Wednesday, September 1, 2010

MGT603 Assignment # 1 Solution

Solution File of
ASSIGNEMENT # 1
MGT503
Lecture 1 to 17
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?
2. How do the religious & cultural factors affect the working of subway in its
franchises located in over 85 countries?
3. While expanding on the international level what are the various management
challenges which subway has to face, including challenges in POLCA
KEY
1. Advantages & disadvantages of choice of an alternative:
• Successfully managing diversity issues helps the business grow
• Combining standardization & customization in each franchise gives it a
competitive edge
• Decision-making rests with the franchisors thereby creating hindrance in control
of franchisee
• Issues in implementing and monitoring terms & conditions across all
franchisees
• Brand management ability of franchisee
2. Impact of Cultural, Religious Differences (Mega environmental issues)
• Training staff to ensure blend of franchisors’ organizational culture with local
cultures
• Implementation of policies and rules keeping in mind the cultural & religious
differences
• Menu is standardized and same regardless of the location. Exceptions are
made only in case of strict cultural and religious requirement. Like they don’t
offer beef in India and pork meat in Muslim countries.
3. Challenges in POLCA
• Planning: Determining how to achieve overall organizational goals
through international franchise stores. Formulating the action plans to
implement the winning strategy which is the blend of standardization and
customization.
• Organizing: Resource management, deciding where decisions will be
made.
• Leading: Balancing how to inspire and motivate workers in different
geographical locations with different preferences.
• Controlling: Monitoring progress towards achieving goals and taking
corrective actions.
• Assurance: Ensuring prior management support and POLC functions are
in place. Ensure the successful implementation of the winning strategy
which is a combination of standardization and customization.

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