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Subway - eat fresh

Subway - Eat Fresh

Executive Summary

Fred DeLuca founded the SUBWAY® chain in Connecticut, USA, in 1965. The company has since grown into a multi-billion pound business, with 31,524 outlets in 91 countries. The SUBWAY® chain aims to increase the number of outlets it has in the UK and Ireland to over 2,000 stores by 2010. In 2009, the SUBWAY® chain was ranked the number one franchise opportunity by Entrepreneur Magazine. In 2008, the SUBWAY® chain was voted the No. 1 sandwich provider in the British Sandwich Association's (BSA) sandwich industry report. In most years, about 70% of new SUBWAY® franchises are sold to existing SUBWAY® owners. The low fat menu is popular with customers all around the world.(Subway, 2009)

In this project there will be a brief discussion about the Subway as a fast food chain which will be discuss in different parts. The whole story relating to that assignment would be in the context of SUBWAY. In the first part, the overall strategic environment with respect to the competitive analysis in view of SWOT, PEST or Porters five forces Analysis. as far as the marketing is concern. In the next stage of the that project the discussion will be about the mission/vision statement of Subway. At the third part there will be a mixture of the marketing strategies like segmentation, targeting and positioning in theoretical and practical aspects. Moving further the discussion marketing strategies by using specific strategic tools. At the last level of the project the branding strategy and current and upcoming changes in marketing environment as far as the subway is concern.

Current Market Situation

In the United Kingdom inflation rate is growing. People are looking for cheaper options and bargains to spend their money more efficiently. In such circumstancesit creates a competition among different organizations in fast food industry such as Mc Donalds, KFC, Pizza Hut etc. for their survival in market.

Strategic Marketing Environment

Sandwiches form the largest market segment contributing 36.5% of all sales in 2004. Sandwich sales have benefited from the trends towards shorter lunch breaks and the corresponding demands for light lunches and snacks. Rapid expansion of chains such as Subway and Benjys have also helped sales, along with more variety in the fillings and bread types available. Over 54% of all adults have used a fast-food outlet in the year 2003/2004 so penetration is relatively high. Sales growth in the period 2005 to 2009 is forecast to be less than the previous 5 years, partly due to concerns over healthy eating issues, increased competition from other outlets and saturation in some market segments. The UK fast-food/takeaway and home delivery market was valued at an estimated GBP 8.38bn in 2004 at retail selling prices (RSP), representing a sales growth of 3.9% over the previous year. The pace of growth in the market quickened in 2004 following a sales increase of just 3% in 2003. (Red Orbit, 2009)

SWOT Analysis

The commonest mechanism for a structuring audit information to provide a critical is SWOT Analysis (Pettitt,2006). The table below highlights these Strengths, Weaknesses, Opportunities, and Threats.

Strengths

  • Size & Number of stores
  • Menu reflect Demand
  • Worldwide brand recognition
  • Low set up cost

Weaknesses

  • Decor is outdated
  • High employee turnover
  • Service delivery is inconsistent from store to store

Opportunities

  • Continue to Grow Global Business.
  • Improve Customer Service Model
  • Continue to revise and refresh menu offerings
  • Continue to expand channel opportunities

Threats

  • Price competition
  • Inflation and recession
  • Substitutes availability
  • Economic downturn

Strengths

Size and number stores and channels as compare to the Mc Donald's, KFC etc. Menu reflects demand for fresh, healthy and fast and also the according to the tradition and values of the specific country as different menu in Pakistan, china etc.. As every on Worldwide know the brand Subway. Low franchisee start up costs as its mention in the comparison of different start up cost of fast food setups. Franchisee training is structured, brief and designed to assure rapid start-up and success.

Weaknesses

Decor is not according to the new fashion. Some franchisees can be unhappy because of not been getting attention and benefits from the company as there is a big set up and too many branches. As far as the nature of job is concern there is high employee turn over ratio. There is a chance of no or less control over franchise saturation in given market areas like the quality and customer service.

Opportunities

Due to low investment cost (Franchising cost) as compare to other companies in fast food industry like Mc Donald's, Pizza Hut etc. There is always an opportunity to grow globally. Updating decor can make the sale up and good reputation of the company and brand competition is getting stiffer in this specific industry so improvement in relation to customer service can make a visible difference. There are good potential customers in Chine, and almost 520 M people are belong to upper middle class so with the combination of Chinese traditional menu that can be a good in time thinking to invest in china. Another concept of Halal franchises not only to targeting the Muslim but other customers as well.

