Subway Systems Australia - Case Study Example

Subway Systems Australia Name Professor Institution Course Date Subway Systems Australia Executive Summary Subway Systems Australia is fast food outlet operating in Australia. Subway Systems was first established in 1965 Connecticut, U.S before finding its way into other 105 countries including Australia (Subway 2014). In Australia, The Subway System outlets were established in Perth City in 1988. Subway Systems Australia is the second brand's major market after North America. According to Entrepreneur magazine (2014), Subway Systems is considered one of the rapidly growing franchises and currently has 40,855 restaurants globally. Subway Systems Australia is recognized with its main product submarine sandwich. Other products sold by this company includes Italian B.M.T, Roasted Chicken, Subway Club, Tuna, Meatball Marinara, Subway Melt, Chicken Teriyaki, hamburger, wraps, salad, and Steak and Cheese (Subway 2014). Subway Systems Australia is the biggest single-brand fast food chain both locally and globally. Table of Contents Subway Systems Australia 2 Executive Summary 2 Table of Contents 3 1.0 Introduction 4 2.0 SWOT Table 4 3.0 Findings 5 3.1 Explanation of SWOT analysis table 5 3.1.1 Strength 5 3.1.2 Weaknesses 7 3.1.3 Opportunities 7 3.1.4 Threats 7 4.0 Recommendation 8 4.1 Target market 8 4.2 New Product 9 4.3 Relevant Strategy 10 4.4 Customer value proposition 11 5.0 Conclusion 11 6.0 References 12 1.0 Introduction With the rapid increase in the growth of globalization and technology in the business sectors, managers must make the market research and development one of their top agendas (Reid & Bojanic 2009). Kotler & Armstrong (2010) argue that product and development, diversification, positioning are some of the strategies managers must rethink so as to make the organizations become profitable. One of the sectors that experiences growth in number of market players is the fast food industry. The IBISWorld (2014) report indicates that, fast food lifestyle is turning out to be a trend and common as more individuals eating lifestyle has penetrated the suburban areas and cities of in Australia. One of the market players, Subway Systems Australia has realized it is complex in satisfying the ever changing customer needs without developing new unique products. In light of the information, this essay analyzes Subway Systems Australia SWOT, identify an appropriate strategy and target market into which it can introduce a new product. 2.0 SWOT Table With the changing business environment in the Australian fast food industry, managers must re-evaluate their company’s internal and external environment come up with appropriate strategy to gain market advantage (Pitta 2010, p.132). This involves maximizing the firm’s strength, reducing weakness and strengths and capitalizing on the opportunities. Nguyen (2005) claims that Subway Systems Australia’s capability of staying as one of top of market ranking restaurant is attributed to its internal environment and its intention to control its external environment. Subway Systems Australia’s situation analysis can further be illustrated through SWOT analysis. Strengths Weaknesses 1. Strong brand because of global presence 2. Healthy and hygienic foods 3. Customizable menu packages 4. Highly diversified products 5. Highly qualified staff 1. Several outlets causing lack of control 2. Negative brand recognition 3. Large company network which is difficult to control Opportunity Threats 1. Developing new brand healthier foods 2. Increasing home delivery and take away foods 3. Adoption of technology 1. Intense competition 2. Fluctuation of foreign currencies 3. Consumer and health consciousness 3.0 Findings 3.1 Explanation of SWOT analysis table 3.1.1 Strength Subway Systems Australia is one of the strongest brands in Australian fast food market. Currently the company is ranked third largest fast food restaurant in the market with the market share of 8.8% after McDonald's Australia Holdings (15.3%) and Yum! Restaurants Australia (9.3%) (IBISWorld 2014). Its strong status is supported by the fact that Australia has turned into to be second largest market of Subway's outside the North America (Subway 2014). This restaurant is the biggest single-brand chain both in Australia. Its status as a strong brand has in the past helped the marketing team make the company and products well known. Mccarty (2006) contends that the company’s product submarine sandwich is recognized in terms of its value creation and satisfaction so far, as fast foods are concerned. The menu provided by the company reflects the need for health, fresh and fast foods. Based on this, the Subway Systems Australia brand has benefited significantly from the growing health consciousness of the consumers (Nguyen 2005). IBISWorld (2014) maintains that while the other competitors have inclined towards unhealthy choices, Subway Systems has led the change to healthier alternatives. The company is considered one of the hygienic fast company offering quality and quick service. Offering healthy fast food for a hygienic and healthier food can be regarded as a brand value strategy for Subway (Mccarty 2006). This has been able to improve the image of Subway Systems Australia. It communicates a message to its clients that the company is positioned as a healthy and fresh food (Mccarty 2006). According to Reid & Bojanic (2009) the company has a comprehensive advertising program with an intensive effort to publicize nutritional information, aspiring to differentiate itself further from less healthier alternatives. This restaurant has customizable menu provisions like subs sandwich which is unique from other market players (Subway 2014). The company hires qualified customer service representatives to provide quality customer services at their restaurants. With the rapid change in business sector the Subway Systems Australia also offers training. Franchisee personnel training are well designed and structured to guarantee fast start-up for new staff (Subway 2014). 