Subway Sandwich Franchise - Assignment Example

BUSINESS STRATEGY 1500 words TABLE OF CONTENTS 0Introduction 1 Overview of Subway Sandwich Franchise 2 SWOT Analysis of Subway Franchise 2.0 Competitors Analysis at each level of Subway Franchise with the Threat they represent 2.1 Porter's Five Forces and the Competitive Environment of Subway Sandwich 3.0Conclusion and Recommendation 1.0Introduction Today's business environment is increasingly become more turbulent, chaotic and challenging than ever before and to survive, it is vital that a firm can do something better than its competitors (Wonglimpiyarat 2004:1). Globalisation has not only altered the nature and the intensity of competition but has had to dictate and shape organisations in terms of what consumers wants, how and when they want it and what they are prepared to pay for it (Hagan 1996:1). Kanter (1995:71) on his work of "Mastering Change" argues that success in the present day business is not for those companies that re-engineer the way they do things, or for those fixing the past. According to Kanter (1995) such an action will not constitute an adequate response. This is so because success is based on an organisation's ability to create, rather than predict the future by developing those products that will literally transform the way the world thinks and view it self and the needs (Kanter 1995:71). Within the context of today's global competition, businesses and firms no-longer compete as individual companies but try to corporate with other businesses in their activities (Wu & Chien 2007:2). These researchers went further to argue that, this strategy has become quite common in many businesses including the retail clothing chain stores. The conventional vertical integrated company based business model is gradually being replaced by collaborative relationship between many fragmented, but complementary and specialized value stars and constellation (Wu & Chien: 1). This paper focuses on Subway Franchise Company. The paper examines the strength weaknesses opportunities and threats of this chain of restaurants. There after the paper examines its competitors at various level of the chain, the third section of the paper uses Porter's five forces framework to identify the sources of competition in the industry while the last section provides the conclusion and recommendation. 1.1 Overview of Subway Sandwich Franchise According to the Company's (2008) report, Subway Sandwich Franchise is owned and operated by Doctor's Associates, Inc. (DAI). This chain of restaurant has been rated as one of the fastest growing franchises in the world with approximately 30,881 restaurants in 89 countries. The restaurant is the second largest restaurants after the Yum restaurant brands having 35000 locations. Many analysts have attributed the restaurant's fast growth to the growing concern by restaurant customers and the community. This has been capitalised on by the company's marketing department. Subway today is noted as a health concious restaurant chain. The restaurants are managed by Doctor's associates founded in 1965. The restaurant do not follow just the traditional restaurants, Subway operates in many non-traditional locations. For instance, the Company's (2008) reports states that, there are over 900 Subway locations inside of Wal-Mart stores and 200 on military bases, including several in Iraq, in addition to three located inside the Pentagon, some universities and other shops (Company Report 2008). 1.2 SWOT Analysis of Subway Franchise Strengths Better Value, in the form of lower prices. Fresher merchandise and wider assortments of sandwiches. Superior Locations Better physical appearance of the restaurants themselves. Good will, exclusive rights with some of their suppliers. Maximisation of the four Ps of Marketing at all front. High capital and a pool of reserves, and cheap credit facility offered in some locations. The Employees, 30,881 restaurants around the world. cheaper, better sandwiches and providing more choice 500 own-brand primary suppliers in 89 countries. Best overall benefits package in the industry charitable giving and community-based education programmes Selected as the #2 overall franchise in 2008 It was ranked as the #3 "Fastest Growing Franchise", and the #1 "Global Franchise" as well Adaptation of menu to the local market The introduction of a Market optional program, country optional program is a big success Opportunities A pool of cheap credit facilities China is a big trading partner of the US, an alternative and better source of cheaper items. The impact of Wall-Mart has not been felt in all the states. Many small groceries stores are closing down. The growing pool of technology. The heavy investment on Research and Development (R&D) by the US government Fall of the US Dollars, will mean cheaper operational cost within the US. Availability of traditional and non traditional restaurants location Opportunities for more Halal subway restaurants Opportunities for product and service line extensions. . Threats Anti Grocery stores campaign Loyalty of some consumers to old established restaurants and grocery stores. The likelihood of terror attack of some Subway locations in the US. Natural disaster such as the hurricanes, tornadoes, tsunamis, are now on the rise Exclusive rights enjoyed by Burger King, McDonald with some of its suppliers Difficulties finding their own suppliers, or owning their own farms. Current market leader, Yum Brand is getting more and more aggressive. Weaknesses Some dissatisfied customers Sole right to some products by competitors Key Niche players The lack and absence of unique product with total differentiation from those of competitors. The lack of ownership of exclusive patents. Dropped and sold of many products that have not delivered reasonable profits Aggressive expansion, stores competing against each other The above matrix was originally developed as a means to access and assess organisation resources and capabilities potentials. 