Need a Rewrite on case study 7 business policy

Case 7: Chipotle Mexican Grill, Inc.: Conscious Capitalism by Serving “Food with Integrity” (Corporate Governance and Social Responsibility)

Park University

Synopsis of the Case:

Founded in 1993 by Steve Ellis, Chipotle Mexican Grill (CMG) strived to change the way fast food was processed and delivered to their consumers. Additionally, their goal was to change the way people thought of fast food by providing the freshest, raw ingredients, from sustainable sources, at competitive prices for the consumer. (pg 7-1) ¹ The “fast-casual” restaurants were appealing to consumers as they were seen as providing higher quality food and service. By 2006, CMG had grown to over 1600 restaurants in the United States and internationally. With competitors entering the “fast-casual” market and due to price fluctuations of agricultural products (usually increasing), by 2008, CMG began to see fluctuations in their profits. CMG marketed “Food with Integrity” which meant they ensured the products used (such as pork, chicken, and steak) were of a specific quality. To adjust to profit losses while keeping with their “Food with Integrity” marketing, CMG cut costs in areas such as operating and labor costs. CMG prices were higher than their competitors as they felt consumers would be willing to pay more for quality.

Relevant Factual Information about the Problem or Decision the Organization Faced:

Competition is affecting profits for CMG. When established in 1993, they were the only restaurant on the market providing “fast-casual” food. Their menu, quality measures, customer service was unlike anything on the market. Over time, competitors began to follow CMGs lead and provide the same products at cheaper prices. CMGs weakness was that nothing was proprietary and its product was very easy to imitate. CMG failure to take advantage of the niche they had over the entire restaurant service by having a product only they provided to the consumer. They failed to take advantage of their propitious niche. The company’s competitive advantages, that other organizations are not likely to challenge it (pg 171). ¹

To combat the loss in profits and to keep up with competitors, CMG began purchasing their meats from local sources and stopped following their original plan of only serving naturally raised and organic products. This was costly to CMG not only in profits but in trust in the consumer community. Due to the change in purchase of materials, the company suffered from food-borne illness outbreaks thus, losing consumer confidence in their products.

Explanation of Relevant Concepts, Theories and Applications Derived from Course Materials:

When CMG began, they only used naturally raised meats and organic beans in their menu items. The pricing of their menu items was slightly higher than their competitors. CMG felt that consumers would be willing to spend a little extra for quality, natural, organic ingredients. As more competitors hit the market, CMG was unable to keep up. Competitors were providing the same products as CMG and in some cases, providing more variety at cheaper prices. With competition and the increased cost of natural and organic ingredients, CMG looked to local sources for their products that did not fall in line with their marketing. The failure to ensure the quality of their products resulted in a loss in consumer confidence in the chain.

CMG is now working to get back their customer base and regain their trust. They have changed their leadership and their board of directors, adding two new officers, four new directors and a new CEO. ² By returning to their original process of only providing natural, fresh ingredients. CMG, in an attempt to keep up with their competitors, has added products to their menu such as queso and a breakfast and kids menu. ³ Even though one of their biggest competitors Taco Bell, already has this on its menu, their cheese was processed whereas CMG continued with their fresh and organic ingredients.

Recommendations:

New leadership was a good start for CMGs recovery. The new leadership is dedicated to ensuring the safety issues encountered by not following their processes doesn’t reoccur. By bringing in new directors, they have enhanced communications with their restaurants. To keep up with competition, CMG should continue to add to their menu, only those items that can be quickly put together by their staff in the production line and that require the same ingredients as those items currently on their menus.

Another area CMG has instituted is the ability to accept Mobile Payments. For a variety of reasons, more eateries are refusing to allow cash payment, and only accepting debit and credit cards. ⁴ CMG has an edge on their competitors by incorporating mobile payment training to their employees. Having this service available to customers along acceptance of cash, credit card and debit payments shows the company is paying attention to the social and technological climate thus, making it easier for the consumer to dine at their restaurants. This technology also adds to a sanitary environment due to employees not having to handle cash and food.

Alternative Recommendations:

CMG has a leg up on most of their competitors due to their restaurant locations and how their restaurants are set up. They provide a restaurant feel even though their customers are eating fast food. This is how they can continue to differentiate their product and services from their competitors.

Conclusion:

CMG has a lot of work to do to gain back their customer base along with community confidence in the product. Recent stock and profit numbers show that they are on their way but, they still have a long way to go. New leadership, improved employee training, increase in employee pay (higher than minimum wage), in-house promotions of staff, and improvements in the design of their restaurants, CMG is slowly regaining their customer base. Continuing on this path will return them as the number one “fast-casual” restaurant on the market.

References:

¹Wheelen, T. L., Hunger, J. D., Hoffman, A. N., Bamford, C. E. (2018) Strategic Management and Business Policy (15th ed.), New York, NY: Pearson Education Inc.

²Parmley, S., (2018, February 16)., Chipotle continues recovery., Retrieved June 30, 2018 from http://www.leadertelegram.com/Business/From-the-Wire-Business/2018/02/16/div-class-libPageBodyLinebreak-Chipotle-continues-recovery-div.html

³Bowman, J., (2017, July 19)., Chipotle’s Latest Move is Ruffling Competitors Feathers. That’s a Good Sign., Retrieved June 30, 2018 from https://www.fool.com/investing/2017/07/19/chipotles-latest-move-is-ruffling-competitor-feath.aspx

⁴Gillies, T., (2018, January 27), Restaurants embrace the future, getting patrons to pay without cash., Retrieved June 30, 2018 from (https://www.cnbc.com/2018/01/26/cashless-technology-catches-on-at-restaurants.html