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BTEC Advanced Professional Award Diploma in

Management Studies

UNIT 17: Strategic marketing management

Student Name: Nadeem Saleem


Student ID: DMS/1004
College: Commonwealth Law College

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BTEC Advanced Professional Diploma in Management Studies
Unit 17 - Strategic Marketing Management

Assignment Topics:

In view of the current market situation; you are required to draft a marketing plan for
Subway outlining the following aspects-

1. Strategic Marketing Environmental analysis with a special focus on Competitive


Analysis (Use at least two analytical tools)

2. Vision, mission and values at Subway.

3. Segmentation, Targeting and Positioning Strategies.

4. Marketing Strategies (Use Strategic Tools to choose marketing strategies)

5. Marketing mix with a special focus on Branding Strategy.

6. Recent and Future changes in Marketing Environment and Subway.

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Subway's Business Plan:

Founded in 1967, Subway is the largest sandwich chain in the world and specializes in
selling foot long sandwiches. Sandwiches are prepared fresh in front of the customer via
a long clear enclosed counter that houses a broad choice of popular sandwich toppings
and condiments. Subway has long enjoyed a niche as the “healthiest” QSR option at a
reasonable price – a very compelling value message among today’s health seeking, cash
starved consumers. The chain rolled out a hugely successful $5 foot long sub promotion
in April 2008 that is driving 25% sales growth and is currently accounting for 18% - 20%
of total sales. Resultantly, the chain is turning its marketing prowess to power this new
promotion such that it is quickly becoming part of Subway’s brand DNA.
Interestingly, this promotion has actually increased the average check as customers trade-
up from the 6” subs but has also cannibalized higher margin beverage and sides sales.
Subway will enjoy higher sales leveraging its new found success although more price
tweaking is probably necessary to improve unit level margins. Subway is the world's
biggest sandwich chain, and overtook McDonald's in 2002 as America's biggest fast-food
restaurant by number of outlets. Growth has been generated partly by Subway's offer of a
healthy alternative to burgers and fries, but also a supremely efficient franchising model
organized by parent company Doctor's Associates. As a franchising machine it has few
equals, voted the #1 franchise opportunity in the US an astonishing 16 times in the last 22
years because of its levels of franchisee support and development and the potential for
growth. Subway continues to expand with astonishing speed, opening an average of
2,000 new outlets each year between 2002 and 2008. Its ultimate goal of overtaking
McDonald's by global outlets looks eminently achievable.

Objectives

The SUBWAY® chain works very closely with its franchisees and encourages them to
actively participate in the decision making process. Franchisees in the UK and Ireland
actively participate in the running of the international advertising fund (iFAF) and the

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European Independent Purchasing Company (EIPC). The SUBWAY® chain’s
franchisees in the UK and Ireland actively participate in the international advertising fund
(iFAF). In the UK and Ireland, 4.5% of gross sales (minus sales tax) is paid to iFAF –
although some markets may vote to increase the marketing fee percentage for local
advertising purposes. National and regional iFAF Boards are elected each year.
The Board members are elected franchisees that serve to make marketing decisions and
ensure franchisee funds are used to benefit all franchisees equitably. The aim of the
marketing, advertising and public relations campaign is to drive profitable sales for
franchisees. SUBWAY® stores sell millions of Subs every week in the UK and Ireland.
The chain’s customer base is extremely varied but the marketing is predominately
focused on 18 to 49 year olds. The goal of the chain's current advertising campaign is to
increase the brand presence in the consumers' “consideration set” - that is, which fast
food restaurants consumers consider when deciding where to eat.

Mission

Subway's mission is to bring to market the tastiest and healthiest fast food at a slight cost
premium over other fast food restaurants. Subway's high standards of quality and
cleanliness will establish our reputation as the cleanest fast food restaurant. The
community is as important to them as making a profit. This company is founded on the
concept that good works and good deeds not only serve the needs of the community, but
will also keep the company healthy and committed to the success of its customers.

Keys to Success

The most important key to success is Subway's location. It is very important that the
location live up to our expectations, and is convenient to as many potential customers as
possible. As stipulated by the franchise agreement, our "Type A - Profile 1" location must
contain a minimum of 6,000 customers within a four block radius (or five minute walk
time). The pedestrian traffic must be adequate and the lunch habits of the customers must
be conducive to eating out.

