Customers in more than 100 countries, walk into Subway for their delicious, healthy options.

It’s
likely one of the first restaurants to pop into your head when you’re craving something low-calorie,
easy, and healthy for dinner.

The company boasts their vast selection of fresh, healthy vegetables, meats and bread. Their slogan
is “eat fresh” after all. And health-conscious customers adore it.

But that doesn’t mean the company hasn’t faced challenges. Especially after a certain spokesperson
of theirs was convicted of a heinous crime.

Political factors affecting Subway: Food and safety guidelines

Subway is considered a fast food restaurant. And, like any business in the food industry, Subway
must abide by political factors. Following the restrictions of the health and safety regulations is the
company’s top priority. From packaging to distribution, Subway and their workers handle the
responsibility of their food products.

However, health guidelines change based on a country’s specific policies. The regulations in the
United States differ overseas compared to Muslim countries. There, most companies abide by a
strict Halaal food restriction. If the food isn’t Halaal, it won’t be eaten by the general public.

Subway needs to make sure they’re following the rules in each location strictly. Otherwise, they may
lose favor with their customers.

Subway economic factors: Customers happily buying subs

In the west, customers have more disposable income than ever. Add in the benefits of inexpensive
options fast-food restaurants typically offer, and customers are happily spending money at places
like Subway.

It wasn’t always like this though. Fast food sales were affected during the recession several years
ago. Retaining customers was difficult; many were laid off or terrified of being laid off. At this time,
fast food was more of a “luxury” purchase. People were counting every penny and spending it on
only the necessities.

Subway didn’t make the cut.

Luckily, Subway has shown an ability to adapt to changing trends. They offer unique and healthy
options for the general public. They’re a “saving grace” in a world filled with high sodium, high-
calorie fast food.

Unfortunately, Subway did face a social backlash with their connection to a certain individual within
the last couple of years.

Social factors affecting Subway: The “Subway” guy

For many years, Subway’s marketing campaigns starred a man named Jared Fogle. He quickly
became dubbed “the Subway guy”. By eating only Subway, he managed to lose an excessive amount
of weight. Considering Subway prides itself on being healthy, using Fogle as a literal “before and
after” spokesperson was smart.

The ads with Fogle were incredibly successful. People knew him the moment he popped onto the
screen. Others envied Fogle’s intense transformation; they yearned for an equally impressive weight
loss.

Everything was all well and good… until Fogle was accused and then convicted as a child molester.

In those months, Subway quickly set a line in the sand between themselves and Fogle. Nothing tanks
a brand better than being associated with a child molester, after all. Subway started a race to
separate their identity with the Subway guy they created.

Subway still has the healthy angle working for them. They just don’t bring up their former
spokesperson. Ever. And for the most part, Subway hasn’t suffered too much with their association
with Fogle. But for months, it was difficult for the brand.

Subway technological factors: Easier marketing but easier bad publicity too

Changes in technology the quality Subway can offer their customers. The brand can now showcase
their full menu online. They can also provide nutritional information about each offering, including
the calories of individual meats, veggies, and bread of their meals.

Additionally, Subway can advertise their selection on social media. Many fast food places put video
ads on platforms like Facebook and Instagram. And they converse with customers on Twitter.
Answering questions and showing off new promos was once only possible through print and
commercials. Now it’s easier to reach new audiences.

But the addition of social media isn’t always good.

It makes it easier for customers to complain. Or leave bad reviews. This amount of freedom for
customers can be troublesome for Subway. Because unhappy customers are stereotypically the
most vocal online. The anonymity of the internet allows strangers to team up and complain.

Businesses have collapsed due to the influence of social media and consumers before. Subway has
to be wary of how they manage, handle, and treat customers when it’s so easy to destroy a
company’s reputation online.

Legal factors of Subway: Food management and food nutrition

Subway needs to follow food quality laws. This includes keeping an eye on packaging, distribution of
food products, and waste management.

Quality must be maintained in their restaurants too. In many cases, workers must wear hair nets and
gloves before handling any Subway food. If Subway can’t maintain proper compliance and hygiene of
their workers, their stores will shut down.

