Competitive analysis of a business firm
Crust has become the number one gourmet pizza brand in its short ten year history. Recent expansion to New Zealand and Singapore over the past few years show encouraging signs that Crust Is quickly becoming a multinational force In the gourmet pizza market. The pizza industry has traditionally consisted of big chains, which focus on fast delivery at the expense of a quality product, or independents that offer a high quality product, but with limited delivery service. Crust is all about changing people’s perceptions of what a delivery and take away pizza is by delivering a great tasting, quality gourmet Aziza to your door.
Crust believes its positioning will allow itself to benefit from the extreme growth potential of the gourmet food market segment and more specifically the gourmet pizza sector. Crust is a strong supporter of giving back and supporting the community through the Corporate Social Responsibility Program. Crust see ourselves as a chain of boutique pizza bars, as opposed to a big brand fast food chain. Their aim has always and will always be to challenge the perception of pizza, by delivering a quality gourmet product with the same consistency and speed as any another take away option.
From the head office staff their pizza makers, Crust differentiates themselves from the rest of the take away food Industry by focusing on four key areas: Quality, Efficiency, Care, and Health. Why Crust is in business? Crust Gourmet pizza offers one of the finest pizzas in canning vale suburb. Though, the pizza is on the expensive side but people do prefer Quality over price. Crust has been sticking to it high quality deliverance right from the day It entered the market. Quality, efficiency, care and Health keys factors. Other than this, Crust at canning vale also provides excellent services to customers.
Some of the services include Short wait for pizza pickups, low pizza delivery charges, Fresh and healthy quality pizzas with excellent customer service. Crust at canning vale also charges the lowest pizza delivery fees compared to all its competitors. This give them a competitive advantage and also makes it easy for the customer to get the pizza delivered at their doorstep rather than coming to store and picking it up. Creating Value As said earlier pizzas at Crust are not one of the cheap options. The Cheapest of the medium range adult pizza starts from $17. Even at this price, people do prefer crust why?
There must be something that attracts people even at this price or in other words it creates a good economic value even at that price. A rationale consumer would buy a product or an item only if he or she finds it more beneficial to the price paid against it. That means the perceived cost Benefit (BGP) received from having a medium adult pizza is more than 17$ that is paid against it. A consumer is willing to buy a product only when he/she finds some consumer surplus in the product. Consumer surplus refers to the extra benefit that a consumer feels after consuming a reticular product.
In this case, when a customer haves a pizza from Crust Gourmet Bar he willingly pay 17$ for it as he/she thinks that price is less compared to the desire, satisfaction and transaction cost that will be paid against it. Putting them into figures and assuming a consumer rates his satisfaction received from having crust pizza as 25$ I. E. Perceived Gross Benefit (BGP). Transaction cost that is the cost a consumer pays to reach to the Crust Canning vale outlet or get the pizza delivered to his/her own house is assumed to be 3$.
So the total cost, what a consumer feels eased on this assumption is 22$ for the pizza but he only pays 17$ to get the same pizza. This difference of 5$ is nothing but the consumer surplus which induces a customer to buy the pizza from crust. We have been talking only about the consumer side but nothing about the producer side I. E. Owner of the Crust franchise at canning vale. The main principle of any business is to create some monetary surplus. This principle is also followed by the owner at Crust canning vale. The final price of a pizza is obviously decided by keeping a certain margin of surplus over the cost of production.
This surplus is nothing but its profit from running the outlet. Putting them into figures again, let’s assume the average cost of making one pizza is 10$. This price is an average price which includes the ingredients cost, labor and other fixed costs. The owner is selling this pizza at a price of 17$ to the customers. So the surplus from one pizza is 7$. In other words profit made from one medium pizza by crust canning vale is 7$. In case the cost of production increases, the owner will no longer sell the pizza for 17$ he would increase the price to match the increase in cost keeping the surplus margin unchanged.
In other words, the cost increased is transferred to the consumer and is known as consumer cost. Now, after summing up both the scenarios we can see that the consumer surplus is 5$ and Production Surplus is of 10$. If we add them, it comes to 15$ that is nothing but the economic can be thought as a space that opens up between consumer’s perception of benefit arising from the consumption of a particular product and the resource cost of providing this product. Demand for Crust Pizzas Crust being a very famous brand from east coast of Australia, the demand for it in Perth canning vale area is relatively high.
