Paper Example on Exploring Subway's Value Chain: SWOT Analysis

SUBWAY RESTAURANT STRATEGY REPORT

Executive Summary

Subway Restaurant, founded 43 years ago and with the most number of stores surpassing even a famous brand like McDonald's, has been making huge losses in the past five years, also causing the closure of some stores. The purpose of this document is to analyze the strategies currently in use by the firm critically and to suggest new strategies the management can adopt to help put Subway Restaurant back to profitability. According to this document, the restaurant will need to review its value chain (both primary and Secondary), to salvage the drop in its chain's unit-count and a shrinking clientele base. The marketing strategies and employee welfare will both need a review.

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The relationship with the franchisees is also a critical factor to be assessed. In ensuring reliability, validity, and credibility of the findings, this research has used tested and proven models like Porter's model, the SWOT analysis matrix, and Ansoff's model. In calculating ROCE, Gearing, and Current ratios, the study analyzed the firm's most recent financials for the past three years; 2018, 2017 and 2016. The 2019 report was not available on the website.

The recommendations from this study will be shared with the top management of Subway Restaurant for assessment and possible implementation to put the business into profitability trajectory again.

Subway Restaurant Strategy Report

Introduction

SUBWAY Restaurant has its strengths and weaknesses, but is also in pursuit of opportunities and is dodged by particular challenges too. The restaurant currently possesses the highest number of outlets standing at 44,852 (Gerhardt et al, 2012, pp. 17- 22). This significant difference allows it to cover potentially a larger population. The business has high brand loyalty and recall and following among its clients, only beaten by McDonald's and Star bucks. Its brand value is today at $10.3 billion (Martinez, 2012, pp. 107-110).

The store offers a healthy subs sandwich as compared to foods provided by the competition like McDonald's. Subway's foods are much less oily than those sold by McDonald's and KFC (Euromonitor, 2013, pp. 45-47). Subway clientele is rapidly increasing due to the rise in health-related problems caused by the consumption of junk food. People are moving more toward healthier food options. The move stood out as the best strength in the Subway's strength, weakness, opportunity, and threat analysis. Subway is also easy to franchise as training of staff is conducted by the agency and is brief, structured, and designed in a way that employees are sure of a rapid start-up (Warsi & Nasi, 2005, pp. 31-33). Competing in an industry with several sellers of pizza and burger chains, Subway is somewhat different because its sandwich is customized. A client can build his sandwich according to his taste, making the restaurant famous and loved amongst its peers.

Gerhardt et al (2012, pp.23-27) noted that Subway, however, suffers specific weaknesses like brand value compared to its biggest rival the McDonald's, despite having the most outlets. Satisfaction and service level has been unique to each store given that staff training is conducted on behalf of the franchisee. Commitment, therefore, cannot be uniform in all restaurants. The subway runs restaurants with an old-fashioned theme. The fact that it has not updated their restaurants' styles to the changing time has resulted in the client's reduced satisfaction level, making the customers change their preferences over time. Subway can assist their existing clients in improving their eating habits and generating more loyal patrons. Having a drive-through could be a way of capturing those clients who are on the move.

Lack of online presence and other promotional initiatives affects a company's brand name. In today's digital era, an online presence by a firm is very vital. Subway has not been keen on this. Also, low pay and low skills job have led to low performance and high turnover among employees. Training costs and the general costs of Subway has therefore increased. Specific opportunities, however, exist for Subway. People are getting more and more conscious about their health, hence a need for more healthy foods in addition to the subs. Vegetarian meals could be introduced to their menu, to see them diversify further. The business could also try home delivery like other successful restaurants are doing.

Fast food business, specifically the Fast food restaurants and the fast-casual restaurants, constitutes the segment of the Quick Service Restaurants (QSR), which is a part of the restaurant industry (Edwards, 2013, pp. 224-225). This sector constitutes over 50% of sales in the entire restaurant sector, with the market base of the Fast Food restaurant industry projected to increase by 1.3% in 2020. The market size of the same has grown at an average of 2.9% per year between 2015 and 2020, with the industry worth being put at $570 billion globally in 2019 (Warsi, 2005, p. 29).

A strategy is a long-term action plan intended to achieve a particular goal geared towards a win. According to Hargis and Bradley (2011, p. 107), this idea was initially confined to the military but has lately been borrowed by the corporate world in fields such as Marketing, Management, and Economics. To gain a competitive advantage, a business must match its resources and capabilities to the opportunities within its external environment (Merchant, 2014, pp. 292-294). A strategy includes such concepts as distinctive capabilities, strategic plans, competitive advantage, strategic goals, resource-based strategy, strategic ability, and strategic management.

