Marketing Management

COMPETITIVE ANALYSIS

Submitted To: Prof. Poonam Nair

Submitted By:
Anand Joshi G1010

Hemangi Rathod G1037 Kajal Odedara Kirtan Chauhan Mitesh Machhi Sreyash Patel G1022 G1004 G1016 G1029

Index:
Sr. No. Topic
History: McDonalds and Subway SWOT Analysis: Competitive Analysis: McDonalds Vs Subway: Corporate Social Responsibility: Supply Chain Management:

1 2 3 4 5 6

McDonalds History:
The business began in 1940, with a restaurant opened by brothers Richard and Maurice McDonald in San Bernardino, California. Their introduction of the "Speedee Service System" in 1948 established the principles of the modern fast-food restaurant. The original mascot of McDonald's was a man with a chef's hat on top of a hamburger shaped head whose name was "Speedee." Speedee was eventually replaced with Ronald McDonald by 1967 when the company first filed a U.S. trademark on a clown shaped man having puffed out costume legs. McDonald's first filed for a U.S. trademark on the name McDonald's on May 4, 1961, with the description "Drive-In Restaurant Services," which continues to be renewed through the end of December 2009. In the same year, on September 13, 1961, the company filed a logo trademark on an overlapping, double arched "M" symbol. The overlapping double arched "M" symbol logo was temporarily disfavoured by September 6, 1962, when a trademark was filed for a single arch, shaped over many of the early McDonald's restaurants in the early years. The famous double arched "M" symbol in use today did not appear until November 18, 1968, when the company filed a U.S. trademark. The first McDonald's restaurants opened in the United States, Canada, Costa Rica, Panama, Japan, the Netherlands, Germany, Australia, France, El Salvador and Sweden, in order of openings. The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc, in Des Plaines, Illinois, on April 15, 1955, the ninth McDonald's restaurant overall. Kroc later purchased the McDonald brothers' equity in the company and led its worldwide expansion, and the company became listed on the public stock markets in 1965. Kroc was also noted for aggressive business practices, compelling the McDonald brothers to leave the fast food industry. The McDonald brothers and Kroc feuded over control of the business, as documented in both Kroc's autobiography and in the McDonald brothers' autobiography. The site of the McDonald brothers original restaurant is now a monument. With the expansion of McDonald's into many international markets, the company has become a symbol of globalization and the spread of the American way of life. Its prominence has also made it a frequent topic of public debates about obesity, corporate ethics and consumer responsibility.

Subway History:
Fred De Luca borrowed $ 1,000 from family friends Haydee Pinero and Peter Buck to start his first sandwich shop on August 28, 1965, when he was only 17 years old. He was trying to raise money to pay for college. He chose a mediocre location for his shop, the corner of East Main Street and Boston Avenue in Bridgeport, Connecticut, but by noon on opening day, customers were pouring in. On the radio advertisement they had promoted the name as Pete's Submarines, which sounded like "Pizza Marines", so they changed the name to "Pete's Subs", eventually it adopted the "Subway " name and they decorated the store with maps of the New York City subway system; a theme that continues to this day. As of March 9, 2011, the company has 33,749 franchised locations in 95 countries and produced US $ 15.2 billion in revenue every year. In 2007, Forbes magazine named De Luca number 242 of the 400 richest Americans with a net worth of $ 1.5 billion. In addition to traditional restaurants, Subway operates in many non traditional locations. For instance, there are over 900 Subway locations in Wal-Mart stores and 200 on military bases, including several in Iraq and Afghanistan, in addition to three located inside The Pentagon, as well as an increasing number on college and university campuses. Subway restaurants have been consistently ranked in Entrepreneur Magazine's Top 500 Franchises, and Subway was selected as the 2 overall franchise in 2008. Additionally, it was ranked as the 3 Fastest Growing Franchise and the 1 "Global Franchise" as well. In March 2011, Subway was ranked the most popular Fast-Food Restaurant in the United States of America in a poll of over 43 thousand social media users. As of March 2011, Subway operates 34, 246 stores in 95 countries and territories.

