Pizza Hut Malaysia is a fast food industry that operated by QSR Brands Bhd which is the biggest chain franchisee and also acquired to holds the KFC and Ayamas over the outlets in Malaysia. QSR Brands Bhd dominates Malaysia’s retail food industry and expanding over the local market. In 2011, Pizza Hut Malaysia chain has grown to over 210 larger sized restaurants in Malaysia. The first outlet is located at Yow Chuan Plaza, Kuala Lumpur which is established on 19th May 1982. With the featuring of Italian-American cuisine – the world’s favorite pan pizza and other dishes, Pizza Hut Malaysia offers a comfortable, friendly environment and having a great moment time with family or friends in a casual dining restaurant (Pizza Hut, 2013). Moreover, QSR Brands Bhd also operates Pizza Hut Delivery Malaysia to provide delivery services to the consumers (QSR Brands, N/A). Pizza Hut Malaysia produced the pizza as main goods. Pizza is perishable goods which those pizzas are frozen and have to keep in the fridge freshly in a certain period of time. Pizza also can be consumer goods because it is consumed by the consumers.

According to QSR Brands Bhd annual report 2011, the total revenue of Pizza Hut Malaysia is RM412, 423 (Bursa Malaysia, 2011). It is clearly to know that Pizza Hut Malaysia is keep on increasing the revenue from 2007 to 2011. Based on this article, the new cheesy pizza “Ultimate Cheesy 7 Pizza” had contributed 20 per cent of revenue to the company. This is because they are using promotion strategies such as TV advertisement and campaign events in order to boosting up the sales of pizza hut from the revenue every year (Eu, 2011). With the Malaysian trends of population becoming more urban in the lifestyle, a wide range of customers such as households and teenagers would become their main targeted group.

Determinants of a change in demand

In addition, there are few of determinants for the Pizza Hut goods can influence the change of demand. Pizza Hut Malaysia has launched the latest Mexican Fiesta dishes which are Mexican Fiesta Pizza and Mexican Corn chips with Mexican sauce in 2007. During the three month limited promotion period, QSR Brands Bhd is expecting the two new products can increase around 20 per cent of total revenue. They look forward to 3 out of 10 customers will order the latest products because customers always seeking for interesting and variety foods which can bring them satisfied (New Sabah Times, 2007).

Figure 1.1

 Based on the figure 1.1, it shows that demand of pizza increases when people desired to eat the new flavor of pizza and the demand curve shifts to the rightwards from D_o to D₁ which creates a new demand curve. Consumers will buy more pizza regardless of the price of a pizza. In terms of a change in demand, it states that when the determinant of demand change, the price is remains the same, the quantity demanded change and shifts to the demand curve (Parkin, 2014).  From this situation, taste will influence a change in demand for the pizza but the price is not affected and remains constant.

Recently, Pizza Hut Delivery Malaysia has rising 10 % in sales to RM500 million in 2013 (Bernama, 2013). The delivery services are very convenient and will guarantee the time as well as hot oven fresh pizza to the consumers. This preferred by the consumption of consumers especially busy office workers because they always no time to go for lunch and dinner. In addition, consumer who live the place far from the pizza hut location also prefer to order the pizza by delivery service because they can save more petrol by using transportation. As a result, preferences will determine the demand of pizza as the larger consumers prefer on delivery services. Therefore, a change in demand is same with based on figure 1.1. In this situation, it shows that when the preferences is the determinants of demand change, the price of the pizza is remains the same but the quantity demanded change and shifts to the demand curve rightwards from D_o to D₁ and it occurs a new curve.  

Determinants of a change in supply
Besides that, there are few of determinants of a change in supply. As Pizza Hut Malaysia is the producer of the pizza, they have to using the advances technology such as high-tech heating oven, dough equipment and refrigerator to produce a best quality pizza to the consumers.  In terms of a change in supply, it states that when the determinants of supply change, the price is remains constant, the quantity supply change and shift the supply curve (Parkin, 2014). It can be explained by the figure below:

Figure 1.2

  So when there is an advance in technology, it can lower the cost of producing the pizza and also the quantity supplied of pizza increases and it will shifts the supply curve to the rightward from So to S1 which is the new supply curve.  

