Industry profileFast food is Quick Service Restaurant (QSR). The food can be prepared and served quickly. It usually only needs to preheat or precooked ingredients and served to the customer. The fast food market means the sales of foods and drinks for immediate consumption (Borade, 2012). This industry can satisfy the demands of people especially children.

Forces affecting competitive strategyThe threat of new entrants is moderate. If new entrant releases new products, it will cause QSR threat. These existing competitors are more likely to have a stronger supplier relationship which let them enjoy the cost advantage. The entrants are unlikely to have the same financial intermediaries (Nihat, 2006). The bargaining power of buyer is moderate. The competitiveness of the market can increase the power and the customer price sensitive and no switching costs between providers. However, the officer attempted to reduce buyer power for providing a range of products to cater to the entire population (Ibrahim, 2012).The bargaining power of suppliers is also moderate. Competition in the global supply chain, supplier's strength is limited. Suppliers in the industry because of the number, it is difficult for them to take advantage of significant powers of fast food companies.The threat of substitute is high because customer can choose another QSR. Since McDonald's be classified as fast-food services, we need to consider an alternative description of the goods and other fast food items. The intensity of rivalry among competitors is high. More competition is not only fast service agencies with similar, but with a beverage companies and high-end food.

PEST analysis of fast food industryA) Political Government takes action of improving health for people in the QSR. This is because fast food is strongly involved by public nowadays and causes many diseases such as obesity. The other factors which are employment law, tax law and related trade restrictions also vital to concerned (Fung Kan, 2013).

B) Economical The changes in inflation and the exchange rates can influence the organizations. The chains should make adaption to the problems and the economic environments consequents. The raw materials supply and demand relation also depends on the economic elements. However, the wage ratio, inflation ratio, and expenses living also impact the business (Ivythesis, 2011).

C) Social-Cultural The sales of the fast food company will be changed if the lifestyles of people change. Different country has different eating behavior, so the eating habits of customers in Malaysia are different with customers in foreign country (Fung Kan, 2013).

D) Technological High technology can help the industry on developing such as improve its management and productivity performance. Technology in QSR can be applied in making advertise through internet and offering Wi-Fi service to its consumers. It also tends to add value for their products (Fung Kan, 2013).

SWOT analysis of McDonaldsThe first strength is it has the strong brand name, image and reputation. This is because it has provided the foods which taste and flavor are popularization and suitable for people from all walks of life. The second strength is it is the largest market shares in the QSR of global which in accordance with the total world sales 8% (Jurevicius, 2013).Target on children is the third strength. McDonalds has offered a lot of toys and equipment of playground to attract children. Moreover, managers in McDonalds are high quality because they have well-trained. Having good managers are beneficial for developing the business. The last strength is that McDonalds has uses technology for innovative in this modern century. Customer can order the meals online, thus this will save the time to them (Candyleo, 2012). The first weakness is unhealthy food menu. Besides, it has a weakness which is high employee turnover rate because employee of McDonalds received low salary, the job is low skilled and employees need to repeat the same steps of working every day (Jurevicius, 2013).The next weakness is they are standardized to products. It means that everything in the meals is fixed and which cannot add more other ingredients. Food standardized limits the consumers choices on their meals. The first opportunity is increasing demand for healthier food. It can introduce the new products which are healthy such as fresh burger, nutritious dessert or salad. Besides, the service of home meal delivery is also an opportunity for McDonalds. It will enhance its scope to consumers. The last opportunity is changing customer habits and new customer group. McDonalds should introduce new needs to change customer habits and it can also fulfil the needs of customer group which is untapped before. The first threat is strong competitors. Nowadays, there are many QRS appeared in the fast food industry. Some of them have the strong brand also such as Wendys or Burger King. Although they are not really well-known as McDonalds, but it is also a threat to McDonalds because they maybe will gain some customers to them. The second threat is public health crisis. In recently, there are many cases such as obesity occurred. Therefore, some customers will reduce having fast food such as McDonalds for maintaining their healthy. Economic depression is the last threat. When the economic downturn, it may influence the sales of retailers and it will tighten the peoples budget, so it might lead to a reduction of McDonalds customers.

