Purchase Intention and Market

Penetration of Subway, Rohtak

SUBMITTED BY GROUP 6
GAURAV BATRA
KAUSHLENDRA SINGH
LAV
MEHER KIRAN
ADITYA PATIL

PGP06022
PGP06028
PGP06030
PGP06033
PGP06038

1. Introduction
India is one of the fastest growing economies in the world with an average growth rate of 7% over the
past decade (The World Bank 2014). With a population of 1.2 billion, India offers to be one of the
most lucrative markets for consumer products, therefore attracting a strong and continuous flow of
investments in scalable businesses with a strong back end supply chain. As the purchasing power of
the middle class increase along with the urbanization of smaller cities, the demand for quick service
restaurants, fine dining and casual dining restaurant will grow manifold in years to come. The
estimated size of the food and beverage industry is valued at USD 341 billion within which the
countrys restaurant sector is valued at USD 48 billion, with a potential to grow to USD 78 billion by
the year 2018 (RNM Associates, 2015).
The restaurant services market has been divided into four areas; quick service restaurants, fine dining,
casual dining and cafes, bars and pubs. The food and beverage service market has witnessed a
compounded annual growth rate of 20% (FICCI Report, 2015). The overall scenario of the food and
beverage sector has transformed from a time where a handful of restaurants existed to a time now
where consumers are flooded with choices of cuisines, locations and range of prices.
Subway the second largest fast food chain and the fastest growing in the world with 44,603
restaurants in 111 countries and territories as of January 19, 2016. USA alone has 27,058 outlets. It is
the largest single-brand restaurant chain and the largest restaurant operator in the world (Wikipedia).
The main differentiation of the products of the Subway are that their Submarine Sandwiches (Subs)
are prepared in front of the customers and is healthier than subways main competitor McDonald and
suits its tag line Eat Fresh.
Subway primarily targets the customers of age between 18 years to 39 years with a medium level to
high level income living in the urban areas wanting to have a healthy diet (Tharanga Siriwardena,
2009). In India, Subway opened its first branch in 2001 in New Delhi. Subway as well made many
changes in their menu by banning beef and pork and serving the non-vegetarian food after halaal. As
of 2013 there were 395 subway restaurants in 68 Indian Cities and currently Subway is also planning
to enter Tier 1 and Tier 2 cities of India. Further, as per those plans, Subway had recently has
opened a restaurant in Rohtak where in this research paper analyses and expects to establish
relationship between its sales and market acceptance with different factors.
The paper is structured as follows. A theoretical background of the factors considered for the study is
followed by hypotheses development and conceptual framework. Later the methodology used for
testing the hypotheses is described, results will be discussed and deliberate on the theoretical and
managerial implications of the study. The paper ends with a conclusion on the limitations of the study
and other suggestions.
2. Theoretical background
2.1 People Income
People income of any geography is quantitatively measured as Gross domestic product (GDP) of that
region. It demonstrates the disposable income of the people which can be utilized in the consumption
of various products and services. India is among the top performer in the GDP growth in the worlds
large economies (Ministry of Statistics and Programme Implementation, 2015). Among the various
state Haryana is at 4th in terms of GDP per capita at constant prices in India with Haryana having GDP
per capita of $2919 compared to Indian average of $1627 (Ministry of Statistics and Programme
Implementation, 2015).
2.2 Dietary Habits
A key component of this exceptional period of development has been the change in the nature of the
Indian diet. As the world economy turns out to be more incorporated and connected, diet transition

would have been inevitable. In any case, it is clear that the latest decade of globalization has played
an important part in the change of food consumption in India. With an expanded number of working
ladies in towns, change in work timings and increased wages of recent years, individuals are willing to
pay more for prepared food which liberates their time for different exercises (Regmi and Dyck, 2001;
Kennedy and Reardon, 1994). This has led to the rise of stores and fast-food chains as a developing
power in India since mid-1990s (Pingali and Gwaja, 2004).
2.3 External factor
Haryana recently witnessed the Jat Reservation Agitation a series of protests by Jat community. The
protesters were demanding for reservation under Other Backward Class (OBC) category. The protest
was started on 12 February, 2016, and turned violent on 20 February. The agitators blocked highways
and railway lines, burnt down several vehicles, damaged public and private property including house
of state's finance minister. They also blocked water supply to the neighboring Delhi, resulting in a
temporary water crisis in that state (Wikipedia). According to PHD Chamber of Commerce and
Industry Haryana has witnessed an estimated loss of INR 34000 crore.
2.4 Competition
Competition plays a prominent role in market penetration of a company in that particular market. A
company with no strong competition can expand very fast and gain maximum market share. On the
other hand, a saturated market i.e. market with large number of players makes it very difficult for a
new player to expand.
Subway comes under modern fast food chains which consists of other players like McDonalds, Pizza
Hut, Dominos Pizza, KFC, etc. These fast food chains are frequented by higher income individuals and
families. Other type of fast food joints i.e. traditional fast food joints consist of old bakery shops, Indian
fast food restaurants, Chaat shops, etc.

