Category: Subway

Brief Business Description

Subway is one of the key worldwide competitors of KFC and McDonalds. The company was established in the middle of the 20th century. The creator of the Subway brand defined the essential values of the company. He claimed that the quality of the food and outstanding customer service should be the key strengths of the company. Subway restaurants are aimed at providing excellent production while trying to ensure the lowest production costs possible (Valentin 202). This managerial incentive defines the international success of Subway restaurants. The company offers numerous sandwiches to its customers and expands Subways product mix annually. The company carefully listens to their customers feedback and is motivated to adjust its strategy for the variability of the clients wishes and needs.

Country Selection

The country that is chosen as the next expansion opportunity within the framework of this paper is Indonesia. Subway may experience significant growth in this country due to its economic peculiarities and financial state of affairs. Indonesia is a perfect candidate for expansion because there is only a small number of local competitors. Introducing Subway as a contender to the market of fast-food restaurants will be a great opportunity to test the survivability of a major corporation in tough commercial conditions and all-inclusive bureaucracy. It is also important to take into consideration the occupational and personal values of Indonesians who will work for Subway. Therefore, several issues should be addressed by the marketing specialists before entering the Indonesian fast food market.

Marketing Issues and Their Solutions

The first issue is the lack of risk-taking and innovative mindset among both Indonesian managers and employees (Simi and Matusitz 60). This aspect of the business is a crucial characteristic of the future success of Subway in Indonesia. The expansion of the chosen fast food restaurant chain can be undermined by the lack of motivation of local employees. The company should identify all applicable approaches to improve the morale of the employees and implement several incentives that are typical of the United States and Australia (Lee and Edwards 42). Subway should also look out for the issues that may transpire during the brand registration process. In Indonesia, these rules are fairly authoritarian. On the other hand, the availability of natural and human resources may mitigate the adverse impact of the strict government on Subways practices. On a bigger scale, the resources that are available to Subway in Indonesia should be perceived as the most significant asset intended to help the company in the battle against the local marketing issues (Min and Min 286).

Another marketing issue typical of Indonesia is a high probability of commercial fiasco. There are numerous personal and business factors that should be taken into account before expanding the business. The majority of these external factors have an adverse influence on the Indonesian business and Subway will not be an exception. Therefore, the issue can be described as an array of business-related troubles that transpire due to the incompetence of the local workers (Krishna 138). There is a risk of losing control of the Subways financial aspect. Another related issue is the business culture in Indonesia. Discussing business predicaments is considered to be discreditable in this country, and this may lead to negative business transformations instead of collaboration.

The Best Marketing Strategies

Subways strategy should be aimed at driving consumer traffic and competing with the local contenders. This will be possible if the company uses several widespread marketing strategies. The first strategy is to build connections with Indonesian kids by selling various collectibles. These collectibles may relate to a popular movie, game, or anything else that may grasp the attention of the potential customer. This strategy can also be improved by offering a free collectible with a certain meal. At this point, Subway needs to find a niche that is not exploited by its competitors and make the best use of it (Pitt et al. 65). Another marketing strategy that may be useful in Indonesia is market segmentation. Subway administration will have to conduct research and identify the groups of customers that visit their restaurants frequently.

This demographic information is necessary to fine-tune the restaurants practice in alignment with the needs of their loyal customers (Pitt et al. 66). These clients can be offered special discounts and coupons. In Subways case, the third marketing strategy that may be profitable is societal marketing. This strategy is based on volunteer activity and charity events. The implementation of this marketing strategy is supported by Indonesian mentality and respect toward humanitarian values. The core objective of this marketing strategy is not to make more sales but to come up with more valuable ideas and build positive relationships with the companys customers (Pitt et al. 68). In turn, this will motivate the customers to patronize Subway and its practices. The long-term objective of this marketing strategy is to build a loyal follower base and dynamically adjust the companys approaches to the needs of their customers.

Works Cited

Krishna, Ketana. Analysing Competition in the Quick Service Restaurant Industry. SSRN Electronic Journal, vol. 15, no. 2, 2014, pp. 135144.

Lee, Alvin, and Mark Edwards. Marketing Strategy: A Life-cycle Approach. Cambridge University Press, 2013.

Min, Hokey, and Hyesung Min. Benchmarking the Service Quality of Fastfood Restaurant Franchises in the USA. Benchmarking: An International Journal, vol. 18, no. 2, 2011, pp. 282300.

Pitt, Leyland, et al. Managing the Franchised Brand: The Franchisees Perspective. Advances in Corporate Branding, vol. 5, no. 4, 2017, pp. 5971.

Simi, Demi, and Jonathan Matusitz. Glocalization of Subway in India: How a US Giant Has Adapted in the Asian Subcontinent. Journal of Asian and African Studies, vol. 4, no. 11, 2015, pp. 4562.

Valentin, Erhard. Business Planning and Market Strategy. SAGE Publications, 2015.

Abstract

Subway Company is a leading fast-food chain of stores. It operates around the globe, but with its main offices in North America. The company is classified as a service sector organization that offers healthier foods as a replacement of pizza and hamburgers, which have been linked to problems such as obesity.

Its main goals entail producing customized foods that meet clients tastes and preferences. The company has experienced continuous growth since its inception in 1965. Its operational environment is competitive. Many organizations, which pose a threat of substitution, influence its strategic decisions.

The company has the potential to secure long-term success considering that its strategy of focusing on healthy fast foods aligns well with the growing consumer attention to the consumption of low-calorie foods.

Introduction

Subway is a US incorporated organization that operates in the fast-food industry. Mainly concentrating on sea sandwiches, the company expands through the area monopoly strategy. Doctors Associate Inc. not only owns the fast-food supply chain, but also operates it.

Subway constitutes one of the first growing single brands across the globe. As at the end of 2014, the organization had an excess of 43,000 different outlets in over 108 operational territories (Covert & Gibson, 2015). The companys central offices are situated in Connecticut. Different operations centers support the functionalities of the company.

Rationale for Selecting Subway

Subway operates in a highly aggressive fast-food industry that has giants such as McDonalds and Yum Food Company, which are constantly changing their growth and operational strategies to derive their competitive advantage from their people.

The process of analyzing the effective operational strategies of an organization, which can be deployed as a benchmark, is well accomplished by considering an organization that operates in a highly competitive environment. This assertion forms the rationale behind the selection of Subway as the company on which to base the analysis.

Indeed, it is interesting to identify why Subway remains such a successful single brand across the globe, considering that its competitors have been engaging in business partnerships to secure long-term business success, yet Subway is still able to withstand the competitive forces.

Brief History

Subway was born in 1965 when Fred DeLuca, its founder, sought the help of USD1000 from a friend, Peter Buck, to initiate what he called Petes Super Submarine. The location of the business was chosen to be Connecticut. In 1966, Peter and Fred registered a company called Doctors Associates Inc.

The main task of this entity was to manage the operations of the restaurants since its number of franchises continued to grow to the extent of penetrating the American market even deeper (Subway, 2012). The name of the company arose from the desire of Peter to pursue a course in medicine and the fact that Peter had a doctorate degree.

Hence, the name of the business was not in any way associated or linked with any medical school. However, in 1968, the organization got a new trade name, namely Subway (Subway, 2012).

Between 1965 and 1978, Subway mainly focused on the North American markets. Indeed, in 1978, it opened its first outlets in California. In 1984, Subway opened an outlet in Bahrain.

As Jargon (2011) confirms, In 2004, Subway began opening stores in Wal-Mart Supercenters where it surpassed the number of McDonalds locations in the US Wal-Mart stores in 2007 (Para.5).

This observation suggests that Wal-Mart has been critical in enhancing the growth of Subway in terms of helping it in the selection of strategic outlet centers. From 2007, Subway has always been ranked in the top positions in the list of the best-performing entrepreneurial franchises in the US.

For example, in 2012, it was listed number 2 in the best performing 500 franchises on the Entrepreneur Magazine. Indeed, at the end of 2010, Subway was larger than McDonalds by about 1,012 outlets globally (Covert & Gibson, 2015).

The Type of market

Organizations operate in different types of markets. Economists identify ideal competitive, monopolistic aggressive, oligopoly, and monopolistic bazaars as the four chief souks in which an organization can operate.

The ideal competitive bazaar is marked by an increasingly high number of small business entities, which cannot determine prices of the offered products by themselves.

The cost of commodities is determined by clientele requirements and the conditions under which the various service providers operate. The monopolistic souk has only one seller within a given geographical area (McGuigan, Moyer & Harris, 2010). Subways market has many organizations that deal with fast foods.

Therefore, it does not certainly operate in the monopolistic or ideal aggressive market since many of its competitors are large-sized corporations.

Many vendors operate in oligopolistic markets. Every seller supplies large quantities of products that are offered on the market for sale. However, the high cost of entry limits the number of new entrants. The companies have control over the prices of products and services they offer. The products are similar and often not differentiated.

Since Subway offers differentiated products by the way of branding and customer experience, it does not operate in the oligopoly markets. Monopolistic rival bazaars possess a high number of retailers.