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Another key to success lies with our ability to execute the plan. Subway does not neglect
any aspects of their plan, whether that is their numbers, their employees, their cleaning
and food standards, or their commitment to customers. The positioning, communicated
via an effective advertising campaign, will serve to make the subway chain part of
customers' everyday consideration set. Some important points are-

1. Locations: visibility, high traffic patterns, convenient access.


2. Store design: visually attractive, relaxed atmosphere, fast and efficient operations.
3. Unique products: differentiation, competitive pricing, no direct competition.
4. Quality controls: genetically modified free policy, consistency, clean presentation.
5. Service: cheerful, professional, articulate and informative.
6. Marketing: positive image, educational, word-of-mouth advertising.
7. Employee retention: training, ongoing education, recognition programs.

Products

Subway offers a large variety of Submarine sandwiches, salads, soups, chili, chips,
cookies, and sodas. The sandwiches are made with The Sub Shop's unique sweet mustard
sauce and each loaf of bread is made fresh daily. The bread is toasted for every order and
the soups are made daily.

Product Description

All of Subway's sandwiches are available for customization. In addition, customers will
love the fresh, toasted bread, and the freshly sliced meats and cheeses. Below is a short
list of some of the subs they will market, the rest of the products is broken down by unit
sales in the sales forecast table:

German Snack: Italian Salami, Bologna, Roast Beef, Tomato, Onion, Bell Pepper,
Cheese, Vinegar & Oil and Salt & Pepper upon request.
Swiss Delight: Cheeses (3), Tomato, Onion, Bell Pepper, Cheese, Vinegar & Oil and

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Salt & Pepper upon request.
Spanish Conqueror: Cheeses (2), White Meat Chicken, Jalapeno Sauce, Tomato, Onion,
Bell Pepper, Conqueror & Oil and Salt & Pepper upon request.
American Suburban: PB&J.
American Urban: Tofu, Onions, Tomatoes, Cucumber, Carrot, and two Cheeses.
American Traditional: Angus Beef, American cheese, Lettuce, Tomato, with a 1/4 slice
Kosher Pickle.

Sales Literature

Subway's sales literature consists of menus supplied by The Sub Shop and custom flyers
designed in-house. The custom flyers will offer catering prices, explain the difference
between Subway's lunch specials and those of its competitors, and show its hours of
operation.

Sourcing

Subway will provide the supplies necessary for operation. Due to bulk buying by The
Sub Shop, and its standardized franchise-based supply line, its purchasing costs will be
10% below similar costs incurred by a non-Franchise restaurant and its payment day’s
average 45 instead of the industry median of 30 days.
To maintain a conservative financial perspective, Subway has not built this 10% discount
into its cost of goods in the Profit and Loss Statement. It has calculated cost of goods as a
flat 35% of sales, an average for our industry. Subway will update these amounts with
real figures once it has three months of purchase history.

Technology

Subway will take advantage of the latest technology in order to speed its business
processes and develop more efficient operations. In planning for the launch, it has
purchased copies of Business Plan Pro software. Each principle has been given a segment

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of the plan to work on. Each person synchronizes their machine with the secureplan.com
secure server, making the most recent version of the business plan available at all times
on the Web. In addition to using technology to establish the business model and
methodology, Subway also use technology for day-to-day operations. The Sub Shop
supplies us with the latest in ordering equipment, including a merchant credit and debit
card account, number verification, inventory management software and time clock (HR)
software. Each employee is given a cell phone for personal use, and in exchange for this
relatively inexpensive benefit, they are expected to work flexible hours, and respond
when called in to replace an employee that is sick, or otherwise not available for their
shift. Technology is also used for routine maintenance and sustainable operations. The
company uses only biodegradable soaps and cleaning supplies, and encourages all
employees and customers to recycle plastic, glass, and cardboard items. Subway views
these options in sustainability as being tied directly to advances in technology.

