Subway IP Inc.

Introduction

Subway is one of the fastest developing restaurant chains in the global market. The restaurant was founded back in 1965 by Fred DeLuca who opened the first outlet in Connecticut United States (Subway, 2016). The idea of opening the restaurant developed from Fred’s inquisitiveness to cater for his education fees. One of his family friends advocated for him to open a shop for submarine sandwich. Fred opened an outlet in Bridgeport, Connecticut using the capital which he acquired from a loan that was led by Peter Buck his friend (Subway, 2016). After some years of operation, Fred had acquired sufficient skills of learning the business which helped him enhance customer relations and experience. As a result, Subway at the early stages of development was able to offer premium quality services and products to its customers. Additionally, Fred was able to keep the operating costs low together with reaching a wider customer base. By 1974, the restaurant was a chain operating approximately 16 outlets spread all over Connecticut (Subway, 2016). By this time, the restaurant was a partnership business owned by Fred and Peter Buck. In the contemporary global restaurant chain market, Subway operates approximately 44,818 restaurants spread in 112 countries (Subway, 2016). In United States, the restaurant chain operates only 26,880 restaurants while the others are operated overseas. This makes Subway the dominating restaurant chain among the single-brand restaurant chains in the world (Miller & Washington, 2013). In terms of size, Subway is the largest restaurant outlets operator both in United States and in the world. One of the factors that have propelled the restaurant chain towards their success in the global market is an approach of being customer oriented. This means that every implementation made is by considering their customers.

Subway’s mission statement is “to provide the tools and knowledge to allow entrepreneurs to compete successfully in the fast food industry worldwide, by consistently offering value to consumers through providing great tasting food that is good for them and made the way they want it.” (Subway, 2016)       

The vision statement of the restaurant chain is “to make their restaurants and operations environmentally and socially responsible as possible.” (Subway, 2016)

The mission and vision statements of Subway are straightforward and simple. It is exhibited that the number one concern for the company is to delight every customer by making sure that they enhance their experience and relations. Additionally, which offering quality services to the customers, their vision is to ensure that their business operations pose positive impacts to the environment and the community while improving the lives of the customers, employees, franchisees and the general community. Thus, it is perceptible that the mission and vision of Subway Inc. have helped the company withhold its customer oriented culture which has in turn enhanced their operations and overall success. Additionally, the company is able to retain their commitment in making sure that their products and services achieve the desirable quality. Subway has been committed towards implementing cost effective strategies for their franchise operations. Lastly, through their mission and vision, the company has been able to adhere to sustainable initiatives on the basis of environmental conservation, sustainable energy consumption and sustainable supply chain management.    

Five Forces of Competition

The level of competition of an organization is assessed using Porter’s five forces analysis framework to determine the attractiveness of the organization in the market. The framework is based on the notion that there exist five forces that influence the competitiveness of the business together with its attractiveness in the market. Therefore, this framework helps in identifying the strengths and weaknesses of the organization especially that influences its attractiveness and competitiveness in the market. The model uses the current position of the organization in the market together with position that the organization anticipates to achieve in future. This means that the analysts in the organization can be able to assess the profitability of new products and services intended to be introduced by the company. Generally, it is recommendable that the management staff should use the model to enhance business operations. The components of the model includes threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products/services, and rivalry from the existing competitors. Therefore, in Subway’s case, it is factual that the restaurant chain is affected highly by every component of Porter’s framework though at different extents. The following is the description of how Subway is affected by the components of Porter’s model.

• Threat of New Entrants   

Citing from the fact that there are low entry barriers derived from low consumer switching cost, it is perceptible that restaurant industry is highly susceptible to new entrants threat. This is derived from the fact that the capital requirement to start the restaurant business is relatively lower and it is easy to operate.

• Threat of Substitute Products/Services

It is perceptible that there are numerous convenient outlets that offer foods and services offered by restaurants. This means that there is variety of alternatives for the customers in the restaurants market. Thus, Subway as an organization in restaurant market is affected by the threat which obliges it to implement an appropriate marketing strategy.

• Bargaining Power of Suppliers

There is a relatively low pressure by the bargaining power of suppliers to the restaurant market. This is because suppliers appear unwilling to lose Subway since the ingredients of their products are highly demanded always.  

