EXECUTIVE SUMMARY

The business environment nowadays plays a major part in influencing a business. It is more
global and competitive than earlier. A company can gain competitive advantage through
many ways. The focus of this report is to show the need and importance of business
environment and the factors which affect the quick service restaurant industry. It will focus
on Subways external and internal environment and will showcase how it can gain competitive
advantage by using various models and tools.

The major findings from this report shows that Subway has a good strategic plan in place but
a few things are to be set right for which recommendations are provided.
Table of Contents
INTRODUCTION.....................................................................................................................................4
EXTERNAL ENVIRONMENT ANALYSIS....................................................................................................5
PESTEL Analysis..................................................................................................................................5
Porters 5 Force Analysis.....................................................................................................................6
Industry Life Cycle..............................................................................................................................7
Internal Environment............................................................................................................................8
VRIN Model.......................................................................................................................................8
McKinsey 7-S Framework..................................................................................................................8
Value Chain Analysis..........................................................................................................................9
Conclusion...........................................................................................................................................11
Recommendations...............................................................................................................................12
References...........................................................................................................................................13
INTRODUCTION
Quick Service Restaurants are accountable for more than fifty percent of sales in the whole
restaurant sector. This industry is at its peak growth and the market for it stands at around 200
billion US dollars. (Virtual Butterfly, 2019). The annual revenue is expected to rise ay two
percent annually. To become a profitable business, quick service restaurants should take into
consideration the market trends such as healthy options, bundled products, meal options
(Team, 2019).

The QSR industry is at the matured sage in the industry lifecycle. It has reached a saturation
point. Attributes such as per capita disposable income, etc. will help boost a QSR’s sales. The
major focus of this industry is on young adults and business class people (Virtual Butterfly,
2019).

Subway is an American QSR that sells salads and sandwiches. According to QSR Magazine
(2019), its total market share is five percent. It is the largest restaurant chain with 40,000
restaurants in 110 regions (Subway, 2018). It takes pride in being the healthiest fast food
restaurant. According to Peterson (2016), its brand value is 10.314 US Dollars. Subways
vision is to be the number one QSR. Their strategy is to target an underserved segment and to
have many franchisees.
EXTERNAL ENVIRONMENT ANALYSIS
This plays a vital chunk in operating the future of industries (Barney, 1991). It helps
industries to guess variations in the marketplace and aids to use opportunities and protect
against threats. There are numerous tools which a business can use out of which this report
will be concentrating on PESTEL, Porters 5 force analysis, and Industry Lifecycle.

PESTEL Analysis
Political Factor

The packing guidelines in numerous nations affected the QSR industry where the usage of
plastic was forbidden. To handle these protocols, subway uses re washable fabrics and bags
to pack.

Economic Factor

Numerous QSR labours get hourly charges and activist groups are rebellious to increase the
pays. Subway is affected by the remuneration law as it pays its staffs less.

Social Factor

The Menus of QSR’s are fluctuating because of society apprehensions with high fat, sugar
and salt contents. Issues such as beliefs and use of halal meat also effects this industry.
Subway has eliminated sugars from drinks, hydrogenated oils from food.

Technological Factors
Technical aspects such as online ordering, mobile wallets and loyalty cards are taking over
the QSR industry. Subway has a vast existence on social media. It runs a loyalty card called
the Sub Card.
Environmental Factor

Environs create alertness towards cleanliness, environment safety, fusion food products and
reutilizing issues in the business. They are motivated towards eating environment friendly
foods so they expect QSR’s also to pay regard to these subjects. Subway backs principled
handling of animals and by no means uses synthetic colouring.

Legal Factor

Legal elements such as overseas rules, transaction laws and guidelines, migration policies,
VAT policies etc. The laws on data shield will disturb the Sub Card and will be vital for
subway to defend is patrons information particularly now when there is a peril of hacking
which can hurt the trademarks status.
Porters 5 Force Analysis

Threat of new entrants

This is incredibly high in the QSR industry as there are exceptionally less hindrances to
section and the expense of set up is very low (Data monitor, 2012). The dining experience
will separate Subway from its rivals as a result of its neat environment, healthier alternatives,
fast assistance and assortments of sandwich choices (Ottenbacher and Harrington, 2009).

Power of buyers

Price sensitive clients will demand to reduce the prices. . In the QSR business, with the buy
choice, the intensity of purchasers increment. Customers of QSR demand for unique dining
experiences, cheap priced food and superior quality food (Kisang, et. Al, 2010). To stay away
from clients from leaving for less expensive other options, Subway must keep up a low cost
at this point and give them a good dining experience (Bloom, et al, 2012).

Power of Suppliers

This is non-existent in the industry as there are unlimited suppliers for products.

Threat of Substitutes

Alternatives are permanently accessible and food can be credited. But, suitability is the worth
addition element of service which decreases threat of substitutes. Clienteles can prepare home
food at a lower price but there will be an absence of suitability. To reduce the threats,
Subway should trade high feature produces at lower prices (Hill and Jones, 2009).

Rivalry among existing competitors

Competition is in elevation. Changes in fee, distinguishing the produce, find better dealers and
marketplace extension can poorer the threat. In order to persist in the market, subway needs to
wing it on its technology and arrangement (Ogaard, Larsen & Marnburg, 2005). With its
lively menu and quick service, subway has altered to the fluctuating circumstances.
(Ottenbacher & Harrington, 2009).
Industry Life Cycle
An industry life cycle demonstrates the numerous phases where industries function, develop,
prospect and drop within an industry. An industry life cycle typically consists of four stages
—

1. Introduction
2. Growth
3. Maturity
4. Decline

The QSR business is at phase of maturity. This suggests that the evolution level is
deteriorating. According to Kotler and Keller, (2008) the business is observing ultimate sales,
low cost per customer, high incomes, and opponents deteriorating. At this stage, subway,
grabbed supreme income, revenues and cash flows because purchaser demand is objectively
great and stead. Subway’s offerings are famous among the public, and the prices are rational.
Organizations at this stage try to maintain their strengths to safeguard themselves and
maintain profits by introducing new strategies to stop the entry of new competitors these
strategies also help to reduce competition (QSR Magazine, 2019).

