Subway in Financial Year 2013-2014 has witness 1.32 billion revenue in Australia market. Since Subway has many ambitious plans to expand its business and occupy bigger market share, it is crucial for Subway to propose a sustainable long term plan to expand its domestic market share by examining the external and internal environment in which new product is to be introduced. This paper is aiming to analyse the market environment by using SWOT analysis and investigate the potentials of the new product with recommendations regarding the elements and marketing mix. Introduction
The brand Subway is owned by Subway Systems Australia Pty Ltd, which functions as one of the global franchisors and assists with Australian restaurant targeting the domestic marketing (Subway 2014). Originated in the US, Subway entered the Australian market in 1988. Today, Australia has become one of the largest markets outside of the U.S. There are over 1,300 stores national wide (Subway 2014). Subway has made a lot of efforts in enhancing the public attention of health diet. It has gained its market share over the traditionally fast food such as McDonald’s and KFC. Its products are most famous for low in fat and high in fibre, with only six grams of fat or less (Subway 2014). Current Market Share
The SWOT analysis analyses the strengths, weaknesses, opportunities and threats (La Trobe Business School 2013). A good SWOT analysis can assist the company developing a strategic plan to help identifying the key factors of the internal and external environment of a company (La Trobe Business School 2013). It is noticed that Subway is facing a lot of opportunities in the fast food industry with a lot of internal and external challenges. Table 1 SWOT analysis of the Subway retailer chain and its new products Flatizza (Subway 2014). Strengths (S)
Healthy, fresh food, the new product is fresh cooked
Bargain, the new product is cheap
Number of stores and channels, the Subway retail chain is expanding Customizable menu, with selection of different bread, meat and vegetables
Service quality is inconsistent from store to store
Long queue under high customer flow, one cashier means lower efficiency and lowered customer satisfaction ratings Appearance of products are out dated
Limited seating availability in most stores
No drive-through option, poor customer experiences
CSR achievements, Subway has been positively engaged in some of the Corporate Social Responsibility activities Decoration to encourage more dine-in customers.
Improve Customer Service Model, provide more people to serve the customer, increase the customer capability Improve franchisee relations, with a control of centre distribution centre, the quality of the food can be guaranteed Expand packaged offerings, instead of traditional paper package, box package and other packages can be used. Continue to revise and refresh menu offerings
Competition leads decreases in their prices and hence decreases the profits, the Subway food is also at lower price than its major competitors. More upscale sandwich shops in the local market, the Australian people are more likely to have dine-in food unless they are at work and don’t have too much time Economy downturn, the retail and food industry in Australia is experiencing slow rate of growth Competition from other large fast food companies such as McDonald’s and KFC The sandwich shop invests in another area which is not its specialty is a bold move, if the product is not successful, it will substantial damage other products as well and affect the profits. Findings
Internal environment: there are many risks existing in Subway’s internal environments. First of all, the traditional customer service model has shown significant limitations on the customer volume. The one queue model means only one customer can be served. The customer experience could be downgraded with long waiting time. It is highly likely that customers choose the restaurant with more checkouts and more staff. Secondly, the appearance of Subway store and its products are out dated. Unlike other fast food retailer, the appearance of the package has not been changed with the change of societal environment. McDonald’s, on the other hand, keeps introducing new packages and new appearances of its products in response to major events to push its sale campaign. For example, McDonald’s had introduced the World Cup 2010 menu sets (McDonald’s 2010). In addition, McDonald’s has different packages on which has specified product information such as ingredients and calories.
The third finding in the internal environment is that Subway has shown inconsistency in its customer service quality and food quality. Since each Subway store is operating individually, there is a great risk of lacking of supervision, which might result lawsuits and other negative consequences. The recognition of the store could be damaged if one store has involved with troubles. The inconsistencies in customer service and food quality have largely magnified the risk (La Trobe Business School 2013). External environment: The external environment is dominant by Subway’s advocate of healthy lifestyle from the food, diet, policy and its market expansion strategies. The advocate of low fat, high fibre products have significantly increased the brand recognition and the corporate social responsibility fulfilment.