Additionally, many countries require publicly displaying the number of calories of Subway foods.
Although a legal requirement, it’s also something customers want. But it’s not a requirement in
every country.
Subway’s environmental factors: A restriction on food additives

Bills and regulations pressure companies, like Subway, to adopt greener methods. This includes the
management of food and monitoring how the food is grown. Some places criticize the use of
pesticides and antibiotics in the meat served to their customers.

This concern has led Subway to change the use of additives in their foods. They wish to distinguish
themselves against other fast food restaurants, like A&W, Sonic, and Jack’s, who were found to use
antibiotics in their meat (in the United States).

Company Background

Key Facts

Name Subway

Founded August 28, 1965

Logo

Industries served Fast food restaurants

Geographic areas
Worldwide
served

Headquarters U.S.

Current CEO Fred DeLuca

Revenue $ 16.2 billion (2010)

Profit N/A
 Employees N/A

Parent Doctor’s Associates, Inc.

McDonald’s Corporation, Burger King Worldwide Inc., Yum! Brand Inc., Wend
Main Competitors
Company.

Subway is an American fast food restaurant chain that mainly sells submarine sandwiches (subs) and
salads. It is owned and operated by Doctor’s Associates, Inc. (DAI). Subway is the largest single-brand
restaurant chain globally and is the second largest restaurant operator globally after Yum! Brands.

Strengths

Great degree of subs customization. Customers always like to choose and the more choices they can
make about their purchase the more satisfied they are with it. Subway is better than any other large
fast food chain in providing the choice of meal customization.

Largest fast food restaurant chain in the world by the number of outlets. Currently the comapny
operates 38,181 restaurants in 99 countries, more than McDonald’s or any other fast food chain
operator.

Marketing and promotional strategies. 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, which became a new pricing standard of a sub.

Choice of healthier meals. Subway offers a range of low calorie, fresh and nutritious food, which you
can’t find in other fast food stores, at least not to such an extent. This Subway strength meets
current trend of eating healthier food.

Partnerships with Britain and American Heart Associations. Subway has received certificates from
both organizations that it serves health meal options, which is a great reward and differentiates the
business from other fast food restaurants.

All restaurants are owned by franchisees. Subway doesn’t own any restaurants itself so it
experiences less risk and can focus its efforts on marketing and growing the franchise.

Low startup costs. One of the reasons behind such a high growth rate of Subway stores is the low
startup costs. Subway stores are smaller and require less money for leasehold improvements and
equipment.

Weaknesses

Interior design of the outlets often looks cheap. Subway restaurants lack the interior design and
quality that would welcome everyone to stay and feel more comfortable than in the competitor’s
restaurants.
High employee turnover. Subway Sandwich Artists job is a low paid and a low skilled job. It results in
low performance and high employee turnover, which increases training costs and add to overall
costs of Subway.

Services are not consistent from store to store. The business struggles to ensure consistent services’
quality throughout it stores and so a service in one store may please a customer when another may
fail to do that.

Too much control over franchisees. Despite the fact that Subway fails to ensure consistent quality
throughout the stores it exerts too much control over its franchisees. This is done through the
contracts that are more favourable to the franchisor. An example of such high control is seizeing of
franchisee restaurants if the later one is struggling to keep them open.

Opportunities

Increasing demand for healthier food. It’s an opportunity upon which Subway already grows itself
and could further introduce low fat, low salt and more nutritious subs.

Home meal delivery. Subway could exploit an opportunity of delivering food to home and increase
its reach to customers.

Changing customer habits and new customer groups. Changing customer habits represent new
needs that must be met by businesses. So far, Subway has only one variation of restaurants,
different to its close competitor McDonald’s, which tries to satisfy and reach previously untapped
customer groups by introducing McCafé, McExpress and McStop.

Introduction of drive-thru. McDonald’s already offer only drive-thru restaurants, which is a great
opportunity for Subway to jump.

Threats

Saturated fast food markets in the developed economies. The fast food market in the developed
countries is already overcrowded by so many fast food restaurant chains and this already proves to
be a threat to Subway as it finds it hard to grow in the developed economies.

Trend towards healthy eating. Only part of Subway’s menu offers healthier choices of meals, while
the rest menu is rich in salt, contains many calories and is accompanied by soft drinks. Customers
who care about their food and well-being may opt out for something else rather than Subway.

Local fast food restaurant chains. Local fast food restaurants can offer healthier food and menu that
exactly represents local tastes.