McDonalds SWOT Analysis:

Strengths: McDonalds has been a thriving business since 1955 and 20 of the top 50 corporate staff employees started as a restaurant level employee. In addition, 67, 000 McDonalds restaurant managers and assistant managers were promoted from restaurant staff. Fortune Magazine 2005 listed McDonalds as the "Best Place to Work for Minorities. They are a global company operating more than 23, 500 restaurants in 109 countries. By being spread out in different regions, this gives them the ability to weather economic fluctuations which are localized by country. They can also operate effectively in an economic downturn due to the social need to seek out comfort foods. They successfully and easily adapt their global restaurants to appeal to the cultural differences. For example, they serve lamb burgers in India and in the Middle East; they provide separate entrances for families and single women. All franchisees are independent, full - time operators and McDonalds was named Entrepreneurs number-one franchise in 1997. They have global locations in all major airports, and cities, along the highways, tourist locations, theme parks and inside Wal-Mart. They have an efficient, assembly line style of food preparation. In addition they have a systemization and duplication of all their food prep processes in every restaurant. McDonalds uses only 100 % pure USDA inspected beef, no fillers or additives. Additionally the produce is farm fresh. McDonalds serves 100 % farm raised chicken no fillers or additives and only grade -An egg. McDonalds foods are purchased from only certified and inspected suppliers. McDonalds works closely with ranchers, growers and suppliers to ensure food quality and freshness. McDonalds only serves name brand processed items such as Dannon Yogurt , Kraft Cheese , Nestle Chocolate , Dasani Water, Newman ' s Own Salad Dressings , Heinz Ketchup , Minute Maid Juice. McDonalds takes food safety very seriously. More than 2000 inspections checks are performed at every stage of the food process. McDonalds are required to run through 72 safety protocols every day to ensure the food is maintained in a clean contaminate free environment. McDonalds was the first restaurant of its type to provide consumers with nutrition information. Nutrition information is printed on all packaging and more recently added to the McDonalds Internet site. McDonalds offers salads, fruit, roasted chicken, bottled water and other low fat and calorie conscious alternatives. Weaknesses: Leaving them much less able to compete with fast food pizza chains. High employee turnover in their restaurants leads to more money being spent on training. They have yet to capitalize on the trend towards organic foods. McDonalds have problems with fluctuations in operating and net profits which ultimately impact investor relations. Their test marketing for pizza failed to yield a substantial product. Operating profit was $ 3,984 million (2005) $ 4,433 million (2006) and $ 3,879 million (2007). Net profits were $2, 602 million (2005), $ 3,544 million (2006) and $ 2,395 million (2007).

Opportunities: In today's health conscious societies the introduction of a healthy hamburger is a great opportunity . They would be the first QSR ( Quick Service Restaurant) to have FDA approval on marketing a low fat low calorie hamburger with low calorie combo alternatives. Currently McDonalds and its competition health choice items do not include hamburgers. They have industrial, Formica restaurant settings; they could provide more upscale restaurant settings, like the one they have in New York City on Broadway, to appeal to a more upscale target market. Provide optional allergen free food items, such as gluten free and peanut free. In 2008 the business directed efforts at the breakfast, chicken, beverage and convenience categories. For example, hot specialist coffees not only secure sales, but also mean that restaurants get increasing numbers of customer visits. In 2009 McDonalds saw the full benefits of a venture into beverages. Threats: They are a benchmark for creating "cradle to grave" marketing. They entice children as young as one year old into their restaurants with special meals, toys, playgrounds and popular movie character tie-ins. Children grow up eating and enjoying McDonalds and then continue into adulthood. They have been criticized by many parent advocate groups for their marketing practices towards children which are seen as marginally ethical. They have been sued multiple times for having "unhealthy food, allegedly with addictive additives, contributing to the obesity epidemic in America. In 2004, Michael Spulock filmed the documentary Super Size Me, where he went on an all McDonalds diet for 30 days and wound up getting cirrhosis of the liver. This documentary was a direct attack on the QSR industry as a whole and blamed them for Americas obesity epidemic.

