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GLOBAL EXPANSION OF SUBWAY A Marketing Analysis

Table of Contents

Introduction ……………………………………………………………………………………………………………………………….. ……………………………………………………………………………………………………………………………… 3 SUBWAY Mission ………………………………………………………………………………………………………………….. 3 Vision ……………………………………………………………………………………………………………………………………. 3 Market Analysis………………………………………………………………………………………………………………………. ………………………………………………………………………………………………………………………. 3 SWOT Analysis………………………………………………………………………………………………………………………. ………………………………………………………………………………………………………………………. 4 Competitive analysis………………………………………………………………………………………………………………. ………………………………………………………………………………………………………………. 4 Strategic tools………………………………………………………………………………………………………………………….. ………………………………………………………………………………………………………………………….. 5 ………………………………………………………………………………………………………. 6 Recommendation Strategy………………………………………………………………………………………………………. Preparation of business mode, right market and right mix mix…………………………………………………….. …………………………………………………….. 8 Management processes building to Globalization Globalization………………………………………………………………….. ………………………………………………………………….. 8 References………………………………………………………………………………………………………………………………. 10

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Introduction A business organization has to continuously pass through competition competition, whether in a liberalized open market economy or capitalist economy.. Competition at home and abroad coupled with accelerated changes in technology continuously changing demand pattern. Thus, to sustain in such dynamic market the company requires surveillancee on market forces. Such an action requires study of business environment and strategic planning. This paper deals with the assessment of SUBWAY’s ’s marketing strategy and their international expansion plan. SUBWAY is a health aware fast food franchise or chain which was founded in the year 1965 by Doctor’s Associates, Inc. It mainly sells submarine sandwiches which reflect in the name ‘Sub’way. Apart from the sandwiches it also sells salads lads and personal pizzas. SUBWAY is one of the fastest growing fran franchises in the world with approximately 38000 000 restaurants spread across 99 countries. It is the largest single single-brand restaurant in the world. Its advertising slogan is ‘Eat Fresh”. SUBWAY Mission “To To provide the tools and the knowledge to allow entrepreneu entrepreneurs rs to successfully compete in the QSR industry worldwide by consistently offering value to consumers through providing great great-tasting tasting food that is good for them and made the way they like it. it.” Vision SUBWAY's vision is to be ranked as number one restaurant by customers and be the best healthy fast food provider in every market they serve. Market Analysis A market analysis of the environment onment and industry where SUBWAY operates erates will help to fetch a better understanding of market strategies. SUBWAY is the market leader in Quick Service Restaurant industry worldwide. The Quick Service Restaurant market is enormously competitive and continually expanding internationally. Quick Service Restaurants are a category of restaurant that specially focuses on fast food. These restaurants generally are a division of a franchise or chain. The food in these restaurants is characteristically cooked in advance and is kept hot until ordered. This market is very tempting to the consumer on the go who do not have the time to cook or the money for a grand meal. Moreover, the growing inflation rate has more or less affected every country. People are in search of cheaper alternatives and bargains to expend their money more efficiently. In such situation n it calls for a tough competition among fast food brands such as, KFC, Mc Donalds, Pizza Hut etc. for their endurance in market. Let us peep into the strategic marketing environment where SUBWAY deals. Contributing approximately 42% of the total sale in an average, sandwiches andwiches form the largest market segment observed in the recent past. The increasing trends for shorter and light lighter lunch breaks have potentially added to the increasing demand for sandwich which has further resulted in escalating sales. These Quick Service Restaurants and other fast food

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chains have added fuel to the increasing demand by offering variety in the fillings and bread types types. Being a part of an extremely dynamic and competitive market, SUBWAY has to face a strategic marketing challenge c as to what precise marketing mix to apply in order to remain advantageous while maintaining sales expansion and multiply profit. SUBWAY efficiently competes with burger chains and all others that are in the speedy casual sector of the market. Bringing Brin in healthier meals into its menu list and giving m more attention to diabetes and obesity have developed consumer‘s choice for SUBWAY. However, more efforts should be given to improve business during the dinner hour. Added menu options should also be brought in to reply to competitor‘s trends and to place more attention on the children‘s segment. SWOT Analysis One of the commonest methods for structuring audit information to provide a critical analysis is SWOT. The table below focuses upon SUBWAY SUBWAY’s strengths, weaknesses, opportunities and threats. STRENGTHS • • • • • • •

Vast array of customizable menu offering. Largest fast food restaurant chain in the globe by the number of outlets. Low set up cost. Option for healthier foods foods. Partnership with American Heart Associations. Solely owned by franchisees. Efficient promotional strategies.