Currency fluctuations. Subway receives much of its income from foreign operations. That income has
to be converted into dollars and may affect the company’s profits, especially when the dollar is
appreciating against other currencies.

Lawsuits against Subway. Subway has been involved and lost a few lawsuits in the past because of
the poor company policies regarding franchisees management. Lawsuits are expensive, time
consuming and damages the firm’s brand.
The BCG Matrix for Subway will help Subway in implementing the business level strategies for its
business units. The analysis will first identify where the strategic business units of Subway fall within
the BCG Matrix for Subway.

Stars

The financial services strategic business unit is a star in the BCG matrix of Subway. It operates in a
market that shows potential in the future. Subway earns a significant amount of its income from this
SBU. Subway should vertically integrate by acquiring other firms in the supply chain. This will help it
in earning more profits as this Strategic business unit has potential.

The Number 1 brand Strategic business unit is a star in the BCG matrix of Subway, and this is also the
product that generates the greatest sales amongst its product portfolio. The potential within this
market is also high as consumers are demanding this and similar types of products. Subway should
undergo a product development strategy for this SBU, where it develops innovative features on this
product through research and development. This will help Subway by attracting more customers and
increases its sales.

The Number 2 brand Strategic business unit is a star in the BCG matrix of Subway as Subway has a
20% market share in this category. It also the market leader in this category. The overall category is
expected to grow at 5% in the next 5 years, which shows that the market growth rate is expected to
remain high. Subway should use its current products to penetrate the market. This could be done by
improving its distributions that will help in reaching out to untapped areas. This will help increase
the sales of Subway.

Cash Cows

The supplier management service strategic business unit is a cash cow in the BCG matrix of Subway.
This has been in operation for over decades and has earned Subway a significant amount in revenue.
The market share for Subway is high, but the overall market is declining as companies manage their
supplier themselves rather than outsourcing it. The recommended strategy for Subway is to stop
further investment in this business and keep operating this strategic business unit as long as its
profitable.

The Number 3 brand strategic business unit is a cash cow in the BCG matrix of Subway. This is an
innovative product that has a market share of 25% in its category. Subway is also the market leader
in this category. The overall category has been declining slowly in the past few years. Subway has the
power to influence the market as well in this category. It should, therefore, invest in research and
development so that the brand could be innovated. This will help the category grow and will turn
this cash cow into a star. The overall benefit would be an increase in sales of Subway.

The international food strategic business unit is a cash cow in the BCG matrix for Subway. This
business unit has a high market share of 30% within its category, but people are now inclined less
towards international food. This change in trends has led to a decline in the growth rate of the
market. The recommended strategy for Subway is to invest enough to keep this strategic business
unit under operations. If it no longer remains profitable and turns into a dog, then Subway should
divest this strategic business unit.

Question Marks
The local foods strategic business unit is a question mark in the BCG matrix for Subway. The recent
trends within the market show that consumers are focusing more towards local foods. Therefore,
this market is showing a high market growth rate. However, Subway has a low market share in this
segment. The recommended strategy for Subway is to invest in research and development to come
up with innovative features. This product development strategy will ensure that this strategic
business unit turns into a cash cow and brings profits for the company in the future.

The Number 4 brand strategic business unit is a question mark in the BCG matrix for Subway. This
strategic business unit is a part of a market that is rapidly growing. However, this strategic business
unit has been incurring losses in the past few years. It has also failed in the attempts made at
innovation by research and development teams. The recommended strategy for Subway is to divest
and prevent any future losses from occurring.

The confectionery strategic business unit is a question mark in the BCG matrix for Subway. The
confectionery market is an attractive market that is growing over the years. However, Subway has a
low market share in this attractive market. The low sales are as a result of low reach and poor
distribution of Subway in this segment. The recommended strategy for Subway is to undergo market
penetration, where it pushes to make its product present on more outlets. This will ensure increased
sales for Subway and convert this strategic business unit into a cash cow.

Dogs

The plastic bags strategic business unit is a dog in the BCG matrix of Subway. This strategic business
unit has been in the loss for the last 5 years. It also operates in a market that is declining due to
greater environmental concerns. The recommended strategy for Subway is to divest this strategic
business unit and minimise its losses.