SWOT analysis of SubwayStrengthThe first strength is Subway has expanded with many stores. Subway has 38181 restaurants in 99 countries, more than McDonalds or any other QSR. The second strength is the healthy food selection menu to promote health awareness. Subway provides a series of low calorie, fresh and nutritious food. One of the unique strengths, the subway preparation in front of customers, and provides customized food, rather than just adding ingredients that are fixed on the menu. It can only use fresh ingredients (Boone, 2013). WeaknessesThe first weakness is that Subway interior design outlets tend to look like simple. Subway restaurants lack of internal design and quality. The second weakness is the service is not consistent. Each restaurant has their own service and some of them are good, but some of them are not really well. Thus, consumers have the opportunity to differentiate those services. Finally, Subway controls over the franchisee. Although the Subway cannot guarantee the stability of quality in the entire store it exerts too much control over their franchisees facts. This is achieved by a more favorable concession contract completion (Jurevicius, 2013).

OpportunityFirst, Subway is enhancing demand for healthier food. This is a good opportunity, though Subway has grown itself, may be further introduced low-fat, low-salt, more nutrition menu. In addition, it can also provide home meal delivery. Subway can take advantage of the opportunity to deliver food to customers home, increase its coverage to the customer. Finally, Subway also can be introduction of drive-thru. McDonald's and KFC have drive-thru; this is a large opportunity of Subway (Jurevicius, 2013).ThreatsFirst, in the developed economy in the fast food market is saturated. The fast food market in developed countries has a lot of fast food restaurant chain; it has caused the threat of Subway, because it found it difficult to growth in the developed economies. The second threat of subway is healthy diet. Menu is only part of Subway to provide meals healthier choices, while the rest of the menu contains rich salt, many calories, and soft drink. (Jurevicius, 2013).

Generic Strategy of McDonalds McDonalds use the generic strategies which are differentiation strategy and cost leadership strategy for developing. McDonalds develops their service or product which is considered as distinctive in the whole industry on differentiation strategy. For example, McDonalds has offered many services to customers such as drive thru, restroom, lobby and meal menu. They also offer the Wi-Fi service to consumers especially office workers. So, they can eat their meals while working. McCaf, McExpress and McStop restaurants are also differentiation strategy used by McDonalds (Mansaray, 2010). On the other hand, McDonalds also offer the foods with low prices through the cost leadership strategy. They train employees who are inexperienced with keeping the prices low (Scilly, 2015). They tried to minimize the costs between the strong competition price and the similar products for gaining profits. However, other companies can also lower their costs as well which is the risk of this strategy.

Generic Strategy of SubwayGeneric business strategies used at Subway is the broad differentiation strategy. There is in Subway menu provide a wide variety of foods, including pasta, salads, dinner, soups and desserts. They have taken actions to dinner and late-night sales and marketing to children for improving their business. In terms of nutrition, it is made with fresh ingredients; it is healthier than others. Improving the quality of higher money value will increase the value of the product. In a different value pricing, they have different pricing strategies. However, creating products will through quality of service, the environment, variety and convenience (Siriwardena, 2009).

Strategy implementation of McDonalds using the 7-S ModelHard Elements1) Strategy The primary strategy of McDonalds is planning properly with rote map for achieving the advantage competition. They deal with competitive pressure by providing products or services that are better than competitors at competitive price for dominating the market. McDonalds consumers might not possibly change their demand in a short period of time because they are used to eat McDonalds already no matter the price increases or decreases. The external environment can be divided into competitors and healthy problem which can affect the strategies. So, McDonalds adjusted the strategies by developing more effective strategies. 2) Structure The structure of McDonalds is due to a geographic structure. It partitioned its operations into five geographical areas. The hierarchy is a top down management. McDonalds business strategy is centralized which lead to tight controls for franchisees and suppliers. Its information is better given by an explicit recommendation.