Subway SWOT Analysis:

Strengths: Size and number stores and channels Menu reflects demand for fresh, healthy and fast. Use of non-traditional channels. Partnering with the American Heart Association. Worldwide brand recognition. Customizable menu offerings. Low franchisee start up costs. Franchisee training is structured, brief and designed to assure rapid start-up and success. Weaknesses: Decor is outdated. Some franchisees are unhappy. Service delivery is inconsistent from store to store. Employee turnover is high. No control over franchise saturation in given market areas. Opportunities: Continue to Grow Global Business. Update decor to encourage more dine-in business. Improve Customer Service Model. Continue to expand channel opportunities to include event wagons. Improve franchisee relations. Experiment with drive-through business. Expand packaged dessert offerings. Continue to revise and refresh menu offerings. Develop more partnerships with movie producers and toy manufacturers to promote new movie releases through childrens menu packaging and co-branding opportunities. Threats: Franchisee unrest or litigation, Food contamination (spinach), Competition, Interest Costs, Economic downturn, Sabotage, Law Suits.

Competitive Analysis:
Subway is not without competitive pressures. Chief competitors include Yum! Brands, McDonalds, Wendys, and Jack in the Box. Yum! Brands are the worlds largest, with 33,000 restaurants in over 100 countries. Four of the companys highly recognizable brands, KFC, Pizza Hut, Long John Silvers and Taco Bell, are global leaders of the Mexican, chicken, pizza, quick-service seafood categories. Yum! Has a workforce of 272,000 employees and is headquartered in Louisville, Kentucky. McDonalds Corporation (McDonalds) is the worlds largest foodservice retailing chain with 31,000 fast-food restaurants in 119 countries. The company also operates restaurants under the brand names The Boston Market and Chipotle Mexican Grill. McDonalds operates largely in the US and the UK and is headquartered in Oak Brook, Illinois employing 447,000 people. Wendys International (Wendys) operates three chains of fast food restaurants: Wendys (the third largest burger chain in the world), Tim Hortons, and Baja Fresh. Wendys operates over 9700 restaurants in 20 countries, has been included in Fortune magazines list of top 500 US companies, is headquartered in Dublin, Ohio, and employs about 57,000 people.

Jack in the Box owns, operates, and franchises Jack in the Box quick-service hamburger restaurants and Qdoba Mexican Grill fast-casual restaurants and is headquartered in San Diego, California. Target Markets: The increase in sales of the sandwiches has been a result of decreases in consumer interest in hamburgers and fries and increases in demand for healthier options. Sales of sandwiches are growing 15 percent annually, outpacing the 3 percent sales growth rate for burgers and steaks. Current Marketing Program: A new breed of restaurant is making big gains against the market-saturated hamburger establishments. Termed fast-casual, these restaurants are dominated by Mexican chains, and sandwich restaurants offering fresh-baked breads and specialty sandwiches. Responding to evolving consumer expectations for health, fresh, custom-made sandwiches; Subways marketing program addresses these expectations through a number of approaches. The most notable were the television commercials featuring Jared. These commercials emphasize the healthy aspects of a Subway sandwich by highlighting the 245 pounds Jared lost by eating a Subway sandwich diet. Subway also markets through a national sponsorship in events such as American Heart Association Heart Walks and local events such as triathlons, and childrens sports teams. The Subway example represents marketing and product strategies that are classic examples of focusing on market demand, consumer trends, product leveraging, and innovation. The marketing strategies of creating clear brand recognition, brand and product association, and market demands, have strategically positioned Subway to advance market share into the near future. These marketing strategies are also repeatable fundamental marketing strategies transcending the fast food market.

Subway Hint:
Try ordering a wrap (less refined carbs) instead of a normal Sub - most Subway outlets are happy to put anything into a wrap.

McDonald's Hint:
Avoid salads with the word "crispy" in them. Look for "grilled" instead. The crispy options have lots of salt and fat. Subway offers the better options - but you still need to choose carefully. Subway tend to focus on their "eat fresh" mantra While McDonald's try to follow every fad at once - hoping to reach every corner of the market.

McDonalds versus Subway:

The Sandwich Hamburger battle In March 2011, sandwich chain Subway surpassed the worlds largest hamburger chain, McDonalds in terms of the number of stores globally. In 2002, around nine years ago, Subway had already surpassed McDonalds in number of stores in the U.S. However, McDonalds still rules in terms of revenue with $24.1 billion, as compared with $15.2 billion for Subway last year. Subway Rapid growth strategy opening outlets in non-traditional locations Subway has opened around 8000 outlets in non-traditional and unusual locations. E.g. in Automobile showrooms, Goodwill stores, high schools, zoos, appliance stores, ferry terminals, riverboats, and even a church. In China it has around 200 stores and has plans to expand it to around 500. Subway has competitive advantage over other chain restaurants as it costs less for it to open and operate a smaller format store.