• Bargaining Power of Buyers

The brand loyalty in Subway’s market is relatively lower as the restaurant offers distinct types of subs and proposes making own subs. Additionally, competitors such as Quiznos have larger subs thus giving the suppliers bargaining advantage. Lastly, large customer base served by Subway results to a corresponding increase of suppliers’ bargaining power as the company cannot be able to satisfy market demands.  

• Rivalry from the Existing Competitors

The main competitors to Subway include McDonalds, Quiznos, Burger King, and A&W. the stiffness of this competition is based on factors such as price, products/services and overall market changes.

SWOT Analysis   

It is factual that marketing strategies implementation is very complex as it obliges the organization to go through a series of processes prior to executing it. However, the appropriate method to use while planning for the marketing strategy is use of SWOT analysis. SWOT analysis helps the organization identify strengths and weakness together with opportunities and threats that might influence its performance in future. Therefore, in this case, Subway outlets tend to leverage their strengths and utilize existing opportunities which helps them confront their weaknesses and threats to obtain desirable results.

Strengths  

One of the strengths of Subway Inc. is based on size and number of outlets that the company operates. This helps Subway in competing effectively in the market as it is able to make implementations regardless of the cost. The other strength is based on the product line where the company offers variety of products and services that satisfy market demands. The other strength is that Subway uses nontraditional strategies to expand their markets. Their products adhere to healthy living standards that have been a major concern in the contemporary society. Furthermore, Subway enjoys global brand recognition which lowers their cost of marketing for their products. The other strength is based on low franchise startup costs which helped the restaurant penetrate the market easily and operate effectively.

Weaknesses  

The major weakness of Subway is use of old-fashioned décor for their franchise shops. Withholding this décor since the foundation date has affected the competitive advantage of the restaurant significantly. The other weakness is that Subway’s services delivery is consistent from outlet to outlet. Additionally, the company exhibits a high turnover rate for their employees in all franchise outlets (Berfield, Patton & Chaussee, 2015). Therefore, it appears that Subway is not able to control culture of its franchise outlets because of the market diversity.

Opportunities

1. Subway has the fastest global development than any other restaurant chain in the global market.
2. High demand in the market served by Subway promotes growth and development of their brands.
3. Improved franchise relations help the restaurant chain reach out a wider customer base from different markets.  
4. High performing competitors give Subway a comparison platform while making implementations thus increasing its competitive advantage.
5. Partnerships and alliances with the suppliers help the organization offer variety of products in their menu for different target market segments.

Threats

1. Food contamination is one of the threats that might affect the performance of Subway because it is easy to lose customers to other alternatives.
2. Franchise litigation and government regulation on the basis of health standards is predicted to increase in different markets served by restaurants.
3. The current nature of global economy makes most markets susceptible to economic crises which will affect the performance of Subway in those markets.

In order for Subway to capitalize on its strengths and opportunities, and minimize its weaknesses and threats, it has to adhere to the market development strategy. Market development strategy is an approach that is used to source new more markets for the business to operate in. In the process of sourcing new markets, Subway will be able to implement other approaches of fitting in the new markets selected. Precisely, the company will utilize opportunities in the market together with its strengths while adhering to cultural demands of the market served to minimize threats and weaknesses.

Corporate Level Strategies      

1. Diversification

Diversification is an approach where the company ventures new markets that are totally different from the targeted markets. In order to reduce market risks, the company should venture in the trending current markets such as real estate, financial and mobile phone markets. However, the company might not engage in the production process in these markets but should make sure that they play significant roles. This would help Subway in tackling future threats while increasing its competitiveness and profitability in all markets served.

1. Product Development

It is factual that regular improvement of the product and services offered by the business helps in increasing the competitiveness of the organization. Therefore, for the rising concern on healthy living by the consumers, it is recommendable for Subway to develop their products to make sure that they satisfy consumer demands (Subway, 2013).

Business Level Strategies

1. Marketing

In their marketing strategy, Subway should make sure that they address factors affecting current market which include health, product improvement, freshness and satisfaction of consumer demands by the products. The major objective of this is to assure customers that products offered by Subway are healthy and improved according to the changes in their concern.