Although they offer products that serve similar purposes, the products are somewhat differentiated by either awareness of value, trade name, fashion, and/or place of offer among other aspects (McGuigan et al., 2010). Subway operates in the monopolistic aggressive bazaar.

Price Elasticity of Demand (PED) for Subways Products

Subway operates in a monopolistically competitive market in which different substitutes are only differentiated through branding and perception of quality and other aspects of the brand image. PED is obtained by dividing the change in the demanded quantity with change in prices.

A quotient of 1 indicates a unitary PED. A quotient of less than 1 indicates an inelastic PED while a quotient of more than 1 indicates an elastic PED.

The price elasticity of Subway products can be described as unitary elastic, which means that an increase in the price of one of the core products such as the foot-long Black Forest Ham results in a proportionate change in the quantity demanded.

Illustration

The price of Subways foot-long Black Forest Ham is $5. At this price, Jonathan is able to purchase 4 such products. If the firm increases the price of the product by 10% to $ 6.05 [cetiris paribus], Jonathan will reduce the quantity demanded to 3.6 units. Table 1 and graph 1 in the Appendix (a) illustrates the resulting changes.

The graph shows that change in price of the firms product makes consumers move along the demand curve (DD).

Income Elasticity for Subways Products

McGuigan et al. (2010) define income elasticity of demand as a measure used to determine the consumers response to changes in the level of their disposable income. As a fast-food company, Subway Companys products can be described as normal necessities [foods and beverages].

Ghosh and Choudhury (2008) emphasize that normal goods have a positive income elasticity of demand. Therefore, an increase in the consumers disposable income is likely to increase the quantity of products that customers can afford to purchase from Subway.

The income elasticity of the normal products ranges between 0 and +1. Thus, if the consumers income increases by 10%, the demand for normal products changes by 4%. The implication is that the income elasticity for such products is +0.4.

Therefore, a change in the consumers income leads to a proportional change in demand for fast-food products. However, fast-food products are ranked amongst luxuries.

Hence, as shown in appendix (b), if consumers income increases by 10%, their demand for Subways fast foods will increase by 20%, which indicates that the income elasticity of the firms products is +2.0, which is greater than 1.

An increase in Subways fast-food product prices prompts an increase in the amount of supply and demand for the commodities. Changing of Subways product prices is influenced by the number of clients. In the past three years, the trend of price changing has been constant, especially during holidays when many people are out with their families.

At this time, Subways BMT goes for $6. It is crucial to understand that luxurious commodities such as sandwiches are elastic, unlike normal commodities whose prices have to remain the same for a long time.

Hence, if the price of its main product, namely the BMT, shifts from $5 to $6, because of its high demand, the supply will also increase as shown in the Appendix c.

Close Competitors

Subway operates in an industry in which other organizations engage in the production and selling of similar products to the extent that they serve similar purposes (Simon, 2007).

Its competitors include McDonalds, Wendy, Yum Foods, and Burger King.

Through the adoption of appropriate promotional techniques and other mechanisms for building customer loyalty, Subway has developed the capability to cope with the competitive environment so that it comes just second after McDonalds in terms of its ability to push its products into the market.

Indeed, its most powerful competitors who deal with similar products include Wendy and the Daily Queen.

Close Substitutes or Complements

In economics, all products have some associations in the form of complements or substitutes. A complement of product A is the one that is consumed together with it while its substitute commodity is the one, which is consumed in its place. For Subway, close substitutes to fresh salads are fresh vegetable salads that are offered by McDonalds.

Yum foods and McDonalds humbuggers act as substitutes for Subways sandwiches. Many business entities manufacture bread in the US and in other markets that are served by Subways bread. French fries and beverages such as Seattle best coffee form important complements for Subways products.

Indeed, coffee is a major complement of Subways products that are served in breakfast (Maze, 2013).

Changes in Demand for Subways Products

Growth in demand for Subways merchandise is influenced by different factors such as competition and the inability of target consumers to purchase due to financial hardships.

According to Maze (2013), in terms of revenues, Subway falls in the fifth position, making it far larger than Panera Bread, Arbys, Jimmy Johns, Firehouse Subs, Quiznos, Jersey Mikes, McAlisters Deli, and Jasons Deli (p. 42). However, no evidence indicates that these organizations are taking away the demand for Subways products.

Instead, there is an increasing commoditization of sandwiches so that they become easily available in places, including lifts and churches. This observation suggests an increasing access to the products. Such accessibility implies a rising demand.

While the aftermaths of the global economic crisis greatly influenced the incomes of Subways low-end consumers, economies in Subways market have greatly recovered by now. Therefore, the theory that low-end income earners struggle to eat remains invalid (Maze, 2013).

An assertion that the demand growth for Subway has reached its peak is also inconsequential. The company focuses on low-calorie foods whose demand is on the rise, as people have become more conscious about eating high-calorie foods such as hamburgers and French fries. Consequently, the demand for Subways products is growing.

Training of the Companys Labor Force

Productivity of the labor force of an organization is critical in enhancing competitive advantage. In the fast-food industry, quality customer service is critical to increasing and improving buyer experience whilst reducing service rate times (Armstrong, 2009).

For Subway, further training of customers is important in reducing lead times and throughput time. This strategy can reduce costs by ensuring efficient utilization of the labor force. Training of Subway employees on how to increase customer experience can help to attract repeat customers and new ones such that the sales level can increase.

Increased trade translates into increased economies of scale, which cut on the total costs of running the organization. In technological savvy operational environment, work is done with the aid of information processing systems (Dusanka & Aleksandar, 2013).

Since the technology keeps on changing, a room exists for training Subways employees on effective use of technological systems in increasing their productivity.

Profitability and Sustainability of Subway Business

Profits are computed from the knowledge of fixed and variable costs. However, although it is clear that a 12-inch sandwich costs $5, Rotelli (2013) reckons that the company is still privately owned and that it does not share particular numbers.

One way of computing Subways profitability is by identifying the profit margin on every product and then multiplying it by the total number of products. Profits for all product categories can then be summed up.

However, this step is not possible for an organization that is not required by law to make public filings of its financial statements. Indeed, stating profits for each Subways restaurant is incredibly difficult, as it varies depending on sales and location.

Although the company posted profits amounting to $16.6billion in 2011, and that the profits have grown over the years, specific numbers are required in determining the sustainability of the organizations business.

Strategies for Increasing Profitability

Profits increase with increased sales (Camillus, 2010). This situation can occur upon the mitigation of various weakness and threats to an organizations operations. Subway needs to mitigate the problem of high turnover to reduce the cost of replacing employees and training them.

It also needs to encourage uniformity in customer service in different stores to help in building long-term customer relationships. It needs to benchmark from McDonalds and develop drive-thru restaurants.

Another important strategy entails increasing its focus on healthier foods by developing more commitments to reducing salt and fat levels and adding nutritious product lines to the subs. Instead of just waiting for customers in its restaurants, Subway can also focus on home delivery services.

This plan can help in increasing and expanding its target customers to boost its sales levels.

Company Strategy, Prices, Target Customers, Production, and Cost Advertisement

Subways growth strategy entails opening franchises as the main centers for pushing its products to the global market. Through franchises, the company sublets its rights and saves on administrative costs and overheads. In the franchises, the company offers healthy low-calorie foods to attract healthy eating cautious consumers.

Its pricing strategies vary from one product to another and depending on the location of its outlets. A 6-inch sub costs an average of $2.49 while a foot-long sub goes for $5.89 at a restaurant in Alberta. The organization also sells salads between $3.49 and $4.89 at the restaurant. To an average American worker, these products are highly affordable.

Subway targets people who do not carry home-cooked foods at work. It also targets people who wish to eat during breakfast and evening dinners. It has products that fit all demographic groups of people. Fresh raw materials are acquired from farmers and distributed to the franchises.

Although variations may occur, production takes place in-house, but consistent with Subways established standards to ensure uniformity. For the individual restaurants, fixed costs include rent, supply and logistics, the cost of insurance, and premise cleaning.

Additionally, the salary for each owner is in most cases consistent for every restaurant. The cost of purchasing may vary depending on demand forecasts at different times of the year. This claim means that it constitutes a variable cost.

Other unpredictable overheads include oil fees, worker wages, and different utilities that are connected to these expenses. Advertising is a major variable cost for Subway. It takes the second position in advertisement spending, after McDonalds.

Maze (2013) informs that in 2012, Subway spent more than $516million in advertisement. Its advertisements feature its slogan of eat fresh. It shows employees whom the organization refers as Subway Sandwich Artists making fresh breads using highly clean ingredients.

New Markets and Strategies for gaining Market Share

Subway opens new stores not only in the US but also in other parts of the world, including Britain. The internationalization strategy of the company is evidenced by its opening of outlets in Brazil in 2009, Portugal in 2013, and even in Bahrain in 1984. During early 2000, the company also established another outlet in India.

