2 Questions – ANSWER SEPARATELY

The company showcased here for practicing exemplary strategic management is Chipotle Mexican Grill. Chipotle is a rapidly growing firm with highly motivated employees who execute daily a company strategy to capitalize on the public’s increasing concern for animal welfare and preference for organic foods. Chipotle’s most recent sales and earnings were reduced somewhat due to its stance on various ethical issues. This chapter addresses whether companies should take a stand on political and societal issues. Do you think companies should?
Exemplary Company Showcased Chipotle Mexican Grill (CMG) Headquartered in Denver, Colorado, Chipotle is a chain of about 1,700 restaurants in the United States, the United Kingdom, Canada, Germany, and France, specializing in burritos, tacos, and salads. Chipotle is the Mexican-Spanish name for smoked and dried jalapeno chili pepper. In a recent quarter, Chipotle opened another 45 restaurants, including 17 outside the United States. Chipotle Mexican Grill has a vision statement called Food with Integrity, which highlights the company’s efforts to use organic ingredients, and to serve more naturally raised meat than any other restaurant chain. Through the company’s vision of Food with Integrity, Chipotle seeks better food from using ingredients that are fresh and sustainably grown, as well as raised responsibly with respect for the animals, the land, and the farmers who produce the food. Chipotle has reported revenue growth of more than 20 percent annually in the last five years, while rival, traditional, sit-down restaurants are slimming down and growing slowly. The entire restaurant sector is growing about 1 percent annually. Considered to be one of the first so-called fast-casual dining establishments, similar to Panera Bread (stock symbol = PNRA) and Moe’s Southwest Grill (private company), Chipotle is rapidly growing, while many mainstream restaurants such as Red Lobster, Applebee’s, Olive Garden, and even McDonald’s are struggling. Effective July 1, 2015, Chipotle extended many benefits, including tuition reimbursements, sick pay, and paid vacation, previously available only to salaried employees, to its part-time and entry-level workers. The new benefits are available to all hourly and salaried employees, including cashiers and takeout specialists, who have worked at the company for one year. J. D. Cummings, Chipotle’s recruitment strategy manager, states, “We want to invest in the best people we have and keep them with us; we want to recruit and retain high school and college students, a target demographic for entry-level positions.” Chipotle promotes nearly 100 percent of its managers from within, as it did for 9,000 managers in fiscal 2014. The company also uses nontraditional marketing practices such as producing Web videos, sponsoring food and music festivals, and partnering with local farmers’ markets. Recently, Chipotle tried to meet customer and societal expectations for the humane treatment of animals by withdrawing a popular pork product, carnitas, (slow-simmered pork) from one third of its restaurants, because a particular supplier “was not treating hogs humanely.” Chipotle’s actions, however, reveal how healthier, more humane options pose difficulties for any chain trying to balance price, standards, demand, and perception with profitability and growth. Chipotle’s guidelines say “Pigs are to be housed in humane conditions with access to the outdoors rather than in pens.” The chain also tries to use antibiotic-free and hormone-free meat when it can, consistent with societal expectations.