The Australia market has responded Subway’s incentive with increment in its sales and profit. However, with the increasing competition in the domestic fast food market, the healthy concept has been adopted by many fast food companies. McDonald’s labelled the calories of all the products and provided more options in its salads and drinks (George Institute 2014). KFC committed with a 10 per cent reduction in sodium (George Institute 2014). Domino’s Pizza also introduced less sodium pizza with more vegetables in its ingredients. The increasing competition has squizzed the profit margin of the products. Subway seems to have fewer options to change its menu sets, the lower price, which has been used as an advantage in the competition, now also becomes a shortage that brings negative impacts to subway. Recommendations
One big potential market identified in the case study is the children market. As indicated in the SWOT analysis, it is found that Subway doesn’t have children friendly facilities or children friendly meals. In order to gain its market share, it is important for Subway to draw more attentions from children by introducing children friendly menu set. The main competitors of Subway in the market, such as KFC and McDonald’s, have already had value meal for kids. The advantage of children friendly meal is not only targeting the children alone, but also, by bringing the children to the stores; it is likely that the adults will also purchase the food. By doing so, Subway can exponentially increase the number of its customers. New product description and Marketing Mix
The new product of Subway, Flatizza, can increase and consolidate the loyalty of customers. Moreover, it can bring more young customers to the store, because it is small and fast, most parents can enjoy the meal with their kids without a long waiting time. It also helps Subway to gain more profit and higher market share. Flatizza looks like a small pizza, which has the convenience for take away. In addition, it package also have to protect the quality of Flatizza and let the Flatizza keep fresh.
Another feature of this product is that the price is incredibly low. The plain cheese is $2.50, veggie is $2.50, pepperoni is $3.50, and spicy Italian is $3.50. Most children are affordable with this product. Moreover, for adults and seniors, this product can be regarded as snack when they are hungry. This price range is much lower than its competitor’s price, which will help Subway to gain a larger market share. Place
Place will target at large neighbourhood and communities where there are a lot of children. The main target of this product is children; therefore, a store close to the playgrounds and parks will bring significant benefits to the franchise. Promotion
The promotion method of this product should emphasis on the price to attract more customers. For example, Subway can make a voucher for free Flatizza. It can be uploaded to Subway Facebook page or Twitter, and other social networking tools. Customer value proposition
A well-constructed and delivered customer value proposition can make a significant contribution to business strategy and performance (Anderson et al. 2006). First of all, in Subway, each value proposition must be distinctive. This requires that the new product must be superior to Subway’s competitor’s products. Secondly, the value propositions must be measurable and based on tangible attributes (La Trobe Business School 2013); it should be quantified in monetary terns (Anderson et al. 2006). At lastly, the customer value proposition must be sustainable. The company image and brand should be well maintained. Justification of the choice of new product
The strength of the new product is that it maintains the concept of healthy and fresh food and adds some new elements in it. The traditional sandwiches are usually cold when they are served, in Subway, one problem is that there is fewer hot food. When some customers are looking for hot food, they will skip Subway for other options. With Flatizza, Subway can successfully gain more attention from these customers. The price of Flatizza is still a bargain; it maintains the price advantages of Subway to its competitors. The opportunity of the product has made some improvement in its package, which has been criticized for a while. The new package is able to leave a better impression to the customers and provide a more friendly take-away option.
The container of the Flatizza is much handy than traditional paper package. It also helps improve the menu option. Since the menu in Subway has been pointed out to be stalled, this new product will expand its Market and gain a lot of market share from its competitor such as Domino’s and Pizza Hut. The new product, however, is lacking of competitiveness with McDonald’s burgers and KFC’s fried chicken. It doesn’t improve the situation that Subway has been criticised for its meat quality. The new product also needs the market to examine its future, the idea screening and business analysis have concluded that Flatizza will gain more market share and establish new Subway image. But the product testing and market performance needs to be carefully examined in the near future.
Anderson, J.C, Narus, J.A and Rossum, W.V 2006 ‘Customer Value Propositions in Business Markets’, Harvard Business Review, vol.84, issue.3, pp.90. Gargano, S 2014, ‘Fast Food Services in Australia’, IBISWorld Industry Report H4512, viewed 2nd May 2014, Available: http://clients1.ibisworld.com.au/reports/au/industry/default.aspx?entid=2005 George Institute 2014, ‘Fast foods now lower in salt’, , viewed 2nd May 2014, Available: http://www.georgeinstitute.org.au/media-releases/fast-foods-now-lower-in-salt La Trobe Business School 2013, Business Foundations: LaTrobe Compilation, La Trobe Business School, Pearson, ISBN 9781486013753. McDonald’s 2010, ‘McDonald’s Connects Customers around the World with FIFA World Cup(TM) Excitement’, Media McDonald’s. Subway 2014, ‘Franchisee Information- Facts and History’, Subway, viewed 2nd May 2014, Available: http://www.subway.com.au/About/Facts-and-History