CSR Of McDonald:
McDonalds work with "Refrigerants, Naturally!" recognized with the 2011 Roy Family Environment Award McDonalds work with "Refrigerants, Naturally!" was recently recognized with the 2011 Roy Family Environment Award. This is a prestigious award bestowed by The John F. Kennedy School of Government at Harvard University. "Refrigerants, Naturally!" brings together McDonalds with The Coca-Cola Company, Unilever, and PepsiCo to combat global warming and climate change by replacing F-gases in refrigeration equipment with climate-friendly natural refrigerants. Greenpeace and the United Nations Environment Program (UNEP) have been strong supporters of this partnership.

CSR Of Subway:
The SUBWAY restaurant chain has made a commitment to make its restaurants and operations more environmentally friendly. In collaboration with the US Green Building Council, the first SUBWAY Eco-Store in Kissimmee, Florida, will open on November 5. Elements of the Eco-Store include high efficiency HVAC systems, remote condensing units for refrigeration and ice making equipment, day lighting and controls for high efficiency lighting, LED interior and exterior signs, low flow water fixtures, and building and decor materials from sustainable sources. There was also an extensive use of recycles products and furnishings in the construction of the restaurant and an increased emphasis on recycling in customer areas. Another step the brand has taken is in a number of packaging initiatives, including one that now sees the SUBWAY brand using paper napkins that are made from 100 percent recycled materials -- of which 60 percent are post consumer recyclables. The initiative is also realizing a cost savings for its thousands of franchisees. Working in partnership with the franchisee-controlled Independent Purchasing Cooperative (IPC), which sources product and negotiates contracts for SUBWAY franchisees, brand representatives are reviewing everything from materials used in disposable gloves to locations of product distribution centres. There are many product packaging and distribution initiatives in the works. Other steps the SUBWAY brand has taken include: Distribution: Efforts were made to strategically relocate several redistribution centres next to vendor manufacturing facilities, eliminating the need to transport product from long distances. In all, the move saves an estimated 1,660,079 gallons of gas per year and eliminates 10,491 truck loads annually. The brand has

also undertaken an Operational Efficiency program and has a Transportation Management Centre plan in the works, which ensures all routes are optimized and all trucks are full, which saves money on freight costs and emits less green house gasses. The SUBWAY restaurant chain is the world's largest submarine sandwich franchise, with more than 28,000 locations in 85 countries. Headquartered in Milford, Connecticut, and with regional offices in Amsterdam, Beirut, Brisbane, Miami, and Singapore, the SUBWAY chain was co-founded by Fred DeLuca and Dr. Peter Buck in 1965. The SUBWAY brand was ranked the number one franchise opportunity in Entrepreneur magazine's 2007 "Annual Franchise 500" listing. This marks the 15th time in 20 years that the chain has achieved this honour.

Supply Chain Management Of McDonald:

It was early evening and one of the 25 McDonald's outlets in India was bustling with activity with hungry souls trooping in all the time. No matter what one ordered - a hot Maharaja Mac or an apple pie - the very best was served every time. But did anyone ever wonder as to how this US giant managed the show so perfectly? The answer seemed to lie in a brilliantly articulated food chain, which extended from these outlets right up to farms all across India. US-based fast food giant, McDonald's success in India had been built on four pillars: limited menu, fresh food, fast service and affordable price. Intense competition and demands for a wider menu drive-through and sit-down meals encouraged the fast food giant to customize product variety without hampering the efficacy of its supply chain. Around the world (including India), approximately 85% of McDonald's restaurants were owned and operated by independent franchisees. Yet, McDonald's was able to run the show seamlessly by outsourcing nine different ingredients used in making a burger from over 35 suppliers spread all over India through a massive value chain. Between 1992 and 1996, when McDonald's opened its first outlet in India, it worked frenetically to put the perfect supply chain in place. It trained the local farmers to produce lettuces or potatoes to specifications and worked with a vendor to get the perfect cold chain1 in place. And explained to the suppliers precisely why only one particular size of peas was acceptable (if they were too large, they would pop out of the patty and get burnt).