Competitive Comparison

Subway's competition consists of on-campus sandwich shops, fast food restaurants, and
downtown eateries. There are 30000 Subway Sandwich shops now open in over 87
countries worldwide. Our competition will be fierce, but our specialized sub sandwiches
will set us apart from the competition, as will our focus on healthy, yet tasty fast food.
Subway has emphasized the benefits of their healthy sandwiches, because sometimes
other fast food shop's sandwich bread is often tasteless and stale, they don't toast their
bread, they don't use a special sauce, and their production facilities are rarely clean
enough to make dining in their restaurant an appetizing venture.
The other fast food restaurants will offer a more serious challenge: How do we position
ourselves so that people know food is both healthy AND tasty. Many people who eat fast
food burgers and fries are not concerned with the health benefits of such activities, but
rather, the way the food tastes. To be competitive, Subway's sales literature and
promotions will make it clear that their products are tastier than any greasy hamburger,
yet will provide a fun, guilt-free eating experience.

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Market Segmentation

The largest market is the young generation. Subway's next largest target market consists
of downtown workers, locals and tourists. Weekend shoppers and students who work or
visit downtown make up the remaining percentage of the total market.

Target Market Segment Strategy

Downtown Workers:
Subway will target downtown workers through local businesses, advertising, event
sponsorship, and word of mouth advertising.

Students:

Subway expect to reach students through campus activities and marketing, as well as by
Sponsoring special student events.

Tourists:

Most tourists aren't thinking, "Where am I going to find good, inexpensive lunches?"
when they plan their trips because they know fast food venues are abundant everywhere
in America. The strategy will be to stand out from the other venues available on the
street, and letting people know Subway's food is relatively inexpensive, but without
degrading the premium ambience of shopping.

Market Needs

There are two market needs we are attempting to fill. First, there's a need for a fast food
restaurant that produces tasty fast food, at a low cost, in a clean environment. There are

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many people, considered in the traditional sense to be "Middle Class" and above who will
not set foot inside a fast food restaurant due to
a) The restaurant's lack of cleanliness and
b) The relative poverty and despair displayed by the people working in these fast food
restaurants.
To fill the needs of these customers, Subway will market products that appeal to their
healthy lifestyles, their taste buds, and their sense of "place." In addition, Subway's food
line, tables, floors, and counters will be cleaned constantly throughout the day, and
Subway will maintain a very high standard of cleanliness.

Market Trends

The market for fast food is becoming more demanding. While fast food chains such as
McDonald's and others in the mid-1980s failed in their attempt to market low calorie fast
food, since the 90's, some companies have found that healthy fast food pays off. Garden
burgers have become prevalent at many fast food restaurants, and even some fast food
burger franchises are beginning to offer garden burgers, and other soy alternatives.
While marketing fast food only as "healthy" would be corporate suicide, there is a trend
towards quality in both food and ambiance. As mentioned in the Market Needs topic,
many people are heading for restaurants that offer fast food at a slightly higher price, but
at a much higher quality, and delivered by employees who do not feel degraded or
otherwise fatalistic about their role at work. While the latter issue may be debated by
intellectuals in Management 410 B-school courses or readers of the current bestselling
book, "Fast Food Nation," the fact remains that American society will continue to want
more for less. If Subway pursue the niche of customers that reside between the bargain
hunters and the spendthrifts, and of those, the ones that are repulsed by standard fast food
practices, lack of cleanliness, and the total lack ambiance inherent to most fast food
restaurants, Subway will do a brisk business.

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Industry Analysis

Food service industry sales will reach an estimated £30 billion in 2010, or over 3% of
Gross Domestic Product. Within this industry, the QSR (Quick Service Restaurant)
segment represents over 2/3 of total traffic and over half of restaurant sales. QSRs are
defined by the industry primarily based upon menu item, with the burger and pizza sub
segments accounting for over half of total QSR sales. QSR sales are estimated to reach
£15 billion by 2010.

Industry Participants

The industry is composed of several large brand-name restaurants, and a large number of
local fast food chains. Depending on where you look in any given year, 4-5 new fast food
outlets may open and close their doors. The industry is always changing and is a highly
competitive arena where staying power and customer loyalty is difficult to acquire. The
participants include Burger King, McDonald's, KFC.

Competition and Buying Patterns

The fast-food business is based largely on the impulsive choice of consumers. Many
people buy their business lunch, lunch, or family dinners at a fast food restaurant, and
those fast food restaurants offer not necessarily the best selection, but the most reliable
menu and the fastest order completion time. Customers will try other fast food
restaurants, and shop around, but the majority of their fast food purchases are from one of
their favorite fast food or QSR restaurants. Subway's goal is to capture those customers,
and to build loyalty to the product through purchase punch cards, consistent daily
specials, and a direct mail list.

