MGT503 Principles of Management Assignment 1 May 17,2010

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Due date 17 May 2010

“CASE STUDY”
Subway is the worlds’ second largest restaurant chain in the world (behind no.1 Mc Donalds)
with 27,189 restaurants in 85 countries including over 600 international stores. Every year it
adds more than 500 restaurants to the chain.
Many firms prefer customizing their products but subway requires each franchisee regardless of
location to include the same items. Local stores are allowed a mere 6 local items on the menu.
Ingredients such as meat, cheese and bread are standardized. Exceptions are made only in the
case of strict cultural or religious requirements. For example many Subway franchises in India
do not offer beef sandwiches while those in Muslim countries don’t offer pork.
Although these restrictions might seem harsh on the business but Subway is ahead of its
competitors in encouraging and supporting international franchises. For example, the
company’s website features investment information in French, German and Spanish in addition
to English.
Subways’ internal development agents assist the company and internal investors in developing
stores in a certain geographic location. These efforts and others ensure that Subway does not
lose touch with its local markets. The firm has developed a winning internal strategy:
combining standardization and customization.
1. How does Subway’s decision to enter foreign markets through franchising help it to
develop its business? What are some of the potential problems with this choice? (6)
2. How do the religious & cultural factors affect the working of subway in its franchises
located in over 85 countries? (7)
3. While expanding on the international level what are the various management challenges
which subway has to face, including challenges in POLCA. (7)

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QUESTION NO.1 SOLUTION
When entering foreign markets you have to deal with different laws and different means for settling disputes and conducting business. For example in Japan or China when business people disagree they hurt each other and law enforcement does not intervene. When starting a business in foreign countries you must conduct business by the laws of that area, you must learn to service according to their customs and culture. You have to find out the permits required in those areas, the laws regarding conducting business, and you must have business people whom are able to interact with others. The globalization of most businesses has taught many people to grow accustomed to other cultures and way of conducting business. In some countries if you refuse to shake someone's hand they are extremely insulted, in some countries the thumbs up is the same as 'flipping' someone off. When conducting business in other countries you must learn the customs of that area- how things are actually done, and the laws of that area.

Subway has quality food which will be successful in other countries in my opinion but it is not as simple as just building or renting a building and setting up shop. Many details must be worked out before starting the business in foreign countries.

QUESTION NO.2 SOLUTION

Although the SUBWAY® brand tries to keep its menu the same all over the world so that patrons can expect to enjoy the same great-tasting sandwiches no matter where they are, it is very conscious of the different religious and cultural dietary needs of consumers and takes steps to adapt its menu accordingly. For instance, in India, where the population is either Hindu and does not eat beef or Muslim and does not eat pork, these ingredients are appropriately substituted with chicken, lamb or turkey.

QUESTION NO.3 SOLUTION

The SUBWAY® brand evaluates a number of different factors to determine the potential growth and evaluate our ability to execute against that growth. We only wish to enter countries where there is high growth potential, high likelihood of sustainable and profitable growth of restaurants and have a suitable ability to support and conduct business there. Our team periodically reviews high potential countries and may change our development status at any time.