Indeed, at the start of 2013, the company had close to 400 operational eating places located in almost 70 major towns across India. It also has restaurants in Russia and China among other nations. In fact, new markets are important for increasing the distribution density for Subways products.

While attempting to gain market share in new markets and in existing markets, Subway commits its resource to promotional strategies. It creates awareness of its products among its target customers. It places itself as an organization that offers high-quality and fresh products.

The Amount of Customer Purchases and the Most Successful Products

As revealed before, Subway does not provide specific statistics to permit the computation of the total amount of customer purchases since it is privately owned. However, submarine sandwiches account for most of the sales. Indeed, the sandwiches form Subways flagship product.

Its most successful sandwich is the BMT, which has acted as the companys main source of revenue. Subway (2012) reckons that this commodity contains pepperoni, salami, and ham (Para.11). Although the BMT previously meant Brooklyn Manhattan Transit, it now means better, meatier, and tastier.

Although it is not highly profitable, Subway also makes pizzas on order. However, the product is not available in all the organizations outlets around the globe.

Sources of Revenue

Subway generates its revenues from sales of its fast foods, specifically the BMT sandwich as mentioned above. Products that are meant for different markets are designed to meet the needs and preferences of a given market to ensure higher revenues.

For example, in the New Delhi restaurant in India, Subway does not sell pork and products from beef since they are inconsistent with the Islamic and Hindu faith. Rather, it sells vegetable-based commodities.

Recommendations and Conclusion

Subways franchise model of growth is instrumental in ensuring a reduction in its operations cost. The franchises offer high-quality foods in a fast manner without compromising freshness. Although the company has shown some steady growth since inception, it is recommended that it makes some changes.

For example, it loses customers due to lack of a drive-through. This situation makes customers who are in a hurry not to get into its outlets. Thus, it is recommended that Subway gets drive-through restaurants to become convenient for customers in a hurry such as in the case of Wendy, McDonalds, and Dairy Queen.

It should also consider delivering meals at homes to boost its sales in a bid to raise its profitability.

Appendix 1

Table 1.

Reference List

Armstrong, S. (2009). Prediction of Consumer Behavior by Experts and Novices. Journal of Consumer Research, 18(6), 251256.

Camillus, J. (2010). Putting Strategy to Work. Quarterly Journal on Management, 2(4), 83-105

Covert, J., & Gibson, R. (2015). Wal-Mart dumps McDonalds for Subway as in-store restaurateur. Web.

Dusanka, L., & Aleksandar, K. (2013). The Impacts of MIS on Business Decision Making. TEM Journal, 2(4), 323-326.

Ghosh, P., & Choudhury, P. (2008). Managerial economics. New Delhi: Tata McGraw-Hill.

Jargon, J. (2011). Subway runs past McDonalds Chain. Web.

Maze, J. (2013). Are competitors biting into Subway? Restaurant Finance Monitor, 2(1), 41-47.

McGuigan, J., Moyer, R., & Harris, F. (2010). Managerial Economics: Applications, Strategy and Tactics. New York, NY: Cengage Learning.

Rotelli, W. (2013). How Does Subway Profit From the $5 Foot-Long Deal? Web.

Simon, H. (2007). Rational decision making in business organizations. American Economic Review, 3(4), 123-129.

Subway. (2012). Subway Timeline. Web.

Brief Business Description

Subway is one of the key worldwide competitors of KFC and McDonald’s. The company was established in the middle of the 20th century. The creator of the Subway brand defined the essential values of the company. He claimed that the quality of the food and outstanding customer service should be the key strengths of the company. Subway restaurants are aimed at providing excellent production while trying to ensure the lowest production costs possible (Valentin 202). This managerial incentive defines the international success of Subway restaurants. The company offers numerous sandwiches to its customers and expands Subway’s product mix annually. The company carefully listens to their customers’ feedback and is motivated to adjust its strategy for the variability of the clients’ wishes and needs.

Country Selection

The country that is chosen as the next expansion opportunity within the framework of this paper is Indonesia. Subway may experience significant growth in this country due to its economic peculiarities and financial state of affairs. Indonesia is a perfect candidate for expansion because there is only a small number of local competitors. Introducing Subway as a contender to the market of fast-food restaurants will be a great opportunity to test the survivability of a major corporation in tough commercial conditions and all-inclusive bureaucracy. It is also important to take into consideration the occupational and personal values of Indonesians who will work for Subway. Therefore, several issues should be addressed by the marketing specialists before entering the Indonesian fast food market.

Marketing Issues and Their Solutions

The first issue is the lack of risk-taking and innovative mindset among both Indonesian managers and employees (Simi and Matusitz 60). This aspect of the business is a crucial characteristic of the future success of Subway in Indonesia. The expansion of the chosen fast food restaurant chain can be undermined by the lack of motivation of local employees. The company should identify all applicable approaches to improve the morale of the employees and implement several incentives that are typical of the United States and Australia (Lee and Edwards 42). Subway should also look out for the issues that may transpire during the brand registration process. In Indonesia, these rules are fairly authoritarian. On the other hand, the availability of natural and human resources may mitigate the adverse impact of the strict government on Subway’s practices. On a bigger scale, the resources that are available to Subway in Indonesia should be perceived as the most significant asset intended to help the company in the battle against the local marketing issues (Min and Min 286).

Another marketing issue typical of Indonesia is a high probability of commercial fiasco. There are numerous personal and business factors that should be taken into account before expanding the business. The majority of these external factors have an adverse influence on the Indonesian business and Subway will not be an exception. Therefore, the issue can be described as an array of business-related troubles that transpire due to the incompetence of the local workers (Krishna 138). There is a risk of losing control of the Subway’s financial aspect. Another related issue is the business culture in Indonesia. Discussing business predicaments is considered to be discreditable in this country, and this may lead to negative business transformations instead of collaboration.

The Best Marketing Strategies

Subway’s strategy should be aimed at driving consumer traffic and competing with the local contenders. This will be possible if the company uses several widespread marketing strategies. The first strategy is to build connections with Indonesian kids by selling various collectibles. These collectibles may relate to a popular movie, game, or anything else that may grasp the attention of the potential customer. This strategy can also be improved by offering a free collectible with a certain meal. At this point, Subway needs to find a niche that is not exploited by its competitors and make the best use of it (Pitt et al. 65). Another marketing strategy that may be useful in Indonesia is market segmentation. Subway administration will have to conduct research and identify the groups of customers that visit their restaurants frequently.

This demographic information is necessary to fine-tune the restaurants’ practice in alignment with the needs of their loyal customers (Pitt et al. 66). These clients can be offered special discounts and coupons. In Subway’s case, the third marketing strategy that may be profitable is societal marketing. This strategy is based on volunteer activity and charity events. The implementation of this marketing strategy is supported by Indonesian mentality and respect toward humanitarian values. The core objective of this marketing strategy is not to make more sales but to come up with more valuable ideas and build positive relationships with the company’s customers (Pitt et al. 68). In turn, this will motivate the customers to patronize Subway and its practices. The long-term objective of this marketing strategy is to build a loyal follower base and dynamically adjust the company’s approaches to the needs of their customers.

Works Cited

Krishna, Ketana. “Analysing Competition in the Quick Service Restaurant Industry.” SSRN Electronic Journal, vol. 15, no. 2, 2014, pp. 135–144.

Lee, Alvin, and Mark Edwards. Marketing Strategy: A Life-cycle Approach. Cambridge University Press, 2013.

Min, Hokey, and Hyesung Min. “Benchmarking the Service Quality of Fast‐food Restaurant Franchises in the USA.” Benchmarking: An International Journal, vol. 18, no. 2, 2011, pp. 282–300.

Pitt, Leyland, et al. “Managing the Franchised Brand: The Franchisees’ Perspective.” Advances in Corporate Branding, vol. 5, no. 4, 2017, pp. 59–71.

Simi, Demi, and Jonathan Matusitz. “Glocalization of Subway in India: How a US Giant Has Adapted in the Asian Subcontinent.” Journal of Asian and African Studies, vol. 4, no. 11, 2015, pp. 45–62.

Valentin, Erhard. Business Planning and Market Strategy. SAGE Publications, 2015.

A marketing mix allows one to identify the four main aspects that distinguish a company’s product from its competitors, helping one build a marketing campaign that leverages these strengths. Subway is a large fast-food chain that has restaurants across the US and outside the state. The primary competitors of Subway are Jimmy John’s, Jersey Mikes’s, and Publix. This paper aims to present a marketing mix for Subway, including the products, price, place, and promotion.

Firstly, it is necessary to determine the primary product of this restaurant chain, which is a sandwich. The submarine sandwich commonly referred to as a sub, is a bread roll split lengthwise and filled with meat, vegetables, and cheese. There are 18 variations available to the customer, including the New Southwest Chicken and New Steak Club introduced recently (“Subway”). In addition, options such as seventeen wrap tastes and fifteen salad variations are available to health-conscious customers. Moreover, the Fresh Fit options are a source of protein, and vegetables made out of whole-grain are offered with the special Fresh Fit sauce (“Subway”). The menu developed for kids includes small sandwiches with low-fat milk and apple sauce, and breakfast sandwiches are also a part of the list. Some variations to the menu can be present based on the specific country where a Subway restaurant is located. Catering services are available to customers, with food corresponding to that available to regular clients.

