Global Business Plan
Week 7-Final Draft
Subway in Colombia

04/15/2012

Table of Contents

Content Page Number
Table of Contents 2
Executive Summary 3
Module 1: Identifying Global Opportunities 4
Module 2: Analyzing International Competitors 7
Module 3: Assessing the Economic/Geographic Environment 10
Module 4: Assessing the Sociocultural Environment 13
Module 5: Assessing the Political Legal Environment 15
Module 6: Selecting a Global Company Structure 18
Module 7: Financing Sources for Global Business Operations 22
Module 8: Creating a Global MIS (Management Information System) 25
Module 9: Identifying Human Resources for Global Business Activities 27
Module 10: Managing International Financial and Business Risks 29
Module 11: Product Target Market Planning for Foreign Markets 31
Module 12: Designing a Global Distribution Strategy 32
Module 13: Planning a Global Promotion Strategy 36
Module 14: Selecting an International Pricing Strategy 38
Module 15: Determining Organizational Financial Results 41
Module 16: Measuring International Business Success 42
Conclusion 43
Bibliography

EXECUTIVE SUMMARY
(Created by John Isles)

During the course of this business plan, many of the benefits of opening up a Subway restaurant in Colombia will be illustrated. Among the first items presented will be an analysis of startup costs. After a brief summary of the initial costs required, these costs will be broken down into what actually goes in to opening a restaurant with the Subway name.
Recurrent expenses and revenues, which all Subway franchisees can expect, will also be explained. As is the case with the primary upfront costs, these frequent incomes and outflows of money will be categorized. Supplementing this data will be the per-store expenses and revenues from 2008, 2009, and 2010.
Subway’s competition will also be examined. The most prominent information on this topic will be the required initial costs for Subway and four of its closest international competitors. This data will include franchising fees, liquid assets, and the minimum total investment required for Subway and these four other firms.
In addition to the general overview of Subway’s storefront operations, Colombia’s role in the company’s potential expansion will be examined. Colombia’s society and geography will be touched upon, but more focus will be placed on how Colombia’s infrastructure will play a dominant role in Subway’s foreign investments. One detail that will be covered is how Colombia’s assets can potentially benefit Subway—primarily through an increased flow of agricultural products—as well as how Subway’s increased Colombian presence can improve the country’s societal and economic conditions. There will also be an analysis into how Colombia’s society and government might pose problems to Subway’s expansion efforts and the necessary actions needing to be taken to continue investing in this country.

Module 1: IDENTIFYING GLOBAL BUSINESS OPPORTUNITIES
(Created by John Isles)

Global Business Opportunities
Subway is one of the world’s most popular food service establishments. With 33,749 restaurants operating internationally as of the start of 2011, Subway has more storefronts open worldwide surpassing McDonald’s total of 32,737 (Business, 2011); Subway currently operates 36,353 outlets worldwide (Subway Franchise Information, n.d.). In addition, a 2012 study from Entrepreneur magazine named Subway as one of the ten best American franchises to open, ranking higher on this list than all other food service establishments at number two—well above competitors McDonald’s and Pizza Hut, which ranked sixth and ninth, respectively (Daley, 2012, p. 85+).

Potential Markets Subway is currently looking into expanding its current operations within Colombia. As of April 11, 2012, Subway has 55 storefronts operating within Colombia (“Explore Our World”, n.d.). Absolute and Comparative Advantage
Colombia does not have any absolute advantages in terms of agricultural production, since its production is easily trumped by neighboring Brazil.
In 2009, sugarcane was, by far, Colombia’s most commonly produced agricultural amenity with approximately 37,900 metric tons (41,725 tons) (“Agriculture Consumption and Production”, 2011, pg. 126). However, this total is nowhere close to that of Brazil’s sugar production, which totaled well over 474 million metric tons (523.24 million tons) (Poirier, 2010).
Coffee, despite being Colombia’s fourth-largest natively grown agricultural product—behind sugar, rice, and corn, in that order—is the country’s largest export, with close to 480 metric tons (527 tons) being shipped out (“Agriculture Consumption and Production”, 2011, pg. 126). However, Colombia has a minority of the global coffee export market at less than 10%, which is far lower than the approximated 27% share held by Brazil—coincidentally, the country from which Colombia imports much of its coffee (“Global Coffee Outlook”, 2011).

Business Opportunity Analysis
In addition to standalone food outlets, Subway sees potential in setting up operations in other venues. In the past, Subway has opened up locations in uncommon locations, such as a church in Buffalo, New York, and on a German river boat that provides tours on the Rhine River (Thorn, 2011). In addition, Subway can open up storefronts in or near venues in which there is heavy foot traffic, such as major transportation hubs (bus and train depots). Sports venues and amusement parks are also well worth consideration; due to more dense foot traffic, these locations can substantially increase product turnover, often producing up to six times as much revenue as a standard restaurant storefront (Thorn, 2011).
S.W.O.T Analysis
Subway’s greatest strength is its deep market penetration worldwide—which, in recent years, is attributable to having more stores open internationally than McDonald’s, this company’s closest rival (Business, 2011). As of March 24, 2012, Subway has close to 25,000 stores open in the United States, 2,750 stores open in Canada, and 8,700 stores open outside North America (“Subway Franchise Information”, n.d.).
Another advantage that Subway has over competitors is how it offers a high level of customization that clients are given with their sandwiches. After ordering a basic sandwich from Subway’s menu (such as the Cold Cut Trio and Veggie Delight), customers are welcomed to their choice of several types of bread (standards like white and wheat, as well as honey oat and jalapeño cheese breads), additional toppings (lettuce, onions, tomatoes, bacon, avocados, et.al.), and different types of sauces (mustard, chipotle sauce, mayonnaise, et.al.).
Subway’s biggest weakness is that when compared to our main competitors, service is generally less convenient. This is attributable to the fact that all sandwiches are made to order, and all sandwiches are built one at a time. It is also not uncommon to see several individual customers standing in line at any given time during business hours. In addition, Subway does not currently offer any delivery services for sandwich orders.
By far, the biggest opportunity is that we can offer the Colombian citizens and visitors are affordable, convenient meals. One of Subway’s biggest successes in recent years has been our five-dollar foot-long program. The original idea behind this program was started by Miami franchise owner Stuart Frankel in 2009 (Elbin, 2010, p. 7). Despite originally being a locally focused program, this promotion eventually gained widespread attention within the United States which resulted in $3.8 billion in additional revenues (Elbin, 2010, p. 7). This is one promotion that can easily be integrated into operations of all of our international storefronts.
Potential threats that Subway faces will always include competition from other food service establishments—franchised or not. However, we also have to be aware of uncontrollable environmental events that may cause shortages in our food supplies. In such an event, vegetable crops will most likely be affected, and whatever particular crops are affected will result in lessened supplies to local stores.