3.1.2 Weaknesses The company has several outlets (more than 1,300 stores) in Australia which makes it hard for the management to control its operations (Mccarty 2006). Similarly, since all its franchises offer the same products which make it difficult for Subway Systems Australia to make more profits. In some situations, the company had suffered negative brand recognition. This manifested itself in 2014 when this restaurant was accused of making its breads from chemicals, azodicarbonamide, used to raise elasticity in yoga mat, shoe rubber and synthetic leather (Donaldson 2014). 3.1.3 Opportunities In the recent past, consumer behavior has changed significantly. Consumers are now health conscious. The competition is now on the platform of healthier foods; a situation in which Subway Systems Australia adopted ahead of other market players (IBISWorld 2014). For this company, their diversification now can be to increase vegetarian and non-alcoholic products for healthier product portfolios (Nguyen 2005). Subway Systems Australia can use its online operations to increase its sales and use of technologies to attract its customers. For instance, they can provide Wi-Fi for free to its consumer whenever they visit any of their restaurants in Australia. With the 24-hour economy cropping and people having busy schedules, it is hard to go shopping. Pitta (2010, p.134) argues that Subway Systems Australia can use such opportunity to increase their take away and home delivery packages to increase its customer base. 3.1.4 Threats Subway Systems Australia is facing intense competition from its major rivals McDonald's Australia Holdings, Yum, Competitive Foods Australia, Dominoes and Burger King (IBISworld, 2014). The scramble is now directed to a healthy food segment due to health consciousness of consumers. According to IBISworld report of 2014, the competition is also triggered by the need for fast food which has been promoted by the increase in disposable incomes in the previous five years. The company also faces a major challenge concerning the ever changing currency; in particular here is the Australian dollar. The situation normally causes fluctuations in disposable income which is a key determinant to growth of fast food industry (IBISworld report, 2014). IBISworld report (2014) claims that the concern for junk foods more so its relation to obesity is decreasing the consumers’ interest towards fast foods. In turn, this affects the sales of Subway Systems Australia as well as other market players. 4.0 Recommendation 4.1 Target market In the past, Subway Systems Australia’s targets market has been young adults who are in the age of 16 to 39; even though other people of every age and backgrounds have been enjoying its healthy and delicious sandwiches (IBISWorld 2014). Majority of the population lies in between that given age group. The company had identified its target market through its advert “Desiring Young People Who Understands Their personal Minds”. The youths who like to eat nutritious food away from pizzas, fries and burgers. This has performed well in the past. However, the competition is increasing and the market is now shifting to healthy food segments. According to IBISWorld (2014) The Australian Fast Food sector has been changed by increasing consumer and social awareness concerning the significance of healthy eating and living in the recent past. Australian citizens have turned out to be more and more health conscious because of public campaigns on healthy lifestyles and high rates of obesity, diabetes and cardiovascular disease (IBISWorld 2014). Currently, Subway is targeting people who are seeking for healthy fast food. However, since most people are shift in the segment, Subway Systems Australia can diversify into fast food with more vegetable products. According to who report, obesity increase with age and is several in Australia, Canada and the US (Howard et al. 2008, p. 52). For that matter, Subway can target the consumer in the age of 30-60 years. The age group comprises of career people either in the middle or late. These consumers are thought to have high-income and can indulge in any self-orientations (Yankelovich & Meer 2006, p.4). They also understand the important of living healthy; have a great expression of taste, wants finer fads in life. They are usually called the innovator consumers. Subway Systems Australia’s also has an advantage, because this age group also includes experiencers. According to Yankelovich and Meer (2006, p.3) experiencers are consumers with high income, and spend heavily on new products especially on fast food and clothing and social activities. 