The British Beer Industry, Research Paper Example

Effects of macro policies on business operations or performance

Available statistics indicate a considerable decline in the consumption of beer in the United Kingdom and Germany since 2008. The contribution of economic models such as consumer demand, elasticity of demand due to changes in price, cost, and market structures as well as the role of fiscal and monetary policies plays a crucial role in this trend hence affecting the profitability of the business.

Elasticity of demand is determined by percentage change in the demanded quantity in response to the changes in price and can be evaluated using an equation

Price Change Percentage

An inelastic demand is attributed to a large price change that causes a small change in the demanded quantity. On the other hand, elastic demand is attributed to a small price change that results to a large change in the demanded quantity.

Elasticity of demand in beer can be attributed to a number of factors. First, beer is a luxurious commodity. It is also expensive requiring consumers with bigger incomes. There are substitutes to beer that can serve the same purpose and this makes the consumers to sensitive in aspects of price.

Beer consumers in the German market are price conscious and they can hardly pay the recommended premium prices for the highly priced beer. This has caused a significant decline in the price of beer due to oversupply as well as the shrinking demand.

Fiscal and monetary policies have an important role to play in the beer market in the United Kingdom as well as in Germany. The government has stringent regulations concerning taxes and spending in the beer industry which is one of the highly taxed commodities. The market structure is equally influential in the beer industry in Germany and United Kingdom. The industry is generally dominated by big brewing industries and the market is extremely competitive. Bass Brewers for example is a domestic brewer of significantly large size thus controlling close to 35 percentage of the market share. The government has also put in place regulations such as ‘never drink and drive’ with severe penalties being imposed on offenders, thus drastically reducing beer consumption in public places that attracts close to 50 percent of the consumers. The Purity Law (1516) also requires that beer production be of the highest quality and this has significant impact on the level of profits that a business can earn as well as an avenue for discouraging innovation.

The monetary policies are intended to regulate the supply of money in the economy that has significant influence on inflation as well as the interest rates. This has serious ramifications of the buying power and the rates of beer consumption.

The market structure in the beer industry is also influential as it determines firms that are engaged in the production of homogenous as well as identical products. The beer industry thrives in an extremely competitive and fragmented market as can be indicated by Germany with 1349 small to medium sized and family owned breweries based on available data as at 2013. This makes the market to suffer from intensive competition and oversupply. This is a potential cause for financial difficulties among the breweries thus facilitating the need for diversification in business ventures such as golf course as well as real estate.