Action Plan
For us to increase business in Colombia, we are going to have to look into strategic placement of our storefronts. While we can definitely open up storefronts in shopping centers, there are several option in which we can open for business; in addition to the aforementioned sporting venues and amusement parks, other possible locations may include movie theaters and hotels. Of course, if such locations are not available then it would be wise to find places nearby in which a new store can be installed.
In addition, we should also look into using Colombia’s major agricultural assets. It was mentioned earlier that Colombia is easily outdone by Brazil in terms of total agricultural output, which should not discount the utilization of the country’s goods. In doing so, we can only expedite the inflow of supplies to our Colombian stores. Module 2: ANALYZING INTERNATIONAL COMPETITORS
(Created by John Isles)

Potential Competitors
In addition to privately owned mom-and-pop restaurants (generally sole proprietorships or partnerships amongst individuals), Subway sees stiff competition from other American food service franchises. Subway’s biggest competition is McDonald’s, but also sees competition from several other food service establishments, which includes Burger King, Pizza Hut, and Kentucky Fried Chicken.

Competitive Advantages One of Subway’s greatest advantages is its relatively low startup costs when contrasted against other food service establishments with a global presence. Generally speaking, many restaurants—including franchisees and “mom and pop” operations—house large kitchens equipped with refrigerators, freezers, stoves, fryers, ovens, beverage dispensers, and service stations. By contrast, Subway restaurants require fewer pieces of bulky equipment, often needing only an oven and a refrigerator within the food preparation area depending on a storefront’s location. If it is in a mall’s food court or as a standalone storefront, a beverage dispenser can often be found within the customers’ dining area. INITIAL STARTUP COSTS (“Burger King Corp. Financial Information”, n.d.;“KFC Corp. Franchise Information”, n.d.; “McDonald’s Franchise Information”, n.d.; “Pizza Hut Franchise Information”, n.d.; “Subway Franchise Information”, n.d.): Franchising fee Minimum Liquid Cash Req’d Minimum Investment Req’d
Subway $15,000 $80,000 $84,800
Pizza Hut $25,000 $350,000 $295,000
McDonald’s $45,000 $500,000 $1,068,850
Kentucky Fried Chicken $45,000 $750,000 $1,308,800
Burger King $50,000 $500,000 $294,000

International Strategies
At present, all of the items available at Subway’s Colombian storefronts are carryovers from our North American menu (“Menú”, n.d.). However, it is possible for future promotions we will look into menu items that may include traditional Colombian ingredients.

Action Plan Because Subway currently has limited penetration within Colombia, we will be looking into ways to encourage possible entrepreneurs to open new stores. The options available include scheduling a live seminar—two to three per year—and an online presentation, which will provide clients with information in regards to opening up a Subway restaurant. In either case, we will demonstrate that joining Subway is not only easy, but generally more affordable than many other restaurants.

Module 3: ASSESSING THE ECONOMIC-GEOGRAPHIC ENVIRONMENT
(Created by Charina Johnson)

Geographic Influences (University of Texas, 2008).
Colombia is bordered on the northwest by Panama, on the east by Venezuela and Brazil, and on the southwest by Peru and Ecuador. Through the western half of the country, three Andean ranges run north and south. The eastern half is a low, jungle-covered plain, drained by spurs of the Amazon and Orinoco Rivers, inhabited mostly by isolated tropical-forest Indian tribes. The fertile plateau and valley of the eastern range are the most densely populated parts of the country. The climate tends to be much cooler in the highlands and tropical along coast and eastern plains. Colombia is slightly twice the size as Texas. Colombia is ranked number 26—compared to United States being number 3—as far as total area. The nation is 1,138,910 sq. km. The nation has coastlines on both the North Pacific Ocean and Caribbean Sea (The world factbook, 2012).

Major Products and Industries
Colombia has a great deal of natural resources. These natural resources include: natural gas, copper, hydropower, petroleum, coal, nickel, emeralds, iron ore, and gold. The most important industries of Colombia are manufacturing and construction. The key industries in Colombia included: textiles, iron and steel, metal products, shoes, food processing, tobacco, oil refining, petrochemical products, cement, wood pulp, paper, automobile assembly, and chemicals (“Maps of world”, 2011).

Current Economic Conditions
The current economic condition in Colombia tends to be steady. The country had suffered a recession due to a combination of low world oil prices, reduced export demand, and diminished investment flow. “The economy of Colombia is mainly dependent on agriculture and coffee used to be a principal cash crop in the past. But later, when the coffee prices declined in the international market, Colombia successfully diversified its economy. Economic reforms were planned and implemented in the direction of oil and coal, which helped the economy grow” (“Maps of world”, 2011). Currently there are 57 Subway Restaurants in Colombia. If there were more restaurants being built, this will give the people more job opportunities. This could have the people less focused on the bad things that are happening and focus on the good.
There are some other current issues that the country is facing. The country is facing air pollution because of the vehicle emissions and the water and soil is damaged because of pesticides overuse. Security has been in an issue here; the crime rate is very bad here. There are crimes such as robbery, drug cartels, and rebel movement. The country is currently working on trying to reduce this crime rate.

