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 |
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 Do to D1 and it occurs a
new curve.
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
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
Do 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.
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.
Bernama, 2013. Pizza Hut Delivery targets 10%
rise in sales to RM500 mil this year. [Online]
Available at: http://english.astroawani.com/news/show/pizza-hut-delivery-targets-10-rise-in-sales-to-rm500-mil-this-year-15592
[Accessed 23 October 2013].
Bursa
Malaysia, 2011. Company Announcements. [Online]
Available at: http://www.bursamalaysia.com/market/listed-companies/company-announcements/933221
[Accessed 23 October 2013].
Eu, G. T.,
2011. New cheesy meal to help boost Pizza Hut revenue. [Online]
Available at: http://www.btimes.com.my/Current_News/BTIMES/articles/pizzahut14/Article/
[Accessed 23 October 2013].
Gilani, N.,
N/A. The Four Types of Industry Infrastructures. [Online]
Available at: http://smallbusiness.chron.com/four-types-industry-infrastructures-24729.html
[Accessed 20 October 2013].
Jabatan
Perangkaan Malaysia, 2013. Finding Of The Household Income Survey (HIS)
2012, Malaysia: Department of Statistics.
New Sabah
Times, 2007. Pizza Hut expects new products to provide 20% of revenue. [Online]
Available at: http://www.newsabahtimes.com.my/nstweb/fullstory/13162
[Accessed 23 October 2013].
Parkin, M.,
2014. Economics. 11th ed. UK: Pearson.
Pizza Hut,
2013. Pizza Hut Malaysia. [Online]
Available at: http://www.pizzahut.com.my/dining/about-malaysia.html
[Accessed 20 October 2013].
QSR Brands,
N/A. About Company. [Online]
Available at: http://www.qsrbrands.com/about/
[Accessed 23 October 2013].
