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Assessment Task 2:

Marketing Report





Subway Systems Australia Pty Ltd

W o r d C o u n t : 1 7 6 4

[Type the author name]
The Marketing Analysis of Subway and Its New Product
Flatizza



Contents
Executive Summary ............................................................................... 1
Introduction ............................................................................................ 1
SWOT Analysis ..................................................................................... 2
Findings ................................................................................................. 3
Recommendations ................................................................................. 4
Target market ...................................................................................... 4
New product description and Marketing Mix .................................... 4
Customer value proposition ................................................................ 5
Justification of the choice of new product .......................................... 6
Reference ............................................................................................... 7


1

Executive Summary
Subway in Financial Year 2013-2014 has witness 1.32 billion revenue in Australia market.
Since Subway has many ambitious plans to expand its business and occupy bigger market
share, it is crucial for Subway to propose a sustainable long term plan to expand its domestic
market share by examining the external and internal environment in which new product is to
be introduced. This paper is aiming to analyse the market environment by using SWOT
analysis and investigate the potentials of the new product with recommendations regarding
the elements and marketing mix.
Introduction
The brand Subway is owned by Subway Systems Australia Pty Ltd, which functions as one of
the global franchisors and assists with Australian restaurant targeting the domestic marketing
(Subway 2014). Originated in the US, Subway entered the Australian market in 1988. Today,
Australia has become one of the largest markets outside of the U.S. There are over 1,300
stores national wide (Subway 2014). Subway has made a lot of efforts in enhancing the public
attention of health diet. It has gained its market share over the traditionally fast food such as
McDonalds and KFC. Its products are most famous for low in fat and high in fibre, with only
six grams of fat or less (Subway 2014).
Current Market Share


McDonalds
Australia
Holdings,
15.30%
Yum! Restaurants
Australia , 9.30%
Subway Systems
Australia, 8.80%
Competitive Foods
Australia , 7.00%
Quick Service
Restaurants ,
3.20%
Dominos Pizza
Enterprises, 3.00%
Retail Zoo Pty
Ltd, 1.20%
Others, 52.20%
The biggest fast food franchisor is McDonalds,
followed by Yum! Restaurants Australia. Subway
ranks at the third place with 8.8% of the market,
leading Competitive Foods by 1.8%.
The Australian fast food market
has shown a very competitive
feature. There are dozens of small
companies competing in the
industry.
Source: IBISWorld Industry Report H4512,February 2014
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SWOT Analysis
The SWOT analysis analyses the strengths, weaknesses, opportunities and threats (La Trobe
Business School 2013). A good SWOT analysis can assist the company developing a strategic
plan to help identifying the key factors of the internal and external environment of a company
(La Trobe Business School 2013). It is noticed that Subway is facing a lot of opportunities in
the fast food industry with a lot of internal and external challenges. Table 1 SWOT analysis of
the Subway retailer chain and its new products Flatizza (Subway 2014).
Strengths (S) Weaknesses (W)
Healthy, fresh food, the new
product is fresh cooked
Bargain, the new product is cheap
Number of stores and channels, the
Subway retail chain is expanding
Customizable menu, with selection
of different bread, meat and
vegetables

Service quality is inconsistent from
store to store
Long queue under high customer
flow, one cashier means lower
efficiency and lowered customer
satisfaction ratings
Appearance of products are out dated
Limited seating availability in most
stores
No drive-through option, poor
customer experiences


Opportunities (O) Threats (T)
CSR achievements, Subway has
been positively engaged in some of
the Corporate Social Responsibility
activities
Decoration to encourage more
dine-in customers.
Improve Customer Service Model,
provide more people to serve the
customer, increase the customer
capability
Improve franchisee relations, with a
control of centre distribution centre,
the quality of the food can be
guaranteed
Expand packaged offerings, instead
of traditional paper package, box
package and other packages can be
used.
Continue to revise and refresh
menu offerings
Competition leads decreases in their
prices and hence decreases the profits,
the Subway food is also at lower price
than its major competitors.
More upscale sandwich shops in the
local market, the Australian people
are more likely to have dine-in food
unless they are at work and dont have
too much time
Economy downturn, the retail and
food industry in Australia is
experiencing slow rate of growth
Competition from other large fast
food companies such as McDonalds
and KFC
The sandwich shop invests in another
area which is not its specialty is a bold
move, if the product is not successful,
it will substantial damage other
products as well and affect the profits.
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Findings
Internal environment: there are many risks existing in Subways internal environments.
First of all, the traditional customer service model has shown significant limitations on the
customer volume. The one queue model means only one customer can be served. The
customer experience could be downgraded with long waiting time. It is highly likely that
customers choose the restaurant with more checkouts and more staff.
Secondly, the appearance of Subway store and its products are out dated. Unlike other fast
food retailer, the appearance of the package has not been changed with the change of societal
environment. McDonalds, on the other hand, keeps introducing new packages and new
appearances of its products in response to major events to push its sale campaign. For
example, McDonalds had introduced the World Cup 2010 menu sets (McDonald's 2010). In
addition, McDonalds has different packages on which has specified product information such
as ingredients and calories.
The third finding in the internal environment is that Subway has shown inconsistency in its
customer service quality and food quality. Since each Subway store is operating individually,
there is a great risk of lacking of supervision, which might result lawsuits and other negative
consequences. The recognition of the store could be damaged if one store has involved with
troubles. The inconsistencies in customer service and food quality have largely magnified the
risk (La Trobe Business School 2013).
External environment: The external environment is dominant by Subways advocate of
healthy lifestyle from the food, diet, policy and its market expansion strategies. The advocate
of low fat, high fibre products have significantly increased the brand recognition and the
corporate social responsibility fulfilment. The Australia market has responded Subways
incentive with increment in its sales and profit. However, with the increasing competition in
the domestic fast food market, the healthy concept has been adopted by many fast food
companies. McDonalds labelled the calories of all the products and provided more options in
its salads and drinks (George Institute 2014). KFC committed with a 10 per cent reduction in
sodium (George Institute 2014). Domino's Pizza also introduced less sodium pizza with more
vegetables in its ingredients.
The increasing competition has squizzed the profit margin of the products. Subway seems to
have fewer options to change its menu sets, the lower price, which has been used as an
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advantage in the competition, now also becomes a shortage that brings negative impacts to
subway.
Recommendations
Target market
One big potential market identified in the case study is the children market. As indicated in
the SWOT analysis, it is found that Subway doesnt have children friendly facilities or
children friendly meals. In order to gain its market share, it is important for Subway to draw
more attentions from children by introducing children friendly menu set.
The main competitors of Subway in the market, such as KFC and McDonalds, have already
had value meal for kids. The advantage of children friendly meal is not only targeting the
children alone, but also, by bringing the children to the stores; it is likely that the adults will
also purchase the food. By doing so, Subway can exponentially increase the number of its
customers.
New product description and Marketing Mix
Product
The new product of Subway, Flatizza, can increase and consolidate the loyalty of customers.
Moreover, it can bring more young customers to the store, because it is small and fast, most
parents can enjoy the meal with their kids without a long waiting time. It also helps Subway
to gain more profit and higher market share. Flatizza looks like a small pizza, which has the
convenience for take away. In addition, it package also have to protect the quality of Flatizza
and let the Flatizza keep fresh.