WEAKNESSES • • • •

OPPORTUNITIES • • • • • • •

Escalating demand for healthier foods. Continue to develop international business. Upgrade interior to increase aesthetic appeal. Improve franchisee relation. Expand the menu list. Introducing drive-thru thru business. More emphasize on promotion and advertisement.

Interior design of the outlet looks outdated. High rate of employee turnover. Inconsistent servicing from store to store Too much authority over franchisees

THREATS • • • •

Economical down turn. Overcrowded fast food market. Lawsuits against SUBWAY Fluctuation in currency rates.

Competitive analysis SUBWAY is competing with the qui quick service restaurant industry that gives a lot of competitive pressure. SUBWAY's biggest competitor is McDonald's. McDonald's has set strong grip as ‘international burger giant’ in the market since its opening in 1940 and is one of the YUM! food brands. The YUM! brand also consists of the booming Quick Service rvice Restaurants - KFC and Wendy's. These quick service restaurants are not easy to

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compete with as they have a deeply rooted, strong and loyal customer support.. In America, Americ there are other submarine sandwich shops like Jimmy John's, Quiznos and Firehouse Subs with which SUBWAY competes. SUBWAY’s ’s list of competitors do not limits to Quick Service Restaurants only. But SUBWAY also competes with other businesses who sell food grocery stores, convenience stores, delicatessens etc. A number of consumers prefer local restaurants as they give the local taste, great customer service as well as they are more reliable. To these consumers, SUBWAY may not be the preferable option. Moreover, some people are fond of homemade food and cooking in comparison to food offered by a chain company. Strategic tools We can use the ANSOFF Matrix to explain marketing strategies of the company. Existing

Products

New

MARKET PENETRATION

PRODUCT DEVELOPMENT

MARKET DEVELOPMENT

DIVERSIFICATION

New Market penetration Market penetration is when an organization increases its market sh share are in which it already functions. functions SUBWAY always built marketing strategies to penetrate the market where it already exists. There operating department is Franchise sales. This department dedicatedly finds individuals who own the entrepreneurial quality that is required to open a SUBWAY franchise.. They continuously keep on finding new franchisee to penetrate the market. SUBWAY also uses the existing franchisee to expand their market arena. For this function, it has a separate section namely Profit Building and Local Marketing. The prime task of tthis department tment is to help franchisees to initiate design that will increase sales in the local markets. Market Development This strategy helps in finding new markets for the existing product line. SUBWAY has a team dedicated to market development called New business development. This group works with potential franchisees who want to open a SUBWAY restaurant in non-conventional conventional locations like petrol pumps, gas stations, movie theatres etc. The simplicity of the operation and the capability to fit within small spaces unlike competitors, SUBWAY restaurants can be opened in many non-traditional traditional sites, such as

