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Subway Corporation
Subway is the world’s largest fast-food restaurant for sandwiches which is based in Connecticut, US and founded in 1965. Its main products are submarine sandwiches and salads. It is the third largest fast-food business in the world behind MacDonald’s and KFC. It is a multi-national corporation with 44,672 restaurants in 111 countries, even surpassing the number of that if Macdonald’s. The future outlook is bright with a projection of 100,000 outlets by the year 2030. It has five regional centers in the US, Europe, Australia-New Zealand, Asia and Latin America.
The business model is the restaurant franchise with the owning company Doctor’s Associates Inc. as the master franchisor. Despite constant suggestions on public listing, the company insists on remaining private held. The structure and operations of the franchise is simple which is the reason for the high demand from franchisees.
My Role in Subway
I took a job one summer as a Sandwich Artist which is the lowest ranked position. I serve the guests directly by preparing the sandwiches of their choice in the outlet. It is a do-everything job: explaining, preparation, payment, accounting, stocking, cleaning, etc. Though the tasks are many, the procedures are simple and there is a manager to assist you on any problem. I work directly with an assistant manager who looks over the quality of the work I’m doing and also assisting on my tasks when necessary.
I qualified as having a high school diploma is enough but I had to attend the Subway University to learn all about the job. At the end, there is the operations manual that I had to refer to in ensuring quality for everything that I do.
Strategy Organization Design and Effectiveness
Mission
Subway’s mission statement is “"Delight every customer so they want to tell their friends – with great value through fresh, delicious, made-to-order sandwiches, and an exceptional experience." It communicates legitimacy to the customer and the franchisee (Daft). It is declared to the customer what he should expect in going into a Subway outlet: the quality of the product and the buying experience that will be good enough to recommend to friends. The franchisee is also guided to the standard of his service which should be to delight, rather than merely satisfying the customer.
Competitive Advantage
Compared to most fast-food businesses, Subway offers healthy alternatives in its offerings. Combining this appeal with the brand established in a vast network of outlets comprises the competitive advantage. The ever growing concern over the bad nutrition of fast foods and their deadly long-term effects continuously strengthens this advantage. There is also the growing trend for more healthy life styles through physical fitness and eschewing of vices. A healthy diet is as important which plays into Subway’s proposition.
Operative Goals
Differentiation Strategy
Subway’s strategy is differentiation in the fast-food market. Its main differentiator is the healthy features of its sandwiches such as low fat content and inclusion of vegetables. Most fast foods attract customers by taste at the expense of less tasty but healthy ingredients. It did not aim to be a low-cost leader as many consider its price as comparatively premium to that of MacDonald’s or KFC. It also did not adopt a focus strategy as its products cater to the broadest spectrum of customers of any age, gender or race.
Strategy Topology
Subway is currently an Analyzer wherein in continues to strengthen its hold on its market by its franchising program while equally innovating on its food offerings. It continues to bring out new designs in its sandwiches like the Carved Turkey sandwich which came out last April 2016. This is just the latest in the long line of new creations since 1965. It also innovates on its marketing mix like when it introduced the economical $5 footlong in 2011 when the US economy was struggling (Helman).
Subway’s innovations are not seminal as they simply mix and match existing ingredients; that is not in the Prospector mold. It didn’t innovating hence it has not become just a Defender. It is the leader in its particular market and is not a Reactor either.
External Environment
Subway’s industry sector is currently the most affected with the entry of serious contenders in its health food market. As a result, its sales fell by 3% in 2015, the worst among the 25 top fast food businesses. The main competitors are Chipotle Mexican Grill and Firehouse Subs and both are introducing new methods to present freshness in foods to customers, such as freshly-cut meat and use of steamers instead of microwave.