Infrastructure
Colombia has suffered for decades from a weak and even non-existent groundwork that made national market incorporation difficult. “After the 1930s important programs of public investment in infrastructure began, and in recent decades the situation has somewhat improved, though infrastructure still does not meet general needs. Colombia is moving towards greater connectivity, higher density in mass media, and dynamism in the telecommunications sector” (“Colombia - infrastructure,” 2011). The country is in need of more roads and is in the process of doing that. The mayor is planning on building highways for the locals so they can easily get to different attractions. The government is in the process of building a railway that will transport coal from central Colombia to the Caribbean harbor.

Action Plan
It will be necessary to establish a program that offers help in social barriers and local communities. The program can include better access to education, employment, housing, cultural preservation, environmental security, and increased recognition of their culture.
Module 4: ASSESSING THE SOCIAL-CULTURAL ENVIRONMENT
(Created by Charina Johnson)

Demographic Trends
After World War II in the 1960s the population had grown. To other countries you would think that it is small but really has grown. Once the early 2000s hit, the population was around 44 million people and the primary language was Spanish. Colombia’s age structure consists of “26.7% ages 0-14 years of age, 67.2% ages 15-64 years of age, and 6.1% 65 years and older” (The world factbook, 2012). Colombia’s fast population growth has been somewhat caused by the emigration workers looking for better opportunities. “This emigration has been a matter of concern to Colombia, both because the loss represents a high proportion of skilled workers and because these often illegal immigrants experience human rights problems in the countries to which they move. The rate of internal migration from Colombia’s rural areas to its cities continues to be high, partly driven by the search for better wages and living conditions and also because of guerrilla warfare and violence related to drug trafficking” (Colombia, 2012).

Cultural Analysis
There are many culture characteristics in Colombia that contribute to the unemployment rate. Along with this, there are several ethnic groups that make up the population. There is one major ethnic group which is the Criollos. These people are mixed with Caucasian and Mestizo who makes up about 80% of the population. Also, there are many more ethnic groups such as the Mestizos at 8%¸Caucasian at 3%, Mulattoes at 3%, Afro-Colombians at 5%, and Indians at 1%. With these different ethnic groups there is only one language spoken which is Spanish. Knowing that this is the only language spoken in Colombia, the people do not all speak it the same way. People speak it different because of their socio-environment and education.

Social Institutions
In Colombia the majority of the people are Roman Catholic. “In the constitution of 1886, Roman Catholicism was made the official religion of Colombia, and the church controlled such things as marriage and the education of indigenous peoples” (Jermyn, 1999). Surely religion plays a strong part in the Colombian culture. The local Roman Catholic Church is the center of all activities in all of the small towns. There are a few of non-Catholics living in Colombia which are Jews and Protestants. Ministers are in the city to work with the people to help provide education and health care since the government cannot.

Informal Trade Barriers
The greatest barrier to conducting business in Colombia is the violence of the drug trades and guerrilla movements. Guerilla movement is “a form of irregular warfare and refers to conflicts in which a small group of combatants including, but not limited to, armed civilians (or "irregulars") use military tactics, such as ambushes, sabotage, raids, the element of surprise, and extraordinary mobility to harass a larger and less-mobile traditional army, or strike a vulnerable target, and withdraw almost immediately” (“Wikipedia,” 23 J). This violence is affecting the manufacturing division of the city. About 15% of the population is employed in the manufacturing business. Unless security is more strictly enforced and the government gets a handle on this, the business will not succeed because other companies will not be willing to trade and do business.
Action Plan
There are several Subway Restaurants in Colombia. Currently those franchises are doing well and if more were to be built, the Colombian people could get hired and help out the unemployment rate and help their families. “According to the World Bank’s Doing Business Report, it takes 20 days to start a business and nine procedures. A foreign company does not require a local partner to start a business in Colombia” (Bajpai, 2009). Opening more restaurants can help out everyone; it won’t solve all the problems, but it will be a start. The government and all companies should get together to work on a plan for security. The companies should increase the security level and the government should be trying to find more supporters.

Module 5: ASSESSING THE POLITICAL LEGAL ENVIRONMENT
(Created by Charina Johnson)

Government and Politics Currently the federal government is divided into 3 different branches: Executive, Legislative, and Judicial. Legislative power is controlled by Congress which is divided by 2 houses, the Senate and the Chamber of Deputies. Judicial is controlled by the Supreme Court. There are about 61 judicial districts. In 2002, Alvaro Uribe Velez became President. President Velez is all about helping the economy and making sure people are safe. The political leaders here will help us entering the market to open up another Subway Restaurant. Another reason would be that, “the Colombian government’s commitment to help investors and secondly, the rich human resource. Colombia is also very cost-effective for investors. The government has brought in several reforms in the tax regime and other areas of doing business. We are the first country in Latin America that now has laws relating to investor protection. Colombia is a very stable country, both politically and economically. We are most cost-competitive in terms of labor cost” (Bajpai, 2009). President Velez told the city that he will crack down on the guerrilla movement and drug trafficking. The current president is already getting help from the United States but is still requesting more help such as financial assistance and military aid. Later on that year, the president became so desperate that he called on the Colombian civilians to join the national military force to help. This conflict is affecting the relationship with Venezuela because the general belief is they are the cause of this since they harbored rebel leaders.

Formal Trade Barriers In April 2008, there was a trade agreement made my former President Bush with Colombia and the Unites . “A trade agreement between the United States and Colombia benefits consumers ensuring access to the products they demand without the added costs associated with trade barriers. Additionally, a formal trade agreement increases predictability for retailers operating in the global marketplace and would rectify the imbalance that currently exists where many U.S. products entering Colombia face tariffs, while Colombian products enter the U.S. duty free. It promotes transparency in Customs procedures; dismantles services and investment barriers in foreign markets; establishes a secure, predictable legal framework for U.S. retailers operating overseas; and facilitates trade through capacity building and increased regulatory transparency” (Dodge, 2008). Promoting Global Business
The support efforts by the United States and The World Bank have generated an environment aware for promoting global business. Nevertheless, the security level is still a concern which is preventing the production of business in the area.

Intellectual Property
Scarce government seems to present a risk to intellectual property which is a huge issue for many companies. On the other hand, the government is receiving help with the United States to help out on the violence that is a threat to the businesses.