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amusement parks, business centers, airports, colleges and universities, hospitals, schools, stadiums, military bases and many more. Diversification Diversification includes the entering of the firm in a totally different and new from those targeted by the existing activity of the organization. SUBWAY is presently going for mobile phone markets, real estate estat markets and few financial markets to demean its business risk by means of diversification. The SUBWAY’s real estate corp. team assists franchisees with real estate negotiations and leasing. Product Development Improving products from time to time to m maintain aintain the competitive position is what product development is. It is one of the major marketing strategies of SUBWAY, particularly introducing healthier menus. Its Research and Development department is accountable for developing and testing the food that we are served. Its low fat sub choices are extended to 8 subs less than fat of 6 grams. All excess fats are removed from SUBWAY’s core menu item to fit into American erican Heart Association’s standard. Menu options now include high fiber oat, wheat and honey breads, customized pizzas, the Feast Doubled Stacked sub, black forest ham and healthier foods. Recommendation Strategy SUBWAY should try not to focus too much upon its competitors. Franchisees should insulate themselves against outside forces by performing their best and try to improve on their successes. Even though SUBWAY has strong competitors, they have a strong competitive plus point because they have been able to set themselves elevated from the crowd of other fast food franchises. Their unique product offering i.e. submarine sandwiches unlike hamburgers and oily fries should be used as the major selling weapon. Customers today are more prone to healthy light diets. When they can get healthy fast food option, definitely they will prefer to eat them over oily fast ffoods oods like hamburgers and fries. The sales of SUBWAY’s ’s sandwiches marked an annual growth of nearly 17% while the growth rate of burger was only around 7%. Their slogan, “Eat Fresh”, comprises that each sandwich is made right in front of the consumer as ordered, with all the fresh ingredients. Expanding the product line or menu can feature its target market’s needs and requirements of fresh heal healthy and custom-made food. When talking of the target market let’s put an eye upon SUBWAY’s SUBWAY segmentation. SUBWAY first tasted international waters when it opened its first unit in the small alien Middle Eastern nation of Bahrain in December of 1984. In a ffairly short time, the SUBWAY chain started to emerge in such far far-flung lands as Poland, Nicaragua, Iceland and China. SUBWAY targets some of the cultural and religious segments while maintaining their original core menu with relatively fewer changes. It implies that despite d diversity of cultures, SUBWAY’s ’s great taste and freshness has helped it to hold the international appeal. Apart from that, SUBWAY tries target diverse age segments through their existing product lines and product expansion, particularly improving kid‘s meals meals. SUBWAY is getting better with the nutritional substance of its

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Kids Pak meal by changing the carbonated soft drink to a nutritious juice box and switching from a high calorie cookie to fruit snack which is rich in vitamin C. SUBWAY restaurants started to dole out 'Jareds Steps to Healthier Kids' information cards to educate customers about stopping childhood obesity. obesity SUBWAY has positioned their products on the platform of “freshness”. The SUBWAY chain is intensifying its universe of potential customers as a place for "TASTY" and "HEALTHY" food. An effective advertising campaign will appeal to the healthy customer and also build healthy eating habit to those who are currently more prone to fatty burgers and oily fries. In order to deal better with the issues of brand image building and standardization in the unstable market environment with changing customers, taking up a new form of franchise – “Not starting from Zero” will help SUBWAY to gain more ore pace and sustain development in the long long-term. In this form, the franchise organization generally doesn’t issue license to probable franchiser to start a new store, on the contrary, it transfers an already present self self-owned owned store that run for a period of time to the interested person. This can be taken as a win win-win win model which lowers the franchiser’s risks by giving a store to run that already has stable internal functioning functioning,, loyal list of customers, better store management and has been proved to be profitable rofitable and commercially feasible. More over the company itself can have better control over the quality and standard of the store management, product and services and of the individual chain store. However, the tradition way of franchise generally works like this. After the franchiser gets the license, the chain organization will help him/her with the complete store set up starting from the location, key merchandise supplies, marketing, promotion and personal training. A key point of franchise is “copy” - Copying a successful business model to different locations. Although a chain corporation offers support to perform different functions to its franchisers, in many cases, it is predictable for one single store to deviate a bit from the set standard. Se Secondly, condly, the inconsistent quality and customers’ experience may result into unstable brand image. When recommending about the products of SUBWAY,, it is to be mentioned about the sizes of the sandwiches. Many customers believe that the size is too large to take a bite and too large to eat up. Thus it is advisable to bring in some downsized versions of sandwiches so that all can take the bite. Seco Secondly, bringing in some fresh juice and shakes will provide customers with an alternative for drinks other than tea and coffee. By installing a juice making machines in SUBWAY stores will help to deliver fresh juice to the customers made in front of their eyes. e Besides, soups are also preferred in some of the countries. So if SUBWAY adds up to its existing product line it will fetch more customers. Thirdly, the variety of dressing and sauces can be increased. According to standardization and SUBWAY’s franchising chising rules, the ingredients of sandwiches cannot be changed, where as different regions have different preferences in terms of flavor. Therefore, it is advisable to incorporate few localized flavors in the dressings and sauces. When considering the price, SUBWAY is more or less affordable to the greater section of the society, therefore it is not recommended to make vast alteration and changes in the pricing of the products. However, lowering the prices of the down sided sandwiches will provide a larger price range and hence capture more customers.

