Competition and trends can strongly affect whether a hospitality or catering business succeeds. A business must understand what other providers offer and what customers currently want. This helps it make suitable decisions about its menu, service, facilities, prices, promotion and target market. For WJEC Level 1/2 Hospitality and Catering, this topic is part of business success within hospitality and catering provision. Learning how businesses respond to change will help you explain why some are successful while others lose customers.
What is competition?
Competition is the rivalry between businesses trying to attract the same or similar customers. In hospitality and catering, competitors may include restaurants, cafés, hotels, takeaways, pubs, school caterers and food outlets within a local area.
A direct competitor offers a similar product or service to the same target market. For example, two cafés near a town centre may both sell hot drinks, light meals and cakes to local workers and students.
An indirect competitor offers a different product or service but still meets a similar customer need. A café may compete indirectly with a supermarket café, a fast-food outlet or a customer preparing lunch at home.
Why does competition matter?
Customers have a choice. They may compare businesses using factors such as:
- the quality and range of food and drink
- the level of customer service
- the atmosphere, décor and cleanliness
- opening hours and location
- facilities, such as seating, booking systems or takeaway options
- value for money and price
- reviews, reputation and recommendations.
If a competitor offers a more attractive experience, customers may change where they eat or stay. A business therefore needs to know its competitors and identify what makes its own offer distinctive. This is called a unique selling point, or USP. A USP is a feature that helps a business stand out, such as a specialist menu, a memorable setting, particularly convenient service or a strong focus on a specific customer group.
How businesses respond to competitors
A hospitality business might respond to competition by improving its offer rather than simply copying another business. Possible responses include:
- training staff to provide more efficient, polite and consistent service
- reviewing the menu and removing items that are unpopular or no longer suitable
- introducing dishes that meet a clear customer need
- improving presentation, facilities or the atmosphere
- offering convenient collection, delivery or booking options where suitable
- using promotion to communicate the business’s strengths.
Any change should be carefully considered. For example, reducing prices may attract customers, but it could also reduce profit if the business does not control its costs. Adding more menu choices may appeal to some customers, but it can make purchasing, preparation, storage and staff training more complicated. A successful decision should support both customer satisfaction and the financial performance of the business.
What are trends?
A trend is a pattern of changing customer preferences or behaviour. Trends may affect what customers want to eat, how they choose a business or the type of service they expect. A trend can develop over time rather than being a short-lived event.
Examples relevant to hospitality and catering may include changing interest in:
- different food styles, ingredients or methods of preparation
- menu choices that meet particular dietary needs
- convenient food and service options
- eating out, takeaway or delivery experiences
- the appearance and presentation of food
- the use of technology when searching, booking or ordering.
Trends can create opportunities. A business that notices a growing demand may develop a suitable product or service before its competitors. However, businesses need reliable information before investing time and money. They can use customer feedback, sales information, market research, competitor observation and relevant industry information to help identify changes.
Responding to a trend
Imagine that a café’s customers show increasing interest in a particular type of menu choice. The café could investigate the demand, consider suitable ingredients and equipment, test a dish, calculate its costs and train staff before launching it. It could then collect feedback and review sales.
This example shows that responding to a trend is more than adding a fashionable item to a menu. The business must consider whether the idea suits its target market, premises, staff skills, equipment, suppliers and overall image. It must also make sure that the change can be delivered consistently and profitably.
How competition and trends affect business success
Business success means achieving the aims of the hospitality or catering business. These aims may include attracting and retaining customers, building a good reputation, generating profit and continuing to operate effectively. Competition and trends affect these aims because they influence customer expectations and the decisions a business makes.
| Change | Possible effect on a business |
|---|---|
| A new competitor opens nearby | The business may need to strengthen its service, USP or promotion to retain customers. |
| Customers expect greater convenience | The business may review ordering, booking, collection or delivery arrangements. |
| A menu trend becomes popular | The business may develop a suitable product, provided it is practical and financially viable. |
| Customer expectations change | The business may need to review its facilities, staff training and overall customer experience. |
There is no single response that works for every business. A small independent café, a hotel and a large catering organisation will have different resources, customers and objectives. In an exam answer, link the change to the particular business. Explain the likely effect, then give a reasoned judgement about whether the response could improve success.
Exam-ready summary
- Competition is rivalry between businesses seeking similar customers.
- Direct competitors offer similar products or services; indirect competitors meet a similar need in a different way.
- A USP helps a business stand out from competitors.
- A trend is a pattern of changing customer preferences or behaviour.
- Businesses can research competitors and customer trends before making decisions.
- Responses should be suitable for the target market and realistic for the business’s resources.
- Always connect competition and trends to customer satisfaction, reputation, costs, sales, profit or continued success.
Retrieval checklist
Before your assessment, can you:
- define competition, direct competitor, indirect competitor, trend and USP?
- give examples of how a hospitality business may respond to competition?
- explain why a business should research a trend before acting on it?
- apply your explanation to a specific hospitality or catering business?
- explain both a possible benefit and a possible drawback of a business decision?
For the full qualification wording, check the WJEC Hospitality and Catering specification. Specification details and wider industry guidance can change, so use the latest official information when revising.