Country Profile

Chipotle in Norway

Carolyn SherlockJulia Pease

Robertson MengataKevin Doherty

Table of Contents

1. Chipotle Company History 3

2. Norway Country History/Snapshot 3

3. Overview of the Economy in Norway 5

4. Chipotle Operating within Norway’s Economy 7

5. Overview of the Financial Infrastructure in Norway 7

6. Chipotle Operating within Norway’s Financial Infrastructure

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7. Norway’s Business Culture 10

8. Chipotle’s Business Culture Fit 12

9. Norwegian Food Culture 12

10. Chipotle’s Food Culture Fit 13

11. Final Thoughts 13

12. Bibliography 15

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Chipotle Company History

Chipotle was founded in 1993 as a restaurant with a mission to bring higher quality to the

traditional fast-food market. Founder Steve Ells has a culinary background and wanted to keep

the focus centered on fresh ingredients, locally sourced, and prepared with proper culinary

techniques. Today this is the backbone of their mission, “Food with Integrity” (Stock & Wong,

2015). Chipotle is often credited with starting the new wave of “fast casual” dining, fitting the

changing preferences of the consumers looking for less of the McDonald’s fast-food approach.

Interestingly enough, despite being different from McDonald’s in almost every way,

Chipotle owes much of its success to the investment made by McDonald’s early on. While part

of the McDonald’s family from 1998-2005, they grew from 13 stores to 500 around the United

States. They gained valuable insight on distribution, supply chain, and other systems

improvements. From McDonald’s the Chipotle team learned how to manage a large company.

When they split from McDonald’s and went public in 2006, Chipotle also grew internationally

starting with a store in London. Chosen because of its similar characteristics to other locations,

Chipotle did well in starting out in large cities with a culture and interest in fresh food (Stock &

Wong, 2015).

Norway Country History/Snapshot

Norway’s history is similar to that of other Scandinavian countries. In the 1300’s Norway

was united with Sweden and Denmark. This rule and governing union changed many times but

continuously close relations between these countries dictated much of the early political history

(Sandbox Networks, Inc., 2015). Norway finally became independent in 1905 and is a

constitutional monarchy. The King, as the head of state, appoints the government of 20 ministers.

In addition, Parliament consists of 169 elected members. There are seven political parties in the

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country; the most prominent bring the Labor Party and Progress Party. There is also a strong

tradition of local government throughout the 19 counties (Jakobsen, 2013).

Overall, Norway’s foreign affairs policy contains a focus on promotion of peace and

stability. After World War II, Norway worked to form partnerships with nations, like the US,

that had similar democratic values. They were an original member of the United Nations and

they are a member of North Atlantic Treaty Organization (NATO) as well. They are in favor of

peaceful dispute settlements and have often served as a third-party mediator for such

international disputes (Brief history of Norway, n.d.). Given their geographical placement so

close to Europe, it makes sense that there have been considerations to join the European Union.

Several attempts have been made but none successful, usually being voted down by the people of

Norway. While they are the only Scandinavian country that is not a member, they are still

involved in the EU through the European Economic Area (EEA) and as a member of the

European Free Trade Association (EFTA). The issue of EU membership is complicated with

strong positions on either side and there are no signs of membership status changing in the near

future (Wikimedia Foundation, Inc., 2015).

The geography of the country is diverse, with a northern artic climate and in the south a

mild climate. Only a small portion of the land (4%) is suitable for farming, but there are other

natural resources. Larger reserves of oil were found off the shores of Norway in the North Sea

and in the ‘60’s many companies became interested in drilling for oil. Though the resources were

state-owned, they were able to buy the rights from the government. This industry, as well as gas

exports, has helped to make Norway a wealthy nation. Norway exports much of its oil and gas

resources to places like the UK. The many rivers and waterways have allowed for increases in

hydroelectric power, providing inexpensive electricity to the region. Renewable energy has

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become a growing area of investment in Norway with a strong focus on environmental concerns,

research, and evaluation. Maritime and seafood are also key industries for Norway because of

their location on the ocean (Economy of Norway, 2015).

The benefit of the oil industry in generating vast wealth has aided Norway’s success in

adopting policies aligned with Social Democracy. Along with other Nordic countries, Norway

adopted a model that combined a free market economy and a welfare state. The government

funds many social programs and it is primarily financed by the revenue from oil experts and

from taxes. The nation’s investment in these generous programs has led to a high quality of life

for its’ citizens and Norway has even been named the best place in the world to live (Stanglin,

2010). However, these policies do impact the obligations and requirements for employers

entering the country. For example, government has set standards of at least 4 weeks’ vacation

time a year, a 37.5 hour work week, a minimum of 9 months fully paid maternity leave, 10

weeks of paternity leave, and employment contracts (EcoTripSos, n.d.).