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Price
Another feature of this product is that the price is incredibly low. The plain cheese is $2.50,
veggie is $2.50, pepperoni is $3.50, and spicy Italian is $3.50. Most children are affordable
with this product. Moreover, for adults and seniors, this product can be regarded as snack
when they are hungry. This price range is much lower than its competitors price, which will
help Subway to gain a larger market share.
Place
Place will target at large neighbourhood and communities where there are a lot of children.
The main target of this product is children; therefore, a store close to the playgrounds and
parks will bring significant benefits to the franchise.
Promotion
The promotion method of this product should emphasis on the price to attract more
customers. For example, Subway can make a voucher for free Flatizza. It can be uploaded to
Subway Facebook page or Twitter, and other social networking tools.
Customer value proposition









A well-constructed and delivered customer value proposition can make a significant
contribution to business strategy and performance (Anderson et al. 2006). First of all, in
Subway, each value proposition must be distinctive. This requires that the new product must
be superior to Subways competitors products. Secondly, the value propositions must be
measurable and based on tangible attributes (La Trobe Business School 2013); it should be
Benefits / satisfactions
Tangible attributes
Quality Packaging Other
features
Style Branding
Extended product
Warranties Promotion Distribution
convenience
Company image
Customer product perception
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quantified in monetary terns (Anderson et al. 2006). At lastly, the customer value proposition
must be sustainable. The company image and brand should be well maintained.
Justification of the choice of new product

The strength of the new product is that it maintains the concept of healthy and fresh food and
adds some new elements in it. The traditional sandwiches are usually cold when they are
served, in Subway, one problem is that there is fewer hot food. When some customers are
looking for hot food, they will skip Subway for other options. With Flatizza, Subway can
successfully gain more attention from these customers. The price of Flatizza is still a bargain;
it maintains the price advantages of Subway to its competitors.
The opportunity of the product has made some improvement in its package, which has been
criticized for a while. The new package is able to leave a better impression to the customers
and provide a more friendly take-away option. The container of the Flatizza is much handy
than traditional paper package. It also helps improve the menu option. Since the menu in
Subway has been pointed out to be stalled, this new product will expand its Market and gain a
lot of market share from its competitor such as Dominos and Pizza Hut.
The new product, however, is lacking of competitiveness with McDonalds burgers and
KFCs fried chicken. It doesnt improve the situation that Subway has been criticised for its
meat quality. The new product also needs the market to examine its future, the idea screening
and business analysis have concluded that Flatizza will gain more market share and establish
new Subway image. But the product testing and market performance needs to be carefully
examined in the near future.

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Reference

Anderson, J.C, Narus, J.A and Rossum, W.V 2006 Customer Value Propositions in Business
Markets, Harvard Business Review, vol.84, issue.3, pp.90.
Gargano, S 2014, Fast Food Services in Australia, IBISWorld Industry Report H4512,
viewed 2
nd
May 2014, Available:
http://clients1.ibisworld.com.au/reports/au/industry/default.aspx?entid=2005
George Institute 2014, Fast foods now lower in salt, , viewed 2
nd
May 2014, Available:
http://www.georgeinstitute.org.au/media-releases/fast-foods-now-lower-in-salt
La Trobe Business School 2013, Business Foundations: LaTrobe Compilation, La Trobe
Business School, Pearson, ISBN 9781486013753.
McDonald's 2010, McDonald's Connects Customers around the World with FIFA World
Cup(TM) Excitement, Media McDonald's.
Subway 2014, Franchisee Information- Facts and History, Subway, viewed 2
nd
May 2014,
Available: http://www.subway.com.au/About/Facts-and-History