Crust in canning vale didn’t had to spend much on advertising its brand as most of the people in canning vale are migrants from the east coast and they very well know what crust pizza is all about. This was opened in July 2011. The first 6 months owner had hard time even making to its break-even point then, thanks to the word of mouth business started to pick up gradually and steadily. Factors affecting Quantity Demand Demand for any product is never steady. Most of the products do go through the high and low phases of demand. Demand of Pizza at Crust Gourmet bar canning vale is affected by a lot of factors.
Putting in into Economic function quantity demanded can be seen as Sq = Where, Sq stand for Quantity demanded, P stands for Price, L stands for Location, S for services, T for tastes, choice and preferences, C stands for Competition. Let see these factors in detail; Price Price of pizzas at crust is relatively on a higher side compared to other pizza vendors. Further increase in price due to cost or any other factors may affect the demand. Location Crust gourmet pizza in canning vale is located in the prime location for business. Composition of people living in canning vale are wealthy and can afford easily to pay 7$ on pizza.
Also the place where crust gourmet is located, they don’t have any other pizza outlets except for Domino’s. This gives an advantage to crust being a nearest pizza option. Services Crust also provides various services to customers. All the orders are made fresh and in time so the customers don’t have to wait too much for their pick-up orders. Also, crust offers the cheapest home delivery rate in the suburb. They charge only 2$ as for delivery and they deliver around a diameter of 20 kilometers. Any change from existing service facility may affect the demand. Taste, Choice & Preferences Pizzas at crust taste better”.
This is what crust has always been working on and used it as their unique selling point. So this taste has a lot of influence on the quantity demanded at Crust. People choice and preferences over other things also affects the Competitor Competition always affects quantity demanded for any products in an active market. Competitors of Crust at canning vale are Domino’s, Pizza Hut, Eagles boys. They all serve quality pizza but at a lower price. The thing that makes crust different and appealing from them is the quality, quantity, taste and the healthy choice options.
Demand for pizzas at Crust gourmet bar canning vale has always been steady. At times, with the weather change demand is affected by people choice and preferences. When such things are expected and due, Crust always comes up with innovative ideas to manipulate demand and attract customers with exciting offers and deals. Crust canning vale, also participates in social events to build the brand awareness and maintain its name in the market. These things not only help to manipulate the demand, but also create loyalty from customers.
Once customer is loyal towards your brand, they keep coming back to you and give you more business. Currently, measures adopted by crust to create customer loyalty are: WIPE Program: Under this program, a customer has to signing online for WIPE membership. Once the customer becomes a WIPE member he/she is discounted from the delivery charges. Thus it induces more customers to become a member, avail the discount and be loyal to crust. Promotions & Advertisement: Crust canning vale also often participates in promotions to build their brand image and awareness.
These promotions also include free give away sides or half priced pizzas. Advertisement measures such as menu mail drop box is often done in the surrounding suburbs reminding the customers of the brand and existence of crust in the area. Short term trends affecting demand In a short run, demand for crust pizza is affected by number of factors. Due to some of these factors the demand for pizza at Crust canning vale has become very volatile. 1. Seasonal Change: Whenever weather gets a bit hot most of the customers don’t prefer to eat pizzas. This affects the quantity demanded.
On the other side, more pizzas are sold in winter. Competitors Discount schemes: What our competitors are selling and at what price may very well affect the quantity demanded. All business wants to capture argue market share and in order to achieve it they come up with good deals and offers. Long Weekends: Holidays does not always lead to good business. At times where it is a long weekend, people prefer to go for an outing and thus demand for pizza is affected. Long term trends affecting demand vale store. Some of the long term factors that may affect demand are listed below: 1 .
Government Regulation: Change in government policies, change in tax structure, change in interest policy affects the income of a consumer and in long term may also affect demand for crust pizzas.. Recession Some of the countries are still in recession. Consumer thinking over it may prefer to save more and spent less which may also affect the demand in a long run. Employment Un Employment is a long term problem, and without employment buying capacity of a consumer is definitely affected and thereby affects the quantity demanded for crust pizza’s which in turn is a Gourmet product is then a basic product.