Tax Implications
The tax rate here is a flat 33%. Colombia reduced the expenses related with starting a business by no longer requiring an upfront payment of the commercial license fee. “On average, firms make nine tax payments a year, spend 193 hours a year filing, preparing, and paying taxes, and pay total taxes amounting to 18.9% of profit” (Bank, Corporation & Press, 2012). There are plenty of opportunities for opening a business here. The taxes are not an issue and the economy is getting better every day. Gross domestic products have risen from $82 billion in 2001 to $467 billion in 2011. Module 6: SELECTING A GLOBAL COMPANY STRUCTURE
(Created by Ryan Keene )

Strategic Planning “Actions managers take to attain goals of the firm” (Hill, p. 382). With this goal at hand, the strategy that makes the most sense would be the Transnational Strategy. In the Transnational Strategy, there are numerous factors being looked at. Economies of Scale (decrease in cost per unit as the production increases), location economies, and the learning effects are the main ones while working in succession with trying to diversify the offerings in each country to account for differences in demographic, cost, taste, etc. and ultimately causing a skill-sharing venture (Hill, p. 405). The strategy of the entry mode will set the stage for Subway entering the Columbian market. Having a strategy that places emphasis on cost savings will ensure that the consumer pricing is appropriate and lucrative. When looking at the strategy Subway will be using, analyzing the value that we will be creating for the brand name Subway in addition to the profitability to the company are key. The most raw definition is this: is the value of the product we are creating more than the cost of production to the consumer? Subway needs to ensure that the method of production and distribution used is creating enough cost savings to give the consumer pricing the best overall value. There are already competitors in the area so having a good structure based strategy will help achieve this.

Entry Modes As stated above, there are already competitors in South America and specifically in Columbia. Companies like McDonald’s and Burger King have ventured into the area creating alliances with local companies so as to gain market share. Burger King is actually a part of Brazilian-based 3G Capital. The issue faced is that there are a lot of competitors and little time to get into the market. We are definitely not first so we do not have the first mover advantage but we have enough of a lead if we invest now to gain market share. Subway carries a brand culture with it that states we are better and healthier than the other fast food chains. This can create an advantage over the competition. There are many types of entry modes, all of which come with advantages and disadvantages. When looking at what type of company Subway is, this helps us narrow down the choices. The most ideal ones would be Franchising, Joint Ventures, and Wholly Owned Ventures (Greenfield Venture). The obvious advantage of Franchising is that the cost is significantly reduced and is absolved by the franchisee and we as a company set the guidelines of how the franchisee does business; we maintain control while having lowered costs. Disadvantages are that there could be limitations of how we allocate and invest the capital if we were to want to further expand. Another that is more impacting is the quality control factor. This can be significantly damaged if the franchisee does not have the focus and drive to give the best experience and can damage our name entirely. There are ways of managing this to help avoid undue damages. Joint ventures are the act of creating part or wholly owned subsidiaries in the country so that ownership is shared. This would most likely solve the above issue of quality control and help with others. The fact that the master franchise company (Subway) invests in a local company; we gain the market knowledge and know-how around marketing, strategy, etc. This method also goes over well with political decisions if they are heavily regulating market entries. Disadvantages can be severe as well. The loss of company control to the joint venture is possible in addition to losing some control over more subsidiaries in the future. The best scenario for what we are looking to do will be a joint venture. Even with the disadvantages, the advantages outweigh. The marketing niche gained, the lowered entry costs and the proven success with other companies help calm any questionable doubts. We can also look at limiting what is divulged and attempt to maintain majority ownership to protect the intangible assets like management techniques. Walling off the franchisee is an option and should be considered if the split is less than ideal. Organizational Structure With the type of entry being a joint venture, we have the ability to control for the most part. Choosing a hybrid organizational structure will allow us to maintain control of things like Human Resources, payroll, accounting and others while giving more control to aspects like distribution and front line management. We also want to make sure that the structure we choose helps to add a considerable amount of jobs for the local economy and this method is ideal. The headquarters can remain the same where high-level decisions are made and if permitted and cost-efficient, we can even have some departments in the area. Almost like having a Columbian HR system that supports locally but reports to HQ for ultimate guidance. Having this kind of flexibility allows for us to give the aspect of control to the franchisee but allows the majority of control to stay with Subway, the parent company. Strategic Alliance: A strategic alliance is absolutely going to be sought after. The idea of collaborating to increase the global market and the global economy is at the forefront of why we are looking into expansion. Adding something as lucrative as Subway to an impoverished country will help increase the standards of living and the number of jobs in the area. Being also that our entry will be a joint venture, it makes sense to look at a strategic alliance to ensure the safety of both parties and their respected investments whether monetary, tangible or intangible. Strategic Alliance also solidifies why we are there, to increase the local and global economy. According to Hill, “an alliance is a way to bring together complementary skills and assets that neither company could easily develop on its own” (2011, p. 408). This is incredibly true and incredibly valuable for the expansion and the betterment of our company. A strategic alliance will also show our true intentions are not selfish in nature. Action Plan Subway will utilize a transnational strategy to plan market entry. This will ensure cost-efficiency and the quality will come from the plethora of skilled labor and management locally. Once entry is finalized, we will continue to use franchises and joint ventures as we have nationally and continue the success of this trend internationally. We will reach out to one of the major investors in South America, 3G Capital, as our venture capitalist while also reaching out to local franchisee candidates to try and spur small business investment in Columbia. We will utilize a hybrid structure to the business to maintain control yet alleviate some of the burden of distance from the US to Columbia. Having a hybrid system will allow the main decisions and strategic imperatives to be delivered to subset departments in Columbia to carry out the initiatives. Having a local HR and payroll department will allow for more accurate and effortless communication instead of hearing from multiple parties at once. The filtered and raw message will be able to be delivered from either party and execution can be swift.