Supply Chain Management Of Subway:

Innovation is key to Subways success. In 2008, the chain scored a hit with its $5 footlong sandwich promotion. But new ideas are also essential to the workings of the companys supply chain. Risi and her team saw an opportunity to drive improved efficiencies in the way IPC supplied the stores and, not incidentally, to create a more sustainable operation. So the company put together a strategic plan that would scrutinize every step of the process. IPC faces a number of challenges in supplying the franchisees, according to vice president of purchasing Dennis Clabby. The meat, bread and other ingredients that go into Subway sandwiches are highly perishable, often requiring temperaturecontrolled transportation. As a result, speed is always of the essence. And the rapid growth of stores in the chain the number nearly tripled between 1995 and 2009 makes it tough to keep pace with orders. Among the goals of the strategic plan were a greater reliance on cost-efficient truckload transport and faster inventory turns. Early on, IPC asked transportation services provider C.H. Robinson Worldwide Inc. for help in analyzing the dry distribution network. The exercise led to the consolidation of multi-SKU shipments of dry products, to reduce the number of less-than-truckload (LTL) moves. Drawing on the example of Southwest Sanitation, a Dallas-based vendor, IPC began using new redistribution methods for its faster-moving refrigerated products. Up to then, vendors of protein products had been making the items in one place, shipping them to inventory, then moving them to the distribution center. Each stage made it harder for the carrier to maintain a constant temperature, reducing product shelf life. IPC turned to two vendors, West Liberty Foods and Millard Refrigerated Services, for help in creating a redistribution system and new cold consolidation facility in Iowa. At the co-managed site, WLF operates 24 separate operating rooms for slicing. In an attached warehouse, Millard palletizes, shrink-wraps and stores product before it is shipped to the distribution centers. For outbound shipments, the company again looked to C.H. Robinson to make exclusive use of truckload transport. In the process, says Clabby, IPC has increased inventory turns, prevented the crosscontamination of meats between slicing lines and boosted the freshness of product. Proteins are now 66 percent fresher when they reach Subway restaurants, according to IPC. Packaging was another target of the efficiency effort. Once again, a strong vendor

partnership was called for. At the suggestion of C.H. Robinson, IPC began working with Select Product Group (SPG), a supplier of packaging and paper, to create a highly automated regional distribution center. IPC was able to cut the number of individual items shipped to DCs from 160 to 12, even as it boosted the number of truckloads for outbound moves. IPC discovered that 32 percent of its trucking capacity was going unutilized. By adding lightweight items such as straws and napkins, it was able to cube out the loads and bring an end to the shipping of air. The third source of innovation for IPC and Subway lay in the production and shipping of bread. Rapid growth in the number of stores was putting a strain on the old system, with bakeries running at 110-percent capacity in the summer months. IPC knew it had to add bread plants; the only question was where. Working with C.H. Robinson, the company analyzed the location of its current plants and DCs, devising multiple what-if scenarios to come up with the most efficient network and lowest landed cost. One new bread plant in Tolleson, Ariz., operated by Southwest Baking, deployed state-of-the-art, fully automated systems to allow for increased production and greater flexibility in volumes. Other facilities were built in Austin, Tex., Columbia, S.C. and Centralia, Wash. The new network, with plants closer to the source, allowed Subways vendors to double the efficiency of bread-line capacity while improving product quality, Clabby says. IPC and C.H. Robinson reevaluate the bread-sourcing plan each year, taking into account changes in manufacturing costs, bakery capacity, volume commitments, market demand and cost per case. IPC works closely with Subways marketing and product-development managers to support new demand. The $5 foot-long promotion, for example, led to a 20-percent increase in sales. That caused a 48-percent rise in bread usage during the promotional period, along with an additional 700,000 cases of product being delivered to the stores each week. Also involved in the detailed analysis of Subways distribution network were experts from MIT and Chainalytics. Their insights and encouragement gave IPC the impetus to work more closely with Subways manufacturers, who in turn could go to their banks for the necessary capital, Clabby says. The task of transportation management fell to C.H. Robinson, which hired one of its divisions, Transportation Management Center, to oversee related business processes and data management.