Threats

There is stiff competition among the different companies in fast food industry, the fifth of competitive edge, more market share, and brand building competition. But as the present downturn in economy and its may not be a good idea to increase the number of franchises as Subway target to have 2010 branches in UK by 2010. The SUBWAY® chain aims to increase the number of outlets it has in the UK and Ireland to over 2,000 stores by 2010 (Subway, 2009 a).

Porter's Five Forces Analysis

The Five Forces that Shape Industry Competition (Porter, 2008)

There is always a Threat of New Entrant in this market because of the low setting up cost and no product differentiation in the specific fast food industry. As the UK fast food market is concern there are lot of examples of new set up in that particular field.

Overall the world market of fast food suppliers are concern Bargaining Power of Supplier is more due to the alliances among the supplier are taking place in order to get more market share and profit as more potential and demand of their products in international market as far as the farming industry is concern.

Now a day due to current financial crises and low purchasing Power of Buyers (Consumer) and their loyalty with brand in not much strong because consumers are looking for something cheap instead of becoming brand loyal. So Subway must have to manage the strong buyer's power in order to get more market share. In UK context there is always a big Threat of Substitute as lot of convenience shops, mid range restaurants, pre cooked food and some of the health food shops are available in the market, and they are providing substitutes of Subway to the consumers. Fast food industry is facing a stiff competition as there are lots of fast food chains available for consumer in other words more Competitive Rivalry. The example of Mc Donald's, KFC, Burger king etc are the big competitors of Subway. They are competing each other in term of price, quality, branch networking as overall demand of their products is increasing.

Competitive Analysis

There is a sniff competition among the fast food industry with in UK and that is among the big brands like KFC, McDonald, Subway etc. It is one of the UK's fastest growing major fast-food chains and has just sneaked past McDonalds to hold the largest number of outlets in the UK and Ireland, yet Subway remains an underground success (Telegraph, 2009).

Increased customer service is also becoming an important factor in fast-food restaurants' offerings. For instance, McDonald's Corporation makes service its primary focus. Domino's Pizza is testing a customer satisfaction guarantee as a replacement for its 30-minute delivery guarantee. Burger King Corporation, with a lower media budget, has added modified table service and advertises a toll-free number for consumer complaints and suggestions (Emerald insight, 2009).

McDonald's is the largest food service company in the world. The company regards itself as the leading global food service retailer. With more than 30,000 restaurants serving more than 47 million people each day in 121 countries it is hard to argue! In 1974 McDonald's opened its first restaurant in the UK. As of 31 December 2001, McDonald's and its franchisees operated over 1,184 restaurants in the UK (Bized, 2009). Mc Donald's marketing strategy has focused upon diversification, site location extention, improving public relations and price discounts in a recreational period.

Burger King's marketing strategies concentrated on product differentiation, and introduced a number of innovation to the fast food industry (Mazze, 1998).

In the UK the brand has been established for over 40 y ears. The first store was opened in Preston, Manchester in 1965. Today, there are more than 700 outlets in the UK and Ireland, employing some 8,000 people (KFC, 2009 a). The driving force behind the KFC Marketing team is shared passion to deliver a constant pipeline of irresistible testing meals. The process starts with defining consumer needs and exploring new ways to deliver consumer led innovation (KFC, 2009 b). What started with one restaurant in Miami in 1954 has grown to more than 11,500 restaurants in72 countries worldwide. And, like a small child who eats his greens, we're still growing and growing. If you're interested, we'd love to share our past, our present, and where we're heading in the future with you (Burger King, 2009).

Mission

"To provide the tools and knowledge to allow entrepreneurs to successfully compete in the QSR industry worldwide by consistently offering value to consumers through providing great-tasting food that is good for them and made the way they like it." (Subway, 2009 c)

Vision, entrepreneurial spirit and a unique business philosophy

Subway's chain wide growth figures are extraordinary, with the opening of about 48 units per week around the world. This translates to about seven new Subway restaurants opening per day, or one every three and a half hours (Franchise-international, 2009).

Values and Philosophy

They are committed to customer satisfaction through offering high quality food with exceptional service and good value. Subway take great pride in serving each other, their customers and their communities. Subway seek continuous improvement in all that they do. Subway value a sense of urgency and emphasize an innovative, entrepreneurial approach to business. Subway expect fairness and mutual respect in all their activities. Subway know its success depends upon the initiative they take individually and their ability to work as a team (Subway, 2009 d).