This is when Subway gained maximum profits and their cash flows increased. This is due to
the rise in demand for healthy food options. Subway took advantage of the fact that there was
no other player for the same in the market and made it as its unique selling point (Sunway,
2017). This is when the brank grew popular among the general public as its prices were
nominal when compared to its competitors.
Internal Environment

VRIN Model
Value

Subway gives its customers freedom to select ingredients and components that goes into their
food and sandwiches. Almost any dish is convertible into a salad. Value is also created by
using fresh ingredients. The market domination is unmatched as they have many stores across
the globe (Subway, 2017).

Rare

The chain makes its own bread which is rare as no other QSR does so. It is usually expensive
to take a QSR franchise and Subway broke this stereotype and has one of the lowest start-up
cost. All the ingredients are purchased from SAFE- Socially accountable farm employers
(Bloom, et. al, 2012).

Inimitable

The brand uses gluten free breads and brownies. The salt content is reduced by 15%. Usage
of 100% cage free egg is followed. All these are inimitable factors by its competitors.

Non Substitutable

Although it has very less options to choose from, it is non substitutable as no other QSR
offers such a vast healthy menu. The removal of Tran’s fat, artificial colour and artificial
flavours across all its stores has made it stand out (Enz, 2010).

McKinsey 7-S Framework

Strategy
Subway follows market diversification as it caters to over 100 countries. It also adopted the
low cost strategy due to its small processes. Because of its low start-up cost, it follows the
low investment strategy (Grant, 2010).
Structure

Subway follows a matrix system of hierarchy (Peterson, 2016). This structure is

commendable as resources under this can be used up effectively and efficiently. Due to the
need of functional skills and innovation, this sort of an arrangement is necessary.

System
According to Business Insider (2019), the brand depends on recruitment, appraisals,
selection, complaint handling, quality control and a lot more. Subway gives the new
franchisees the required information during the training period and the fee is very low. The
franchisees can also take loans from the brand.
Skills
According to Talaja (2012), subway provides marketing materials, knowledge and the tools
required to run the restaurants impeccably.
Staff

Subway hires hardworking staff and trains them vigorously (Annaraud, 2018). This
encourages employees as it builds a sense of confidence and helps in their career growth.

Style

The brand directs the franchisees by providing useful training and important information. It
supports the franchisees and helps them to operate and start the business (Enz,2010).

Shared Value

The basic provision of Subway is shared value. The brand stands for support, control and
simplicity. It provides its franchisees with tools and knowledge to operate successfully in the
QSR business. It also contributes to civic, educational and charitable institutions.

Value Chain Analysis

Primary Activities

 Inbound Logistics

Subway gives its franchisees the freedom to procure raw materials from any vendor they
want. The motive of this is to get fresh and quality goods. Subway also practises the
backward integration strategy in order to replace most of its suppliers (Grant, 2019).

 Operations
Subway restaurants require a very small space with minimal equipment’s like an
oven, refrigerator and a counter top.
 Outbound Logistics
Subway has sit down restaurants, drive thru and a counter service in a very neat, clean
and warm environment.
 Marketing and Sales
Subway has always had a vast advertising campaign. Use of media, billboards
sponsoring events and hoardings are some of its strategies. Usage of “Eat Fresh”
slogan has made the brand popular.
 Service
The Sub card is a prepaid card which provides customers a convenient and quick way
to make payments at the counters. They provide Wi-Fi to all the diners. The Sub card
may be gifted as well as it has no penalty of dormancy fee as well as no expiry date.
Support Activities

 Infrastructure

Some of subway restaurants are made from a 100% reused stones. All their interiors
are sophisticated and modern. They are aiming at opening many more eco-friendly
outlets which actually reflects on their goals.
 Human Resource

Every employee is hired after a formal interview with the branch manager. The
training is provided by SchoolX which is a global cloud based learning method.
Employees are motivated with monetary and non-monetary incentives which in turn
boosts profits and employees morale.
 Technology Development

Subway pays attention to modernize outlets and engineer the menu regularly. Hence,
it has signed a pact with SiteZeus an outsourcer which gives all related technical help
to all the outlets.
 Procurement
Almost all the materials are procured from local farmers, providers etc. this method is
followed so that the outlets get good quality products at an affordable price.
Conclusion
The economic conditions will be a threat to subway as its pricing will have to be reduced.
The threat of substitutes and competition can affect and influence the brands profit earnings.
They need to become more technologically advanced in order to gain a competitive
advantage.

There is no other QSR with such superior technology and human resources and these two
factors develop the competitiveness and because of this experience, customers provide
repetitive purchases which will in turn boost the brands profits and sales. Therefore, it needs
to adapt a few strategies in order to stay at the top of their game
Recommendations
 QSRs nowadays are opening shops in more non traditional venues such as airports,
hospitals, colleges , military bases and amusement parks. Therefore, subway can
identify such venues and create a market penetration strategy.
 Subway can introduce a meal option so that it can create a value proposition for its
customers. All other QSR’s have a meal options. This can increase traffic at the
restaurant.
 Subway can improve its technology by having self ordering kiosk. This will in turn
reduce traffic at the ordering counter.
References

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