When compared to other sub sandwich restaurants such as Jimmy John’s, Jersey Mikes’s, and Publix, the price of Subway food is higher. The justification is the low-calorie content and quality of the products. The place of Subway restaurants should be examined with a consideration that this is a global franchise network operating in both the US and outside. The chosen model allows the company to open new locations quickly, and in 2016 there were 26,982 Subway restaurants in the US and 44,702 globally (“Number of Subway Stores Worldwide”). The promotion that Subway uses targets the freshness of the ingredients that their restaurants use to make sandwiches. For instance, currently, the company promotes its “making change for good” and “fresh veggies. Quality food. Smarter nutrition” campaigns, emphasizing the corporate social responsibility focus, and emphasis on healthy eating habits (“Subway”). Finally, the process of implementation, evaluation, and control of the marketing mix requires one to outline the steps necessary for achieving the goals set in the marketing plan. Currently, Subway carries out its promotional activities by informing customers through advertisements on digital platforms, TV, and via the Internet.

To implement a new marketing plan, Subway will have to use the information presented in this paper as a marketing mix to distinguish its original features enabling differentiation from competitors. Next, the company will have to choose one marketing tactic that corresponds with the identified characteristics and develop steps for achieving the aim. The process of evaluation for Subway will consist of examining quantitative metrics, such as sales, number of people on the restaurant’s website, the number of online orders, and email newsletter subscribers. The control process will involve comparing the achieved impact to the predetermined benchmarks, for instance, Subway may want to increase sales of the three new sub sandwiches by 10% across the US through the marketing campaign. Overall, this paper presents the marketing mix for Subway, including product, price, place, and promotion, and offers strategies for implementation, evaluation, and control.

Works Cited

“Number of Subway Stores Worldwide from 2011 to 2018.”Statista, Web.

“Subway.” Subway, Web.

According to the data obtained from the survey, Subway is far from being popular in comparison with the other fast-food brands. Although Subway is on the second place in the U.S. in terms of outlets, it occupies the twelfth place in terms of sales. The survey results show that it is visited almost ten times less than MacDonald’s that occupies a leading position among all fast-food restaurants. The main reason for this, in my opinion, is that Subway uses a traditional approach, whereas its competitors introduce something new, focus on a particular type of customers, and expand abroad. Thus, for example, Blimpie’s main focus is the international development, Quiznos are aimed at attracting families, Togo’s Eatery highlight high-quality ingredients in their menu, Schlotzsky’s adds pizza and salads to its menu, and so on. Subway’s main focus is working class people who want to have a quick lunch.

However, all Subway’s competitors have one thing in common. They all agree that the key factor of success is the quality. They see that customers are willing to pay more if the product is upscale; therefore, they make their menu upscale and add more kinds of food to it. They also diversify their menu by creating different kinds of eating occasions: breakfast, lunch, dinner, and snacks. One more important strategy that most of the fast-food restaurants including Subway have started to implement is the value pricing. Other companies decided to avoid price competition by positioning themselves as high-quality fast-food restaurants.

Subway has started to focus on breakfast recently. However, in my opinion, this is not a good strategy, according to the survey, the customers prefer lunch and dinner times more. Also, according to the results, people often visit fast-food restaurants with a spouse, children, alone, or with their friends, whereas Subway’s main focus is workers. Subway excludes a great percentage of customers who like fast-food restaurants. It should focus on a wider range of people. In this respect, introducing kid packs which include food items and a premium gift was a good strategy. Thus, in my opinion, in order to be successful, Subway should introduce an upscale menu, focus on a wider range of people, and make its menu more versatile adding new types of sandwiches and other types of food to it, as quality and versatility are the key to success. Also, the last but far from being the least, Subway should expand abroad and to other continents, as 99% of its outlets are located only in North America. Thus, if we take McDonald’s as an example, expanding abroad is also the key to success.

Although it is impossible to get rid of competitors, no matter in what sphere a company specializes, there are certain strategies that can help reduce the number of Subway’s competitors. In my opinion, when making an advertisement, Subway should highlight the product in which it specializes, that is sandwiches. Then, it is crucial to stress on the high quality of the product and to show some new features of this product, for instance, new filling, new spices, new size, new types of menu, and everything that can convince customers to come exactly to Subway. At the end of the advertisement, it is necessary to mention other types of food like pizza, salads, pasta and so on which are also on the menu.

As for the so-called Marketing Communications Mix, Subway should include four its aspects into its promotion campaign. Thus, in terms of short-term sales promotion, Subway should introduce some discounts that will depend on the type of a day, on the amount and type of products bought and some other factors. In the advertisement, Subway should highlight their product and its unique features. As for the public relations, in my opinion, Subway should organize public events and competitions on different occasions. In terms of direct marketing, Subway should create a web-site and a delivery service that will attract people who want to order food from home or work.

By the time Subway became extremely popular with American customers, the company’s management had already reflected on the idea of international expansion to attract an even bigger target audience. However, once they started the process of expansion, they were primarily focused on introducing Subway restaurants to English-speaking states such as the UK and Canada. Moreover, the company’s management only considered opening the restaurants where they were welcomed at the time. Hence, the first issue they faced during the expansion was the low density of stores across the states, which was inefficient for Subway logistics. To address the problem, the decision was made to negotiate with local management on the matter of opening more restaurants in the area, as the local customers were already familiar with the network’s concept.

After expanding to other English-speaking countries, the company’s management decided to open restaurants in other areas. However, the major issue in terms of the expansion was the notion of cultural diversity, which concerned language and food habits. To deal with the problem, Subway directors decided to expand the core menu of the restaurant with culturally-specific food while retaining the basic product – sandwiches (“Subway international expansion,” n.d.). For the sake of efficiency, the company decided to create a position of regional directors across the globe for them to collect all the necessary data, such as customer surveys and basic information about the area. By hiring regional directors, Subway also managed to resolve the issue of legal differences and supply lines. Finally, after the expansion, the management faced the problem of communication between the restaurants all over the world. To solve this, they introduced a system of training programs for local managers.

Reference

Subway international expansion [Video file]. (n.d.). Web.

Subway, a global fast-food chain, is one of the largest sandwich chains in the world. With a rich history that dates back to 1965, Subway has established itself as a household name, known for its delicious sandwiches and healthy options. However, in recent years, the company has faced numerous challenges that have resulted in a search for new leadership and a shift in business strategy. Despite its popularity and success, Subway has struggled to stay afloat and has been searching for a new direction to help it regain its position as a leading fast-food chain. In order to make the franchise more attractive to franchisees, Subway should consider alternative strategies whereby they can sell the company at a higher price while making it easier to work at the grassroots level.

The Current Strategy of Subway

The current strategy of Subway is centered on maximizing profitability by reducing expenses and delegating responsibilities to third-party vendors and franchisees. The company has implemented a lean operation that has resulted in the layoff of over 2000 employees in the United States alone (Ganatra et al., 2021). Revenues have improved due to reduced expenses, but the company has faced a lot of discontent from franchisees. The franchisees have been forced to accept changes, including the costs associated with such alliances. Most of the in-house tasks and costs associated with these changes have been passed on to the franchisees, thus shrinking their bottom line.

Subway’s current strategy has introduced third-party vendors who have delegated most of the in-house tasks, including ordering uniforms and equipment, leasing, and store inspections. This has helped the company reduce its expenses and increase sales, revenue, and profitability, but it has also resulted in much discontent among franchisees. The franchisees feel they are being forced to bear the burden of these changes, which has negatively impacted their bottom line.

The company has similarly made some mistakes, such as introducing a slicer in restaurants without the prior approval of the health department. As a result, most stores have been fined an average of $350 for installing unauthorized equipment. Every franchisee has had to spend an additional $200-350 and submit new plans to the health department for review and inspection (Ganatra et al., 2021). This has created a lot of discontent among franchisees, who now face additional expenses and operational challenges.

The overall goal of Subway’s current approach is to increase profitability by cutting costs and handing over duties to franchisees and third-party partners. Although this method has increased the company’s sales, revenue, and profitability, it has also caused dissatisfaction among the franchisees. It has resulted in the introduction of unlicensed equipment, which has cost the health department money. Subway needs to change its approach and concentrate on enlisting franchisees and enhancing operations at the ground level to boost the company’s worth and make it more appealing for sale. This can be accomplished by supply franchisees with more resources and assistance, soliciting franchisee feedback, providing incentives, enhancing the menu, and making technology investments.