Vision

Subway's vision is to be the best and leading fast food provider around the globe. Their goal is to be the largest fast-food franchise in every market. But let's get one thing straight, Subway is not your everyday fast food outlet. They don't sell hamburgers or greasy French fries; they're in the business of healthy eating, their main products being their submarine sandwiches which are made right in front of your eyes by the highly efficient staff members.

Conclusion:It is clear that vision, mission, and value statements give shape to the company to make plan plans about its future. Where a mission statement concentrates on values and goals, vision reflects what the organization is trying to do on very general level and how it wants to achieve it and value represents company's way of conduct. Subway's vision is to provide its customers hygienic fast food and is targeting young people under 35-s. its mission is to concentrate on value of money and quality of its products and its values are its commitment to its customers and its code of conduct.

Segmentation, Targeting and position Strategies

(Consumer Psychologist, 2009)

Market segmentation is the process of classifying a market into distinct subsets (segments) that behave in similar ways or have similar needs. The process of splitting customers, or potential customers, in a market into different groups, or segments, within which customers share a similar level of interest in the same or comparable set of needs satisfied by a distinct marketing proposition (Weinstein, 2004).

In segmenting an organization can tailor specific product for a specific market and can satisfy specific customer or market needs. To be more efficient towards goal, market segmentation has to be well planned and customer needs and profiles must be considered. Marketing is concerned with identifying and satisfying customer needs. Market segmentation also provides the key to improving a company's competitive position. For segmenting in the market Subway must considered the basic factors which are needed for an effective segmentation, these factors can be Geographic, Psychographic, Behavioural, and Demographic.

In geographic segmentation markets are divided in different geographical units. Geographic segmentation is an important process and useful for multi-national and global businesses. There are different areas where geographic segmentation can be implemented. Those areas can be nations, states, regions, counties, cities, or neighbourhoods. Different market programs can be started to fit the needs of individual geographic areas by localizing, advertising the products. Subway has started regional and national marketing programs to promote their products, with the help of advertising and promotions to meet individual needs of particular geographic unit. It always been an opportunity for expanding its networking in around 100 countries but there is lot of business potential for Subway as a fast food in China as 520 million people belongs to upper middle class but again Subway need to introduce something that can match to the Chinese traditional food requirements as they like to have their own traditional food.

In psychographic factors, buyers can be divided into groups according to customer's lifestyle, personality, value, social class, and attitude. If these factors are known well by a company, then products and marketing campaigns can be customized to appeal more distinctively to customers motivations.

In Demographic segmentation is a most widely used method. In this method market can be divided into groups based on variables such as age, gender, family size, income education, religion, occupation, race and nationality. Age is an important factor with a customer's life cycle. Consumer's requirements change with their age cycle. Certain age groups can be targeted by using such segmentation. Subway can target different age groups and can bring changes to its products. Range of Subway meal deals can be introduce to attract customers. As already Subway introduce Halal outlets to focus and target the Muslims. Segmenting market by focusing on gender is not a useful method for fast food setups. As there is equal trend both in male and female. This can help company to communicate with its customer in a better way by providing what they need. Segmenting by family factor does not apply to the subway as compare to the Mc Donalds as they are offering entertainment for the children within the outlet. Income is another important factor for segmenting the market. But in subway case the meals are affordable for all range of customers and income group.

Now a day's occupation is linked with income. Occupation can provide useful basis for segmentation of market because of lifestyle that individual in particular occupation needs. Busy life style and white collar job people prefer to eat fast food and ready to eat stuff like subway, Mc Dolands etc.

Target Marketing

After successful identification of marketing segments the next segment will be targeting the market. According to Blythe, (2005) target marketing is "the process of selecting a segment to aim for".

Differentiated targeting marketing is followed by Subway as products are different as compare to the rest of the fast food market.

Customer Perception and Customer Expectation

Customer perception is a key factor affecting a product's success. Many potentially revolutionary products have failed simply because of their inability to build a healthy perception about themselves in the customers' minds. Subway being an internationally renowned brand brings with it certain expectations for the customers.

Customers expect it to be an ambient, hygienic and a little sophisticated brand that respects their values. The customer's expect the brand to enhance their self-image. However, fulfilling some of the customer expectations like a broader product variety provide SUBWAY a great scope for improvement. As subway is already offering variety of deals like Classical subs which includes Chicken & Bacon Ranch, Subway Melt, Steak and cheese, Veggie Patty, Meatball Marinara, B.M.T, Tuna, Spicy Italian. Low fat Subs like Beef, chicken breast, Ham, Subway Club, Sweet Onion Chicken teriyaki, Turkey Breast. Breakfast Subs like Bacon, Bacon and Egg, Mega Breakfast, Sausage and Egg, Sausage and other sub of the day according to the day like on Sunday Spicy Italian etc.