The Number 5 brand strategic business unit is a dog in the BCG matrix for Subway. This is operating
in a market segment that is declining in the past 5 years. The company also has negative profits for
this strategic business unit. However, it is expected that the market will grow in the future with
environmental changes that are occurring. The recommended strategy for Subway is to invest in the
business enough to convert into a cash cow. This will ensure profits for Subway if the market starts
growing again in the future.

The synthetic fibre products strategic business unit is a dog in the BCG matrix of Subway. The market
for such products has been declining, and as a result of this decline, Subway has been facing a loss in
the past 3 years. The market share for it is also less than 5%. The recommended strategy for Subway
is to divest this strategic business unit to minimise any further losses.

The artificially flavoured products strategic business unit is a dog in the BCG matrix for Subway.
These products were launched recently, with the prediction that this segment would grow. However,
with increasing health consciousness, people are now refraining from consumption of artificial
flavours. The market is shrinking, and Subway has no significant market share. The recommended
strategy for Subway is to call back this product.

Some of the strategic business units identified in the BCG matrix for Subway have the potential of
changing from their current classification. For example, a dog changing to a cash cow. These have
been identified in the BCG matrix of Subway and recommended strategies to ensure such change
have also been made.
Let us start the Subway Marketing Strategy & Mix to understand its product, pricing, advertising &
distribution strategies:

Subway Product Strategy:

The product strategy and mix in Subway marketing strategy can be explained as follows:

Subway is one of the leading fast food chains in the world and offers a variety of products under its
marketing mix product strategy. The first product that Subway offered was a submarine sandwich
and today the product has diversified offerings. It serves in its restaurants as well as takes up
catering services. Its restaurant menu includes a variety of sandwiches, breakfast items, snacks, sides
drinks, breads. Its catering services include products like Giant subs, Sandwich platters, Subway to
GO! Meals, desserts, sides and drinks. Sandwich platters have a range of sandwiches like Chicken
Ham, Turkey breast, and trademark sandwiches like Subway club and Veggie Delight. Subway serves
baked items like cookies, doughnuts, muffins, and wraps. For certain countries Subway has
introduced flat breads, Breakfast sandwiches, English muffins. Subway has diversified its menu based
on the local taste preferred in its region of operation. And also expanded in beverages with ‘Seattle’s
best coffee’.

Subway Price/Pricing Strategy:

Below is the pricing strategy in Subway marketing strategy:

Subway serves its products for higher price than its competitors.

But it serves food for calorie conscious customers. The sandwiches are offered between $4to $8
depending upon the size and type of sandwich which is being made. So, accordingly the price is
justified. Subway also claims to serve better quality food than any of its competitors, thus making its
pricing very obvious. Their differential pricing strategy with value pricing is according to the value
generation in terms of quality delivered by the Subway outlets. Hence, this gives an insight on the
marketing mix pricing strategy of Subway. The annual revenue of the company is around $10 billion.

Subway Place & Distribution Strategy:

Following is the distribution strategy in the Subway marketing mix:

Subway mainly operates through franchises and is one of the fastest growing franchises. Subway has
35,000 franchises across 100 countries and territories. They are located in off-beat premium places
and it has turned out to be a boon for the brand. They are located on airports, malls, amusement
parks, business centers, hospitals, military bases, etc. These Subway outlets are located in premium
places where the customers are more calorie conscious and thus would be willing to pay the higher
price.

The catering services are located for business meetings, office gatherings, birthday parties, holiday
gatherings, social gatherings, field trips.

Subway Promotion & Advertising Strategy:

Subway uses various promotional activities to promote its brand and products. Subway advertise
their products, employ personnel that personally sells, involve public relations and sales promotions
in its marketing mix promotional strategy. They use their slogan, ‘Eat fresh’ to promote the freshness
and high quality food that they make. Most of their promotions are directed to adults between 18-
35, thus their advertisements are broadcasted majorly during primetime, sports and on cable
networks. Like every other brand, Subway's advertisements are targeted so that the customers
move up the brand from awareness set to consideration set when it comes to eating in fast food
chains. They have been making the sandwiches in front of their customers to flaunt the quality and
freshness of their ingredients and the way their sandwiches have been crafted by their ‘Subway
Sandwich Artists’. Subway have involved cartoon characters like Peter Griffin for promoting their
new sandwiches. They had a promotion series for product placement in US TV series, ‘chuck’. They
also had ‘Buy one sandwich, Give one sandwich free’ promotional campaign on National Sandwich
Day. With its "Refresh" campaign, the brand focused on young consumers to refresh its image &
boost sales.