Alternative Strategy for Subway

When choosing a franchise company, the decisive factor is often not the number of royalties, products, or brand awareness but the level of corporate support. A strong team and interaction between structural divisions can be decisive for new investors in choosing your company. An experienced franchisee evaluates the availability of innovations, the effectiveness of tools and work planning, and openness and interest in partners’ success. Franchisees play a vital role in the success of Subway, as they operate individual stores and represent the brand in their communities (Nyadzayo et al., 2018). However, as the company has implemented cost-cutting measures and shifted responsibilities to franchisees, many have become dissatisfied and struggled to run their businesses effectively. Improving franchisee support can help address these challenges and bring franchisees back on board, ultimately strengthening the company’s overall success.

To improve franchisee support, Subway can offer more resources and training programs to help franchisees run their businesses more effectively. This can include marketing support to help drive sales and streamlined ordering processes to make it easier for franchisees to obtain the necessary supplies and equipment. In addition, Subway can provide training programs to help franchisees improve their operations, including best practices for customer service, food preparation, and store management. Another way to improve franchisee support is by offering financial assistance to help franchisees upgrade their stores and equipment. That can include grants, loans, or other forms of financing to help franchisees purchase new equipment, make renovations, or expand their businesses (Ganatra et al., 2021). It not only helps franchisees improve the overall customer experience but moreover helps the company maintain its competitive edge by offering high-quality products and services.

Finally, Subway can improve franchisee support by providing regular communication and support from corporate headquarters. It can include regular meetings, webinars, and other opportunities for franchisees to share their experiences, ask questions, and receive feedback from corporate leaders (Ganatra et al., 2021). An open and transparent communication can help franchisees feel more connected to the company and feel more confident in their ability to run their businesses effectively.

Investing in Technology as a Way to Attract Franchisees

Technology advancements have revolutionized the fast food industry, and Subway can take advantage of this trend by investing in innovative technology solutions. One area where Subway can invest in technology is its ordering process. By introducing an advanced online ordering system, Subway can streamline customers’ ordering process, increasing sales and convenience (Palacios & Jun, 2020). Additionally, the franchisees will benefit from a more efficient and automated ordering process, which will reduce the workload and increase accuracy. Another area where Subway can invest in technology is in its kitchen operations (Ganatra et al., 2021). For example, present smart kitchen equipment can help franchisees manage their inventory and track food waste. This will improve their bottom line and help reduce waste and make more environmentally friendly decisions.

Subway can similarly invest in digital marketing technologies to increase its online presence and reach a wider audience. A robust digital marketing strategy can help Subway attract new customers, engage existing customers, and build loyalty. Moreover, franchisees can benefit from these efforts through increased brand recognition and sales. Additionally, investing in technology can help Subway to improve its supply chain management (Palacios & Jun, 2020). By implementing sophisticated logistics and transportation management systems, Subway can better manage its supply chain, reducing waste and ensuring timely delivery of food and supplies to franchisees.

Sustainability in Franchisee Attraction

Focusing on sustainability is a crucial alternative strategy that Subway can implement to appeal to customers who are increasingly concerned about the impact of their food choices on the environment. By incorporating sustainable practices into its operations, Subway can show that it cares about the environment and appeal to customers who are conscious of the impact of their food choices (Ganatra et al., 2021). Subway can focus on sustainability by using recyclable packaging, reducing waste, sourcing ingredients from local and sustainable suppliers, and using energy-efficient equipment.

In addition, by focusing on sustainability, Subway can differentiate itself from its competitors and build a strong reputation as a reliable and eco-friendly brand. This can also help attract new environmentally conscious customers who want to support brands that share their values. Furthermore, implementing sustainable practices can lower operating costs and improve the franchisees’ bottom line, as they can benefit from reduced waste and energy costs (Ganatra et al., 2021). Focusing on sustainability is a win-win strategy that can help Subway increase its appeal to customers, stand out from its competitors, and lower its operating costs.

Franchise Marketing

For every start-up business, even part of a franchise, a customer acquisition strategy is important, as this will show potential attraction for customers. In this regard, it is important to maintain a competent and effective marketing campaign for Subway. For a franchise to be successful, the marketing activity of the entire network must attract many customers (Sashi & Brynildsen, 2022). If the franchise network can do this all the time, all possible internal conflicts will be stopped. The most successful franchise networks give franchisees the opportunity to express their opinion on the plan of marketing activities (Sashi & Brynildsen, 2022). While the franchisor will make the final decision, it is important to allow everyone to contribute. It will not only allow the franchisee to become part of the entire business but can also greatly help attract customers since the franchisee is in direct contact with them.

Within the franchising system, it is necessary to build communications with the franchisee in such a way that he promptly receives information about the conduct of marketing and promotional activities and is able to carry out these activities in his retail facilities in the same volume and at the same level as the franchisor, and others franchisee. In this regard, the franchisor should develop a procedure for transferring information about marketing and advertising activities to the franchisee. Thus, when selling a business-format franchise, the franchisor and the franchisee sign an agreement that establishes that the franchise user undertakes to carry out the same marketing and advertising campaigns that the franchisor implements. It includes participation in loyalty programs in which the copyright holder participates. Particular attention should be paid to considering franchisee proposals for improving and supplementing marketing activities within the franchise system. Regional features of market development, and significant differences in the methods of competition of local retail chains, form the conditions for adjusting the activities of franchisees in various regions and cities.

Conclusion

In conclusion, Subway has the potential to overcome its current challenges and increase its value by implementing several alternative strategies. By improving franchisee support, investing in technology, and focusing on sustainability, Subway can create a more efficient and appealing brand that appeals to customers and attracts new investors. Particular attention should also be paid to the marketing audit conducted by franchisors as part of the overall program for monitoring the franchisee’s activities and the level of their involvement in marketing. These strategies can help Subway differentiate itself from its competitors, attract environmentally conscious customers, and lower operating costs while increasing profitability. Ultimately, by taking these steps, Subway can position itself for success and create a brand that appeals to customers and investors alike.

References

Ganatra, V., Utama, A. A. G., Puran, P., Pandey, R., Qi, L. M., Kee, D. M., Ling, I. S., Sien, L. H., Tien, T. J., Ramadhan, H. S., Sin, L. G., & Pandey, M. A. (2021). A study of Subway Marketing 4P strategy. Asia Pacific Journal of Management and Education, 4(2), 47–64. Web.

Nyadzayo, M. W., Matanda, M. J., & Rajaguru, R. (2018). The determinants of franchise brand loyalty in B2B markets: An emerging market perspective. Journal of Business Research, 86, 435–445. Web.

Palacios, S., & Jun, M. (2020). An exploration of online shopping convenience dimensions and their associations with customer satisfaction. International Journal of Electronic Marketing and Retailing, 11(1), 24. Web.

Sashi, C. M., & Brynildsen, G. (2022). Franchise network relationships and word of mouth communication in Social Media Networks. Industrial Marketing Management, 102, 153–163. Web.

Subway is a chain of fast-food restaurants operating according to the principle of franchising. It is the largest by the number of points of public catering enterprises with 41,863 locations in 108 countries worldwide, providing sandwiches and salads. The company is committed to offering healthier food choices to serve the communities and make the lives of people easier. The core idea of Subway is to make a positive impact on customers and the environment by reducing their footprint and using healthy foods (“Our Commitment”). Subway’s vision can be identified as the journey to becoming the most responsible quick service restaurant (QSR), delivering exceptional service and a great variety of delicious foods at affordable prices. Compared to such competitors as Jimmy John’s, Publix Subs, and Jersey Mike’s, Subway works continually to enhance its services and focuses not only on people as customers but also as integral quality contributors.

The first action that is planned to be implemented in terms of the specific vision is the provision of business transparency. The customers will be offered a menu with ingredients and nutritious options, which will promote healthy lifestyles. All the stakeholders and contractors will be verified towards the highest safety and quality standards. The continuous search for cost-effective decisions is the second action, the outcome of which will allow preserving food quality and price without compromising any of them. The collaboration across franchisees is the third action devoted to contributing to the development of communities across the globe. In particular, social challenges, cultural issues, and environmental needs will be considered to make them public and improve. The environmental sustainability, Subway is committed to waste reduction and waste conservation, which are controlled as a part of the company’s supply chain management.

Work Cited

“Our Commitment.”Subway, Web.

Introduction

Subway is a leading world fresh-made sandwich provider with 33318 restaurants, distributed in 92 countries. Other than itself operating from a central point, it franchises its name. The restaurant was established in 1965 by Fred DeLuca and Dr. Peter Buck (Subway publication, 2010).

The first restaurant was established in Bridgeport, Connecticut, United States of America. It is known for its fresh quality fast food. This paper analyses the strategy on how I would further update the Subway product line and advertising campaign in light of current macro trends.

Mission Statement

The mission statement of the company, which doubles as its goals statement states that “Our goal is to be ranked the number one Quick Service Restaurant (QSR) worldwide while maintaining the great-tasting freshness of our products that is our trademark”. This is the statement that the company has worked with all along and has led to its strong brand name that facilitated its entry in the franchising business (Dennis, 2004).

Since its incorporation, it has been involved in numerous social responsibilities and all along whether it’s a franchisee or not, it’s guided by the passion to delight customers by serving fresh, delicious, made-to-order sandwiches, as was the dream by its incorporators.