Figure 1.3

Based on the figure above shows that the price of regulated goods produces which is a determinant that can influence supply. When the price of the taco rises, production will shift from pizza to taco because both of them are substitute that can be using the same resources, then the supply of pizza will decreases and shift the supply curve leftwards. Moreover, when the price of flour increases, the supply of pizza will increases because both of them are compliments that must be produced together, so the supply of pizza will increases and shifts the supply curve to the rightward.

Income Elasticity of Demand

Figure 1.4

According to income elasticity of demand, it states that a change in income can influence a change in quantity demanded for pizza is based on the consumer level of income. Based on the statistics, it showing that monthly household income in Kuala Lumpur is the highest income whereas the lowest income is in the Kelantan between 2009 and 2012 (Jabatan Perangkaan Malaysia, 2013).  Based on figure 1.4 shows that for people with a middle-class income or upper-class income in city such as Kuala Lumpur, they are think pizza is a normal good because when consumer’s income increasing, they will consume more pizza. As a result, it is positive income elasticity of demand which is greater than 1. If when consumer’s income decreasing, they definitely will consume less for the pizza, so it is positive income inelasticity of demand which is less than 1. However, pizza can be a luxury good because for people with a lower-class income in the city such as Kelantan, consumer will demand more pizza when their income is rising because they think affordable and consume more on the pizza compare with the middle-class and upper-class consumers. If when lower-class consumer’s income falls, they won’t able to afford on the consumption of pizza and the demand of pizza falls.

Cross Elasticity of Demand

Figure 1.5

 According to cross elasticity of demand between Pizza Hut and Papa Johns, this two are close substitutes. Based on the figure 1.5, when the price of Pizza Hut increase, the demand for Papa Johns increase which means that consumers are choose to go Papa Johns to consume the pizza and so the demand curve for Papa Johns will shifts to the rightward from D_o to D₁. As a result, the cross elasticity of demand is positive. Then soft drink is a compliment of pizza. When the price of a soft drink is increases, the demand for pizza is decreases and then the demand curve will shifts to the leftward from D₀ to D₂. So the cross elasticity of demand is negative.

Market Structure-Monopolistic Competition

Pizza Hut is a monopolistic competition in the market structures. So Pizza Hut can set its own price as a price maker. It also can be defined as many or several firms such as Dominos and Papa John have some power in a large market, which means there are no ones are price takers. Each firm produces a different product from the other rivals. They produce close substitution yet not perfectly substitute for the products. Pizza Hut and Domino’s produced the similar product - pizza but they are differentiated on the size, ingredients, taste and recipes (Gilani, N/A). Due to Pizza Hut and Domino’s produced differentiated pizzas, people willing to pay more on one of other rivals that produced the pizza. If the price of Pizza Hut increases and the price of Domino’s remain the same, then Pizza Hut will sell less and Domino’s will sell more and so the quantity demanded for Pizza Hut decreases. It will disappear in the market if the price of Pizza Hut increases by a large amount. Pizza Hut is free to enter the industry if they want to make profit because they just using heating oven and machines as the low start up cost in the long run.

Short Run and Long Run

When firms to decide to make a decision between the firm’s output and cost to maximizing the profit as main objective. All decisions can make in the two times frames which are short run and long run (Parkin, 2014). For Pizza Hut, we know that the fixed input is land and machines and other variables input can change in the short run. To increase the quantity of variables input, Pizza Hut must hire more labor and operates the machines in order to increasing the total product. However, short run decisions are easily reverse because a firm can increasing or decreasing the output by the increasing or decreasing the number of labor. In the long run, all fixed or variables input can be changed. Pizza Hut can decide whether they want to install the new machines or expand the size of plant. Nevertheless, long run decisions are not easily to reverse because they are dealing with investment and the decision making by top management. Therefore, it will takes longer time and have to consider it as a sunk cost because the expanding the size of plant is processing and incomplete. Thus, the sunk cost is incurred by the firm if not will get lost because the particular plant costs a firm millions dollar so it cannot be changed easily.

Reference List:

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Available at: http://english.astroawani.com/news/show/pizza-hut-delivery-targets-10-rise-in-sales-to-rm500-mil-this-year-15592

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Jabatan Perangkaan Malaysia, 2013. Finding Of The Household Income Survey (HIS) 2012, Malaysia: Department of Statistics.

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Available at: http://www.newsabahtimes.com.my/nstweb/fullstory/13162

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Parkin, M., 2014. Economics. 11th ed. UK: Pearson.

Pizza Hut, 2013. Pizza Hut Malaysia. [Online]

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