Subway PESTEL Analysis | Business Teacher
The PESTEL analysis will examine the political, economic, socio-cultural, technological, legal and environmental factors of Subway’s external environment (Johnson et al 2014; Angwin et al 2011).
The UK and USA are currently undergoing political changes due to the recent elections in both countries and the Brexit process in the UK. This has led to some uncertainty about trade agreements and access to markets and it is likely that some changes will occur in these areas, but that this will take some time to take place. There have also been concerns regarding the exchange rate which has made the pound weaker, but this may provide an advantage to Subway. Planning regulations in the UK may also restrict where Subway can locate its franchises and in the USA, Subway can be found in traditional locations such as shopping centres, but are also in churches and schools (Subway 2017a).
Economic growth has remained relatively low in the UK since 2008 due to a range of economic factors. This has included austerity measures which has seen caps on public spending; higher rates of unemployment and less secure employment such as zero hours contracts. Disposable income has reduced leading to the increased use of discounted food retailers. This fall in disposable income and consumers being more cautious with their money has impacted on retailers such as Subway which has seen a fall in revenue per location (Peterson 2016). Whilst interest rates in the UK have remained low, the slow level of growth has impacted on Subway and has reduced the level of income from each franchise, which might make the organisation less attractive to potential franchisees. Furthermore, increased competition in the fast food sector has led to Subway dropping from second to third position in this industry (Peterson 2016).
Socio-cultural factors may be impacted by the behaviour of the organisation and whether it is perceived to be acting responsibly (Johnson et al 2014). In 2015, Subway’s spokesman, Jared Fogle, was convicted on child pornography charges and sentenced to more than 15 years in prison (Peterson 2016). Fogle had been credited for achieving substantial growth for Subway due to the fame he achieved for losing more than 200 pounds in weight whilst eating its sandwiches (Peterson 2016). Changing consumer tastes, such as in the millennial demographic, has also impacted on Subway with consumers looking for greater variety in their menu choices (Peterson 2016).
Technological factors include spending on research and development which may be relatively low due to the roll out of the franchise outlets. Subway’s strategy is reliant on the growth of outlets across the world, which offer regional variations, but also tend to operate the generic menu. Subway does have a large presence on social media including Facebook and Twitter (Subway 2017a). Subway operates a customer loyalty card, SubCard, which includes various offerings such as competitions and this provides a useful data collection for the organisation (Subway 2017c). Technology is also used to collect the franchise fee of 8% through the use of cash register data.
Subway is subject to both national and local environmental regulations, but stakeholder interest in the food content of fast food chains has led to some criticism of the organisation (Peterson 2016). Online campaigns which have criticised the use of antibiotics in its meat and the additive azodicarbonamide in its bread and this has led to Subway pledging to remove all artificial additives from its food over the next two years (Peterson 2016). However, the failure of Subway to respond appropriately to this growing concern, has enabled other competitors to gain market share from its franchises (Peterson 2016).
Subway operates across the globe and is therefore subject to a range of international and national laws. The UK is currently operating under a range of EU regulations including laws related to employment and the environment, but these may now be subject to change during the Brexit process. This may lead to increased complexity and uncertainty for Subway, but it is important for it to ensure that it acts within the national context within which it operates. This includes issues such as Data Protection, which will affect areas such as its SubCard and it will be important for Subway to protect its customers’ personal details, particularly in an era when the risk of hacking, and the damage this can create for business reputation and its finances, is a major business concern (Subway 2017c).
- Angwin, D, Cummings, S and Smith, C (2011) The Strategy Pathfinder: Core Concepts and Live Cases, (2nd ed), Chichester: John Wiley and Sons Ltd, Chichester
- Brandau, M. (2015) ‘What Subway’s sales decline says about the industry’ [online] Available from https://blogs.technomic.com/what-subways-sales-decline-says-about-the-restaurant-industry/
- Forbes (2017) ‘Number 92 The World’s most valuable brands – Subway’ [online] Available from https://www.forbes.com/companies/subway/
- IBIS World (2017) ‘Takeaway and fast food restaurant in the UK: market research report’ [online] Available from https://www.ibisworld.co.uk/market-research/takeaway-fast-food-restaurants.html/
- Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regnér, P. (2014) Exploring Strategy, Text and Cases (10th ed.) Harlow: Pearson Education Ltd
- Peterson, H. (2016) ‘Subway is facing two problems that are wrecking its business’ [online] Available from http://uk.businessinsider.com/subway-sales-are-declining-2016-5?r=US&IR=T
- Subway (2017a) ‘The History of Subway’ [online] Available from http://www.subway.com/en-gb/aboutus/history
- Subway (2017b) ‘Own a franchise’ [online] Available from http://www.subway.com/en-gb/ownafranchise
- Subway (2017c) ‘SubCard’ [online] Available from https://subcard.subway.co.uk/cardholder/home_uk.html
- Subway (2017d) ‘Sustainable Sourcing’ [online] Available from http://www.subway.com/en-gb/aboutus/socialresponsibility/sustainablesourcing