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To improvise upon promotion, magazines are recommended to use as a key medium. Major fashion and health related magazines should be looked upon for both printed ads as well as advertorials where the main themee will be of course healthy diet. Besides, internet can also be used as the majority of target market can be found on internet. Interacting with potential customers will also help to arouse their interests and help to find the target customers. Offline ch channels annels can also be used like PR events which can relate SUBWAY with travel with a highlighting and appealing caption. Another proven way to promote product is the coupon. Distribution of coupons via online and offline mode is recommended in crowded locati locations like colleges, offices etc. to gain more consumers. Physical evidence and the aesthetic appeal play a vital role in the growth of such QUICK SERVICE RESTAURANTs. s. Many customers primarily judge the interior decoration and furniture before the healthy food ood options. So to target those customers, it is advisable to rethink and renovate SUBWAY’s store infrastructure and decoration. When switching to international market, there are few common strategic options that a company can pursue. These are exporting, multi-country country strategy, licensing, franchising, global strategy and strategic alliances. The Franchising strategy is considered better for companies who are looking for global extension in retailing and service but it is tough to keep up the cross cross-country quality control. There are three stages of internationalization: Preparation of business mode, right market and right mix To become global, SUBWAY first had to decide which markets are more suitable for entry by considering a lot of factors like the business set up cost cost, the GDP, fast-food growth,, political stability, and the probable religious or cultural variations. SUBWAY was initially focusing on ten precise markets but changed its plan suddenly. This abrupt change occurred because it began considering dering the impressive and fast growth throughout the world. SUBWAY is exclusive for combining the ease of fast food being healthy and fresh at the same time. It is also very significant that SUBWAY's food maintains its consistency to ensure that customers get the same high quality and fresh ingredients in the food regardless of the country and region they are operating operating. The SUBWAY managers have the ability to make a further profit due to lessen in consumer's interests for hamburgers, fatty fries and other unhealthful fast food choices. They can also flourish off of the fact that America has a growing problem with obesity. Sales of sandwiches rise with the demand for healthier food options. SUBWAY, from the very beginning has adopted franchising system as their heir principal business model in terms of globalizing their business. This his choice has proven to be an immense success factors. Moreover, the flexibility and originality that SUBWAY has introduced made the franchisers to set up the stores worldwide in unconventional places.