Overview of the Economy in Norway

Any rational decision to invest abroad involves an understanding of the key elements of

the country’s economic environment in order to reassure not only the existence of growth

opportunities but also the sustainability of profits resulting from the investment. As part of our

analysis with Norway, we will focus on the economic system, a few key world development

indicators, the natural resources, and finally the quality of life. These items will inform us about

the attractiveness of the economy of Norway as well as our company’s chances of success in that

country.

First of all, the economic system in Norway is opened and mixed including a

combination of public and private ownership(http://www.invinor.no/no/Why-Norway/,

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/en.wikipedia.org/wiki/Economy_of_Norway). Although the economy of Norway remains

influenced by global business cycles, it has always demonstrated its ability to grow because of its

rich natural resources. Furthermore, Norway offers a safe environment for foreign investment

companies. For example, in 2014 the country recorded more than 5,500 foreign-owned limited

companies, resulting in a high total value of foreign direct investment abroad whose stock was

estimated at 130 billion euros(http://www.invinor.no/no/Why-Norway/). Norway supports

domestic and international efforts to protect intellectual property; therefore software piracy is

very low and cyber-squatting is not a generally problem.

The key development indicators of Norway are good in general. Norway has a very

powerful economy. According to the World Bank, in 2014, Norway had a gross national income

(GNI) per capita of $102,700(http://wdi.worldbank.org/table/1.1) which is very high compared to

others mature countries such as France, Germany and United States whose GNI per capita

respectively were $43,520, $47,250 and $53,470. In addition, Norway has one of the greatest

purchasing power parities in the world at $65,450. This is the result of several improvements,

including the right regulations and low barriers to entry, which drove an increase in economic

freedom of 1.1% in 2015(http://wdi.worldbank.org/table/1.1). Norway has various rich natural

resources, including oil, gas, forests, fishing and other minerals. The investments made in

hydroelectric power during last century have also contributed to their industrial growth,

especially within the iron and aluminum sectors. Norway is also among the largest shipping and

aquaculture nations in the world. Other important economic areas include agriculture and

forestry.( https://en.wikipedia.org/wiki/Economy_of_Norway)

Norway is known as one of the best places in term of quality of life, according the

UNDP, the Human Development Index 2013. Norway is a generous state that offers a generous

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and extensive social security system(http://www.invinor.no/no/Why-Norway/). Priority for

ecology has given Norway its reputation as a green state, where the environment contributes to

the well being of the population.

Despite having the highest standards in terms of quality of life and purchasing power, the

economy of Norway presents some weaknesses such as the population size of 5.1 million, which

is distributed unevenly with 70% of people living in urban areas and 30% living in rural

localities. In addition, Norway has a very high cost of living(http://www1.american.edu/).

Transportation and rents remain expensive. Lastly, the tax burden and strong government

involvement are factors that may constitute brakes on the ability to grow in Norway.

Chipotle Operating within Norway’s Economy

Our review of the Norwegian economy has shown us a country whose economy is

favorable to investments for foreign companies. In addition, its key indicators of development,

reinforced by its rich natural resources, show its strength especially when compared to most of

the major world economies. Even though Norway is known for its high cost of living, the

measures initiated in the course by this government could sustainably strengthen its economic

performances. For those reasons, we believe that Chipotle may invest in Norway and adept it’s

marketing to the socio-cultural specificities and take a competitive advantage over other players

in the market.

Overview of the Financial Infrastructure in Norway

Before entering into a new foreign market, it’s critically important to examine the

financial infrastructure of the country in order to confirm that the company will be able to

operate there with no major roadblocks. For our purposes with Norway, we are looking into the

banking system, the ease of doing business in the country, the tax code and labor regulations, and

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finally the transparency with which business deals are done in the country. These areas will let

us know if our company has the ability to succeed there.

To begin, the banking system in Norway is very sophisticated and is in line with what

would be expected in the United States and Europe. There are commercial banks throughout the

country, some that have been in operation since the 1700’s helping businesses to grow in

Norway and beyond. (Just Landed, 2015) Aside from these domestic banks, there are branches

of many multinational banks operating in Oslo and throughout the rest of Norway as well. The

banking system in Norway is very stable and there have not been any significant issues with the

value of the Krone, Norway’s official currency.