S.W.O.T. Analysis Table

(Esquerre, 2005).

Target Market

The company cannot be said to have a specific class or group of people that it targets in its productions, but basically it aims at the whole family production. There are packages that are said to fit more to the young generation, that is the youth and there are those that are meant for children. There are family packages also. However, it aims at establishing the most dominant population composition so as it can produce goods in that line (Neal and Quester, 2006).

Products are divided into different sizes to cater for the economic welfare of the people thus the well to do and the less fortunate in the society are accommodated.

Macro-environmental Analysis

The Economic and Political Environment

Of late the world is in a recession period from the world economic crisis that hit at the end of year 2007. This has affected businesses in one way or the other and fast food business is not an exemption. Consumer’s disposable income has drastically reduced. On the other hand, marketing and advertising methods and tools have taken another angle. This is where internet advertising has taken centre stage in almost at least 42% of world’s advertising (Trading Economics, 2010).

More and more fast foods are increasingly being established that offer a different set of products. What has become important is to look for mechanisms to ensure that the company remains competitive. Various mechanisms have been employed to sustain itself in the market, they include, cost reduction mechanism, ensuring that customers are satisfied through offering quality and fresh foods always and establishing its branches in good locations.

The Technological Environment

The cost of advertising versus the population reached has reduced with the adoption of internet and social marketing/ advertising. The company is in face book and other social network tools. According to Interactive Advertising Bureau [IAMB] 2009, the revenue from internet advertisement rose to $23.4 Billion in 2008, 10.43% increase from the previous year’s record of $21.2 Billion (Advertising Association, 2010).

The advertising and marketing online gives an interactive environment such that the target customer can be able to communicate with the website. This gives the user the advantage of airing his or her views. This was never possible in the old marketing and advertising models.

The population in the world today, has a majority which is enlightened and knows its rights. In the exercise of these rights, these people need an environment that does not dictate on what they are supposed to do, the way the traditional marketing and advertisement seemed to do (Web Ad.vantage, 2010).

Web Advantage. (2010).

The Social and Cultural Environment

According to United Nations, 1998 the world is continuously facing an increased population. The numbers of youth and young families, who are continuously adopting modern lifestyle, are on the rise. As a result there is increased demand for junk foods. The company is also reaping the benefits of a strong brand name. A strong brand name assists a company to self market and advertises itself.

Australian population is also in the rise, according to Australian bureau of Statistics, 2010 it stands at 22,431,468. The population is mostly concentrated among the young; these are people who are below the age of fifty years. The following population structure portrays this fact;

Social Trends/ Improved Living Standards

In this era of industrialization and computers, the living standard of people is on an upward rise. People are adopting modern methods of lifestyle to a point that they are creating recreational time. In these recreations, the foods relied upon are snacks and junk food like those produced by subway.

This has led to an increase in sales. In Australia, health issues are catered for by various programs by the government and thus the general population is healthy without having to spend ones savings. This leads to more disposable income that leads to improved business.

Competitive Landscape

General Strategies

The food industry is one of the fast growing industries in Australia; there are numerous fast foods and hotels that compete for growing population. Fast foods generally sell the following products Hamburgers, Pizza, Other goods, Chicken, Sandwiches, rolls, baguettes, focaccias, Salad and juice bars, Fish and chips, Pies and pasties.. Some fast foods have a strong brand name and are well established they include MacDonald, and Hungry Jack’s. However to curb competition from these established then the following can be done:

Product Strategies

Pricing Strategies

Promotion Strategies

Distribution (Place) Strategies

Assessing the Current Position

Subway is currently the world largest sandwich company. It has its branches in 92 countries both as franchised names and original company. To attain this position the company has embarked on policies that ensure that it remain competitive. Some of these ways are ensuring that it has satisfied its customers in all means (Kaplan, 2008).

This is by offering quality and fresh food at all time times. Its location’s is another factor that has given the company an upper hand. All franchised companies are supposed to abide to regulations set by the central company. Fast food joints should provide fresh foods at all times to attract more customers. This will make them more competitive (IBIS World, 2010)

Current Marketing campaign

Today many companies have entered in fast food business; these companies include McDonald and Hungry Jack’s. To curb this competition and remain competitive subway has engaged in aggressive marketing and advertising methods. These methods include; online advertising where the company is on face book, twitter, has a well updated website. A person can assess its menu over the internet as well as a 24hour call centre.

To advertise and ensure that customers get the message, the company uses television and video advertising that are put on electronic advertising boards located at different corners in towns. Some of the audio-visual adverts are show people enjoying various brands by the company and states the offer price which may vary by seasons.

In print media, other than in the daily papers, the company advertises in magazines and use of brochures. In united States of America, it has offered some of its products like Humbuggers to be used as cover page on food and nutritional magazines. the companies brochures’ are found in supermarkets, cinema halls, some hotels, beaches and along streets.

Product line

Subway company specialises in making of fast foods, it mainly concentrates with making of Sandwiches, but due to changing population, it has diverted to other products like Pizza, Other goods, Chicken, rolls, baguettes, focaccias, Salad and juice bars, Fish and chips, Pies and pasties.

The development is to ensure that it can satisfy its customers and have a competitive edge in the market. At any one time, the company tries to ensure that its products are of high quality and can be spotted among others. It is very concerned about the feeling that a customer derives after visiting it.

There is a new product line that the company is trying to adopt, this is in the area of pizza, Chicken, chips and fish. This is an area that it is incorporating in the old line of sandwiches. To venture in this market, the company need to ensure that customers get more satisfied when they take these products from the restaurants. On the other hand to move as a block, all franchised companies should be taught on how to cook these products to the standards required by the company.

The following chart shows classified fast food joints in Australia according to the products that it sells;

Though a sandwich is not among the leading fast foods products in Australia, it accounts for a good percentage that if well targeted will give enough market share to the company. A sample sandwich by the company looks like;

A franchising company requires its brand name be placed in a visible position by a franchisee (Entrepreneur, 2010). A sample brand name looks like;

Developing Marketing Capabilities of Updating the Subway Product Line

One of the strategies that the company should embrace is diversification. Instead of concentrating in one line of business i.e. sandwiches, it should venture in other areas that can blend with sandwiching (Kuhn, 1998). In striking for the right opportunities, the company will have to analyze its main market rival.

The strategies being employed by the competitor should be critically assessed and evaluated for necessary counter action. In addition, the general plan of the competitor in a bid to control the market is a vital toolkit which this company can use to estimate the competitive edge of the market. Similarly, the product being offered to the market at lower price should be investigated to determine its type and nature (Cook, 2008).

Why, for instance, is the company lowering the price of this commodity? Do they have access to cheaper raw materials or is it that quality of the product has been compromised and can be offered at a lower price than normal market value?

Finally on opportunities, the marketing department will have to investigate the company’s managerial structure both current and in the past and give a detailed finding as well as possible conclusions on the same (Hanssens, Rust & Srivastava, 2009). The following is an example of some foods available in the market that the company can adopt;

Conclusion and Recommendation

Despite that the company is enjoying as the leading sandwich provider, there are other companies that have come up with the aim of entering the same business. To ensure that it maintains its stand, then it has to utilize its available opportunities well. Opportunities for the company are dependent on both the internal and external assessment criteria of its operations profile.

Similar to the weaknesses discussed above, the company can still optimize on the various opportunities available to bring about sustainable growth through effective competition. Some of the underlying opportunities for this company in regard to the macro environment are the diversification of its activities.

The company may opt to not only run on large scale but also produce variety of products. This concept of variety may be approached from different angles like design and suitability (Paley, 1999). The advertising campaigns should be made to fit the target market. The advertising campaign should be tailored to cover the following.

The adverts are placed on the most likely places that the target market is likely to be at any one time, for example they are expected to spend on tourist hotels, at the gate of the hotel, a poster should be put that gives a connection of the soft drink and the customer; “have a world class feeling at Subway”.

There are public transporting companies, a contract with them should be put in place so that the company is allowed to paint the cabs with its known color and a persuasive message about the company. The electronic sign boards are other areas of advertising, since they have the advantage of being formatted to bring different issues, the issues to bring are the replays of the last Olympic Games. T-shit advertisement; T-shirts should be produced that pass a message to the consumer that advertises the company.

Reference list

Advertising Association. (2010). Advertising Industry Statistics Web. Web.

Advertising Bureau [IAMB] 2009. Internet advertising Revenue Report Archive. Web.

Anctil, E. (2008). Marketing and Advertising the Intangible. ASHE Higher Education Report, 34(2), 31-47. Web.

Anon (2010). Buy a franchise: Advantages and disadvantages of franchising. Web.

Australian Bureau of Statistics.(2010). Australia’s Population. Web.

Cook, S. (2008). Customer Care Excellence: How to Create an Effective Customer Focus. London, Kogan Page Publishers.

Dennis, G. (2004). “Subway sets out to torpedo McDonald’s“. The Daily Telegraph (London). Web.