Module 7: FINANCING SOURCES FOR GLOBAL BUSINESS OPERATIONS
(Created by Ryan Keene)

Economic Environment Columbia much like the rest of the world has suffered downturns and has shown progress as of late. The economy has been growing in certain areas since 2010, but inward investment has been slowed. The environment is tense. The unemployment rate is above 15%, which is the highest since 2004 at 17% (Whitaker, 2012). With this being said, according to the World Competitiveness Yearbook, “Colombia ranks no. 1 among the leading economies in Latin America in terms of the availability of skilled labor, and is second in so far as qualified managers is concerned” (Whitaker, 2012). This proves most advantageous to Subway as the labor will be plentiful and cheap. The economic policies in our area of business are also very supportive for inward investment, so entering the market will not be an issue.

Start-Up Costs Being that we decided to go with joint ventures and franchises, the start-up costs will be minimal. As mentioned in Module 2, the startup costs are significantly lower than that of our competitors. With the venture capitalists and franchisees bearing the burden, we only need to staff the local department and possibly split costs with acquiring the location and building in that location. As referenced in later modules, utilizing greenfield or brownfield entry tactics will affect our bottom line and is dependent on what is available. Location is crucial when entering a market so proper analyses of available real estate will need to take place. There are a few costs that we, as a company, need to be prepared to take on—insurance, licensing, permits, labor for expatriates and local liaisons, technology and advertising materials are some that are inherent to entering any market (Morah, 2009). Below is an itemized breakdown of what is needed for franchising a Subway restaurant:
Total Investment: $84,800 - $258,800
Franchise Fee: $15,000
Ongoing Royalty Fee: 8%
Term of Franchise Agreement: 20 years, renewable
Financial Requirements:
Net Worth: $30,000 - $90,000
Liquid Cash Available: $80,000 - $310,000
(Entrepreneur.com, 2012).

Financing Sources
Subway already has significant capital to invest so one of the methods we can use is direct investment to the franchisee company to fund the build. This will not only strengthen our portfolio and revenue, but this will also spur local investment in Columbia. This should not be the sole source of investment though, being that all entries into Columbia have to go through the Banco de la Republica, which will be our asking party for investment and funding. Again, the idea will be to spur local investment therefore circulating funds throughout Columbia while maintaining profit share.

Action Plan We will take advantage of the leniency Columbia is showing around inward investment and market entry. The market is flooded with labor, so finding the staff and the means will be one of the lower challenges. The initial startup costs will be shared by Subway, our venture capitalists, and our franchisees. Funding will come from and be sustained by numerous parties. Subway will offer capital to a degree, but heavy funding will come from Compass and from the local Banco de la Republica. Subway has already developed a great relationship with Compass for investments. The company offers stable interest rates (around 11-13%), and we have done significant investment with them thus far. Utilizing them will help locally and internationally (IFA, 2012). This will ensure a stable market entry that will last and prove beneficial and have the longevity desired.

Module 8: CREATING A GLOBAL MIS (MANAGEMENT INFORMATION SYSTEMS)
(Created by Ryan Keene )

Global Information Needs Columbia is making fast movements in the technology world. Although the prevalence is not quite there, the trends are up and to the right when one looks at the numbers. “Colombia represents the third largest IT market in South America. The size of the IT sector (computers, software, components, and related services) in Colombia is estimated at USD $2,468 million, representing a small proportion of the global economy (currently less than 0.5% of GDP), but it is a sector which has been growing well above GDP rates in recent years” (GlobalTrade.net, 2011). The country has a lot of small businesses that are venturing into the technology world. What this says is that Subway needs to lead the market in technology utilization and spur the growth in the GDP to elevate the economy. The country needs to have cash registers, debit and credit card readers, and basic computers for everyday use. This also means that there will be the need for internet service. Using local businesses to wire the building (if a greenfield investment) will help use local economic resources and prove cost efficient. In addition, internal systems will be necessary to transmit and send data back and forth between the local store and our United States headquarters. Email will be a large tool used for communication as well.

Global Information Sources Subway has already had much success with CCP Global for SaaS (Software as a Service); the recommendation would be to continue this use. “A lot of the onus is on the vendors to design the software and the architecture in a way that that can withstand a failover situation” (Thibodeau, 2011). Subway Restaurants looks to simplify things for the franchisee by not complicating them with large and expensive IT services. CCP makes this easy with friendly, cloud-based interface for easy access and use.

Technology for Managing Information
As stated above, cloud-based storage will be the best option for this venture. Cloud storage is stored on a general server that is linked by a log-in and is web-based. This means the information is easily viewed by anyone, anywhere they can access the information. Cloud-based storage is cheaper than hard storage and does not require as many servers to hold the information. This will simplify the process as well and increase the ease of learning for all employees.

Action Plan The action plan will be to link with CCP Global to inform them of the plan to operate more in Columbia and consult a plan of action for software. Hardware can be obtained by other means, whether through US-based or Columbian-based stores. A lot of small businesses in Columbia are IT and hardware suppliers, so acquiring these materials should not be an issue. Module 9- IDENTIFYING HUMAN RESOURCES FOR GLOBAL BUSINESS ACTIVITIES (Created by Luthfur Khan)

Staffing
Subway is expanding internationally—including Colombia. As a national company expands overseas, the staffing function becomes crucial. As a business grows from regional to national to international in size, functions like sales operations, facilities, and production become more complex. Initially, we will send employees overseas who will have the responsibility of selecting the best local employees for the job. As an international business, we will follow the hybrid organizational structure that combines elements of models. Subway Corporation has a central headquarters that sets the strategy and forms high level policies, combined with product or geographic divisions that determine operational methods. This brings us to training and development.

Training & Development
Training and development functions take on greater emphasis. First, we train the expatriates before departing to Colombia. Many individuals who take on international assignments fail because of the adjustment that they have to make with the new environment (GHRMOD, 2012). When staffing is complete in Colombia, local employees must also be aware of the corporation’s needs. Training will primarily be focused on developing the knowledge of Subway products, including baking bread and keeping everything fresh. Also, our goal will be to identify potential management talent among the local employees in order to reduce any national or ethnic animosity, and to ensure smooth execution which can lead us to great performance.
Performance Appraisal
Performance appraisals will help us run the business efficiently. The appraisal is based on assigned duties and responsibilities versus the results obtained by the employees. Our main goal is to recognize achievement, to evaluate job progress, and then to design training for further development of skills and strengths. For local employees, “pay-for-performance structure” will be designed to increase salary and promote into higher positions (GHRMOD, 2012). Compensation
As a fast food company, we recognize the importance of the middle class. One U.S. dollar equals approximately 1,800 pesos in Colombia; the average Colombian salary is 180,000 pesos per week—approximately US$100 (Sidney, 2012). Colombian life style is much lower and cheaper than the United States. In order to satisfy the employees, each member will be paid a weekly salary. Permanent employees will have several benefits. Managers can be shareholders and will have future opportunities to open their own stores. Annually, each member will be given a standard incentives package based on a performance summary. We will also award the employee of the month at the end of each month.