The overall ease of doing business in Norway is incredibly good. In 2015 the World

Bank ranked Norway as the 6th easiest country to do business in out of 189 economies across the

world. (World Bank, 2014) For perspective, the United States was ranked 7th. This takes into

account such things as how easy it is to get construction permits, how easy it is to get electricity

to a building, how easy it is to enforce contracts, pay taxes, establish credit, resolve insolvency,

and a myriad of other factors. Norway has consistently been ranked high on the list of great

places for startups to operate and some have even labeled the country an “entrepreneurial

paradise.” (Salmon, 2011)

Norway is known throughout the world as a country where personal and business taxes

are higher than most others, but also where the standard of living is exceptional, the social safety

net is the envy of other countries, and where poverty is almost unheard of. Aside from personal

income taxes, there is a VAT (value added tax) of 25% on some purchases, which would include

restaurant meal orders. There is also a 27% corporate tax rate for businesses operating in

Norway. (Tax Rates of Europe, n.d.) As we learned from the World Bank Report, paying taxes

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and understanding the tax code of Norway is very easy as compared to other countries. Norway

is also a very good place for worker’s benefits, where aside from the free national healthcare,

workers are given mandatory injury insurance by their employer as well as mandatory

enrollment in a company pension plan. Laying-off employees in Norway due to financial

hardship is very easy, however firing an employee for cause can sometimes take months and may

end with a severance package having to be paid.

Finally, we wanted to touch upon the transparency in which business transactions are

done in Norway. Once again, Norway is rated very highly as the fifth least corrupt country in the

world to do business. As a comparison, the United States is ranked as the 17th least corrupt

country for business operations. The control of corruption in Norway is at 97%, making it a very

safe and fair place to do business all around. (Transparency International, n.d.)

Chipotle Operating within Norway’s Financial Infrastructure

After reviewing the financial landscape of Norway, there are no major issues that would

cause any significant concern for Chipotle to expand into the country. In fact, most of what has

been researched about the financial infrastructure in Norway reinforces the choice to open

restaurants there. Since Chipotle already has some European stores in places like England,

France, and Germany, a country like Norway would be an excellent choice for further expansion

considering these factors. Another reason it would work well in region is that Chipotle is

considering smaller stores, as much of the business is moving to take out. Even with the high

price for the retail space, expanding there would be more affordable with a smaller store model.

Though we learned that Norway has a very robust and modern banking system made up

of both domestic and well-known multinationals, it really would not be a significant factor for

Chipotle to consider. All Chipotle restaurants are company-owned, not franchised, so most of

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the capital needed to undertake this venture would likely be financed by themselves or through

existing, US-based banks. That being said, it is likely Chipotle could benefit from partnering

with a local Norwegian bank that can help navigate in their financial systems and tax codes.

As we learned from the World Bank reports, Norway is clearly a very easy place to start a

business with no red tape and a welcoming government. Chipotle would have no trouble

building new stores, hiring employees, and operating their restaurants in just about the same way

they do domestically and in the other European countries. For a fast-food chain like them, the

benefit of not having to stray too much from their standard operating procedures will be a huge

plus. They can also rest easily knowing that everything is done fairly and ethically there.

Finally, Chipotle’s own internal values and beliefs seem to mirror those of Norway’s.

The company has a very sound social conscious, which meshes well with the way all the

countries of Scandinavia are set up. Though the taxes may be higher there, it’s not too far off

from what they may be in a place like New York City, where Chipotle does resoundingly well.

Norway requires injury insurance, and pensions for all employees, but Chipotle already offers

paid vacations and free tuition reimbursement to all full and part-time employees in the US, a

rare thing for a fast food place to do, so it appears they would be quite willing to offer these

mandatory items as well.

Norway’s Business Culture

At first glance the Norwegian business culture is fairly similar to that of the Western

world; however, there are a few important cultural differences that must be appreciated. In the

late eighteenth century, there was intellectual elite who worked along with religious figures and

government officials to record the history of Norway. The process of gathering this information,

as well as the information itself, helped high-society Norwegians better understand the rural

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communities that made up the major of the country, and helped them distinguish their culture

from other Scandinavian countries. (Advameg, n.d.) This resulted not only in a period of national

romanticism by the intellectual elite, who exalted the rural populations in writings and art, but

the building a national identity. The spirit of Norwegian culture was recorded in the egalitarian

interpersonal code called ‘Jante Law’, the main tenant of which is paraphrased as, ‘you shall not

think you are special’. (Law of Jante, n.d.)

The underpinnings of this belief are still alive in Norwegian culture today and can be

seen in the economic and social policies as well as business life. There are very few hierarchies

within business organizations, as all people are considered equal. Managers are not expected to

boss people around but instead act as mentor and facilitator. They are also expected to listen to

and solicit feedback from employees. Shows of wealth or power are considered in poor taste.