Subway Restaurant, which this study is about, is a privately owned US restaurant franchise started 43 years ago. It primarily sells subs and salads. As of October 2019, the company had 41,512 locations in more than 100 countries. Over half of these (57.6%) are in the US. It is currently ranked the largest single-brand restaurant chain and the world's largest restaurant operator (Warsi & Nisa, 2005, 32-34).

Value Chain Model Strategy

A value chain is a set of activities or the process by which a firm adds value to a product or service. It includes production, marketing, and after-sales services. Porter's (2011, pp. 132-135) noted that the value chain model is a prevalent concept in the business world and could be vital in the analysis of the activities of Subway Restaurant. The first step towards adopting Porter's Value Chain framework is to understand each activity and the role they play in the process of product/service delivery. The operations, according to Porter, can be divided into Primary and Secondary (Porter's, 2011, pp. 136-138).

Primary Value Chain Activities

These are the activities directly concerned with the production and sales of products. In the case of Subway, they could include inbound Logistics, whereby they would work to develop a strong relationship with the suppliers, who are essential in receiving, storing, and distributing the products (Baldwin & Evenett, 2015, PP. 31-33). This relationship is crucial as it helps a firm to focus on all the aspects of transforming raw materials into finished products. Included here are the retrieval of raw materials, storing the inputs, and internal distribution of the raw materials and components (Bustinza et al., 2015, pp. 53-55).

Next is operations, which commences when the raw materials arrive, and their processing into final products and eventual launch in the market. Activities here include machining, assembling, packaging, testing, equipment maintenance, and repair (Chang et al, 2016, pp. 282-285). This analysis is necessary to improve productivity, maximize efficiency, and ensure that Subway remains competitive. The resulting increased productivity can assist the business in achieving consistency in economic growth, set a strong basis for competitive advantage, and increase profitability.

Subway will also need to look at the outbound logistics, which involves activities that ensure product delivery through various intermediaries. Considering this will include order scheduling and processing, handling, and final delivery. The analysis and optimization of the outbound logistics can help the firm explore sources of competitive advantage and to achieve the desired business growth objectives (Chang et al, 2016, pp. 286-289). If timely management of outbound activities with the cost and delivery processes put at a minimum adverse effect on the quality, customer satisfaction will be maximized, and growth opportunities increased. Perishable products with a need for quick delivery should be a top concern for Subway.

Concerning marketing and sales, the business will have to significantly look at the merits and the points of differentiation of the products to convince the clients that the products are superior. Jashari and Kotsios (2019, pp.11-15) noted that the mere production of high-quality goods at affordable costs and with distinctive features could not alone create value until the firm invests in the sales and marketing activities. Activities here will include advertising, Salesforce, promotional events, channel selection, pricing, and building strong and trusted relations with the channel members.

Subway may adopt either a push or pull marketing strategy, depending on its objectives, competitive dynamics, brand image, and current standing in the market (Jim, 2013, pp. 27-30). If wisely and effectively used, the integrated marketing activities can help develop the brand name of the restaurant and see it stand out. Subway must, however, not make false commitments about product features that it cannot fulfill. The last activity under the primary category is the pre-sale and post-sale services the firm may decide to offer. Such services will be critical in building customer loyalty, given that modern clients consider after-sale services essential (Kotler, 2012, pp. 3-4). The firm must find its support activities to avoid damaging the brand reputation.

Secondary Value Chain Activities

Porters (2011, pp. 140.144) observed that secondary support activities play a vital role in facilitating and coordinating the primary value chain activities. The first activity in this category is the infrastructure and includes quality management, listed accounting, handling of legal matters, planning, strategic management, and financing. If effectively employed, infrastructure management can see the restaurant optimize the value of its entire value chain. The business can control the infrastructural activities (overhead costs) to make steady competitive positioning among the competitors (Riasi, 2015, pp. 15-17).

Hargis and Bradley (2011, pp. 110-115) opined that the human resources should be analyzed through the evaluation of various HR parameters, which include recruitment, selection, training, rewards, performance management, and other public relations management exercises. The analysis will allow Subway to reduce the pressure due to competition as the employees will be motivated, committed, and skilled. The heavy...