Action Plan
Senior management is working on locating enough resources. A timeline will also be developed for visiting Colombia and performing the staffing administrative functions. Human resource departments are taking an administrative lead and working on a formalized employee selection, evaluation, and payroll process. Company policies and a standard application will be designed using the regional language. HR will immediately identify the qualifying candidate(s). Help will be provided, such as relocation assistance if experience candidates require. Paystubs will be developed locally by the store owner or general managers. If an owner has more than five stores, he or she will be required to have a trained general manager, who will be responsible for paystubs and creating a tools or strategy to keep tracking the timesheet. Subway as a corporation will be ready to advise.

Module 10 – MANAGING INTERNATIONAL FINANCIAL AND BUSINESS RISKS
(Created by Luthfur Khan)

Economic and Financial Risks There are risks involved in investments—especially in the international market. In this case, the value of the peso is very low against the U.S. dollar. Colombia has also experienced some royalty and tax schemes in the past. It has a very high unemployment and poverty rate. As a result, there are fewer outgoing people and higher criminal activity, such as kidnapping. For example, 23 oil workers were taken hostage by leftist rebels in 2011 (Kabir, 2008). Investors are always wondering about these new risk factors.

Social and Cultural Risks
The history of Colombia scares most investors. The country’s long history is marred with violence, narcotics trafficking, and the operations of the Revolutionary Armed Forces of Colombia (Kabir, 2008). However, this trend has been decreasing since President Alvaro Uribe came into office in 2002. He is taking action against narcotics traffickers and has appointed Juan Manuel Santos as his Defense Minister (Sidney, 2012). We will work with Colombian authorities and adopt the government policies. When high crime exists in the society, the economy suffers, and we have to ensure that Subway does not become a part of it.

Political and Legal Risks
There are short-term and long-term political risks to account for. First, there is a presidential election in June and a tight race for President Alvaro Uribe. The rebel violence and tension with Venezuela needs to be watched this year. In the long term, “Colombia remains the world’s number one cocaine producer and illegal armed groups are all engaged in drug trafficking, making the government’s task more complex as rebels form alliances with drug trafficking gangs” (BWHA, 2012). We will keep an eye on the new government for signs of improvement and ways to help.

Action Plan
Risk management will be approached with several tools. All these tools and processes of risk management are designed to reduce or eliminate the associated risks. First, we will identify and categorize all the possible risks; this will help us prioritize our record and respond to each type of risk. For short-term risks such as cultural differences of Subway Corporation and Colombia, financial threats, and violence, we will provide security if needed. For long-term risks such as fire, hijacking, and robbery, we will carry various insurances. Having a risk management plan is an important part of maintaining a successful and responsible company. Every company should have one and we will design one with all the above conditions. Module 11 - PRODUCT AND TARGET MARKET PLANNING
(Created by Luthfur Khan)

Product Concept
The product concept is specified. Most of the products will be supplied by the Subway Corporation. Most of the products will be pre-prepared and ready for sale. The company will provide instructions and recipes if any products need preparation in the restaurant.

Product Life Cycle
The mission of the Subway restaurant is to provide fresh food to our customers. In order the keep the products fresh, we will keep the life cycle shorter. For example, bread will be cooked daily; lettuce delivered twice a week, cheeses and meats will have expiration dates posted depending on the preserving process. This will ensure that the freshness Subway advertises is maintained. Branding And Packaging
Branding and packaging is very simple for a franchise. The Subway brand will sell the packaging product from a central location; brand names will be used on all packaging. We will make every effort to align with the Colombian environment protection agency and reduce the plastic and use more paper packaging. Target Market
There is significant potential for fresh food products like Subway in Colombia. Studies and producers feel that healthy food categories are new in Colombia and growing fast (Colombia Country Profile, 2011). Therefore, the demand of new portfolios of healthy products is increasing. We will take these opportunities and target Colombia’s fast growing market.

Action Plan
Since Colombia has plenty potential for growth, Subway will take initiative to expand in this market. Consumers are looking for new and healthy flavors. According to a survey, most food service operators in Colombia buy food products from food importers and retailers specialized in food service (Colombia Country Profile, 2011). Subway strategy will be to post menus and run different categories of advertisements to target the potential growing market.

Module 12 - DESIGNING A GLOBAL DISTRIBUTION STRATEGY
(Created by Chris Knapp)

Infrastructure Analysis
The main goal is treating the global market as the domestic market. In March, 2011, Subway Company has demonstrated the strength and saturation in the American market. According to information released by the Securities and Exchange Commission, in February, 2011, Subway had opened 33,749 restaurants around the world, compared to McDonald's 32,737 (Subway Chain Longer than McDonalds, 2011). The Colombian market data analysis has indicated the possibilities of expansion in this foreign investment. The international activities expected are sales of products, performance of services for foreign customers, and establishing facilities for sales, logistics, and distribution, among other purposes.
By expanding in the international market, Subway is attempting to create a successful competitive and strategic globally mixed environment for the quick-service restaurant segment. The issues of political risk, restrictions on currency repatriation and an unreliable legal system continue to exist in the Colombian foreign market. “The U.S. is the largest supplier of food and agricultural products to Colombia and it is the third largest market for U.S. agricultural products in Latin America after Mexico and Venezuela” (Colombia Country Profile, 2011).

