Free «The Beer Oligopoly in the US» Essay Sample

The relations and market position of Anheuser-Busch and MillerCoors can be characterized as oligopoly as they control about 80% of the beer market in the USA. Because the economic model of pricing may only serve as a guideline for entrepreneurs, perhaps price ought to be considered from other perspectives. For example, when price is quoted in monetary terms, it is the dollar amount that a willing buyer will exchange with a willing seller. Sometimes goods and/or services are swapped for desired products or services or this exchange is referred to as barter. Perhaps then price should not solely be considered as monetary in nature, but should be related to "value," as demonstrated by an exchange as in the barter situation. Value is defined by the perceived importance (quality?) of a product or service in the eyes of the buyer. This perceived importance or desirability, that is, "value," sets the upper or highest price the purchaser would be willing to pay. If the price is exactly equal to the product's value, the buyer might be indifferent to the purchase.

For, Anheuser-Busch and MillerCoors, elasticity of demand increases competition between companies fighting for the end consumer. In this case, the greater the ratio of value to price, the greater the likelihood of the willingness to purchase. A purchaser's knowledge regarding a manufacturer or distributor impacts price, because knowledge adds or subtracts from perceived risk. Anheuser-Busch buyers are reluctant to add new and unknown suppliers to their buying lists. A missed delivery, a divergence in expected versus actual quality, slower response times for maintenance or repair or other intangible product attributes may "cost" the buyer more than potential savings. As a result, MillerCoors price alone is rarely the sole determinant in a purchase, but many decisions are made with inadequate and imperfect information (Friedman, 2003). "Both brewing groups typically adjust the price on a six-pack every year to reflect changes in the costs of ingredients like barley or hops.

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But their ability to do so now, while their customers are hurting most, highlights the pricing power that has accompanied industry consolidation" (Rising Beer Prices Hint at Oligopoly, 2010).

Anheuser-Busch and MillerCoors use game theory to indicate and evaluate outcomes of their strategic decisions and create the best possible approach for marketing. As receptors, they are prepared to launch counterstrategies to those taken by others. The normal competitive cycle of a business becomes one of programmed innovation and counterinnovation. The stimulus for innovation at any time, however, may be curtailed because of either external or internal resistance. Critics admit that Anheuser-Busch follows: ""pseudo-variety game, with dozen of variations on the same basic recipe for American lager beer" (Oligopoly brief: Anheuser-Busch 2007). Internal resistance may stem from inertia, lack of capital, fear of countercompetitive consequences, or a host of real or imagined obstacles perceived by company personnel. External resistance, which raises the most substantial barriers, includes consumers' resistance in the marketplace (Vives, 2001).

Marketing acknowledges that human motivation has an impact on economic and corporate growth and on development. Anheuser-Busch and MillerCoors concentrate on achievement as a significant stimulus for economic advance. Anheuser-Busch and MillerCoors recognize that consumers, stimulated by the achievement motive, try by increasing productivity to satisfy their desires for consumption and to improve their standards of living. The utilization of resources is not determined merely by availability and technological advancement. To a large extent MillerCoors is responsible for efficient systems of production and for the implementation of technology. It is impossible to understand our culture without a comprehension of marketing as an institutional force.

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Marketing is an institution of social influence in much the same sense, but not of the same degree, as the school or the home. It exerts an extensive influence that can lead to the betterment of social and economic life. MillerCoors consumers are faced with a dilemma. On the one hand they have an abundant automated economy that provides a surplus of products, an increasing amount of leisure, and an opportunity for a life of ease. On the other hand they have the tradition of perseverance, hard work, thrift, and saving, and a philosophy that an opulent life style is sinful, immoral, and wrong. Consumers actually appear to fear the "good life" and are basically uncomfortable with it. Many of the fundamental precepts underlying buyer and consumption behavior are now changing because our basic life-style constraints have shifted. Consumption is no longer exclusively a home-centered activity, since consumption of many goods outside the home has become common. For Anheuser-Busch and MillerCoors, physical work and drudgery, which were heralded as a virtue, are being replaced by machines. The life of toil is changing to one of greater leisure. Inherent values of thrift and saving are now challenged by prosperity through spending. The latter philosophy, in contrast with the puritanical outlook, suggests that a life of' abundance, ease, and great material wealth should be accepted as a moral one -- that it need not corrupt. It holds that an emphasis on extending consumption, on generating a desire for consumers to increase their store of material possessions, can also be a force for social and cultural betterment. It emphasizes that consumers should not feel guilt-ridden because they lead a comfortable life (Friedman, 2003).

The case of Anheuser-Busch and MillerCoors shows that profit is maximized in the industry. Regardless of the viewpoint accepted, it seems clear that in an abundant economy, consumption must not be considered happenstance. In order to proceed on a continuing and orderly basis, we must establish the necessary considerations for consumption. New marketing tools that encourage continuing rather than irregular production, such as sales on a replenishment basis and the placement of consumer orders in advance, must be developed. The model also assumes that true marginal costs are determinable and continuous, and that consumers respond in predictable ways. Thus, the use of the model for new products may tend to serve as a guideline, but in reality there are few guidelines that the entrepreneur can follow when setting prices for new products. Anheuser-Busch consumer responses remain unpredictable. However, although the use of trends to support marketing decisions may lead to forecasting errors, history can provide some useful guidelines (Vives, 2001; MillerCoors Home Page 2010).

In general, the competition is beneficial to consumers as it influences quality demands and prices. When a firm or an individual purchases a product, a bundle of services is purchased that the product carries along with it. That may be clean clothing, as in washing machines; prestige, as in some automobiles or other high-visibility goods; or "freedom from worry," as provided by warranties and guarantees. Expected on-time delivery and freedom from product failure may be a major reason to purchase from a particular manufacturer or distributor. Purchasers may also be buying certain financial arrangements such as delayed payments, extra discounts for cash, or product tie-ins with other goods or services. The reasons for any particular purchase are many. One environment also affects the other. Supplier availability, and their geographic dispersion, play a significant role in determining how heterogeneous the environment is perceived by the entrepreneur. This perception guides management decisions of how the firm will behave in relation to other channel members as it attempts to control the channel. Power, in terms of channel leadership, and the corresponding degree of control, enables the channel leader to achieve economic advantages by influencing how goods are physically transported and stored.

Therefore, comprehensive distribution strategies of channel design, integration, and firm positioning all hinge on the ability of the Anheuser-Busch and MillerCoors to either manage the system to their advantage, choose to fit within a prevailing system, or design their own separate system. The preceding discussion of the interface between entrepreneurship and distribution management intended to allow the drawing of several conclusions (Anheuser-Busch Home Page, 2010).

In sum, oligopolistic position of Anheuser-Busch and MillerCoors influences prices and demand but it does not result in poor quality or high prices of the proposed products. If one believes that the objective of marketing is to satisfy consumer wants and needs, then distribution plays an integral part in servicing those needs. New oligopolistic ventures, quite frequently, succeed or fail on the basis of whether or not they provide a desired level of service to their target consumers.


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