1. Price Leadership

Citing from the fact that Subway is competing with large restaurant chains which exhibit economies of scale such as McDonalds and Burger King, it is recommendable for Subway to use pricing strategy for competitiveness. This means that they should offer their products and services at lower prices in order to attract new customers and retain the existing ones.

In order to communicate the strategies recommended above, the company can use either formal or informal channels to make them known to all stakeholders. Some of the formal methods of communication that can be used to communicate the strategies include meetings, email, newsletters, posters, and conference calls. Except for the, newsletters, posters, and conference calls, it is factual that formal methods are effective in making sure that the stakeholders have received the message. Additionally, formal methods facilitate immediate feedback from the stakeholders. On the other hand, some of the informal methods that can be used to communicate the strategies include voice mail, lunch meetings and personal short conversations. These methods are used to address the stakeholders personally and individually in order to capture their ideas. Generally, it is recommendable for the company to use informal methods first before going to formal methods. This is based on the fact that it will help capture ideas of different stakeholders and by compiling these ideas; it is easier to modify the information to be addressed in the meetings, email, newsletters, posters, and conference calls.

Corporate Governance Mechanisms 

The first corporate governance mechanisms used by Subway is partnership with Doctors Associates Inc. which assures the customers of the restaurant that products offered are healthy and of premium standard. The partnership with Doctors Associates Inc. helped the company operate overseas to a level of developing in those markets where it owns more than 15,000 outlets in foreign markets.

The other corporate governance mechanism is adherence to original management since the foundation date. It is factual that Subway’s top management which is controlled by the founders of the company has never changed since 1965 (McFadden, 2015). Precisely, what changes is the management of the outlets operated by the organizations where different staff members and regulated and shifted frequently. This has promoted continued success of the restaurant chain in oversea markets because employees are given chances to acquire experience in operating in different markets.

Partnership between Fred DeLuca and Peter Buck can be regarded as the determining factor for the overall success of Subway Inc (McFadden, 2015). This is based on the fact that it has promoted sharing of ideas in the management of the business which resulted to the idea of overseas operation of Subway. However, in order to increase the performance of the company and enhance its ability to adopt the current trends in the market, it is recommendable for the company to assign the top management to personnel from outside who have experience in the contemporary management of businesses. This is based on the argument that Fred DeLuca and Peter Buck might be using traditional management strategies which the reason behind problems such as withholding traditional décor of the restaurant outlets even in foreign markets. Generally, adopting new management strategy will help Subway adapt to the current trends in the market thus enhancing its competitive advantage currently and in the future.

Corporate Social Responsibility      

Citing from the vision of Subway Inc., it is perceptible that the company has been concerned not only in expanding their operations but also in community building and environmental conservation (Subway, 2016). As a result, Subway has partnered with American College of Cardiologists (ACC) to encourage the society to eat and live healthily. Additionally, the company has been engaging in different events such as sports in order to benefit youngsters to be active in the community. On the other hand, the company has adhered to environmental leadership, for example back in 2010; the company was able to reduce carbon emissions by more than 100,000 metric tons by shifting to electrical energy (Subway, 2016). From then the company has been utilizing energy effectively as a way of preventing environmental pollution. Lastly, the company has been engaging in donations and sponsorships for charity and education institutions to facilitate excellence of the community (Subway, 2016). Generally, these activities have enhanced brand recognition of the company thus increasing its competitive advantage and profitability.

References     

Subway (2016). Social responsibility. Retrieved from http://www.subway.com/en-us/aboutus/socialresponsibility

 Miller, R. K., & Washington, K. (2013). LARGEST CHAINS IN METROPOLITAN AREAS. Restaurant, Food & Beverage Market Research Handbook, 74-88.

Subway Restaurants Healthy food for health-related environments. (2013). Caribbean Business, 41(20), B28-B29.

Berfield, S., Patton, L., & Chaussee, J. (2015). JARED ISN’T SUBWAY’S ONLY PROBLEM. Bloomberg Businessweek, (4434), 38-45.

Subway (2016). History. Retrieved from http://www.subway.com/en-us/aboutus/history   

McFadden, R.D. (2015). Fred DeLuca, hands-on co-founder of subway sandwich chain, dies at 67. New York Times. Retrieved from http://www.nytimes.com/2015/09/16/business/fred-deluca-co-founder-of-subway-sandwich-chain-dies-at-67.html?_r=0