Analysis of Subways internal and external environments Essay
Analysis of Subways internal and external environments
This essay will analyse the organisation Subway’s internal and external environments and their impacts on this organisation. This will include a swot analysis on resources and capabilities which are a part of the internal environment and on customers, suppliers, competitors, pressure groups, economic, political, technological, natural environment and emerging trends in the external environment. “A SWOT Analysis is a useful technique for understanding your Strengths and Weaknesses, and for identifying both the Opportunities open to you and the Threats you face” MindTools. com (2013).
Internal environment Resources: 1. The Workforce Strengths – Subway restaurants operate out of over 36,000 locations in 99 different countries. Subway is an equal opportunity employer, where every employee can be assured that they will be treated with respect and not be discriminated or harassed for any reason. They continuously provide employees with training and encouragement through teamwork, against shared goals and benchmarks and to be accountable for their actions. Weaknesses – Many subway employees are younger generations and are particularly inexperienced in the workplace.
This can be a weakness for subway as this younger group of employees have other priorities such as school/university which can make it difficult when creating the roster for shifts and being unskilled can cause delays in service and not properly organised meals going to the customers. Opportunities – Subway has the opportunity to train their unskilled employees in a way that suits them and is in line with the organisation’s goals. Threats – Subway’s direct competition offer similar workplace conditions and environments which can be a threat to Subway by these companies attracting higher skilled workers in the industry away from Subway.
2. Capital Availability Strengths – As Subway is operated as franchises, the overall company has a large amount of capital coming in from the franchises. Subway (2013) states “The SUBWAY® chain’s start up costs are exceptionally low for a franchise of its size and stature. Total investment will depend on many factors, including location, rent, outlet size and equipment”. Weaknesses – There are many economic conditions, such as unemployment that contribute to weaknesses concerning Subway’s capital.
Combine these economic issues with poor marketing strategies and it can affect the capital dramatically. For example the new “$5 Combo Deal” that they are offering, has resulted in a decrease in sales, as the average customer is now spending less money per purchase. Opportunities – Start-up costs of the franchises is low compared to similar organisations, it makes Subway more appealing to potential owners, there for encouraging more people to purchase a Subway franchise which will increase the capital of the overall company.
Threats – Economic issues such as the Global Financial Crisis, unemployment and inflation can cause a threat to subway from opening more stores, which in turn affects their available capital. Capabilities: 1. Marketing Strengths – “Eat Fresh, Live Green” is Subway’s commitment to making a positive impact in all that they do. This is very appealing to consumers, as Subway’s beliefs and values are in line with theirs. Subway restaurants are also navigating the world of online social media to bring their message closer to consumers. Subway is experienced in international marketing.
Weaknesses – Subway restaurants lack the interior design and quality that would welcome everyone to stay and feel more comfortable than in the competitor’s restaurants Opportunities – Subway employs superior marketing techniques and promotional strategies to attract and grow their customer base. The most successful Subway’s promotional offer was to offer footlongs for only $5. Threats – Subway runs the risk of decreasing their client base if they fail to meet consumers’ wants and needs if continuous innovation and new processes are not being developed and used.
2. Production Strengths – Restaurants are clean and maintained. Preparation goes into getting the food ready to be served so quickly before, after and during store hours – veggies need to be washed, diced, sliced and stored. All of this preparation contributes to the productivity of the store. Without these steps, the restaurant would not run efficiently. Weaknesses – Old equipment that is no longer working at its best and staff not being available to work can be weaknesses in the production process.
Opportunities – Focusing their sustainability initiatives on energy efficiency, water & resource conservation, waste reduction, sustainable sourcing and supply chain management. Threats – Equipment failure and power outages are a huge threat to Subway concerning production. If either of these occur the Subway store would not be able to operate or produce any products. 3. Research and Development Strengths – Develops and test markets the food that they serve, making sure it is of high standards and quality. Weaknesses – The markets are constantly changing and they cannot always source produce from the same suppliers.
Research needs to be done constantly and they do not always have the resources to do so, Opportunities – Do customer surveys in different demographic areas to provide what those areas are in demand for. Threats – Data recorded may be incorrect depending on what type of information they require and can come from unreliable sources. 4. Financial Management Strengths – Subway’s finance team is responsible for tracking, organizing and reporting on all financial activities and storing this data for future reference. This data can help them find better ways of financially running the organisation.
Weaknesses – Variables in costs for produce depending on time of year and certain promotions. Variables in labour as employees come and go, more staff required for busy times of the year (holidays). Opportunities – With the support they provide and the low start-up costs they offer with their franchises, they can attract more buyers and expand the Subway chain even further. Threats – Price fluctuations, for example oil, can dramatically threaten Subway’s financials as consumers will have lower disposable incomes which will stop them from freely spending their money.
5. Information Systems Strengths – Subway has a loyalty card system which they use to gather information on their customers. Each card has a unique 16-digit identification number. The card enables Subway to collect data on its customers from its point-of-sale (POS) terminals to its CRM applications. Weaknesses – The first loyalty card they developed was easily copied. Opportunities – To introduce this card throughout all Subway stores so they can collect a larger amount of data for their information system.
Threats – Without security measures in place with their loyalty cards people could produce fraudulent cards to receive rewards from the company. External Environment Customers Strengths – Subway already has a strong client base because of their fresh and more nutritious products. These factors appeal to the customers. Weaknesses – Customers do not always feel like healthy options and on occasions want a greasy alternative that Subway does not provide. Opportunities – Subway provides customers with the opportunity to provide feedback on their products and service.