The other problematic sector is its market sectors particularly the difficulties currently facing its retailers in the form of franchisees. Territorial competition, thin profits and low wages are cited and sale of franchises are increasing. (Harwell)
Environmental Uncertainty
In the simple-complex dimension, Subway is considered simple being one of the players in the simple fast food industry. The products, customer market and suppliers are well defined as well as the technologies and raw materials involved.
In the stable-unstable dimension, the environment has started to shift to the unstable with the health movement among customers going strong and government regulations zeroing in on health food reform.
We can then say that Subway operates in the simple-unstable environment where health considerations are causing many changes to a relatively simple industry.
Mechanistic Management Processes
The business model of Subway is the franchising model which is a typical of having mechanistic management processes. There is a clear hierarchy of authority where at the very top is the privately owned Doctor’s Associates, Inc. (DAI) and just below it are the franchisees which get directions from DAI as the master franchisee. The franchisees receive a strictly structured program of policies, standards and rules that is typical of franchise agreements. All initiatives for innovation are reserved with DAI which would be implemented across all franchises.
One of the key elements in Subway’s business model is the acquiring the real estate that will house the franchise businesses. The objective is to secure a formal tenancy agreement with property owners whose property meets the specifications. In effect, Subway is forming formal partnerships with these property owners to build the franchise facilities. In the business model, there are essentially three partners: DAI as the franchiser, the property owner and the franchise operator. (Misonzhnik)
Subway is also attentive and responsive in its relationship with the government and the public. Any valid complaint raised leads to immediate action such as the one on the additive azodicarbonamide in its bread. It changed the recipe immediately and even proceeded to remove all artificial flavors, colors, and preservatives. When a star advertising pitchman was found to be involved in a despicable crime, Subway immediately terminated his services. (Peterson)
Organizational Design for the International Environment
Motivations for Global Expansion
Subway’s motivation with its franchising model is to reach as many customers as possible across the globe. This indicates the need to achieve economies of scope in both products and customer markets. Operating in a foreign country provides knowledge of the culture, local needs and wants which leads to localization of products. There are 19 sandwich designs in other countries that are not found in the US.
Though Subway does not have factories that manufacture its ingredients, economies of scale can be applied when franchises combine to purchase in volume.
Stage of International Development
In achieving 44,672 restaurants and 5 regional centers in 111 countries, Subway was able to reach the multinational stage. The regional centers are responsible in developing the business in the regions by acquiring tenancy in commercial spaces and selling franchises.
It has gone beyond the domestic, the international and the multi-domestic stages. With its franchising extended to other countries, it does not leave much room for independent operations as allowed by the abovementioned three other stages. Subway is still considered a home-centric company with most franchises in the US.
Structure for Global Strategy
The simple strategy of franchising leads to no other global structure but the geographic division structure. Subway implemented this by the establishment of regional offices, business development offices, regional franchisors, regional purchasing companies and franchises in 111 countries. For example, there is a Latin and Caribbean Division ("Subway's Latin America & Caribbean Market Is a Regional Sensation").
A matrix structure is implemented in the form of projects management where operations managers are also entrusted with projects and they report to project managers. The main product are sandwiches and to salads to a lesser degree. There is too little product diversity to form a product division structure.
Global Coordination
There are teams called Regional Operations Teams which basically fulfill the role of global teams whose main function is coordination among the offices in various countries. They are entrusted with the implementation of global initiatives that have been launched by general headquarters. Problems and solutions from regions and countries are shared through these teams. ("Job Details: Director, Regional Operations Teams")
Headquarters planning is also practiced in Subway as the franchising model requires a strong control on the franchise framework and programs.
