foreign markets, strengthen partnerships with ethical food producers, integrate technology, and diversify the menu (“Food with Integrity”, n.d.). The need for these measures stems from broader market tendencies such as the infamous volatility of the US market, the evolving needs of the consumers, and their behavior shifting toward conscious buying and online shopping (Shaverien, 2018). Chipotle has so far been in tune with what the modern customer wants: a product that is ethically sourced and has health benefits.
The ST plan, in turn, seeks to address the existing threats by making use of the company’s strengths. It appears reasonable to increase the advertising budget, given that it so far has been lower than those of Chipotle’s main contenders. Keeping prices on par with contenders together with an expanding menu is also part of the ST plan. The WO strategic plan prioritizes portfolio diversification and attracting talent to propel the company’s research and development. Lastly, the WT plan responds to the worst-case scenario and suggests measures such as lowering prices and defending Chipotle’s stained reputation due to food safety concerns (Giammona & Patton, 2015).
The Boston Consulting Group Matrix provides an important tool for understanding Chipotle’s current position on the market. Currently, it shows that the company belongs to the “Question marks” territory: it takes up a small niche with a good growth rate. In other words, Chipotle is at the crossroads: it has potential that could be used for greater benefits or wasted altogether. The IE Matrix provides a more optimistic perspective: it reflects high IFE and IEE scores, putting Chipotle in a position of power. Lastly, the SPACE matrix adds a necessary level of detail to the current picture. It suggests that at present, the Mexican style eatery has a few favorable options such as internal upgrade and internationalization. Evidently, both decisions require financial resources that Chipotle is fortunate to have at its disposal (Keller & Kotler, 2015). The restaurant chain has a strong presence in the United States with almost 2,500 locations as well as verified tools for further research and development (Lock, 2020).
Chipotle’s strategic analysis would not be full without objective financial data that is reflective of its performance in the last few years. For starters, Chipotle was able to pay its current and short-term obligations without the need to get additional financing. Additionally, the company has a favorable inventory turnover that measures whether an organization holds excessive stocks of inventories or whether they are slowly selling inventories. An area for concern, however, is evidence that suggests the companies’ liabilities were more than its assets between 2016 and 2017. Lastly, the final area of concern is the return on equity that is currently suggestive of financial distress.
It goes without saying that Chipotle’s transformation will be impossible without strong leadership. In the process of strategic analysis, we were able to identify organizational issues that might be holding the company back and stifling its growth. The current organizational structure can be characterized as vertical: everyone is reporting to one person and that would be the CEO and the chairman Brian Niccol. So far, he has been accepted very well by insiders and outsiders: in 2020, he was named the restaurant leader of the year. Despite his obvious talent in managing people, CEO Niccol cannot possibly handle every request, complaint, and piece of feedback. Therefore, it is not sustainable for Chipotle to have only one person that oversees the entire process and responds to everyone.
For this reason, we propose a new structure that will enable better communication. Namely, employees will be able to have their requests handled without the intervention of the top management. Potentially, this will help to get things done in a quick fashion. With the new structure, the CEO will only accept reports from the CPO which is Marissa Andrada. Everyone else will report to her and everything that the CEO needs to get done will be handed down through her. Open communication enabled by managers’ leadership skills will help employees to become more autonomous and accountable in their decisions. Aside from that, they will feel that their voices matter since they will not have to wait for a response and be able to receive a quick response.
References
David, F.R. (2013). Strategic management concepts: A competitive advantage approach. Pearson. Food with integrity. (n.d.). Web.
Giammona, C. & Patton, L. (2015). Chipotle’s greatest strength not it’s greatest weakness too. Web.
Keller, K. L., & Kotler, P. (2015). Holistic marketing. Does Marketing Need Reform?: Fresh Perspectives on the Future: Fresh Perspectives on the Future, 300.
Lock, S. (2020). Chipotle Mexican Grill – statistics & facts. Web.
Romeo, P. (2020). Chipotle CEO Brian Niccol named 2020 Restaurant Leader of the Year. Web.
Shaverien, A. (2018). Consumers do care about retailers’ ethics and brand purpose, Accenture research finds. Forbes. Web.