Strategic Managment - Assignment Example

Lecturer: Introduction Achieving growth strategies in an organization requires calculated planning, risk assessment and smart objectives. A clear growth strategy and a well-organized implementation plan is significant to the success of profitable expansion. It is important to put in to consideration the various growth opportunities that exist within the business, in the business environment as well as the sub-segments that emerge in the new markets. It is also necessary to establish strong groundwork that has the capability to support successful implementation of the growth strategies. This paper describes the basic growth strategies and critically analyses how they are implemented by Subway as it continues to grow. The paper examines the strategic capability of Subway and identifies its competitive advantage over its competitors. It also discusses which of these strategic capabilities contribute to Subway’s competitive advantage. Subways Strategic Growth According to Aaker et al. (2006), market segmentation is one of the significant growth strategies that a small business can effectively accomplish. It involves identifying a sub-set of the whole market and focusing all the sales efforts on it. It is a way of being specific with regards to whom to sell the products to. Successful businesses usually slice out a particular section of the market and maximize their efforts towards owning it. With such focus, it is possible to understand the changing customer desires and engage in customer focused production. Even though the strategy may eliminate part of the prospective customers, it helps to concentrate on the core customers thereby developing a vibrant growth path. The entrepreneur makes business choices through segmentation with regards to who to serve, who to evade as well as which segment to focus on to increase profitability. According to Hoyer & MacInnis (2006), segmentation is a customer focused growth strategy that generates great impact value schemes for new market sub-segments. The foundation of this strategy is to understand customers in a different point of view. It requires managers and product experts gaining new perceptions with regards to customer desires and preferences, which is a significant step in identifying the inadequately served consumer groups as well as unseen growth opportunities. The market sub-segments can be based on recently identified customer needs, purchasing patterns as well as the profit margin of the sub-segments. Innovations are focused on the most promising sub-segments where an organization intends to create high impact value offers. The new innovations are tested within the sub-segments, which allows upgrading business on the basis of the results of the tests (Hoyer & MacInnis, 2006). According to Crawford & Benedetto (2008), small businesses can focus on low end consumer sub-segments. The cost to the consumer can be minimized through eliminating non-essential characteristics on the products such as expensive value addition that does not affect the product’s utility. Many customers in these sub-segments are likely to welcome the new changes since they lower the cost and hence increase affordability. The segmentation growth strategy for sub-way began with the decision to operate in smaller and more specialist outlets-such as schools and factories-because of its smaller scale business formula. Market segmentation was also applied in Subway through the assessment of customer needs whereby it was established that an increasing market share came to Subway because it offered a low-fat alternative to burgers and French fries. This knowledge was used in 1998 to develop a marketing campaign that focused on a line of seven low-fat sandwiches that significantly boosted sales. Further, the customer sub-segment that required full calorie meal was satisfied through the development of a range of big-eater sandwiches-for example, steak and cheese, which also helped to increase sales significantly. According to Aaker et al. (2006), product differentiation is an important growth strategy that allows a business to serve a wide range of consumer needs and also helps to distinguish company products from those of competitors. Businesses need to focus on the reasons why customers would prefer their products over those offered by competitors. Differentiation generates unique value and hence distinctive competitiveness. Crawford & Benedetto (2008) observes that product differentiation is not a onetime activity since competitors will reproduce or improve on the unique product characteristics thereby making the highly valued product features to become common over time. To maintain competitive advantage, it is therefore important for an organization to engage in continuous development through product differentiation thereby creating new value and paybacks in the present products and services and developing new ones to maintain product leadership in the market. Subway has achieved product differentiation and continues to develop and improve on its existing products thereby maintaining a competitive edge over its competitors (Tayal, 2007). Leveraging partnerships is an important growth strategy that can be used in a pragmatic way to increase business competitiveness. Partnerships can enhance growth especially through franchising, which according to Cagan & Vogel (2001), provides an all winner situation whereby businesses in the franchise agreement enjoy mutual benefits. It is a financial expansion strategy that generates a business arrangement focused on long term economic gained. Franchising is a system of business partnership whereby the franchisor is the rightful owner of the business while the franchisee is the partner who opens the same business in a different place (Stone & Jacobs, 2001). The Franchising strategy has significantly contributed to the expansion of subway in to global markets, which is aimed at opening 7,500 restaurants globally. Currently, subway franchised outlets have surpassed McDonald’s, which was already established when Subway was in its formative stages. Entry in to new markets is an important growth strategy applied by businesses to increase their sales volumes (Fock, 2001). It allows a business to exploit emerging opportunities before competitors can establish. Subway applied this strategy to venture in to new markets thereby increasing sales and taking products close to the target consumers (Bergeron, 2002). Maintaining a competitive edge is fundamental to the success of an organization and is accomplished through strong organizational capabilities. It is always therefore necessary for managers to continuously clarify, evaluate and constantly reinforce the strategic capabilities. This is accomplished through the management looking beyond the company itself to understand what efforts competitors have put forward, as well as the perceptions of the consumer (Hoyer & MacInnis, 2006). Subway has managed to constantly remain in visible in the eyes of its customers while demonstrating concerted efforts to provide excellent value. Subway has maintained competitiveness through a set of strategic capabilities. Most importantly, the company has a strategic capability of remaining on top of the business trends, changing offerings in line with consumer needs (Hoyer & MacInnis, 2006). When Fred Deluca learned that an increasing number of customers came to Subway because it offered a low-fat alternative to burgers and French fries, he took this opportunity to develop a marketing campaign that focused on a line of seven low-fat sandwiches, which helped to boost sales significantly. Competitive advantage was achieved through promotion of the theme of health living through eating healthy. Consumers are increasingly becoming aware of the implications of fast foods to their health and therefore are careful in their selection. Subway attracted customers through promotion of sandwiches as a healthy fast food option and lowering the production of Hamburgers and fries (Belch & Belch, 2006). To suit consumer needs and to demonstrate responsibility in promoting healthy eating habits, Subway interacts with consumers and allows them to see how their custom made foods are developed. The marketing campaigns are also focused on the theme of health and freshness whereby consumers are made to believe that Subway is a type of fast-casual eating place where freshly prepared foods such as cakes and sandwiches are offered. This is a strategy that puts the company at a competitive advantage promoted by the ‘eat fresh’ slogan, which makes consumers to view competitors’ products as lacking the desired freshness. The company enjoys strong brand equity that is promoted by the many franchises (Geller, 2002). Subway has been successful in selling a story to its customers on top of promoting health value of the company’s products. The health benefits of the sandwiches of Subway are effectively illustrated in the story of Jared, a representative who was recruited in one of the franchises to narrate to the public how he managed to lose weight through consuming Subways’ sandwiches. The story is personalized with a theme that encourages consumers at an individual level. Consumers are attracted to products that have been tested and proved to work as indicated by the manufacturer. All the franchises globally have capitalized on this story to promote their business mainly because it has generated a dynamic fan following globally. Competitors may find this strategy difficult to imitate due to its uniqueness, thereby helping Subway to maintain a competitive advantage (Belch & Belch, 2006). According to Bergeron (2002), the capability to offer an exceptional level of customer service in a way that makes it challenging for competitors to reproduce, the company has empowered its employees in various departments to view service delivery as a core task in their day to day operations rather than it being left for the customer service division. This has enhanced linkages and free cooperation among employees within the organization which allow appropriate sharing of information regarding customers and service delivery. Changing customer desires can therefore be effectively identified and included in the production processes with ease. Subway has managed to promote response to distinct customer service requirements among employees rather than focusing their loyalty on the organization only. This has been enhanced through flexible vertical structures characterized by few employees, up to 8 employees per store compared to competitors such as McDonalds with up to 20 employees per store. On the other hand, flexibility has also been an important strategy for the company to expand its market share. For example, even if it positioned its products as a low calorie hence promotion of healthy living, it emerged later that there was a sizeable market for a full calorie meal and hence the company developed a range of big-eater sandwiches for this market thereby enabling it to attract both groups of consumers. Another important strategic capability is the move beyond the elementary storefronts where it would have been difficult to develop successfully. The location of outlets in hospitals and schools among other places where consumers can get what they want conveniently has been significant to the company’s competitive advantage. It was a tactical move closer to the customer rather than waiting for the customer to look for the company stores (Geller, 2002). Franchisor and customer satisfaction has been viewed as a core capability for the success of Subway. The company has managed friendly interactions with them while competitors such as Quizno’s has been involved in constant wrangles with franchisees, with most of them complaining of unfairness. This has enabled Subway to maintain a competitive advantage associated with robust reputation and hence the ability to attract a bigger market share (Cagan & Vogel, 2001). Conclusion Market segmentation is a significant growth strategy that allows the business to identify the most profitable customer groupings to serve. Small businesses can take advantage of the low end consumer sub-segments to promote growth. Subway effectively targeted strategic market segments by assessing customer needs, producing according to customer needs and taking the products closer to the consumers such as near schools and hospitals. Product differentiation also helped Subway to serve a wide range of consumer needs through offering products for customers who do not need high calorie as well as those who need high calorie foods. The company has been successful in leveraging partnerships through franchise, which has been a significant marketing strategy. The company ensures product development that matches consumer needs thereby remaining on top of business trends. The marketing strategy of promoting a success story has promoted brand equity and also made it difficult for competitors to imitate. Franchisor and customer satisfaction have been important in the maintenance of a competitive edge by Subway. References Aaker, D. A., Kumar, V. & Day, G. S. (2006). Marketing Research, Wiley Belch, G. & Belch, M. 2006. Advertising and Promotion: An Integrated Marketing Communications Perspective w/ Premium Content Card, McGraw-Hill/Irwin Bergeron, B. 2002. Essentials of CRM: A Guide to Customer Relationship Management, Wiley Cagan, J. & Vogel, C. M. 2001. Creating Breakthrough Products: Innovation from Product Planning to Program Approval, FT Press Crawford, C. M. & Benedetto, C. A. 2008. New Product Management, McGraw Hill Higher Education Fock, H. K. 2001. “Retail outlet location decision maker - franchisor or franchisee?” Marketing Intelligence and Planning, 19(3): 171 -178. Geller, L. K. 2002. 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