Entrepreneur (2010). Franchise 500. Web.

Esquerre, B. (2005). Have You Done Your S.W.O.T.? Today? Fitness Business Pro, 21(12), 24. Web.

Hanssens, D., Rust, R., & Srivastava, R. (2009). Marketing Strategy and Wall Street: Nailing Down Marketing’s Impact. Journal of Marketing, 73(6), 115-118. Web.

IBIS World. (2010). Takeaway Food Retailing in Australia. Web.

Kaplan, D. (2002). “Jared’s Back Plugging for Subway,” Adweek Eastern Edition.

Kuhn, S. (1998). “#13 Lucky for Subway Restaurants and Its Customer 7/6 Campaign Proves to Be a Winner,” Total Food Service.

Neal, C. and Quester, P. (2006). Consumer behaviour: implications for marketing strategy. Australia, McGraw-Hill.

Paley, N. (1999). The manager’s guide to competitive marketing strategies. New York, CRC Press.

Subway publication (2010). “Official SUBWAY Restaurants Web Site”. Subway Restaurants. Web.

Trading Economics. (2010). Australia GDP Growth Rate. Web.

United Nations (1998). Australian Bureau of Statistics. Web.

Web Ad.vantage. (2010). Web Advantage is an agency solely specializing in online marketing and advertising, and therefore we do it really well. Web.

Abstract

Subway Company is a leading fast-food chain of stores. It operates around the globe, but with its main offices in North America. The company is classified as a service sector organization that offers healthier foods as a replacement of pizza and hamburgers, which have been linked to problems such as obesity.

Its main goals entail producing customized foods that meet clients’ tastes and preferences. The company has experienced continuous growth since its inception in 1965. Its operational environment is competitive. Many organizations, which pose a threat of substitution, influence its strategic decisions.

The company has the potential to secure long-term success considering that its strategy of focusing on healthy fast foods aligns well with the growing consumer attention to the consumption of low-calorie foods.

Introduction

Subway is a US incorporated organization that operates in the fast-food industry. Mainly concentrating on sea sandwiches, the company expands through the area monopoly strategy. Doctor’s Associate Inc. not only owns the fast-food supply chain, but also operates it.

Subway constitutes one of the first growing single brands across the globe. As at the end of 2014, the organization had an excess of 43,000 different outlets in over 108 operational territories (Covert & Gibson, 2015). The company’s central offices are situated in Connecticut. Different operations centers support the functionalities of the company.

Rationale for Selecting Subway

Subway operates in a highly aggressive fast-food industry that has giants such as McDonald’s and Yum Food Company, which are constantly changing their growth and operational strategies to derive their competitive advantage from their people.

The process of analyzing the effective operational strategies of an organization, which can be deployed as a benchmark, is well accomplished by considering an organization that operates in a highly competitive environment. This assertion forms the rationale behind the selection of Subway as the company on which to base the analysis.

Indeed, it is interesting to identify why Subway remains such a successful single brand across the globe, considering that its competitors have been engaging in business partnerships to secure long-term business success, yet Subway is still able to withstand the competitive forces.

Brief History

Subway was born in 1965 when Fred DeLuca, its founder, sought the help of USD1000 from a friend, Peter Buck, to initiate what he called Pete’s Super Submarine.’ The location of the business was chosen to be Connecticut. In 1966, Peter and Fred registered a company called Doctor’s Associates Inc.

The main task of this entity was to manage the operations of the restaurants since its number of franchises continued to grow to the extent of penetrating the American market even deeper (Subway, 2012). The name of the company arose from the desire of Peter to pursue a course in medicine and the fact that Peter had a doctorate degree.

Hence, the name of the business was not in any way associated or linked with any medical school. However, in 1968, the organization got a new trade name, namely Subway (Subway, 2012).

Between 1965 and 1978, Subway mainly focused on the North American markets. Indeed, in 1978, it opened its first outlets in California. In 1984, Subway opened an outlet in Bahrain.

As Jargon (2011) confirms, “In 2004, Subway began opening stores in Wal-Mart Supercenters where it surpassed the number of McDonald’s locations in the US Wal-Mart stores in 2007” (Para.5).

This observation suggests that Wal-Mart has been critical in enhancing the growth of Subway in terms of helping it in the selection of strategic outlet centers. From 2007, Subway has always been ranked in the top positions in the list of the best-performing entrepreneurial franchises in the US.

For example, in 2012, it was listed number 2 in the best performing 500 franchises on the Entrepreneur Magazine. Indeed, at the end of 2010, Subway was larger than McDonald’s by about 1,012 outlets globally (Covert & Gibson, 2015).

The Type of market

Organizations operate in different types of markets. Economists identify ideal competitive, monopolistic aggressive, oligopoly, and monopolistic bazaars as the four chief souks in which an organization can operate.

The ideal competitive bazaar is marked by an increasingly high number of small business entities, which cannot determine prices of the offered products by themselves.

The cost of commodities is determined by clientele requirements and the conditions under which the various service providers operate. The monopolistic souk has only one seller within a given geographical area (McGuigan, Moyer & Harris, 2010). Subway’s market has many organizations that deal with fast foods.

Therefore, it does not certainly operate in the monopolistic or ideal aggressive market since many of its competitors are large-sized corporations.

Many vendors operate in oligopolistic markets. Every seller supplies large quantities of products that are offered on the market for sale. However, the high cost of entry limits the number of new entrants. The companies have control over the prices of products and services they offer. The products are similar and often not differentiated.

Since Subway offers differentiated products by the way of branding and customer experience, it does not operate in the oligopoly markets. Monopolistic rival bazaars possess a high number of retailers.

Although they offer products that serve similar purposes, the products are somewhat differentiated by either awareness of value, trade name, fashion, and/or place of offer among other aspects (McGuigan et al., 2010). Subway operates in the monopolistic aggressive bazaar.

Price Elasticity of Demand (PED) for Subway’s Products

Subway operates in a monopolistically competitive market in which different substitutes are only differentiated through branding and perception of quality and other aspects of the brand image. PED is obtained by dividing the change in the demanded quantity with change in prices.

A quotient of 1 indicates a unitary PED. A quotient of less than 1 indicates an inelastic PED while a quotient of more than 1 indicates an elastic PED.

The price elasticity of Subway products can be described as unitary elastic, which means that an increase in the price of one of the core products such as the foot-long Black Forest Ham results in a proportionate change in the quantity demanded.

Illustration

The price of Subway’s foot-long Black Forest Ham is $5. At this price, Jonathan is able to purchase 4 such products. If the firm increases the price of the product by 10% to $ 6.05 [cetiris paribus], Jonathan will reduce the quantity demanded to 3.6 units. Table 1 and graph 1 in the Appendix (a) illustrates the resulting changes.

The graph shows that change in price of the firm’s product makes consumers move along the demand curve (DD).

Income Elasticity for Subway’s Products

McGuigan et al. (2010) define income elasticity of demand as a measure used to determine the consumers’ response to changes in the level of their disposable income. As a fast-food company, Subway Company’s products can be described as normal necessities [foods and beverages].

Ghosh and Choudhury (2008) emphasize that normal goods have a positive income elasticity of demand. Therefore, an increase in the consumers’ disposable income is likely to increase the quantity of products that customers can afford to purchase from Subway.

The income elasticity of the normal products ranges between 0 and +1. Thus, if the consumers’ income increases by 10%, the demand for normal products changes by 4%. The implication is that the income elasticity for such products is +0.4.

Therefore, a change in the consumers’ income leads to a proportional change in demand for fast-food products. However, fast-food products are ranked amongst luxuries.

Hence, as shown in appendix (b), if consumers’ income increases by 10%, their demand for Subway’s fast foods will increase by 20%, which indicates that the income elasticity of the firm’s products is +2.0, which is greater than 1.

An increase in Subway’s fast-food product prices prompts an increase in the amount of supply and demand for the commodities. Changing of Subway’s product prices is influenced by the number of clients. In the past three years, the trend of price changing has been constant, especially during holidays when many people are out with their families.

At this time, Subway’s BMT goes for $6. It is crucial to understand that luxurious commodities such as sandwiches are elastic, unlike normal commodities whose prices have to remain the same for a long time.

Hence, if the price of its main product, namely the BMT, shifts from $5 to $6, because of its high demand, the supply will also increase as shown in the Appendix c.

Close Competitors

Subway operates in an industry in which other organizations engage in the production and selling of similar products to the extent that they serve similar purposes (Simon, 2007).

Its competitors include McDonald’s, Wendy, Yum Foods, and Burger King.

Through the adoption of appropriate promotional techniques and other mechanisms for building customer loyalty, Subway has developed the capability to cope with the competitive environment so that it comes just second after McDonald’s in terms of its ability to push its products into the market.

Indeed, its most powerful competitors who deal with similar products include Wendy and the Daily Queen.

Close Substitutes or Complements

In economics, all products have some associations in the form of complements or substitutes. A complement of product A is the one that is consumed together with it while its substitute commodity is the one, which is consumed in its place. For Subway, close substitutes to fresh salads are fresh vegetable salads that are offered by McDonald’s.