Since this is a service marketing brand, here are the other three Ps to make it the 7Ps marketing mix
of Subway.

People:

Subway, being a prominent restaurant brand, must focus on its people i.e. customers as well as
employees. More than 400,000 people are employed with Subway worldwide, for whom customer
service is of the highest priority. Subway daily serves millions of customers worldwide. Every
employee at the store is trained well to make the sandwiches, package them and complete the
financial transactions as well.

Process:

One the USP of Subway is the transparency it gives to the customers while making freshly made
sandwiches. The services are important for a brand like Subway and hence they focus on the
customer service. At the store, a customer can customize their sandwich and select the type of
bread, meat or vegetables, salad and sauces. As far as other business processes are concerned,
Subway has efficient food procurement, warehousing, storage, supply chain etc processes.
Physical Evidence:

For a restaurant brand like Subway, its main physical evidence are its stores. Subway has more than
35,000 stores spread across the world. The ambience at the stores, the staff, location, maintenance
etc form the physical evidence of the brand. Also, the quality of vegetables, chicken, breads used,
because of which the product is made, completes the physical evidence of the company. Hence, this
completes the Subway marketing strategy & marketing mix.

Subway Employee Engagement

Employees at Subway report engaging in community outreach activities never. Additionally, Subway
employees typically meet outside of work never. Community engaged employees create an
environment of social responsibility both inside and outside the workplace.

Company Values at Subway

A Company’s Values are established by leadership and have a profound impact on how a company’s
culture is formed. Teamwork & winning are the most important values to Subway employees and
because of this 57% of employees are proud to be part of Subway.
Segmentation, targeting, positioning in the Marketing strategy of Subway –

Subway uses a mix of demographic and geographical segmentation to make its products more
appealing to the targeted group of customers.

The largest single-brand restaurant chain uses undifferentiated targeting strategy to design the
offerings and services as per the choice of the customers.

It uses value-based positioning strategy to create a long-lasting brand image in the mind of the
potential consumers.

Vision- “To become no. 1 in quick service restaurants worldwide while maintaining the taste &
freshness”

Tagline-“Eat Fresh”

Competitive advantage in the Marketing strategy of Subway –

A high number of chains in the world: The brand Subway is owned by the Doctor Associates who
collects 8% of the revenue from 45000+ franchised outlets in the world with presence in 120+
countries.

Low or no operational cost: Doctor Associates does not own any of its franchised outlets which
safeguard them from the risk of failure or from financial burden due to operational cost.

The submarine sandwich and salads of Subway are stars in the BCG matrix whereas none- veg menu
items, baked goods like muffins, doughnuts are a question mark in the BCG matrix due to the
presence of a large number of players in the segment.

Distribution strategy in the Marketing strategy of Subway –

Subway is the largest chain operator in the world have more than 45000 restaurants outlets globally
with all being operated on the franchised model and the owner company Doctor’s Associates
collects 8% of the revenue from each franchise.

Brand equity in the Marketing strategy of Subway –

In the list of most valuable brands in the world, subway stood at 87th position (May 2016 report).
Aggressively advertising brand offerings across various channels have helped the brand in increasing
its visibility in the market.

Competitive analysis in the Marketing strategy of Subway –

Fast food companies are giving head-on competition to Subway but due to its focused marketing
strategies highlighting healthy diet, quality, taste, nutrition & several other health-related benefits
company is able to create sustainable competitive advantage.

Market analysis in the Marketing strategy of Subway –

The fast food market is flooded with MNC’s and local food joints eating each other market shares.
Subway with 45000+ outlets across the globe is the leading player in the QSR industry (Quick service
restaurants) and is ahead of many chains like McDonald’s, KFC, and Dominos etc.
Changing lifestyle, rising health issues, changing eating habits and increasing health awareness
factors are affecting the growth of the companies in this industry

Customer analysis in the Marketing strategy of Subway –

Customers of Subway are the health conscious people in the age group of 15-40 years who love
outing with their friends, family and loved ones. Subway has attracted the younger population who
are outgoing and are in schools or colleges.