Threat of Entry

Barriers to enter the pizza industry

 Pizza Hut

Pizza industry is huge. There are already tons of firms competing with
each other within the field. If I were to enter this industry, I would need to prepare
and consider a lot of things. There would be a lot of challenges and issues, so
before entering an industry I would need to observe and think twice before
deciding.

In entering, I would need to observe my barriers and weakness against

the existing firms within the industry. First is the economies of scale. As a startup
restaurant, I wouldn’t be able to take advantage of the economy of scale unlike
the other larger and more established firms who can order in bulk and demand
for lower prices. Thus, this would affect my product pricing and my customers
attraction because I have no choice but to start my business with a higher price
compared to other larger restaurants. This would greatly affect my first
impression as potential customers have more restaurants to choose from with a
much lower price than my restaurant. Another barrier except for the price is my
competitor’s incumbency advantage like their brand identity. Except for the fact
that they have much lower price than me because of their longer establishment
like Pizza Hut being one of the world's largest restaurant companies, they also
have their brand advantage which would greatly affect the customers choice
because many customers would rather choose the one with a lower price and the
one that is more familiar and trusted by them rather than a newly established
restaurant. One way around this barrier is to provide a unique offering that will
catch the customers curiousness that will make them want to consider my
restaurant.

Another problem is the distribution channel or the location of my

restaurant. Compared to larger restaurants like Pizza Hut that has many
franchises that is easy to locate, it would be hard for us to compete with them
since you can find Pizza Hut in almost every mall unlike us that is just starting so
we need to find a good location where many potential customers can be like
commercial lot. Since many restaurants are more convenient to reach than a
startup restaurant like us and since they have all the different advantage as an
existing firm many people will tend to buy more from them where network effects
take effects. Since the demand for Pizza Hut is high, many people would also be
more attracted to them. With regards to the switching cost of the customers many
people would also choose Pizza Hut since as I have said Pizza Hut is located
almost everywhere so the switching cost for the customers is high when it comes
to time, money, and effort. If they would choose us, a startup restaurant, they
would need to take an effort and time to locate our restaurant as well as their
travel cost and other expenses. But if we provide them a new and unique offering
that cannot be seen in others that will make the people to be willing to take their
time and effort just to try our goods. Then the restaurant might be able to make it.
Restaurants also requires a large amount of capital and is also difficult to
establish since the products are perishable and health requirements are also
very strict. These are the issues and problems that can be encountered in
entering this line of industry. Hence, it is important to plan ahead and be aware if
entering this kind of industry, and attempt to clear as many of the issues as
possible before entering and taking your shot.