Yum foods’ and McDonald’s humbuggers act as substitutes for Subway’s sandwiches. Many business entities manufacture bread in the US and in other markets that are served by Subway’s bread. French fries and beverages such as Seattle best coffee form important complements for Subway’s products.

Indeed, coffee is a major complement of Subway’s products that are served in breakfast (Maze, 2013).

Changes in Demand for Subway’s Products

Growth in demand for Subway’s merchandise is influenced by different factors such as competition and the inability of target consumers to purchase due to financial hardships.

According to Maze (2013), in terms of revenues, Subway falls in the fifth position, making it far larger than “Panera Bread, Arby’s, Jimmy John’s, Firehouse Subs, Quiznos, Jersey Mike’s, McAlister’s Deli, and Jason’s Deli” (p. 42). However, no evidence indicates that these organizations are taking away the demand for Subway’s products.

Instead, there is an increasing commoditization of sandwiches so that they become easily available in places, including lifts and churches. This observation suggests an increasing access to the products. Such accessibility implies a rising demand.

While the aftermaths of the global economic crisis greatly influenced the incomes of Subway’s low-end consumers, economies in Subway’s market have greatly recovered by now. Therefore, the theory that low-end income earners struggle to eat remains invalid (Maze, 2013).

An assertion that the demand growth for Subway has reached its peak is also inconsequential. The company focuses on low-calorie foods whose demand is on the rise, as people have become more conscious about eating high-calorie foods such as hamburgers and French fries. Consequently, the demand for Subway’s products is growing.

Training of the Company’s Labor Force

Productivity of the labor force of an organization is critical in enhancing competitive advantage. In the fast-food industry, quality customer service is critical to increasing and improving buyer experience whilst reducing service rate times (Armstrong, 2009).

For Subway, further training of customers is important in reducing lead times and throughput time. This strategy can reduce costs by ensuring efficient utilization of the labor force. Training of Subway employees on how to increase customer experience can help to attract ‘repeat customers’ and new ones such that the sales level can increase.

Increased trade translates into increased economies of scale, which cut on the total costs of running the organization. In technological savvy operational environment, work is done with the aid of information processing systems (Dusanka & Aleksandar, 2013).

Since the technology keeps on changing, a room exists for training Subway’s employees on effective use of technological systems in increasing their productivity.

Profitability and Sustainability of Subway Business

Profits are computed from the knowledge of fixed and variable costs. However, although it is clear that a 12-inch sandwich costs $5, Rotelli (2013) reckons that the company is still privately owned and that it does not share particular numbers.

One way of computing Subway’s profitability is by identifying the profit margin on every product and then multiplying it by the total number of products. Profits for all product categories can then be summed up.

However, this step is not possible for an organization that is not required by law to make public filings of its financial statements. Indeed, stating profits for each Subway’s restaurant is incredibly difficult, as it varies depending on sales and location.

Although the company posted profits amounting to $16.6billion in 2011, and that the profits have grown over the years, specific numbers are required in determining the sustainability of the organization’s business.

Strategies for Increasing Profitability

Profits increase with increased sales (Camillus, 2010). This situation can occur upon the mitigation of various weakness and threats to an organization’s operations. Subway needs to mitigate the problem of high turnover to reduce the cost of replacing employees and training them.

It also needs to encourage uniformity in customer service in different stores to help in building long-term customer relationships. It needs to benchmark from McDonald’s and develop drive-thru restaurants.

Another important strategy entails increasing its focus on healthier foods by developing more commitments to reducing salt and fat levels and adding nutritious product lines to the subs. Instead of just waiting for customers in its restaurants, Subway can also focus on home delivery services.

This plan can help in increasing and expanding its target customers to boost its sales levels.

Company Strategy, Prices, Target Customers, Production, and Cost Advertisement

Subway’s growth strategy entails opening franchises as the main centers for pushing its products to the global market. Through franchises, the company sublets its rights and saves on administrative costs and overheads. In the franchises, the company offers healthy low-calorie foods to attract healthy eating cautious consumers.

Its pricing strategies vary from one product to another and depending on the location of its outlets. A 6-inch sub costs an average of $2.49 while a foot-long sub goes for $5.89 at a restaurant in Alberta. The organization also sells salads between $3.49 and $4.89 at the restaurant. To an average American worker, these products are highly affordable.

Subway targets people who do not carry home-cooked foods at work. It also targets people who wish to eat during breakfast and evening dinners. It has products that fit all demographic groups of people. Fresh raw materials are acquired from farmers and distributed to the franchises.

Although variations may occur, production takes place in-house, but consistent with Subway’s established standards to ensure uniformity. For the individual restaurants, fixed costs include rent, supply and logistics, the cost of insurance, and premise cleaning.

Additionally, the salary for each owner is in most cases consistent for every restaurant. The cost of purchasing may vary depending on demand forecasts at different times of the year. This claim means that it constitutes a variable cost.

Other unpredictable overheads include oil fees, worker wages, and different utilities that are connected to these expenses. Advertising is a major variable cost for Subway. It takes the second position in advertisement spending, after McDonald’s.

Maze (2013) informs that in 2012, Subway spent more than $516million in advertisement. Its advertisements feature its slogan of ‘eat fresh.’ It shows employees whom the organization refers as ‘Subway Sandwich Artists’ making fresh breads using highly clean ingredients.

New Markets and Strategies for gaining Market Share

Subway opens new stores not only in the US but also in other parts of the world, including Britain. The internationalization strategy of the company is evidenced by its opening of outlets in Brazil in 2009, Portugal in 2013, and even in Bahrain in 1984. During early 2000, the company also established another outlet in India.

Indeed, at the start of 2013, the company had close to 400 operational eating places located in almost 70 major towns across India. It also has restaurants in Russia and China among other nations. In fact, new markets are important for increasing the distribution density for Subway’s products.

While attempting to gain market share in new markets and in existing markets, Subway commits its resource to promotional strategies. It creates awareness of its products among its target customers. It places itself as an organization that offers high-quality and fresh products.

The Amount of Customer Purchases and the Most Successful Products

As revealed before, Subway does not provide specific statistics to permit the computation of the total amount of customer purchases since it is privately owned. However, submarine sandwiches account for most of the sales. Indeed, the sandwiches form Subway’s flagship product.

Its most successful sandwich is the BMT, which has acted as the company’s main source of revenue. Subway (2012) reckons that this commodity contains “pepperoni, salami, and ham” (Para.11). Although the BMT previously meant ‘Brooklyn Manhattan Transit’, it now means ‘better, meatier, and tastier’.

Although it is not highly profitable, Subway also makes pizzas on order. However, the product is not available in all the organization’s outlets around the globe.

Sources of Revenue

Subway generates its revenues from sales of its fast foods, specifically the BMT sandwich as mentioned above. Products that are meant for different markets are designed to meet the needs and preferences of a given market to ensure higher revenues.

For example, in the New Delhi restaurant in India, Subway does not sell pork and products from beef since they are inconsistent with the Islamic and Hindu faith. Rather, it sells vegetable-based commodities.

Recommendations and Conclusion

Subway’s franchise model of growth is instrumental in ensuring a reduction in its operations cost. The franchises offer high-quality foods in a fast manner without compromising freshness. Although the company has shown some steady growth since inception, it is recommended that it makes some changes.

For example, it loses customers due to lack of a drive-through. This situation makes customers who are in a hurry not to get into its outlets. Thus, it is recommended that Subway gets drive-through restaurants to become convenient for customers in a hurry such as in the case of Wendy, McDonald’s, and Dairy Queen.

It should also consider delivering meals at homes to boost its sales in a bid to raise its profitability.

Appendix 1

Table 1.

Reference List

Armstrong, S. (2009). Prediction of Consumer Behavior by Experts and Novices. Journal of Consumer Research, 18(6), 251–256.

Camillus, J. (2010). Putting Strategy to Work. Quarterly Journal on Management, 2(4), 83-105

Covert, J., & Gibson, R. (2015). Wal-Mart dumps McDonald’s for Subway as in-store restaurateur. Web.

Dusanka, L., & Aleksandar, K. (2013). The Impacts of MIS on Business Decision Making. TEM Journal, 2(4), 323-326.

Ghosh, P., & Choudhury, P. (2008). Managerial economics. New Delhi: Tata McGraw-Hill.

Jargon, J. (2011). Subway runs past McDonald’s Chain. Web.

Maze, J. (2013). Are competitors biting into Subway? Restaurant Finance Monitor, 2(1), 41-47.

McGuigan, J., Moyer, R., & Harris, F. (2010). Managerial Economics: Applications, Strategy and Tactics. New York, NY: Cengage Learning.

Rotelli, W. (2013). How Does Subway Profit From the $5 Foot-Long Deal? Web.

Simon, H. (2007). Rational decision making in business organizations. American Economic Review, 3(4), 123-129.

Subway. (2012). Subway Timeline. Web.