Distribution Barriers
As of August, 2011, Colombian authorities issued two decrees for preferential duty treatment in hopes to correct a lack of supply in the domestic market. “Colombian authorities frequently provide temporary or permanent tariff relief to a broad range of imported merchandise in order to correct an apparent lack of supply in the domestic market, incentivize domestic production and/or promote foreign and domestic investment” (Colombia Provides Duty-Free or Preferential Duty Treatment to Range of Products, 2011).
There are many economic allies that may create barriers for the expansion of Subway Company into Colombia. The main barriers may be caused by The Andean Community Agreement—which includes Ecuador, Bolivia, Peru, and Venezuela—and possibly the CAN-MERCOSUR—which includes Brazil, Argentina, Paraguay and Uruguay. “On April 16, 1998, MERCOSUR members Argentina, Brazil, Paraguay and Uruguay, along with Andean Community members Bolivia, Colombia, Ecuador, Peru and Venezuela, signed a framework agreement towards the creation of a free trade agreement between the Andean Community and MERCOSUR” (Andean Community-MERCOSUR, 2012). A relatively small yet powerful agreement is currently between two nations, the Colombia-Chile free trade Agreement. One agreement that may beneficial for the Subway Company may be the CPTA-US to Colombia Trade Promotion Agreement. This will be the key building block to advance bilateral free trade. “The U.S. International Trade Commission estimates that the elimination of tariffs and related barriers in Colombia will increase U.S. GDP by nearly $2.5 billion and U.S. merchandise exports by $1.1 billion. This results in jobs here in America” (The U.S.—Colombia Trade Promotion Agreement, 2011). The goal is to create super-factories that cover metropolitan areas of Colombia in order to distribute all cold items properly.
The focus is to concentrate on local produce and to involve the produce growing communities. “Over the last two and a half years the United States has exported nearly US$4 billion of food and agricultural products to Colombia, but those exports have faced close to US$185 million in Colombia tariffs during that period”(Colombia Country Profile, 2011).

International Intermediaries
Border controls may create difficulties when dealing with the amount of time delivery vehicles will take to arrive to the distribution facilities, as well as adding to transportation costs. Barriers for foreign employees may create some friction and may require the hiring of national employees. The Subway Company must ensure the proper steps are taken prior to establishing zoning, health, safety, sanitation and building government regulations.
The Subway Company will ensure the chain of distributors, wholesale and retailers understand the importance of acquiring fresh local products. “Most food service operators in Colombia buy food products from food importers and retailers specialized in food service. Fruits and vegetables are mostly bought from wholesalers. Dairy products are obtained directly from dairy plants and distributors” (Colombia Country Profile, 2011). It is crucial to maintain a tight line of sight when dealing with direct importers, imports agents, direct exporters, export agents and clearing and forwarding agents, due to the heavy influence of drug trafficking in the Colombian markets.

Distribution Channel
Colombia’s agriculture has had many benefits due to their different climate zones which allows for several harvest per year. However, currently the price of Colombian produce is not doing so well in the international markets. In the 1980s, “Many domestically consumed crops did not perform as well as export crops, however, largely because they were produced on small plots using traditional farming techniques and were cultivated without the benefit of modern agricultural inputs” (Colombia-Crops, n.d.). There is a lack of safety in difficult driving locations as well as security in remote regions that make it difficult for small farmers to get their produce to large cities. Another negative factor that affects the Colombian agrarian culture is the cost of transportation of products as small farmers fail to transport are often exploited by the middle men.
Although there are currently only seven Subway quick service restaurants in Colombia, the Subway Company has adequate resources to pursue business expansion in the Colombian market. It is important to continue providing cold items to local facilities by means of contracting local trucking companies to meet timely and accurate delivery. Subway controls the quality of their main product by making the bread themselves daily. Subway typically contracts many companies as suppliers in order to keep bargaining power low.

Action Plan The main strategic plan is to establish new distribution facilities through greenfield investments. A secondary strategic plan is to purchase similar buildings already established by prior food service vendors through brownfield investments. The logistics involved through owning trucks is to deliver fresh cold items within a 300-mile radius to stores. It is crucial to ensure the approval of credential and vocational qualifications of all employees prior to establishment. Another requirement will be a firm grasp of having numerous local suppliers for each ingredient in order to lower the risk of suppliers increasing the prices.
Subway must maintain fresh menu items such as salad options, healthier meats, and healthier bread options.

Module 13 - PLANNING A GLOBAL PROMOTION STRATEGY
(Created by Chris Knapp)

Promotional Goals
The focus of utilizing the Subway Company’s competitive advantage: Healthy fast food that tastes great. Ensuring the company image coincides with the advertising campaign of “Subs with 6 grams of Fat or Less”.
Promoting an increased availability of lower calorie menu items will be the focus for these local segments. Based on demographics, there has been an increase in health-conscious food items. Properly marketing lower calorie, delicious, and affordable food items to a new market will require the blend of local language and accessibility.

Business Environment
We will introduce expatriate managers and training programs to demonstrate to attention to detail to customers and suppliers. Ensuring the proper management style and team is crucial. Subway must certify the management team has a foundation in marketing, finance, and management.
Subway must take initiatives in local menu items in the local segments. In order to meet customer demands, Subway must maintain focus on healthy menu items.

Media Plan
Subway has a main marketing strategy of affordable, fresh and healthy food options. Hiring professional well fit athletes to endorse their product, Subway has created a positive perception of the brand. Another focus will be to improve local internet advertising campaign in the local language(s). Re-establishing focus on current menu items and their calorie standings will help the brand maintain its image. However, it is important to understand and blend local languages and tastes in the menu items. Promotional Strategy
The teams selling and marketing power will meet the demands of this expanding market segment. The potential demand for B2B and B2C clients may be fulfilled by our services. Thousands of customers have proven that the menu items Subway Company offers are diverse and it satisfies their tastes. Our high-quality service to customers and suppliers shows proof that our expert staffing meets their needs. Maintaining focus on long-term customer satisfaction by promoting healthy breakfast options and continuing to promote their main revenue lunch menu items is necessary to survive.

Action Plan
Subway’s action plan seeks to generate a significant increase in company sales and profits from the delivery to the strategic analysis and reporting services.