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However, in many countries franchising is frequently limited to domestic markets only. Therefore, in such countries, the expansion possibility becomes limited for companies like SUBWAY. SUBWAY Besides, transgressing borders in many places like Europe are still difficult as these places lack overall regulation and legislation. Many trans-border globalizations are limited to neighboring nations. Management processes building to Globalization To expand in different locations throughout the country country, the SUBWAY representatives have to seek local entrepreneurs and local developers. developers SUBWAY outsources the majority of its supplying. Franchisees work cooperatively and willingly to acquire wrappings, paper, bags, and other resources.. The business progress is outsourced to local Development Agents. This means that SUBWAY head office can focus on brand protection, new concepts, market analysis, financial administration and expansion by giving way to new franchises. it, and the final verdict is according to the new franchisees. The SUBWAY’s subsidiaries are not owned by it subsidiaries are only accountable for searching franchisees and do not have any power on franchising contracts; these are issued by the SUBWAY head office in Milford, Connecticut. In order to expand its association of franchisees, SUBWAY has introduces a system of responsibilities: Regional Directors direct and look after the actions related to the staffs in the field and regional offices. They build d and execute strategies to develop the stores on a regional level. They are accountable for the accomplishment of long-term term growth and annual objectives. Area Development Managers are allotted a precise geographic region where they have to build up activities aimed to maximize growth, profit and achieve sales objectives. They assist the development agents. Development Agents are independent contractors who are accountable for finding and searching new franchisees in their region.. They are allotted to transfer the knowledge,, information and tools essential to a successful setting up of a SUBWAY bistro to the new franchisees. They manage numerous field consultants. Field Consultants are responsible for the inspection of on-field tasks of the SUBWAY restaurants and they are in charge of the daily operational guidance and assistance to the franchisees. SUBWAY has provided the access to its franchises more tough than in the past in order to assure quality and brand fortification. Franchisees also have several constraints once they are accepted. They have to pay the initial start-up fee, buy the standard equipment equipments, hire and appoint employees; operate and run the store and its accountancy; have to pay 8% in royalty and 4.5 % for the SUBWAY promotion fund. But, in return, the company offers the franchisees with restaurant design assistance, location guidance, guidance and equipments ordering support;; training programs, produce formulas, operational support and episodic assessments. Investments vary based upon the ccountry, location and the size of the store. SUBWAY‘s low set up cost and capacity to fit into unusual and odd spaces are other reasons for their great success. A SUBWAY restaurant is a perfect business as it requires small spaces without the need for heavy cooking equipments. Its local office makes the franchise start start– process easy and simple. simple Many countries are

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wide open for growth at present. As SUBWAY’s brand consciousness sness grows all across the globe covering every country, more and more people will become aware of SUBWAY as a great healthy, fast and fresh lunch option with loads of nutrition values. SUBWAY has introduced the concept of eco restaurants by adopting the sstrategy trategy of niche marketing and setting themselves apart from the crowd as “healthier” fast food provider. Their advertisement showcases slogans like “98% fat-free,” free,” 7 subs under 6 grams of fat.” And “one serves of 55-a-day.” day.” Their maxim of “Eat Fresh” has gained ained them many honors in the process food business. They have recently launched new ‘eco’ restaurants each one designed to reduce water, energy and waste consumption in lucrative ways. SUBWAY’s Corporate Social Responsibility efforts are not limited here. They have also introduced recyclable plates and paper napkins made of 100% recycled substance. They have also started using paper menu cards instead of the plastic ones. Their other Corporate Social Responsibility scheme includes the Fit to Hunger operation to raise consciousness of healthier food options to control obesity.. Customers are also offered with the option to join in by donating food and money in the local food banks. Thus, if SUBWAY incorporates more such Corporate Social Responsibilities and social activities, it can appeal to the masses. References: 1. Strategic Management : The Challenge of Creating Value, Second Edition by Peter Fitzroy, James M. Hulbert and Abby Ghobadian 2. Marketing Management: Philip Kotler; Str Strategic Marketing (page no – 275) 3. Michael John Baker, 2003, The marketing book, 5th edition, Butterworth Butterworth-Hienemann, Hienemann, (Page no. 120) 4. Armstrong, G., Kotler, P., Saunders, J., Wong, V.: Principles of Marketing. European Edition, Great Britain: Prentice Hall 5. SUBWAY (2009) ‗Mission Mission and values‘, web page http;//www.SUBWAY.co.uk. .co.uk. 6. SUBWAY (2009) ‗student student educator‘, website link http;//www. http;//www.SUBWAY.co.uk .co.uk 7. McDonald, M. (2003) Marketing Plans, 5th edition, Kent: Butterworth-Heinemann Heinemann publications. 8. Burger King, 2009, webpage link http://www.burgerking.co.uk/company 9. Lancaster, G and Reynolds Reynolds, P (2003) Marketing made simple, 2nd edition, Oxford: Made simple. simple 10. Consumer Psychologist, 2009; segmentation, available at http://www.consumerpsychologist.com/cb_Segmentation.html

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Global expansion of subway