2.0 Competitors Analysis at each level of Subway Franchise with the Threat they represent Competitor's analysis is one of the many models created by Porter. It focuses on competitor's objectives, competitor's assumptions, competitor's strategy, and competitor's resources capabilities. It serves to assess both internal and external environment (Johnson et al 2007). After the analysis firm response by developing management and business processes to give them an environmental fit. An organisation does not exist in isolation but is part of the mega-environment in which it operates. Subway faces competition at different level of its activities, from store location selection, employee's recruitment, supplier's retention, products extension to advertising its activities. At the level of its product line extension and sales, the franchise faces competition from other restaurant chains such as, the Yum brand, McDonalds, Quiznos Sub, which popularized toasted submarine sandwiches. For example, while with Subway emphasis is on fresh franchise made by Subway Artists, at Quiznos Sub emphasis is on toasted sandwich, Subway had to follow this principle in markets were competitors were strong. Other main competitors at this level of products line extension will include local fast food restaurant, Kentucky Fried chicken chain KFC, Mum and Pop restaurants etc. At the level of suppliers Subway competes with other restaurants for ingredients and other meal related items such as coke and Pepsi, lettuce, tomato, onions, bell peppers, cucumbers, olives, jalape'os and pickles, as well as market selected options such as carrot, corn, radish and avocado (Company Report 2008). To re-launch existing/new products, enter new markets and strengthen market segments, firms often perform environmental analysis of their competitor's strength, opportunities, and weaknesses and threats (Bauerschmidt & Bloodgood 2002). Under this assumption in some major strategic theories firms know their industry and competitors fairly well and to gain an environmental fit, environmental analysis help conceive key strategies, develop capabilities, networking, establish relationship with key customers and a change of approach if required (Bauerschmidt & Bloodgood 2002). 2.1 Porter's Five Forces and the Competitive Environment of Subway Sandwich Porters five forces, is a framework developed as a way of assessing the attractiveness (Profit potential) of different industries. It is quite valuable in identifying the sources of competition in an industry or sector (Johnson et al 2007). In analysing Subway Sandwiches Franchise the suppliers those of its fixed assets, IT maintenance, cash transfer, it customers are those who shop, wine and dine with them. Threat from new entrants is low because of the necessary capital requirements, and laws to comply with food safety. Competitor's rivalry will include actions from Yum brand of restaurants, Mom and Pop restaurants, KFC, McDonald, Burger King, etc. Through the five forces framework the sources of competitive advantage in the grocery sector will be analysed in line to Subway Sandwich franchise capabilities. Porters five forces framework was originally developed as a way of assessing the attractiveness (Profit potential) of different industries. As such, it can help in identifying the sources of competition in an industry or sector (Johnson & Scholes 2005, Brand 1963). The basis upon which this framework is built will serve in analysing Subway Sandwiches Franchises strategic capabilities. With thousands of different Subways Sandwich shops in the United States and the world at large with each of them being strategic players, a competitor will have to adapt to local values in the United States. The competition is going to be fierce, Subway Sandwich franchise through partnership with major supermarkets such as Wal-Mart, has an easy market breakthrough and penetration strategy. Thus, competing firms should pay attention on the four Ps, product price, promotion, and place in these markets (Charles 2007). Subway Sandwich Franchise has a pool of financial resources, reserves; managerial capabilities that can help the company cope up with competition. In the United States, Thailand and Japan, Subway Sandwich restaurants will have to adapt to local values through sourcing of local materials and resources, the recruitment of local staff. Management will have to think globally but act locally (Company 2007 Report). The company ongoing exclusive rights with suppliers, distributors and transporting companies should be replicated in these markets. This is an area of core competence and strategic advantage of the restaurants chain. In these markets, it will be difficult for local restaurants to get up overnight and start operating at Subway Sandwich restaurants scale. Though there are potentials for the sector to attract potential competitors or new entrants, the situation is however difficult for new entrants to enter the line of business, because huge capital, and capabilities are necessary to support after sales services. In terms of technical expertise to get up overnight and open a grocery store that will compete with Subway Sandwich restaurants is not easy. More so, restaurants often strived at having an exclusive right with their suppliers (Cheng & Bolong 1993, Drejer 2002). These are the same type of relationship, competitors will need to maintain with their suppliers in these markets. Suppliers and customers have a high bargaining power in these markets. Each restaurant chain strive at having unique items, others offer almost the same thing making customers and potential customers to base their attention on price, quality and after sales benefit (Mayo 2001). 3.0Conclusion and Recommendation Fjeldstad and Ketels (2006:123-125) identify the following from a case study of a Swedish Insurance firm Fo''renade Liv identify a good number of other strategies that service and manufacturing firms scan adopt to achieve, maintain, sustain and developed competitive advantage within the strategic fit which include: Analyzing competitive advantage and not operational efficiency; Considering effects on the attractiveness of the network when assessing customer value; Emphasizing activities and choices that affect the composition of the customer set; Identifying potential markets with value configuration analysis; and References Birkinshaw, J. (2000). Entrepreneurship in the global firm. London: Sage Blocher E., Chen K. Gary C., Lin T. (2005). 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