Subway Case Analysis

Subway Case Analysis

SUBWAY® is the market leader in sub and sandwich shops offering a healthier alternative to traditional fast foods. SUBWAY's® annual sales exceeded $6.3 billion dollars, while countless awards and accolades have been bestowed its chain over the past 40 years. SUBWAY® had 7,825 units worldwide with 7,750 units in North America whilst its rapid growth has attracted many investments and brought it many competitors such as KFC and Burger King. Recent initiatives to attract customers beyond SUBWAY's® traditionally health-conscious consumers should increase the company's share of the fast food market.

Strategic Marketing Issue

Being part of a highly competitive and dynamic market, SUBWAY® faces a strategic marketing challenge as to what specific marketing mix to use in order to sustain a differential advantage while maintaining sales growth and, above all, profitability.

Issue Response

Subway effectively competes with burger chains and others that are in the fast-casual segment of the market. Including healthier meals into its menu and giving much attention to obesity and diabetes have supported consumers' choice for Subway (Tarantino, 2005). However, Subway has not been satisfied thus far; instead, more intensified efforts have been made to improve business during the dinner hour. Additional menu options have also been added to answer competitors' trends and to place more focus on the children's segment.

Proof

Team B's SWOT analysis can be helpful to highlight Subway's 1) internal strengths and weaknesses along with 2) the external opportunities and threats.

In the past few years, the sandwich market has gained incredible popularity in the American culture. As the fast food landscape continues to evolve and change, one of the most dynamic segments within the quick serve restaurant market continues to be sandwiches, subs, and wraps. Driven by consumer interest, sandwich chains are expanding in locations as well as variety. The sandwich sub and wrap market has grown 70% since 1999, or from $9.9 billion to an estimated $16.8 billion in 1999-2004. Primarily Subway, Quiznos, and Panera Bread have fueled the growth and momentum in this market (Mintel Int'l Group, 2005).

Subway has grown into the largest sandwich chain with over 25,000 restaurants in 83 countries. The chain offers more operating units in the U.S. Canada and Australia than McDonald's (Subway, 2006). Even though competitors have entered the sandwich market, Subway continues to be the market leader in this segment. As the sandwich trend continues, competition continues to increase while competitors expand their menu selections to include lighter and healthier sandwich choices. As other restaurants continue to capitalize on this market, it is imperative for Subway to adjust market strategies in order to provide more choices for their customers.

Subway's traditional target market has been those consumers who want a fresh meal in a hurry but are eager to find an alternative to burgers and other less healthful food choices. Bob Goldin of Technomic, Inc. in Chicago terms this phenomenon as "menu fatigue" (Buchthal, 2006). "Of the national chains, Subway and Wendy's have the highest consumer commitment. This is despite the fact that the larger chains spend more on advertising" (Food, 2006). Many customers are loyal to Subway because of the variety of healthful options available on the restaurant's menu. As consumers discover the benefits of healthy living, Subway is ready to serve them.

Beginning in the year 2000, Subway promoted its healthful choices in a series of ads that featured Jared Fogel, a customer who attributed his 245 pound weight loss to a diet of Subway sandwiches and a walking regimen (Subway, 2006). The campaign brought many new health-conscious customers to the restaurant chain.

The perception of Subway has historically been that the restaurant is an ideal selection for lunch, but not for other meals. The possibility of improving business by attracting the dinner crowd has been the objective of a recent Subway marketing campaign. The Subway Dinner Theater ad series seeks to attract "overworked moms and young dudes who don't know how to cook for themselves" (Cebrzynski, 2006).

Subway has also entered the competitive children's market. The Subway "Kid's Pak" targets younger consumers who might otherwise order a Happy Meal at McDonald's, or any other similar children's meal. Tweens, those children who are no longer "little" but are not yet teens, are also being courted by Subway in an age where childhood obesity is a very real problem. Subway has teamed up with Vans, a company that has traditionally been associated with the surfing scene, to encourage young people to remain active in their everyday lives. "Subway will continue to layer kids' promotions into its general-market strategy, and boost its marketing budget as sales rise" (Spethmann, 2006).

In the interest of continued growth, Subway needs to offer higher quality, fresher ingredient choices than competitors. Areas of expansion can