Market Positioning

Market positioning is a process where marketers try to create an image of their target market for their product, brand or organization. According to Baker, (2000) marketing positioning is 'the location of a product (or service) relative to others in the same marketplace and then promoting it in such a way as to reinforce or change its position'. In another words this is the position of a product or company in the market. Subway is already famous for its value of money fast food and have good market position. This positioning brings competitive advantages to the company.

Subway's successful competitors are Mc Donalds, Burger King, pizza hut etc. These fast food markets have similar marketing positioning as Subway. But as the main feature that Subway use its own bake bread so EAT FRESH. Where Mc Donalds sells highly discounted products. But Subway focuses more on buying and supply chains than branding and increase the number of branches. There are certain positioning techniques that need to be applied while positioning the market.

Doing these positioning strategies it's important for an organization to identify possible advantages that can be achieved by choosing the right method of positioning. Like other fast food chains Subway must adopt powerful advertisement campaign to position itself in the market. It can start putting adverts on its stores; it can use Media and internet for advertisement purposes as well. Subway uses demographic segmentation strategy with age as the parameter. The main target segments are children, youth and the young urban family.

Marketing Strategies

Marketing strategy is a process that allows business to concentrate on its limited resources on highest opportunities to generate profit and to achieve sustainable competitive advantages According to (Loudon, 2004) Marketing strategies provide direction to marketing efforts. Alternate courses of action are evaluated by management before commitment is made to a specific strategy outlined in the marketing plan. There are certain tools that can be used emphasizing on marketing strategy such as Ansoff's matrix, Porter's generic strategy.

The Ansoff Growth Matrix is a tool that can help an organization decide its product and market growth strategy. In Ansoff's growth matrix's its suggested that business growing depends on whether it markets new or existing products in new or existing markets.

Ansoff's matrix tool (emeraldinsight, 2009)

Market penetration strategy:

Market penetration is known as a growth strategy where a business focuses on selling existing products into existing markets. There are four main objectives to achieve while using this strategy. To increase or maintain its business share which can be achieved by using competitive price strategies, advertising and sales promotions. Secure dominance of growth market and using aggressive promotional campaign supporting by different pricing strategies and Increasing its usage by existing customers, such as starting loyalty schemes.

Subway can adopt market penetaration strategy by focusing on the selling existing products in existing markets. It can increase its share in fast food market on the expenses of its competitors such as Mc Donalds, burger king, pizza hut etc. Subway is already has a name in market by offering hygienic food on its value for money it can adopt new pricing strategies to attract more customers.

A Market development strategy, applicable when firm seeks to achieve greater sale of present products from new markets, focuses on new geographic or customer segment. ( Sandhusen, 2008)

In product development a business aims to introduce new products into existing markets. This strategy requires business to develop modified products that can b appealed by existing markets. As Subway got a good reputation when it comes to its product quality. Most customer have been complaining about poor customer service and interiors of the franchise. If Subway do some focus on these thing can easily get more market share. This will help Subway developing its products and can appeal market.

Marketing Mix

According to Kotler, (2005), marketing mix is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.

(Smartdraw, 2009)

Marketing mix is often referred to as the four P's such as product, price, place, promotion. But now a days competitive business environment the the four P's are converted into seven p's with addition process, people and physical evidence. In marketing mix organization needs to focus on Product or service that customer obtain. Product is a key element that can be used to target market and making product appropriate to the market segment where it's trying to be sold. So main focus in Subway must be on the product itself as a stiff competition is taking place among the key players because customers are looking for healthy food but in affordable prices, Subway is not dealing with the junk food like Mc Donald's and Subway refer to the quality food but in affordable prices. Subway's is the name of quality food. It's very crucial to do the Pricing of a product. Price must be compared to the competitors first because it is the vital part of marketing. Proper pricing techniques must be used when considering pricing for a new product. Because of rising inflation rate in the UK customers are becoming more efficient about their spending when it comes to pricing. Price is the main element now a day in fast food market. As whole world is facing recession and people's buying power is not high as compare to the past, food at affordable price can make subway to gain more market share. Currently Subway is following skimming pricing strategy but present situation is in favour of high price so subway should change its strategy of pricing and should focus on penetration pricing strategy instead of skimming. To sale a product, arranging Place to open a outlet becomes very important. Place determines where a product is distributed to the customers. As Subway do have many Outlets on and near Oxford Street but the research shows that the outlets near to subways or public places can make the huge difference as far as the sale is concern. But some time people get irritated to see the too many Outlets within a small area like Subway do have many branches on Oxford Street so some time can be negative point.