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Main Competitors

Subway's main competitors are the major national fast food franchises. McDonald's is its
largest competitor, with 12,868 franchises in the U.S. Alone. McDonald's contributes to
the growth in our market by advocating for healthy eating habits via online, TV, and
radio advertising. They are Subway's largest competitor, yet they also contribute to the
nationwide growth of the healthy food segment of this market. Subway can count on
them to bring people into its stores, and will target their local operations through direct
mail flyers that offer specials to customer that bring in their Subway 10-sandwich punch
cards.

Strategy and Implementation Summary

Subway's strategy is to focus on our customer experience. Its success hinges on whether
customers receive what it promise them, and are pleased enough to come back for more.
Its KISS (Keep it Simple Stupid) approach will be successful only if it doesn't distract
itself from the core business of making good sandwiches fast, and of treating the
customers as if they are special. As with any business model in the new millennium,
Subway must adapt its strategy to the customer and market trends, while maintaining
consistency of brand and message. This is a challenge for any business in any industry
because the nature of business will always, and has always determined that the best
strategy with the most resources behind it will survive. This millennium has proved to be
very successful in growing this market, and of supporting its franchises.

Strategy Pyramid

Build Customer Loyalty and Word-of-Mouth (WOM)


Buzz, Punch Card, System, Community Event, Sponsorship, Store Ambiance,
Sandwiches, Free, Jackson County Run, Toys, Tots, European Prints, Furniture

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Value Proposition

Subway's value proposition is that it offers high-quality, healthy fast food at a reasonable
price. Its facilities are clean and its food is tastier than that of its competitors. The
ambiance of its facilities contribute to customers' desire to eat their meals in a
comfortable, healthy environment. Competitive Edge Subway has a competitive edge in
regards to the overall quality and differentiation of its products, and in the cleanliness and
ambiance of its seating area. Subway sandwiches, soups, etc. are all of the finest quality,
and have been refined through test sponsored by Subway. The walls will be painted a rich
yellow color, the tables and chairs are a rich walnut color, and the floor will consist of
high-quality tile. Subway will differentiate its food from McDonald's in regards to taste,
quality of bread and contents, attentiveness to customers, and overall experience.
Subway's unique products and focus on the customers experience will give it a significant
market edge and differentiate the company from its competitors. The company has
several distinct advantages over its two leading competitors; its authentic products,
modern baking and presentation equipment, and the latest operating systems and
technology. A fast and unique food alternative: Subway offers its customers a completely
new experience through its sandwiches, pastries, salads and desserts. The look, feel and
taste of its products when compared to the competition will initially establish a sense of
curiosity, followed by a value for money reputation and eventually a loyal following of
sandwich lovers and connoisseurs. Products are made from the finest quality ingredients
and are low in fat and free of genetically modified foods. Many products, such as the
authentic Sub sandwich, will not be available anywhere else. Its products will be served
fast and ready to consume and will be an alternative to the usual fast-food options
available in today's market. The importance of the experience: With so many fast food
restaurants and prepared foods being offered at grocery markets, the customer experience
becomes extremely important as an effective way of distinguishing offerings. It is this
experience that remains in the customer's mind well after they have consumed their food.
This memory is what is communicated to their friends and colleagues. Subway realizes
that its business is a lot more than just pies. It’s our pies, our people and the experience

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the customers have in the stores. The store environment will play a major role in a
positive customer experience. The cleanliness, smoke-free environment, color scheme
and nostalgic Upper Peninsula/Great Lakes images will create a completely new
experience.

Marketing Strategy

Subway's Marketing Strategy is to reach the largest amount of tourists, residents, and
students for the least amount of money. Its strategy will focus on three solid points:
1. Building customer loyalty.
2. Extending the franchise brand locally.
3. Develop local word-of-mouth advertising (buzz).

Positioning Statement

For people looking for a fast, friendly, and tasty lunch, Subway produce a quick meal. Its
seating area will be clean and the overall ambiance of the place will be pleasing to the
senses. The food will be good and the service, friendly and fast.