Technology keeps on advancing. Keeping up to date may be a costly affair. Today technology calls for mobile phone applications to order pizzas online. If u don’t keep up with the technology you may be left out from the competition and hence, your emend for your product may get affected. Some other factors that also affect quantity demanded in a long run are Economic growth and development, Inflation, Exchange rate and rate of interest. Price Elasticity Price elasticity is nothing but the demand responsiveness of quantity demanded to change in price. Market for Crust Pizza at canning vale is of Elastic in nature.
Any change in price may have an effect on the quantity demanded of pizza. Price Quantity Demanded 20 50 17100 15150 It could be seen in the above graph price is having an inverse relation with quantity demanded of pizza. When the price is 17 quantity demanded is 100, when the price is increased to 20$ quantity demanded is reduced to 50 units and when price is reduced to 15$ quantity demanded is again increased to 150 units. This change can be also be calculated as Change in percentage method Percentage change in quantity demanded Percentage change in Price Factors affecting Elasticity of demand and so the price.
Some of them are listed below: Essentials refer to basic necessity of life. Crust has always been a Gourmet pizza which makes them difficult to get hold of customers who are living on par. Substitutes Substitutes for crust are cheap. If consumers prefer price over quality definitely crust will face demand crunch. Change in income Change in income with respect to change in government policies, tax structure, unemployment etc always have an impact on demanded quantity. Market Structure There are four basic market structures.
A market structure characterized by a large number of small firms, similar but not identical products sold by all firms is known as Monopolistic Competition. The other three are perfect competition, monopoly and oligopoly. The real world is widely populated by monopolistic competition. Perhaps Alfa of the economy’s total production comes from unapologetically competitive firms. Crust Gourmet pizza also falls under Monopolistic Competition market structure. The reason why we say that is because Crust Gourmet Pizza contains all the characteristics of a firm found under monopolistic competitive market.
Characteristics here refer to large number of small firms in market, Firms selling similar product, free entry & exit in the market. There are many other firms who sell pizza same as crust but the pizza sold by crust is differentiated in terms of physical difference, perceived difference and the service backed by quality. Strong and high Rivalry in business 1. Domino’s Pizza Domino’s are one of the cheapest pizza sellers in today’s market. Domino’s is located very close from Crust in canning vale. They are the biggest threat to any pizza makers due to the price at what they sell. 2.
Pasta cup is again a very strong competitor of Crust Pizza. Pasta cup is located right opposite to the Crust store in canning vale. What customers do is order pizza from crust and buys pasta from pasta cup. There by crust loses the market for its pasta. Creole’s Fish and chips Creole’s Fish and chip is again a strong competitor located close to crust. They offer quick delivery with a low price, which in turn is appreciated by many customers. Strategies to seek competitive advantage in the market In today’s competitive world, it becomes very important to strategies your business to competition.
Let’s look at some of the strategies that Crust Gourmet Pizza needs to follow to seek competitive advantage in the market. Cost Minimization Cost minimization is an important strategy aimed by all business. Cost directly affects your profit. To stay in the competition cost should be minimized as much as possible to gain surplus. 2. Product Differentiation Pizzas at crust are already different from other retailers but they need to continue with that. With Monopolistic competitive market, it won’t take time for a new competitor to enter the market with similar product.
Crust at canning vale need to come up with innovative ideas every time to be ahead of their competitors. 3. Effective advertisement Advertisement has become a very import factor of business these days. Through advertisement you can keep your product fresh in mind of the customers. Crust has been following that but needs to enhance it a long run in order to get more into the market and to multiply the loyal customer’s database. . Economies of Scale Crust canning vale should also look out for producing more pizzas. This will not only allow them to enjoy benefits of economies of scale but also gain higher profits.
By achieving economies of scale will also allow them in reducing the price and be more competitive in the market. Conclusion To conclude pizzas at crust are outstanding in terms of quality and satisfaction. The market share for crust pizza is still limited due to non-awareness of their existence. In the long run, the canning vale store would definitely like to come up with new innovative ideas that would make them more dominant in the market. It has also men observed that demand for crust has an increasing trend, doing right things at right time will Just make them the best in the market.