The forth part of marketing mix is a process of informing your customers by promoting products of company is called promotion. There are numbers of methods can be used like, media advertising such as television, internet, and radio. It can be achieved by personal selling involving sales persons and non personal communication such as, competitions, free samples. In order to promote subway there should be some bundle offer should be introduce like buy one get one free as in recession period and offer some loyalty card schemes to make customer loyal to Subway. People plays important role in any organization success , in Subway case people refer to the employees and the culture within the organization who are responsible of delivering the value to its customers. Process itself represent the company's structure as placing an order at Subway outlet has got its unique features and every thing is being prepare in front of customers and same unique proposition of web ordering and making ones own selection of ingredient. But in some cases it can be negative point for Subway if employees are not performing their jobs accurately. Physical evidence should be according to the set standard of fast food industry standard and should attract customers and give the feeling of proud to eating in Subway.

Randall (2000) defines a brand as 'an intangible but critical component of what a company stands for.' A brand is a set of promises; it implies trust, consistency, and a defined set of expectations.' Subway has wide products within outlet these are as follows.

(Adopted from Subway, 2009)

Subway has a strategy on its branding activities. Company has most of the sandwiches under its own brand labels and subway wrapping papers and its high quality food has attracted young customers because of its value of money food. Fast food outlet's success is depended on products and marketing targeted to healthier menu selections, brand consistency, low start-up costs, franchisee support, and consumer convenience. Subway is becoming a global brand and as the result of increasing number of branches and people are getting familiar with subway brand it self. According to (Gilligan,2005) there are four types of branding approaches, like Corporate umbrella, family umbrella, range branding and individual branding. But Subway is following individual branding because it is focusing just on Sandwiches although there are lot of types available within sandwiches but the main product is sandwich, but Subway should also involve in family umbrella branding by introducing stuff for kids and providing entertainment space for kids playing area.

Future changes in Fast Food market:

Market is full of uncertainty and there are economic, social, political and technological factors involved that determined demand. It's also predicted that market will be lifted by inflation than volume growth. In such case Subway would need to enhance its products, as well as the factors that determined future success like better outlet, better sitting place and good customer services facilities. Even in this recession period demand of fast food is increasing but people are becoming more and more price conscious instead of brand conscious. In order get market share Subway should focus on it products price and should go for market penetration strategy instead of skinning as a result of current downturn.

People are now more health conscious they like to get something cheaper but also the healthy one so Subway should make it possible to market its product in such a way that provision of affordable quality should be available in market. This can be achieve by offering discounted coupon and buy one get one free offer, as doing so may decrease its profit but in order to sustain in market and competing with the competitors it is necessary to do so. On the other hand there should be a strong focus on improved customer services should be implemented.

References:

Web Links:

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Books/Journals

1. Geoffrey Randall, 2000, Branding: a practical guide to planning your strategy Marketing in action series, 2nd Ed., Kogan Page Publisher, page no. 148

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4. Jim Blythe, Alan Zimmerman, 2005, Business-to-business marketing management, Cengage Learning EMEA, Page no. 95.

5. Michael John Baker, 2003, The marketing book, 5th ed., Butterworth-Hienemann, Page No. 120

6. Ronald D. Michman, Edward M. Mazze, 1998, The food industry wars, Greenwood Publishing Group, Page No 48

7. Michael E. Porter, 2008, "On Competition", Harvard Business Press, Page No. 4

8. Frances Brassington, Stephen Pettitt,2006, Principles of Marketing, 4TH ED., Pearson education, Page No 1007

9. David L. Loudon, Robert Stevens, Bruce Wrenn - 2004, Marketing Management: Text and Cases, PublisherRoutledge, Page No. 160

10. Richard L. Sandhusen, 2008, Marketing, 4th Ed., Barron's Educational Series, Page No. 216

11. Philip Kotler, Gary Armstrong, 2005, Principles of marketing, Prentice Hall, 275

12. Kotler, P, Armstrong, G., Saunders, J., Wong, V. (1996) Principles of Marketing. European Edition, Great Britain: Prentice Hall


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