Advantages and Disadvantages of Competition: Pizza Case Study

There are now many places on the high street where you can buy, and often take away pizza as well. In the 1990s however this was not a big industry and prices were often expensive, due to lack of competition unlike today, where prices are constantly being pushed down due to more competition.

Competition can have advantages as it offers a more diverse choice for consumers. Having more competitors of the same product type (pizzas) allows the consumer access to a wider range of variety, which helps push innovation in the market as firms have to come up with new ideas in order to attract customers.

This competition has led to inventions such as the stuffed crust pizza, which was introduced after market research suggested that this idea would be popular with consumers, and now most pizza firms offer this option.

Due to the larger amount of variety, firms are also forced to lower their prices in order to attract as many customers as possible and deter them from going to another firm that offers a similar product instead.

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This also allows an increase in quality, as certain firms such as Pizza Hut also began to focus on quality of service, wanting to stand out from the other firms in the business.

This is a big advantage for consumers as it allows consumers access to not only a cheaper product, but also a higher quality one such as Domino’s Heatwave invention allowing consumers to have hot pizzas at the customers door, to justify the extra price compared to other smaller firms.

The large number of firms in the market lead to price competition, which is an advantage for consumers as some prices dropped to as low as £1.

However, competition can have disadvantages. In some cases, due to the extra cost needed to promote the firm’s products prices may rise instead of fall, an example of this being Pizza Hut being forced to use colour leaflets to create a bold image when it would not have been necessary when Pizza Hut was only one of the few pizza firms. Another factor that could increase the price for consumers is that firms may decide to advertise their products as boldly as possible, such as Pizza Hut launching an advert to introduce a new product staring a celebrity in order to gain publicity. Also, if the price of the product was to drop due to competition, the quality of the product would also be likely to drop, and this is sometimes the case with smaller firms as in order to be cheap, their products use ingredients such as reused oil which can have a long term negative health effect on the consumer.

Competition can have both positive effects, such as decreasing prices for the consumer and offering a wider variety of choice, as well as promote innovation. However in some cases it can lead to firms being forced to spend more money in order to promote their services, and this can lead to raised prices for the consumer. Another issue is that firms may also choose to rely on cheaper ingredients in order to market their pizza at a cheaper price to the consumer, and this can lead to long term negative health effects.