3. Hypothesis development and conceptual framework

3.1 People Income and purchase intention
People having the higher level of income have sufficient saving and surplus amount to spend on the
various product offering, as a result they are much responsive to the offered product than those who
earn less (Abdul Waheed, Syeda Shawana Mahasan and Moeed Ahmand Sandhu, 2014). In addition
to this, the current population of India armed with its higher purchasing power and exposure to buying
pattern of the west is inclined toward the global brands (Syed Tabrez Hassan, Bilal H Hurrah and Amit
Lanja, 2014).
H1. Increase in the people income has the positive impact on purchase intention of Subway, Rohtak.
3.2 Dietary habits and purchase intention
Nature of food demand recognizes two particular phases of eating transition move connected with
the period of economic growth. Amid the principal stage, salary impelled eating routine broadening,
shoppers move away from mediocre products to prevalent sustenance and substitute some
conventional staples, particularly rice. In the second stage, diet globalization, the impacts of
globalization are considerably more set apart with expanded utilization of proteins, sugars and fats.
The way that youths visit fast food channels only for the purpose of fun and some change from day by
day schedule. It was found that way of life changes and tastes buds are supported by the urban culture
and strongly affects the sort of nourishment requested and the utilization by the general population.
Changing way of life and work propensities are the two main considerations choosing buyers
inclination for fast food that is driving them towards junk food (S. Vasantha, S. Vijaylakshmi and
Prabha Kiran, 2015). An NSSO survey (2004) shows that growing awareness on health and access to

all vegetables made consumers shift from locally available, wild, farm, leafy and seasonal vegetables,
to all kinds of vegetables including potato, broccoli, cabbage, cauliflower and capsicum throughout
the year.
H2. Dietary habits have the positive impact on the purchase intention of people.
3.3 External factors and purchase intention
Almost all the eateries and food outlets including Dominos, McDonalds, Hotel Rivoli, and Friends
were burned to ground by violent Protesters. Subway in Rohtak has started its operations afterward.
Since there is no significant competition available except for the few local restaurants. Subway, Rohtak
enjoys a better position to tap the fast food market. However the purchasing power of the people
whose shops and business have been destroyed during protest would get negatively affected,
resulting in a dwindling customer base.
H3: External factor has a mixed (positive and negative) impact on the purchase intention of people.
3.4 Competition and purchase intention
In Rohtak, traditional fast food shops have been prominent in last five years. But in recent times, many
international fast food chains like McDonalds, Pizza Hut, and Dominos Pizza have set their shop in
Rohtak. This is due to high per capita income of Haryana state. So, Subway is not the first international
player in Rohtak but market is also not saturated yet.
H4: Competition has a positive impact on the purchase intention of people.

Fig. Conceptual Framework of the Study

4. Research Method
4.1 Nature of study
The present study is an effort to explore the direct and indirect impacts of citizens household income,
peoples dietary habits, external factors and competition on their purchase intention of Subway,
Rohtak. Four hypotheses pertaining to the impact of each mentioned factor on purchase intention of
Subway, Rohtak, are developed with relevant literature support. The hypotheses would be tested for
their relevance after collecting and analyzing primary data through data collection and analysis
techniques.

As we have come to finding the factors for this study by literature review, this study uses exploratory
approach of research. We have also constructed our hypotheses from literature review, it is also
exploratory approach of research. After initial ascertaining of factors and hypotheses, we will be
testing and analyzing out four factors and their respective hypothesis with data collected from our
sample, this constitutes the conclusive approach of research.
Hence this study is combination of Exploratory as well as Conclusive approach of research.
4.2 Measures
It is very important to carefully adapt the constructs as this will be the source of acquiring primary
data. For measuring the effect of people income we have adopted the five items developed by Dr.
Reeta Arora, Dr. Asha Chawla, Ms Monika Bansal (2014) which is having the nominal scale. In
addition to that to measure the effect of dietary habits we have adopted the four items as constructed
by Food Standard Agency (food.gov.uk) having nominal scale. Similarly purchase intention
adopted from Wan Zawiyah Wan Halim, Abu Bakar Hamed (2005) and the item is measured

on 5-point Likert scale (1 = strongly disagree to 5 = strongly agree). The effect of competition and
external factor is also measured on the above described 5-point Likert scale.
4.3 Data collection instrument
To collect the sample data structured questionnaire would be used. Subsequently, it is assumed that
the respondents speak to the populace flawlessly and the study is preparatory in nature and can be
taken up for further research.
4.4 Population and Sample
The population in this study was made out of individuals of age 14 years or above. The sampling outline
comprised of people of Rohtak, a city of Haryana, India. The objective of capturing purchase intention
in precise way and to facilitate the data collection process is to know when the individuals prefer to
eat out at Subway. A survey utilizing convenience sampling was applied to gather information with
organized questionnaire from the populace in Rohtak. The respondents were precisely chosen and the
study was directed in Rohtak. Our sample size will be 160.