By doing this the customers have the opportunity to influence Subway’s decisions with how to do things better and to discover what products sell the best and what the customers like about the service they receive. Threats – Poor customer service is a major threat to any business that deals with customers. Subway, without its customers, would not be able to operate. Another threat is if negative feedback from customers is spread around then this could potentially stop customers from returning Suppliers Strengths – Subway sources as much produce as possible locally.
They try to support their locally communities as much as possible. They source this produce from suppliers that share their commitment to social responsibility and sustainability. Weaknesses – Some suppliers can be unreliable and not provide stock when ordered. Opportunities – There are more opportunities to source more locally grown products and help support local businesses grow and stay in the market. Threats – The supplier may not have enough produce/stock to provide Subway at certain times and the supplier may think
that the price they are receiving for their products is too low, causing them to refuse supply. Competitors Strengths – Largest fast food restaurant chain in the world by the number of outlets. Currently the Subway operates over 38,181 restaurants in 99 countries, more than McDonald’s or any other fast food chain operator. Weaknesses – Majority of Subway’s competitors offer cheaper meals than what Subway can, based on the price they purchase their products at. Opportunities – Subway has many competitors, so they need to stay innovative and keep their products on top of the others that are available.
They have the opportunity to promote their products as healthy options and deep-fryer free compared to their competitors to encourage more sales. Threats – McDonald’s, Hungry Jacks and KFC are some of subways main competitors. These competitors all offer family meal deals and cheap snack sizes on their menu’s which makes them more appealing to consumers. Pressure Groups Strengths – Subway takes input from pressure groups and community members so they can improve the operations, products and service. Weaknesses – Subway cannot rely on the information that pressure groups provide them with as it does not always represent the majority.
Opportunities – Pressure groups can be a huge opportunity for Subway to listen to their opinions and issues with the organisation and how the pressure groups think Subway can resolve these issues and develop their company to be more socially responsible. Threats – Pressure groups however can be a threat as they don’t always have the majorities input on these issues and are misrepresenting the whole community when the push their ideas and beliefs on Subway which can make other customers stop returning to purchase goods from them. Economic Strengths – Subway opens stores when the economy is doing well.
By doing this they establish their presence in the demographic and build up a good amount of returning consumers. Weaknesses – Subway needs to have a contingency plan in place for when the economy in their area decreases. If they do not, potentially they will reduce in the amounts of sale because they cannot control consumers disposable incomes. Opportunities – When the economy is strong, consumers have higher disposable incomes. This give Subway the opportunity to slightly increase prices and promote their products more as consumers are more willing to spend money.
Threats – Not all geographic areas have the same amount of disposable income and Subway needs to take this into consideration. In these areas Subway may need to offer special promotions or lower their prices to cater for this otherwise they will lose sales. Political Strengths – Subway follows and adheres to government legislation including the Fair Trading Act and policies relating to environmental conservation. Weaknesses – Each state has different standards and restrictions in place which means not every Subway store can fully operate the same.
Opportunities – With these policies, it creates a safer work environment at Subway and helps them become innovative on how they can reduce their environmental footprint. Threats – If Subway does not follow these regulations on how they operate, produce and promote their products they can be fined hefty amounts of money or even closed down. Technological Strengths – As a global brand, Subway continues to make strides in sustainable packaging, and waste management as well as look for more efficient equipment and operational practices Weaknesses – Not all technology is good just because it is new.
Subway needs to research thoroughly before investing in new technology to make sure that it operates with their commitments to a cleaner, healthier environment. Opportunities – To obtain newer technology and apply it in aspects of their business would be a big opportunity for Subway. Threats – Some local markets may not be ready for new technologies and don’t have a full understanding of how they work, therefore consumers not trusting or believing in the new technologies. Natural Environment Strengths – An organization cannot survive without the support of its
environment. Subway takes in resources such as labor, money, and raw materials from outside its boundaries in the natural environment. Weaknesses – Subway cannot control the climate or the weather in the areas that have stores operating in. Opportunities – There are opportunities that arise depending on the weather. In the hotter season Subway can promote their salads more for a meal that is more refreshing in the heat. In the cooler seasons they should promote there “subs” toasted for something to warm the belly.
Threats – Depending on locations some areas may experience unpredictable natural events like cyclones or tornados. These can cause a dramatic threat to Subway stores in areas where events like this occur as there can be damage to roads and buildings, no electricity and no stock or fresh produce from suppliers. Emerging Trends Strengths – Subway franchises are involved with the communities surrounding them so they are always aware of the current and emerging trends happening in their locations. Weaknesses – Subway cannot follow all emerging trends as there are too many and it would be too costly for them to do so.
Opportunities – To expand their online ordering (catering for meetings/offices) to be made available for individuals to order and then pick it up, or start a delivery service. Threats – Often trends don’t last for long periods of time, making it costly for Subway. Conclusion As you can see from the above analysis, there are many different factors, both internal and external, that effect the organisation, Subway. There are many internal and external forces that Subway needs to consider and stay on top of so they do not fail. References
MindTools. com, (2013). SWOT Analysis. Retrieved on 11 September 2013 from http://www. mindtools. com/pages/article/newTMC_05. htm#sthash. 86tx07Tn. dpuf SUBWAY (2013). Corporate Opportunities. Retrieved on 13 September 2013 from http://www. subway. com. au/info/franchise_information/corporate_opportunities/ Unknown Publisher, (2012). Evaluating the External Environment. Retrieved on 13 September 2013 from http://2012books. lardbucket. org/books/strategic-management-evaluation-and-execution/s07-evaluating-the-external-enviro. html