Pricing Strategy

Subway's pricing strategy is different for different customers. Prices to retail customers
will be fixed by the chairs, and based on a relative cost of living indicator. Retail prices
will be competitive at about £6 for the average meal. This is about 15% above
McDonald's and Burger King Prices. Customers are simply willing to pay more for
healthy, flavorful food served in a clean, comfortable environment. Subway's highest
margins will come from its catering services and large sub products. It will focus on
expanding this segment of the market as soon and as aggressively as possible.

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Promotion Strategy

The chairs will promote Subway's products on the national level. In order to reach its
local customers, and build loyalty, it will offer special mid-day promotions, sponsor local
community events, advertise in the local classified paper, and Subway's President will
become a leading figure and spokesman in the community. Its strategy is to focus on
promoting the business through local PR efforts, rather than paid advertising.

Distribution Strategy

Subway plan to distribute its products direct to customers without the use of a separate
channel of distributors.

Marketing Programs

Subway's marketing programs will include customer-centric appeals to switch from the
competition, build loyalty, provide cost value to the customers, and build word of mouth
marketing.

Here's a list of the sales and marketing programs Subway intend to implement within the
coming years:

• Five daily in-store regular specials, at least 15% off one particular sandwich item.
• A direct mail coupon offering 50% off your first sandwich when you bring in a
• Stamped Subway card and sign up for its coupon mailing list.
• High profile sponsorship of two local sporting or charity events.
• 20% off a menu item when you bring in your Festival ticket.
• Free delivery to any of the local hotels (market only through hotels), and offer to
pay hotels a slotting fee.

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Subway may institute more programs as it see fit. This list of programs is aggressive
when compared to the local marketing done by its competitors, so this should give us an
early advantage as long as it can keep cash balance and sales numbers up.

Sales Strategy

Subway's sales strategy will be to reach the largest amount of local residents and tourists
with consistent value-added incentives to purchase its products and visit its restaurant. In
this industry, and especially as a franchise, its marketing programs are almost
indistinguishable from its sales programs. The indistinguishable handles a lot of the
national and regional marketing, and Subway just pay its fee to have it done. Its
flexibility will lie in its ability to push the boundaries of freedom the indistinguishable
has given it, and to take advantage of opportunities to differentiate itself on sales by sale
level.
Subway intends to succeed by giving its customers a combination of delicious food in an
appealing environment with outstanding customer service. Once a customer enters
Subway store, it is their job to make sure their experience with them is enjoyable. To
establish a loyal customer base, it is vitally important Subway develop repeat business.
Subway needs to offer fast service at peak times. To speed up customer service, at least
two employees will be servicing customers. One employee will be preparing the
customer's order, the other one will be taking care of the sales transaction. All sales data
logged on our computerized POS system will be analyzed for marketing purposes.
Subway will offer punch cards, meal deals and weekly menu specials and keep accurate
track of what types of pies and associated foods sell well through a customer feedback
program. With this information it will be able to streamline our food line to match local
tastes and encourage more people to eat at the pie shop.
Subway need to sell the company as well as the product. All employees will go through a
comprehensive training process on how to offer customers the finest experience.
Employees will be empowered to resolve issues and are encouraged to seek assistance
from managers for any conflicts they are unable to resolve. Part of its mission is to
educate our customers about sandwiches. However, this must be done in a respectful

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fashion. Subway's knowledge is a resource, and must never be used to make a customer
feel uncomfortable or ignorant. Subway's sales strategy requires consistently high quality
food and fast service in a relaxed atmosphere. We can accomplish this by:
• Hiring employees who appreciate our unique products.
• Continually assessing the quality of all aspects of the business and immediately
addressing any issues.
• Interacting with our customers personally, so they know that their feedback goes
directly to the owners.
• Evaluating food choices and keeping favorites on the menu as we rotate weekly
and seasonal specials.

Strategic Alliances
The fast-food business is based largely on the impulsive choice of consumers. Many
people buy their business lunch, lunch, or family dinners at a fast food restaurant, and
those fast food restaurants offer not necessarily the best selection, but the most reliable
menu and the fastest order completion time. Customers will try other fast food
restaurants, and shop around, but the majority of their fast food purchases are made
through one retailer. Subway's goal is to capture those customers, and to build loyalty to
the product through purchase punch cards, consistent daily specials, and a direct mail list.

Management Summary
Subway's managers are also owners. Subway wants its managers to take a personal stake
in the success of the company, and for that reason it has given them a share of any profits
they generate.