Module 14 - SELECTING AN INTERNATIONAL PRICING STRATEGY
(Created by Chris Knapp)

The Economic Environment
Colombia is known worldwide as being heavily influenced by production of large amounts of cocaine, as well as gangs that ensure their drugs get exported by any means necessary. Our goal is to ensure that harsh inspections of imports are at the forefront of every crate that arrives for the use of the Subway Company. Industrial sector analysis indicate the importance of focusing on few main menu items and point of sales systems, as well as adequately advertised affordable menu items. “Now that Colombia has emerged from years of instability and drug- and guerrilla-related violence, some industry experts say it is benefiting from investment that might otherwise have gone to Venezuela or Mexico” (Good times for franchising, 2011).
The Colombian local markets are expanding from the old way of doing business and are making an effort toward the global economy. This concept brings a large amount of development and growth to the region. Due to this reason the needs of the customer is expanding.

Cost Analysis
Subway has been very successful at advertising campaign for the $5 foot-long sandwiches. Although not every sandwich is set at that price, they will eventually expanded to other sandwich items. This campaign may prove to be successful in the local Colombian segments. “Approximately half of Colombia’s citizens live below the poverty line, suffering from income disparities and inadequate social services” (CIA, The World Factbook, 2010). The Subway Company is expected to meet their expected growth projections in higher populated regions, mainly due to the demand of fast healthy food and relatively low cost menu items. Inventory prices must be relatively low in order to provide these affordable prices internationally. This is done by buying in bulk and ensuring an advertising campaign that attracts a sufficient customer base to persuade suppliers of adequate sales.
.
Demand Analysis
The Subway Company’s focus is to make a strong advertisement campaign for other menu products to cover the decrease in sales for the promotional prices. Ensuring the advertising campaign will not create a bait-and-switch negative image that will be irreversible for the Company. The goal is to produce 100% customer satisfaction, which is expected to enhance customer referrals as well as top monetary profit. Continuous innovation is the within the product life cycle. One form of keeping product demand high was through introducing new, healthy, and affordable sandwich deals while phasing out the old sandwich options that were at the decline stage of their life cycle.

Competitor Analysis
The goal is to maintain a business-to-business relationship for local ingredients that prevents suppliers from hiking up prices and competitors from lowering prices to match menu items. Local segment competitors are active and have shown a strong customer base regardless of the size of the facilities. Subway currently has seven locations in Bogota. Subway’s main competitors in Bogota are McDonalds (with nine locations), Burger King (four locations), and Quizno’s Sub (two locations).

Action Plan
The Subway Company insists on forming new relationships with the agriculture producers, distribution personnel, and the customers of the Colombian local market. Module 15 – DETERMINING ORGANIZATIONAL FINANCIAL RESULTS
(Created by Abbie Ludwig)

Revenue Sources

Operating Costs

Start-Up Costs
Initial start up costs in Colombian Peso and US dollars

Profitability

MODULE 16- MEASURING INTERNATIONAL BUSINESS SUCCESS
(Created by Abbie Ludwig)

Financial Gain
As a franchise opportunity, Subway has great potential in Colombia. In 2010, GDP grew by 4.3%, with the second strongest driver being retail, restaurants, and hotels. These business areas are popular for franchising, which grew by an estimated 7.2% in 2011. (DeSilvis & Antia, 2012).

Economic Benefits
With an emerging, powerful economy, Colombia has been “recognized by international agencies as one of the best-managed economies in the region” (DeSilvis & Antia, 2012). Colombia is a developing market for consumer-oriented products. Imports are growing and have opened Colombian consumers to international foods and recipes. (Food Export Association of the Midwest USA, 2011) Social Benefits
Building a Subway franchise in Colombia not only benefits employees that will be hired, but introduces consumers to a nutritional menu for a meal on a budget. Subway has programs that reflect their social responsibility, including a healthy menu, practicing and using products that improve energy efficiency, and enforcing policies that meet and exceed health and safety standards. Their overall commitment is to make their restaurants and operations as environmentally and socially responsible as possible. (Subway, a registered trademark of Doctor's Associates, Inc., 2012)

Social Costs The social impact of a Subway franchise can turn Colombians away from traditional cuisines and meals away from home. The Western culture has embraced fast food because it saves time. In the United States, an overwhelming amount of households have full-time working adults, which has made takeout food extremely convenient. There are studies that have observed correlations between the rise of fast food consumption to obesity; other observations include overconsumption, due to the convenience and portions served. There is a possibility this could happen in Colombia. (Brindal, 2010)

CONCLUSION
(Created by Abbie Ludwig )

Data analysis in the quick-service restaurant segment in Bogota, Colombia, has concluded that the size of the selected market, geographical segments, goods purchased, and customer trends are increasing. Subway already has a presence in Colombia and is looking to expand its operations. Our plan suggests strategic placement of storefronts, such as sporting venues, transportation hubs, and even movie theaters, which will increase profits by six times above the standalone storefronts.
Subway’s main competitors are other American fast food franchises—number one being McDonalds. Our competitive advantage is the relatively low startup costs compared to the competition. Our plan suggests using seminars or presentations to encourage entrepreneurs to open new franchises by informing them of minimal startup costs and affordability by comparison.
Socially and politically, Colombia is great for franchising; Subway is profiting. Unemployment would be alleviated by new storefronts that improve the economy. Because the Colombian government does not require foreign companies to have local partners, opening a Subway franchise is not only inexpensive, but also easy to set up.
Maintaining profitability would require use of a hybrid organizational structure. Having local human resources management and payroll accounting will shorten the distance between the U.S. and Colombia, as well as increase efficiency.
Colombia’s leniency of foreign investment and market entry will ensure the stability and longevity we are seeking. Compass and the local Banco de la Republica will provide sustainable funding. Compass offers stable interest rates; Subway has an established relationship with Compass. The economy of Colombia is powerful and recognized as one of the best-managed economies worldwide. Financially, franchising in Colombia is a growing investment that rose by 7.3% in 2011. Commitment to the environment and improving communities is a Subway standard for all their franchised stores. All these factors together will become a recipe for success for Subway and its franchisees in Colombia. In conclusion, Subway will continue to invest in Columbia and will continue to assist as a company in the success of a growing economy.

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