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... rew's products. Interbrew may also change the styling of the pubs to their own taste to show people that Interbrew own it and not Bass. Customers may not like this change in style and may find an alternative. The main competitor in Britain to interbrew will be Scottish and Newcastle. The takeover will create a duopoly between the two companies.
This duopoly could prove to be unfavourable to consumers and other smaller competition. It would create a Barrier to entry. This means that smaller companies could not enter the market for several reasons e. g. they cannot compete on price, or cannot provide enough choice for the consumer. Interbrew, because of being a powerful company could operate predatory pricing policy.
As the title suggests, this is a policy designed to kill off competitors by reducing the price below cost price temporarily. The idea is that once the competitor is killed off, the firm can raise the price back up to the old level and steal all their customers. This is bad for consumers as well as competitors as it will eliminate a wider choice for the consumer. Interbrew could also participate in price discrimination charging different prices to the consumer and bulk buyers. Customers are affected also by the sale of Bass to Interbrew. If Interbrew decided that one of the brands previously owned by Bass was not making enough money, they might decide to either stop production of it totally, or to modify it slightly so that it has a better taste / quality etc.
This would be bad for consumers because the people who do drink that brand would have it changed and they might not end up liking it. This would lead to customer dissatisfaction and as a result, Interbrew could end up losing that custom. Conclusion In light of this information, my original idea that the acquisition of Bass by Interbrew should go ahead was a quick and un calculated judgment. I have now come to the conclusion that the acquisition should not go ahead and that the takeover would not benefit the consumer. I have reached this conclusion because whilst investigating, I came across several pieces of information, which I had not seen when making my introduction. Also the competition commissions report aided my conclusion.
In reading it they made several valid points about the way in which Interbrew could abuse their power in the market, which I agree with. I do feel this is the best conclusion and is totally in the public interest. Bibliography web web web Glossary Vertical Integration- This is when a company obtains control of its suppliers (sometimes called backward integration) or of the concerns that buy its products or services (forward integration). Social and demographic changes- The study of human populations, including their size, composition (by age, sex, occupation, etc. ), and sociological features (birth rate, death rate, etc. ). Merger- The combination of two or more organizations for the benefit of all of them.
The objective is invariably to increase efficiency and sometimes to avoid competition, although approval of the Monopolies and Mergers Commission may be required and the merger must be conducted on lines sanctioned by the City Code on Takeovers and Mergers. All the parties concerned, unlike some takeovers, normally amicably arrange mergers. Cash flow-The amount of cash being received and expended by a business, which is often analysed into its various components. A cash-flow projection (or cash budget) sets out all the expected payments and receipts in a given period. This is different from the projected profit and loss account and, in times of cash shortage, may be more important. It is on the basis of the cash-flow projection that managers arrange for employees and creditors to be paid at appropriate times.
Stakeholders- These are all of the people affected by a decision a business makes. Stakeholders are usually considered to be shareholders, customers, environment, the government and the workers. Capital Gain- The difference between the sale and purchase price of an asset. Increases of over a certain threshold will be subject to Capital Gains Tax. Dividends- This is the total amount of profit after tax that the business will issue to shareholders at the end of the financial year. The remainder of the profit after tax will be retained in the business for re-investment.
Economies of scale- These are reductions in the average cost of production, and hence in the unit costs, when output is increased. If the average costs of production rise with output, this is known as dis economies of scale. Economies of scale can enable a producer to offer his product at more competitive prices and thus to capture a larger share of the market. Internal economies of scale occur when better use is made of the factors of production and by using the increased output to pay for a higher proportion of the costs of marketing, financing, and development, etc.
Internal dis economies can occur when a plant exceeds its optimum size, requiring a disproportionate unwieldy administrative staff. External economies and dis economies arise from the effects of a firms expansion on market conditions and on technological advance. Downsizing- When staff is made redundant as a company restructures its organisation. Duopoly- A market in which there are only two producers or sellers of a particular product or service and many buyers. The profits in such an imperfect form of competition are in practice usually less than could be achieved if the two suppliers merged to form a monopoly but more than if the two allowed competition to force them into marginal costing Barrier to entry- Factors that prevent competitors from entering a particular market.
These factors may be innocent, e. g. an absolute cost advantage on the part of the firm that dominates the market, or deliberate, such as high spending on advertising to make it very expensive for new firms to enter the market and establish themselves. Barriers to entry reduce the level of competition in a market, i. e. they make it less contestable, thereby by enabling incumbents to charge higher-than-competitive prices.
Predatory pricing- The pricing of goods or services at such a low level that other firms cannot compete and are forced to leave the market. While it has long been accepted that some firms resort to predatory pricing on occasions, the application of game theory to strategic behaviour has shown that predatory pricing is unlikely to occur very often as it is at least as painful for the predator as for the victim. This encourages most potential predators to look for a more cooperative plan. Price discrimination- the sale of the same product at different prices to different buyers.
Usually practised by monopolists, it requires that a market can be subdivided to exploit different sets of consumers and that these divisions can be sustained. Pure price discrimination rarely exists, since sellers usually differentiate the product slightly (as in first-class rail travel and different types of theatre seat). Governments may use price discrimination in order to redistribute wealth but usually it is a monopolists way of extracting a higher pure economic profit.
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