Personnel Plan
Subway's employees will be respected, and will wear a company polo or sweatshirt, not a
tight-fitting, artificial fiber, company-mandated jumpsuit. Its employees will be paid
more (in salary & benefits) than employees at most other fast food restaurants and will be
given tuition reimbursements, thereby making them more empowered and more content

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workers. In this way, Subway will meet the needs of its market, and differentiate the
company from the myriad of fast food behemoths, whose primary goal is to churn out
worthless, tasteless food in a degraded facility and by degraded employees.

Organizational Structure

The organizational structure is very flat. While it's important that Subway's manager on
duty is clearly in charge, it will not belittle its employees through rankism that
dis-empowers them from taking initiative. Its manager on duty will have the final say
regarding all decisions, yet Subway has trained him/her to teach the employees how to
react to customer issues on their own and respond based on their knowledge of company
policy, and when that fails them, their common sense. Fortunately all of the people it has
lined up for the open positions appear to have an abundant supply of common sense.

Financial Plan

Subway's financial plan is based on past experience, knowledge of the industry, growth
expectations for the fast food sector nationwide, and common sense.

Long-term Plan

Subway's long-term plan includes expansion into the global market in the following
years, followed by healthy dividend payouts. Its goal is to build a business out of
franchises, and run each franchise as a profit center for the purpose of building wealth for
employees, the community, and the family.

Break-even Analysis

Subway's break-even analysis is based on a rough estimate of fixed costs. It predicts


average fixed costs to include the cost to lease the building, equipment leases, and

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various other equipment costs and fees. Its variable costs include the cost of labor, food
inventory, and other product-related costs.

Risk Management

New restaurants and fast-food outlets often make one of two mistakes: they are either
unprepared or under prepared for opening. Initial poor service or product quality
discourages customers from returning. Many first businesses spend all of their efforts at
opening and are unable to maintain the quality customers expect on return visits,
decreasing word-of-mouth advertising and leading to poor revenues.
Subway sandwiches will be as prepared as it can possibly be with back–up equipment,
alternative suppliers and at least three month's inventory of frozen product. Initial costs
will be planned accordingly and kept to a minimum. The company recognizes the
importance of its image, first-time impressions and customer service and it will not
sacrifice this in order to satisfy the bottom line.
It is anticipated that marketing costs will be significantly higher in the first three months
of business. Marketing activities will be closely monitored and constantly analyzed to
decide what marketing activities are successful and what are not. A marketing budget will
be set for the first store and for each subsequent store.
Subway sandwiches will establish a loyal and long-term relationship with our suppliers
and always pay on time. It wish to establish fixed-product rates with our suppliers as a
buffer to avoid fluctuating economic conditions that may affect its purchasing
capabilities.
Changes in importation policies and health regulations will always affect Subway
sandwiches. It needs to establish a strong working relationship with the relevant
authorities to ensure all procedures are followed correctly and ensure that it has a steady
supply of product.
Because Subway products are unknown to the general consumer, marketing activities are
vitally important. We plan on implementing several marketing strategies as outlined in
the marketing section of this business plan. To establish product and brand awareness,
Subway will give-away small samples to encourage first timers to try our products.

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Although Subway has quality products, building a loyal customer base will take time.
Subway realize that training and empowerment of its employees will be reflected in their
customer service and that word-of-mouth advertising will be paramount to its success.

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Support materials
Books
Brassington F and Pettitt S — Principles of Marketing, Third Edition
Chaffey D — E-business and E-commerce
Chaston I — E-Marketing Strategy
Christopher M, Payne A and Ballantyne D — Relationship Marketing: Creating
Stakeholder Value
Dibb Setal — Marketing: Concepts and Strategies
IDoyle P — Marketing Management and Strategy
Fifield P — Marketing Strategy, Second Edition
Hatton A — The Definitive Marketing Plan
McDonald M — Marketing Plans: How to Prepare Them

Journals/magazines

European Journal of Marketing


Academy of Marketing Science
Journal of Consumer Behaviour
Journal of Marketing Management
Marketing Business
Marketing Intelligence and Planning
Marketing Week
Revolution

Websites
www.businesslink4london.com
www.cim.co.uk
www.hbsp.harvard.edu
www.knowthis.com
www.mad.co.uk
www.managers.org.uk

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