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Chipotle Mexican Grill SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Chipotle Mexican Grill managers to do a situational analysis of the firm . It is a handy technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Chipotle Mexican Grill is facing in its current business environment.
The Chipotle Mexican Grill is one of the leading firms in its industry. Chipotle Mexican Grill maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Chipotle Mexican Grill to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The central purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Chipotle Mexican Grill strengths, and eradicate its weaknesses.
Step by Step Guide to Chipotle Mexican Grill SWOT Analysis
Strengths of Chipotle Mexican Grill – Internal Strategic Factors
As one of the leading firms in its industry, Chipotle Mexican Grill has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Chipotle Mexican Grill are –
- Strong distribution network – Over the years Chipotle Mexican Grill has built a reliable distribution network that can reach majority of its potential market.
- Strong Free Cash Flow – Chipotle Mexican Grill has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Good Returns on Capital Expenditure – Chipotle Mexican Grill is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Strong Brand Portfolio – Over the years Chipotle Mexican Grill has invested in building a strong brand portfolio. The SWOT analysis of Chipotle Mexican Grill just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Automation of activities brought consistency of quality to Chipotle Mexican Grill products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Highly skilled workforce through successful training and learning programs. Chipotle Mexican Grill is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Superb Performance in New Markets – Chipotle Mexican Grill has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
Weakness of Chipotle Mexican Grill – Internal Strategic Factors
Weakness are the areas where Chipotle Mexican Grill can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Chipotle Mexican Grill is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
- Limited success outside core business – Even though Chipotle Mexican Grill is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Chipotle Mexican Grill
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Chipotle Mexican Grill is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- High attrition rate in work force – compare to other organizations in the industry Chipotle Mexican Grill has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
Opportunities for Chipotle Mexican Grill – External Strategic Factors
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Chipotle Mexican Grill. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- The new technology provides an opportunity to Chipotle Mexican Grill to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Chipotle Mexican Grill to capture new customers and increase its market share.
- Government green drive also opens an opportunity for procurement of Chipotle Mexican Grill products by the state as well as federal government contractors.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Chipotle Mexican Grill.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Chipotle Mexican Grill’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Chipotle Mexican Grill to increase its profitability.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Chipotle Mexican Grill to drive home its advantage in new technology and gain market share in the new product category.
Threats Chipotle Mexican Grill Facing - External Strategic Factors
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Chipotle Mexican Grill in those markets.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
Limitations of SWOT Analysis for Chipotle Mexican Grill
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Chipotle Mexican Grill
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Chipotle Mexican Grill
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Chipotle Mexican Grill managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Chipotle Mexican Grill
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
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References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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