4.2 New Product With increasing health issues, consumers are now aware and cannot consume a lot of junk foods (IBISWorld 2014). As such, it can only be profitable for a fast food firm to introduce a healthier product portfolio into the market. Subway Systems Australia is recognized for its submarine sandwich, roasted Chicken, Tuna and Chicken Teriyaki which is to some extent not healthy enough because of their high fat contents. However, the company has exhausted this market segment, and must diverse into a new product which can help it have some edge over its competitors (Nguyen 2005). The ideal new product is Oven Roasted Chicken with veggies. According to Helpguide (2014), cooking methods bears a big influence on the dietary value of the food. For instance, Frying chicken wills increase the fat content in its meat. On the other hand, roasting a chicken after removing the skin will lower its content while increasing its nutritional value. Oven roasted chicken is rich in protein, vitamin B-12 and iron. This can be served with vegetables for further healthy living (Helpguide 2014). In so doing, the company will not have moved away from its product line, but will have expanded its through developing an already existing product (Pitta 2010, p.134). This is because sandwich and Chicken Teriyaki seems to offer no additional opportunities for growth. Subway Systems Australia can introduce Oven Roasted Chicken into the market through media promotion and skimming pricing. According to Kotler & Armstrong (2010), the skimming pricing makes the company maximize its profits before other market players also venture into the same products and lower the market price. 4.3 Relevant Strategy Subway Systems Australia is developing a new product which it intends to introduce into a new target market segment. In this way, this company is diversifying its market to attain market advantage. This activity needs massive advertising to penetrate the market. In developing new product, diversifying and advertising into to the consumers it can be argued that the company is using Strength-Opportunity (S-O) Strategies (Kotler & Armstrong 2010). Currently, the opportunity into the market is the healthy food segment. Hence, developing a new product into this category is considered as a way the company is pursuing opportunity which matches its strengths (Kotler & Armstrong 2010) Increasing its advertisement through new products is a way of using Weakness-Threat (W-T) Strategies to increase its market presence. IBISWorld (2014) posits that currently, Subway Systems Australia is sitting third in terms of market share after McDonald's Australia Holdings and Yum! Restaurants, therefore, for it to try and increase its customer base and market share, it needs a comprehensive and increased promotional activities. Subway Systems Australia is the second-largest fast food promoter in the behind McDonald's. (Kotler & Armstrong (2010) hold that in using W-T Strategies, the company will be able to contain it’s weakness from making it prone to external threat. 4.4 Customer value proposition Experts claim that every marketer must always aim to create a strong value proposition. Failure to do this, your brand will have a weak Brand salience (Kotler & Armstrong, 2010). Introduction of Oven Roasted Chicken in the market by Subway Systems Australia is assign that the company has discovered that its existing products can no longer create maximum customer value as it used, hence diversifying into a health and nutritious product will. According to IBISWorld (2014), Health concerns have made people move away from unhealthy fast foods with a lot of fats and now prefer low fat content foods with vegetables. Oven Roasted Chicken with vegetables will ensure that consumers can prolong their lives through healthy living (Helpguide 2014). 5.0 Conclusion In the current status, it is clear that Subway Systems Australia enjoys its position as the restaurant which offers healthier fast foods. However, with the health concerns facing Australian citizens, other market players have been forced to diversify to health and nutritious foods. The situation has intensified competition in the market to the extent that Subway Systems Australia must also diversify further to shake off the competition. Therefore, it must create a strong research and development team to help it remain creative and innovative. 6.0 References Donaldson, S 2014, Subway Takes Chemical Out of Sandwich Bread after Protest, ABC News Entrepreneur 2014, 2013 Top Global Franchises, Viewed on 15th April 2014 http://www.entrepreneur.com/franchises/topglobal/index.html# Helpguide 2014, Healthy Fast Food: Tips for Making Healthier Fast Food Choices, Viewed on 15th April 2014 http://www.helpguide.org/life/fast_food_nutrition.htm Howard et al. 2008, Severe obesity: Investigating the socio-demographics within the extremes of body mass index, Obesity Research & Clinical Practice, 2(1), 51–59. IBISWorld 2014, IBISWorld Industry Report H4512: Fast Food Services in Australia, Viewed on 15th April 2014 http://clients1.ibisworld.com.au.ezproxy.lib.uts.edu.au/reports/au/industry/default.aspx?entid=2005 Kotler, P. & Armstrong, G 2010, Principles of Marketing, 13th (Global) ed. Boston, Pearson Education, Inc Mccarty, M 2006, Fast Food Market Forecast - The Subway Example of Strategic Product Positioning, Viewed on 15th April 2014 http://ezinearticles.com/?Fast-Food-Market-Forecast---The-Subway-Example-of-Strategic-Product-Positioning &id=735770 Nguyen, M 2005, Subway plans a revolution against its competitors, viewed on 15th April 2014 http://www.bandt.com.au/news/a6/0c02c2a6.asp 3feb2005 Pitta, D.A 2010, Product strategy in harsh economic times: Subway", Journal of Product & Brand Management, Vol. 19 no. 2, pp.131 - 134 Reid, R.D & Bojanic, D.C 2009, Hospitality Marketing Management, 5th ed, John Wiley and Sons Subway 2014, Facts and History, viewed on 15th April 2014 http://www.subway.com.au/About Yankelovich, D & Meer, D 2006, Rediscovering Market Segmentation, Harvard Business Review: 1–11. Read More