3) System McDonalds main systems are divided into production, service, and shift management. They perform the proposed change with systematic way. An effective processing system of preparing the food and delivery system are easier for company to attain their objective.

Soft Elements4) Shared Value McDonalds commits core values which are teamwork, respect, accountability, integrity, innovation, diversity, employees, stockholders, community to guide their decisions and behaviors. McDonalds corporate culture is according to its shared value system and maintains standardized quality process to make sure that same quality and reduction in lead time.5) Style McDonalds have the leadership management style in which any proposed change is discussed inefficient way. Team leaders apply the management style for creating outlets which are fun environment for working. Employees McDonalds often be competitive, so they are able to improve themselves from the pressure competition. They are just nominal groups because all of them have their own work as they are working individually. They are not really gathering together for the jobs implementation. 6) Staff McDonalds staffs are taking the position with counter service employee or kitchen helper. Top managers assigned their position regarding to the abilities of them. The position currently available is trainee restaurant manager. Some of them are gaps in required competencies because they are lack of qualifications or any conditions. The business might be successful if they decide the staffs position correctly.

7) Skill McDonalds is paying deep intension and spending a lot of money for training employees. The effective skills were developed after training. There are some skills gaps because the learning ability of everyone is different. McDonalds known for doing well by the customers responses or the company sales. Current employees have the ability to do the job and the skills are monitored and evaluated by their employers.

Strategy implementation of Subway using the 7-S ModelHard Elements1) StrategyThe main objective of Subway service by consumers to make a market in every restaurant has become the number one ranking. All restaurants owned and operated by local businessman, selected for their local Subway. Development team will provide assistance to open and run an underground restaurant in a new market and new entrepreneurs. Subway will continue to provide assistance to ensure the franchisee get all the basic information. (Dannygreeff , 2008).2) StructureSubway chain is the establishment of the largest chain of global and it employs about 150,000 people in 90 countries and more than 30000 areas as widely as possible. Since operation measures, Subway has more than 700 development to improve and help people in Milford, Connecticut. Subway can be divided into many departments such as franchising sales, new business development, store design, customer service (Dannygreeff, 2008).3) SystemChains to offer an information resources and program available to the knowledge entrepreneurs need. Subway dealer franchise system formulated the following four criteria:Product quality: It is very concerned about the quality of the product. This is visible fresh products and inspection.Location flexibility: It does not find new markets. Contact Subway potential restaurant owner.Lower investment: Start with the lowest cost compared to other fast food.Operations Support: Subway provides training courses and information resources franchisee.

Soft Elements4) Shared ValueShared value of Subway could be identified by the keywords which are simple, support and control because Subway easy to run systems, operation and information resources to help franchisee and teaching methods to help effectively conduct business. The shared value of the chain is providing tools and knowledge to make a successful entrepreneur in the QSR industry.5) StyleSubway is in the right direction to guide the dealer training courses and the necessary information. It supports franchisees and help to start the business.6) Staff In the two weeks of training, Subway also provides new franchisees and required information. Subway franchise fee is very low. 7) SkillsSubway provides marketing knowledge to join and the necessary tools to operate effectively to the business. They know the market and provide healthy choice than other QSR such as McDonalds.

Financial Performance Analysis of McDonalds2011 ($)2012 ($)2013 ($)

Net Assets32,989.9035,386.5036,626.30

Net Liabilities18,599.7020,092.9020,616.60

Net Revenue5,503.105,464.805,585.90

Source: McDonalds Annual Report 2011, 2012, 2013

In year 2011, Global Comparable Sales Growth is 5.6%; Earning per Share Growth is 11%. In year 2012, Global Comparable Sales Growth is 3.1%; Earning per Share Growth is 5%. The total revenue was decreased from the year 2011 to 2012. This might due to several reasons. For instance, there is economic downturn or inflation during that time, so it will tighten the budget of people. In year 2013, Global Comparable Sales Growth is 0.2%; Earning per Share Growth is 4%. The total revenue from year 2012 to 2013 was increased. This is because there is economic recovery boom during that time. Thus, many of the customers can continue to support McDonalds. Skinner (2011) stated that McDonald's continued success reflects the fundamental strength of our business model and unprecedented alignment around our customer-focused strategies. Based on those data, we can know that the financial performance McDonalds is considered as well and positive although there is a declining trend on the year of middle.

