Answer these questions, using the case.

1. What do you think about Chipotle's strategy? Perform an analysis of the strategic management process at Chipotle relying on the information provided in the case.

2. Provide relevant examples of different levels of strategy implemented by Chipotle. Identify and explain all the major events that have been shaping Chipotle's strategy over time.

3. What mistakes did the company commit with regard to its strategy, views, & decision making? What should the company do now? Provide clear recommendations for future strategic action toChipotle's management.

Case:

Chipotle still hasn't fixed its biggest problem Source: Business Insider, November 1st 2017 When Chipotle Mexican Grill, Inc. reported its financial results for the third quarter, investors had hoped that the company would finally get past the slump that began nearly two years ago, during an outbreak of food-borne illnesses. The company has faced numerous challenges in recent months as well, including another outbreak of norovirus, a breach that compromised customer payment data, and videos of mice in the dining area in a Dallas Chipotle location. And now Chipotle's financial results have failed to excite investors. For the just-completed quarter, Chipotle's revenue increased to $1.13 billion, up 8.8% over the prior-year quarter but lower than the consensus estimate of $1.14 billion. As a result, the stock crashed to its lowest level in nearly five years. DESSERT MENU ITEM, ONLINE TOOL, DIGITAL ORDERING TO DRIVE GROWTH The year 2017 has started on a positive note for Chipotle Mexican Grill (NYSE: CMG). The company reported a nearly 15% increase in same store sales for December 2016, indicating that it is finally seeing some positive traction after reeling under the e coli food scandal for more than a year. Chipotle is tried several new things in 2017 to attract customers. The company is looking to grow its customer base by launching an online tool to help customers to count calories and build a customized meal according to their dietary restrictions and preferences. The company is also looking to attract health conscious customers through this tool by helping them to track their diet goals. However, the company does not consider this menu augmentation to be a strong growth driver. Variety in its menu can entice existing customers to try new items, leading to an increase in the average customer spend at its stores. This metric, the average customer spend, is a key driver of Chipotle's valuation. If there is a rapid increase in the average spend per customer visit and it reaches $13.70 by the end of our forecast period (as opposed to our estimate of $ 12.70), there can be a nearly 10% upside to our price estimate. After a meeting with Mark Alexee, Chipotle's head of investor relations and treasury, BTIG analyst Peter Saleh said that the company is implementing some strategies that it hasn't pursued aggressively in the past. "We came away from the meeting with the sense that management is rethinking the company's approach to many aspects of its strategy and operations and aggressively pursuing sales drivers that they previously shunned as being un-Chipotle including menu innovation and TV advertising," Saleh wrote in a research note Tuesday. While other fast-casual restaurants thrive on wacky limited-time offers, Chipotle has made few changes to its menu in its 24-year history. The company began testing chorizo in select restaurants in Ohio, New York, California, Colora do and Washington, D.C., in June 2016 before rolling out the menu item nationwide in October of that year. The addition of chorizo was uncharacteristic of the burrito chain and was indicative of Chipotle's desire to drive traffic back to its restaurants. According to Saleh, chorizo a spicy chicken and pork sausage only accounts for about 3 percent of protein sales within the company and could be swapped out in favor of other menu innovations. "We have added to our menu over the years (burrito bowls, salads, sofritas and chorizo, for example), and tested other items (including a roasted tomato salsa, and an expanded beverage offering)," Chris Arnold, a spokesman for Chipotle. "So we have never said never to menu innovations, it has simply not been a driver of our business the way it is for other chains. For us to add to our menu, we have always wanted to be sure that what we are adding fits within our menu overall, and does not add unnecessary complexity to our operations." However, menu innovation hasn't come without growing pains for Chipotle. So far, the company has received tepid reviews of its queso, a new dish. Chipotle has long avoided serving queso at its chains because of its "food with integrity" pledge, which promises that its menu items will not contain artificial flavors, colors or preservatives. In a since deleted video, Chipotle said queso is typically "made with artificial stabilizers to keep its shiny liquid form," explaining why it hadn't offered it before. In addition, Chipotle could soon be exploring more breakfast-centric items and a new beverage lineup. Saleh said that Chipotle management said the beverage category primarily nonalcoholic was a big opportunity for the brand, which hasn't changed its beverages in the past eight to 10 years. In addition to menu innovations, the marketing department of Chipotle is looking to update its guest experience and alter its advertising strategy. The burrito chain has been reluctant to create television ads, preferring more grass-roots efforts and quirky film shorts to entice customers. However, it launched both a TV series for kids and a huge marketing campaign in 2017. In April 2017, the company launched its biggest marketing campaign focused on taste and ingredients. As Chipotle builds its recovery path, a focused sales campaign can play an important role in attracting customers back to its locations. Saleh said that Chipotle has had to pivot on some of its old strategies and adopt new ones that are more in line with what its competitors in the restaurant industry are doing. Despite these changes, Saleh remains skeptical about Chipotle's ability to woo diners back in the near term, especially after last month's norovirus incident, which put a dent in sales in the latter half of July.