Business communication is typically direct but informal, yet at the same time not overly

personal, as Norwegians don’t typically engage in small talk at work. Punctuality is essential and

personal initiative is considered highly valued, but with responsibilities being equally share by

all. This is one of the most confounding aspects of working within a Norwegian business for

Westerners, as no one person will claim responsibility for a task, instead all will. (Business

Culture, n.d.)

This culture of equality has determined the high pay level of all employees, even those

who would in western culture receive minimum wage. In fact Norway has refused to set an

official minimum wage, reasoning that it would inherently be unfairly low. (Top-10 Countries

with the Highest Minimum Wage, n.d.) Theoretically minimum wage employees in Norway earn

three times the salary of the average European minimum wage worker and receive the same

extensive benefits offered to all.

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Chipotle’s Business Culture Fit

Chipotle’s business culture should fit well within Norway. Western managers will have

to be mindful of the differences, however the culture of Chipotle is considered one of the most

progressive in the fast food industry, with policies in place to educate and include all levels of

staff. Chipotle believes firmly that their future is going to be found within their own staff. They

seek to build a strong team, grooming leaders from within instead of bringing in managers from

outside. This leads to a culture where everyone is given an equal opportunity to succeed. Given

these similarities, Chipotle should be well position to integrate positively with Norwegian

culture.

Norwegian Food Culture

Before committing to the Norwegian market it is also essential to understand the food

culture that Chipotle hopes to fit in to. Due to the northern climate, locally grown fruits and

vegetables are extremely limited outside root vegetables and cabbage. Even now fresh produce is

expensive, as the majority must be imported. Wild game and fish have been a significant part of

their diet, though like in many parts of the world it is shifting rapidly towards more typical

western meats. One of the staple dishes served at any meal, including breakfast, is cold open-

faced sandwiches. At first glance this couldn’t seem more different from the Mexican cuisine

served by Chipotle. However, the contents of these meals are changing rapidly to conform to the

more common western ingredients. Lunches, traditionally small and cold, are also growing in

size and are increasingly heated. Packed lunches are still the norm but this is also changing.

The cost of restaurant meals in Norway has made the tradition of eating out on a regular

basis, either for lunch or dinner, prohibitive for most families. This is due to not only the high

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cost of produce but also the high cost of labor. However compared with much of Europe,

Norway doesn’t have as much of a daily cooking culture. This has resulted in the popularity of

prepared frozen meals and Norway is infamous for having the highest frozen pizza consumption

in Europe. (Wining & Dining, n.d.) The high price of restaurant food is slowly decreasing

however, particularly when it comes to international cuisine, and Norwegians are starting to eat

out more. Some of the cheapest freshly prepared food available is found at kebab stands and

other street vendors, with mid-range prices being found in Indian and other trendy ethnic

restaurants.

Although Europe is close, continental cuisine is the most expensive and most exclusive.

The variety of ethnic foods in Norway’s cities matches that of most international cities and is

growing by popular demand. In fact, tacos are now tremendously popular in Norway. On Friday

nights, an impressive 8.2% of the population consumes tacos. This is such a phenomenon that it

has been nicknamed “fredagstaco,” a mash-up of Friday and taco. (Friday Night is Taco Night,

2014) There is even a “fredagstaco” hashtag with thousands of photos of tacos, celebrating fresh

ingredients without any extensive cooking required.

Chipotle’s Food Culture Fit

Chipotle is poised to make an excellent value proposition to the Norwegian consumer. If

they can keep the prices low, the consumers seem hungry for the product. The challenge will be

to maintain the profit margin given the cost of ingredients and the cost of labor. However the

market seems like it couldn’t be better suited for an immediate entrance by Chipotle.

Final Thoughts

When we were first were tasked with choosing both a country and a company to base our

research on, we had no intention of trying to conveniently find a perfect match. In fact, the ideas

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for the country and for the company came from two entirely different thought-processes.

However, what we quickly came to find is that Chipotle and the country of Norway seem like a

match made in heaven.

In our research, we have shown that Chipotle would have no major issues operating

within the economic and financial boundaries of the country and in fact they’d seem to strive in

that environment. The business and food culture in the country also seems to be an inviting

place for a high-end fast food chain like Chipotle to operate and the way the company is run now

would not have to be changed in any dramatic way to fit into Norway’s business norms.

Most importantly though, it’s the cultures of the two entities that seem to really

complement each other. In many ways, Norway and Chipotle fit together like guacamole on a

burrito.

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