Case Number one - Subway Sandwich Shops Situation Analysis

Case Number One - Subway Sandwich Shops Situation Analysis

Subway Sandwich, as presented in the Case Study presented in the Marketing Management MGT 551 class, is an undisputed market leader in a segment that is “firmly established as a nationwide food item for which there is plenty of room in all areas” (University of Phoenix, 2008). However, with a growing competition, changing consumer trends and increased product specialization, Subway’s real strategic marketing challenge is to be able to develop and maintain a differential advantage while sustaining sales growths and profitability.

Subway Sandwich effectively competes with other fast-food restaurants by including and promoting healthier meals into its menu, as demonstrated by singling out its submarines with 6 grams of fat or less, and through its advertising campaign featuring Jared “the Subway guy” who lost 245 pounds in one year on a strict Subway diet (Subway, 2008). However, as demonstrated below in a market summary complemented by a SWOT Analysis, it is determined that Subway must attract a clientele beyond its traditionally health-conscious consumers in order to overcome their marketing challenges and increase its individual stores’ volumes and profitability.

Market Summary

The Sandwich Market – a Growing Industry

Consumers’ interests for hamburgers and fries have been steadily decreasing to favor sandwiches, which gives Subway a competitive advantage over competition such as MacDonald’s or Burger King, for example. While most fast food restaurants react to this phenomenon by modifying their menus to include healthier choices, Subway benefits from the 15% annual sales growth of sandwiches compared to a lean 3% growth for hamburgers and steaks (McCarty, 2007). The United States sandwich industry is estimated at more than $121 Billions as of the end of 2007 (Eyre, 2008).

Target Markets

Since 1992, Subway’s sales grew from $2.2 Billions to $6.27 Billions in 2004 in the United States alone (Apuzzo, 2005). With its aggressive global growth strategy, Subway was able to reach in 2006 $11.3 Billions in revenues from its franchises around the World. Subway’s marketing strategy remains the promotion of health through fresh ingredients, while still targeting young adults (16-39 years old) as its main consumers (Subway, 2008).

Demographics

The profile for Subway’s present and potential consumers consists in the following factors:

Geographics:

Subway’s international expansion reached 28,000 outlets in 86 countries in 2007. Their strategy consists in “low start-up costs, ease of operations and healthier menus” (Anderson, 2007), which makes it attractive to franchisees around the World to adopt the concept. Subway primarily targets booming sandwich markets such as United Kingdoms, Germany and other Western Countries with increasing obesity problems.

Subway exercises an aggressive growth strategy by expanding globally, but also nationally in non-traditional locations such as college campuses, hospitals, gas stations, military bases, for example. Geographical saturation is believed to play a great part in Subway’s marketing plan to make customers perceive them as number one fast food chain (Chamis, 2001). Although saturation affects other regional Subway franchises, it boosts the sales and revenues of the entire chain, which is detrimental to the franchisees but benefits greatly the company as a whole.

Demographics:

Ate sandwiches away from home in the last 30 days by age group (US)

18-34 63%

35-64 51%

65 over 42%

Source: 2007 Mintel Report, in Eyre, C. (2008, January 25).

Sandwich consumption on a regular basis by ethnic group (US)

Caucasian 51%

Hispanic 63%

Asian 62%

Source: 2007 Mintel Report, in Eyre, C. (2008, January 25).

Consumers Behavioural Factors:

- Recognize the need to eat healthy

- Frequently eat out

- More