Innovation and Change
Strategic Types of Change
Subway has embraced technology changes as crucial in its business sustainability. It aimed to increase efficiency by streamlining multiple and often redundant data across the enterprise. This would require better data management that would allow faster movement of materials and more accurate accounting. ("Improving the Experience")
Product changes are essential in the fast-food business. Customers change their tastes and competitors are bringing out new products that create new tastes. Subway has been consistent in offering new menus. One such recent innovation is the flatizza which is combination of pizza and flat bread. The concept brought in the pizza experience inside Subway. (Editorial Staff)
Strategy and Structure Change
One of the major technical changes in recent times in the business world is social media. Subway adopted this innovation into its technical core and eventually convinced management to also do so in its management core when it used it for its marketing processes. We can say that Subway was able to use the dual-core approach to successfully implement social media. As of 2012, it has achieved over 11 million likes in Facebook, 400,430 followers in Twitter followers, over 1.6 million views in YouTube views and nearly 9000 followers in Linkedin. It has achieved leadership in social media where it has ranked 27th according to the analyst firm SocialBaker. (Cantwell)
Elements for Successful Change
One innovation which caused a major impact in sales is the $5 footlong. The change process all involved the elements of idea, need, adoption, implementation and resources. The recession in 2008 motivated a small Subway franchise owner to produce ideas to meet an urgent need in the declining sales. The idea was simple in reducing the standard footlong by a dollar. Subway sandwiches has a high acceptability in the market that this price reduction created volume sales in that shop. The idea quickly spread internally and management was quick to adopt, implement and provide resources for the idea.
Decision-making Processes
Organizational Decision Making
The case of innovation in the 5$ footlong was a good example of the Carnegie Method of decision making where ideas are funneled upwards into narrower channels unti la top executive makes a decision. In this case, the idea of the shop owner was tackled in the regional marketing and product committees that covered Sweden and was endorsed to the US headquarters for approval.
Works Cited
Cantwell, Johannah. "Retailer of the Week: SUBWAY". 2012 Apr. 20. Web. 21 June 2016. <http://www.globalrealestateexperts.com/2012/04/retailer-of-the-week-subway/>.
Daft, Richard. Organization Theory and Design, 10th Ed. Mason, Ohio: Cengage Learning, 2007. Print.
Editorial Staff. "Innovating with Subway’s New Flatizza". Fast Food Menu Prices, 2014 May 17. Web. 21 June 2016. <http://www.fastfoodmenuprices.com/innovating-subways-new-flatizza/>.
Harwell, Drew. "The rise and fall of Subway, the world’s biggest food chain". The Washington Post, 30 May 2015. Web. 21 June 2016. <https://www.washingtonpost.com/business/economy/the-rise-and-fall-of-subway-the-worlds-biggest-food-chain/2015/05/29/0ca0a84a-fa7a-11e4-a13c-193b1241d51a_story.html>.
Helman, Linda. "SUBWAY Continues To Innovate and Grow". Chain Store Guide, 11 Aug. 2011. Web. 21 June 2016. <http://newsroom.chainstoreguide.com/2011/08/subway-continues-to-innovate-and-grow/>.
"Improving the Experience". QSR, (n.d.). Web. 21 June 2016. <https://www2.qsrmagazine.com/articles/tools/116/subway-1.phtml>.
"Job Details: Director, Regional Operations Teams". Subway Careers, (n.d.). Web. 21 June 2016.
Misonzhnik, Elaine. "Subway Moves Fast as Opportunities for Expansion Grow". National Real Estate Investor, 20 Jan. 2011. Web. 21 June 2016. <http://nreionline.com/corporate-real-estate/subway-moves-fast-opportunities-expansion-grow>.
Peterson, Hayley. "Jared Fogle is the least of Subway's worries". Business Insider, 23 Aug. 2015. Web. 21 June 2016. <http://www.businessinsider.com/jared-fogle-is-the-least-of-subways-worries-2015-8>.
"Strong Support Network". Subway, (n.d.). Web. 21 June 2016. <http://www.subway.ie/business/franchise/support_network.aspx>.
"Subway's Latin America & Caribbean Market Is a Regional Sensation". Business Review USA, 2012May 17. Web. 21 June 2016. <http://www.marketwired.com/press-release/subways-latin-america-caribbean-market-is-a-regional-sensation-1658916.htm>.