Financial Performance Analysis of Subway

Net revenue00,000Net assets (00,000)Net liabilities(00,000)

2011619,31,4

2012-1,217,61,4

2013-1,315,44

Source: Subway Annual Report 2011, 2012, 2013In year 2011, net revenue is the highest in the 3 years. The lowest net revenue is in 2013. In 2011 net revenue is highest, that is because in that year Subway competitors do not have a lot of. In the next two years increased slowly in less because of the competition. Besides that, net assets decreased in the three years. Subway net asset decreases in three years because it consumes the asset in its operations. Assets uses up include cash, supplies, accounts receivable and prepaid expenses. In the year 2011 and 2012, net liabilities unchanged but in the year 2013 net liabilities decrease. Decrease in liabilities would be a decrease in any bills you owe all together, like long term debt.

Final Analysis - Compare and contrast between the two firms within the same industrySubwayMcDonalds

service is not consistent interior design outlets tend to look cheapweaknesses standardized to product Unhealthy food menu

expanded with many stores health food choices in the menu prepare food in front of customersStrength Largest fast food market share in the world Partnerships with best brands

Introduction of drive-thruOpportunities Changing customer habits and new customer group

In contrast, Subway provides healthy food menu, but McDonald's provide unhealthy food menu. Subway sells foods low in calories, cholesterol, trans fats are very liberal; however, McDonald's offer fried food. Next, Subway expanded with many stores but McDonalds is largest fast food market share in the world. McDonald's has 33,000 restaurants around the world, and provides 52 million people a day. Subway has 36,000 restaurants and 25,549 stores around the world, the sum of the number of McDonald's and Starbucks. Subway interior design outlets tend to look cheap, but McDonalds interior design outlets tend to look suitable for children. Subway furnishings simple, no special place but McDonalds provide playground for children. Subway prepares food in front of customers, so customers can observe the making process directly; however, McDonalds prepares food at kitchen, so customers unable to see the process directly. Furthermore, McDonalds provides toys to children, but Subway did not. McDonalds have provides drive-thru; Subway did not. Having drive-thru service is more convenience for customers who want to take away. The skill of McDonalds is standardization; but Subway is customization. The financial performance of McDonald's is the best within the fast food industry; however, the financial performance of Subway is also good but not as well as McDonald's.

Conclusion and Recommendation As a conclusion, both the two companies have their own characteristic that attracts their customers. Although McDonalds is more popular than Subway, it does not mean that Subway is not good. It is just only because that people nowadays especially teenagers are paying attention on their favorites rather than being healthy. Besides, customization and standardization are really an ideal example of McDonalds and Subway Company for achieving their goals. Both these types of service are sometimes applied together in many workings like Pizza Hut and Little Caesars restaurant. So, the integration of these two types of service is the most effective system; Standardization in McDonalds works effectively between consumers and organization by following the steps while customization in Subway satisfied consumers ideal demand on their foods. For recommendation, we suggested that McDonalds and Subway can complementary on standardization and customization. For example, McDonalds can provide another service such as customization service like Subway. The staff of McDonalds can ask customers whether they want to add on some ingredients on their meals or not. They also will be more satisfied after having the ideal meals. On the other hand, Subway can show the extra add on price in the menu whenever customers want to form their ideal meals. Therefore, customers will know the total price quickly and it will be more convenience for them. To sum up, both the two companies will be more successful if they apply the good and appropriate strategies.(2947 words)

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