Monopolistic Competition – Pizza Hut
I bought a pizza from Pizza Hut in August this year. Pizza Hut is a perfectly monopolistic competitor given that it is the largest pizza restaurant around the globe from the number of outlets as well as its market share. As a subsidiary of PepsiCo Inc., the entity boasts of over 11000 pizza joints and delivery channels globally. Pizza Hut diversifies its products, with the knowledge that producing the same product may not satisfy every consumer in the end. With a wider assortment of recipes, suppliers, and menus for distinct localities, the pizza giant makes diversity its major building block. According to Gascón et al. (2017), the organization is always working towards expanding its offerings. For instance, the introduction of mcspicy, a collection of spicy servings alongside pizza, took the market by storm long before competitors could mull countermeasures. Pizza Hut selects specific towns and makes their products available there. Clearly, it is able to take risks with its products to continue its competitive advantage. This bold move is what has kept Pizza Hut in the pizza business, leveraging a huge advantage that translates to monopoly.
While Pizza Hut is not the only player in the market, its market structure is purely monopolistic since entities such as Papa John’s Pizza and Domino’s Pizza are large sellers in the market but they cannot match its client base, productivity, and competitive pricing. Owing to the highly elastic quick service in the pizza market, Pizza Hut aims at keeping prices competitive yet affordable. Coupled with offer bundles, this kind of strategy increases the quantity of pizza and other products sold by the company. As Nikaido(2015) observes, the organization notes that competitors cannot afford low pricing and still stay in business. In order to augment its profitability, Pizza Hut increases the prices of its products depending on the market response while striving to differentiate its products from competitors.
Competitive pricing gives the organization favorable margins, which contribute to an advantage. Again, Pizza Hut is always ahead in terms of technology. The invention of its own applications ensures that the company is a first mover in the marketplace. Pizza Hut’s strong universal image makes its easily recognizable by customers. The red roof brand makes a global acclaim in the minds of customers that it is impossible to match. Premium positioning is another tenet of monopoly. Pizza’s Hut’s promotions and brand equity are superior to those of competitors. Of course, the company’s products are of superior taste compared to those of competitors. Incorporating product tests for customers has enabled the pizza outlet to customize its offerings to suit changing needs. In a way, Pizza Hut’s financial muscle enables it to channel a huge chunk in this endeavor, something that lacks among its competitors (Gascón et al., 2017). While other players take a cautious approach to their promotions and product exposure, Pizza Hut is always ahead of the park. In what constitutes an unmatched loyalty, the first mover culture makes Pizza Hut’s products rings in the minds of consumers long before competitors make an impact.
Firms in monopolistic competition such as Pizza Hut still advertise to accomplish two key objectives, namely product differentiation and maintaining market control. By creating the perception of differences between its products and those of competitors, advertising enables a firm in monopolistic competition to escalate their differentiation. In the end, product differentiation creates market control.
Gascón, J. F. F., Rodríguez, J. R., Bernal, P. M., & González, M. M. (2017, June). Social media use of fast food companies. In Information Systems and Technologies (CISTI), 2017 12th Iberian Conference on (pp. 1-5).
Nikaido, H. (2015). Monopolistic competition and effective demand.(PSME-6) (Vol. 1391). Princeton University Press.
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