THE PROBLEM

Chipotle has made a number of moves that it believes will restore the chain to its former glory. In addition to the previous changes to its food-preparation techniques, longtime co-CEO Monty Moran resigned, the company made changes to its board of directors, and it has added both a chief restaurant officer and a chief communications officer to its ranks. However, all the changes the company is making aren't making up for the lack of returning customers. The key number that's the most troubling is comparable restaurant sales, which grew an anemic 1% year over year. Adjusting for a sales promotion and new restaurant openings, comps wouldn't have increased at all. Chipotle has struggled to bounce back from an E. coli crisis in 2015 that sickened customers around the U.S. While the company had begun to restore its reputation in the past year, a norovirus incident in Virginia and a viral video of mice at a Dallas location sparked a fresh round of negative headlines. The rate of self-reported foodborne illnesses at Chipotle is at least nine times as high as at all other restaurant chains in the U.S. The rate of food poisoning reports attributed to Chipotle continues to be multiples higher than peers," Quade told Business Insider, referring to data pulled from his website, which allows people to self-report illnesses. "At this rate of reporting, our data indicates we should expect to see another outbreak attributed to Chipotle sometime in the next six to 12 months." A week later, shares in Chipotle Mexican Grill rallied after founder Steve Ells agreed to step down as CEO, clearing the way for a new leader with the operational expertise that the burrito chain says will help pull it out of a two-year slump. Ells, a trained chef who started the company in 1993, will hand over the reins once a new CEO is found, Chipotle said Wednesday. He will continue as head of the board, taking the title of executive chairman. "It is clear that we need to move faster to make improvements," Ells said in a statement. "Simply put, we need to execute better to ensure our future success." Ells had to navigate a minefield of problems over the past two years, beginning with a string of foodborne-illness outbreaks. Norovirus, E. coli and salmonella contaminations sickened about 500 diners between July and December of 2017. In 2015, one of the company's top four executives was arrested on cocaine charges. Mark Crumpacker, who led marketing efforts since 2009, returned to work in September 2016 after completing a rehabilitation program. Chipotle also lacked an operations expert during a time when its food-safety protocols were under fire. The co-CEO, Monty Moran, who was more focused on day-to-day operations. But Moran left that role in December 2016, leaving Ells in sole control. "It's been mismanaged for two years," says Michael Halen, an analyst at Bloomberg Intelligence. "They need someone who can turn around horrible sales and operations." "Bringing in a new CEO is the right thing to do for all our stakeholders," he said. "It will allow me to focus on my strengths, which include bringing innovation to the way we source and prepare our food." Ackman, a billionaire hedge-fund manager, is Chipotle's biggest investor. His firm, Pershing Square Capital Management, took a 10 percent stake in the restaurant chain last year. He described the company then as an undervalued business with a "strong brand, differentiated offering, enormous growth opportunity and visionary leadership." Pershing Square said on Wednesday that it fully supported Ells's decision to step aside. "We remain excited as ever about the future of the company," the firm said in an email. Even though investors seem happy with the decision, the uncertainty of a CEO transition could bring additional pressure, said William Blair & Co. analyst Sharon Zackfia. Chipotle director Neil Flanzraich said on Wednesday that Ells's vision was key to creating and expanding the chain, which helped pioneer the use of fresher ingredients and more menu transparency. But the company now has more than 2,350 restaurantsand difficult problems. The executive-recruitment firm Spencer Stuart will assist with the search for a new leader. Ells said during the call that the roll-out of queso during the quarter helped "successfully change the narrative about Chipotle." He's referring, of course, to the public focus on additional sick customers, rodents, and data breaches. "In my opinion, if the company wants to change the narrative, Chipotle needs to stop providing new reasons for customers to stay away. It troubles me that the company is taking a hit-and-miss approach and continues to focus on the wrong things. People are avoiding Chipotle because of all the negative stories in the press. Once those stop appearing, the customers will return."