Anheuser-Busch Brewing Co's Demand Curve

Executive summary 

This research analyses the ways through which the demand function of Anheuser-Busch Brewing Co has been derived by use of economic analyzing tools. It has first defined the company roles, goals and objectives about its production. The study has also explored work done by other scholars with the aim of making conclusions about the company’s strategies to maintain market demand for its products. The methods adopted for the study include regression analysis, quantitative techniques, and economic analysis that have been explained in detail on the company’s objectives to continue its operation in the market. Reliable sources have also been used for research to calculate the demand function and make analysis concerning the company progress to the future. 

Introduction 

Anheuser-Busch Brewing Co. is the world’s largest alcohol brewer located in the US. The company traces its origin to St. Louis where George Schneider opened the first brewery in 1858. The company went through successive stages as family members managed it through the many years. By the 21 st century, the company was the world’s leading brewery until 2004 when a merger company of AmBev and Interbrew overtook it. Anheuser-Busch Brewing Co., however, remained the leading revenue earner in the industry despite the defeat by the other companies. It diversified into other industries such as recycling, real estate development, turf farming, label printing and the processing of rice and malt. In 2008, InBev purchased the company after an agreed takeover leading to the formation of a new corporation Anheuser-Bush InBev becoming the world’s largest brewer by the end of 2008. This study is aimed at the analysis of Anheuser-Busch Brewing Company’s demand curve as a contributor towards it becoming the world’s leading producer of beer ( Arnold & Shockley, 2001) . 

Review of existing literature 

Anheuser-Busch Brewing Co has made its progress through its development stages all along since its inception. The company stabilized its customer shareholdings through capital investments in a period when beer consumption in the US was very low ( Arnold & Shockley, 2001) . The company’s growth estimates at almost 10 billion dollars in the same period when it diversified its operations in related industries, which include food production, sports industry so that it could manage the economic situation at the time. Furthermore, the company bought interest shares in other related businesses in the brewing industry from foreign countries such as Mexico, Brazil, Chile, Argentina, and the Philippines, which had an improving market for beer products. Anheuser-Busch Brewing Co. took great delight in the foreign countries that displayed potential market for its products and invested considerably in the markets. Various studies found that the company’s joint venture dealings in other nations have given it an opportunity to advance its growth in a unique way. 

A review of the company sales report from previous years shows the progress made. It is very true that the firm has a significant chance to continue with its growth even to the future years as seen from the data. Sales have since been on a steady rise over the years an indication that beer consumers have developed a liking to the beer brands from the company. Supply, which is the function of demand, indicates a relationship with the beer consumption in the market. The company can measure an increase in consumption of its products through the increased supply recorded in the enterprise. 

Analytical and Empirical Frameworks 

The study relied on the most suitable technique applicable to industries operating large sales in the market. In this case, the brewery company is the largest company that produces and supplies beer to many countries. This research has analyzed the financial statements of the company sourced from company declarations and publications to determine its demand function and to enable plotting of the graphs that give the company’s indication. Empirical frameworks were used in this study to analyze the business information from research articles stating the company information. The study employed data from recent financial years to interpret the company’s progress objectives and to analyze the progress for the future of the enterprise (Arnold & Shockley, 2001). 

Data Set Description 

Regression analysis 

Regression analysis is a technique used by organizations with commodities to sell available in different versions that can be sold at various prices in the market. Regression can be used to determine the best price for the commodity through calculations. Regression analysis enables the company to identify points of best fit among the plotted areas in the graph. 



January	1,280	$33,600
February	1,480	36,300
March	1,500	37,800
April	1,300	35,500
May	1,460	36,600
June	1,100	32,900
July	1,450	36,200
August	1,250	33,400
September	1,410	37,700
October	1,490	37,400
November	1,290	33,800
December	1,540	38,100

 The above table represents data relating to the company that was collected. 



SUMMARY OUTPUT
Regression Statistics
Multiple R	0.975435
R Square	0.951473
Adjusted R Square	0.94662
Standard Error	22.41024
Observations	12

 Multiple R shows there is a little relationship in between data used. The smaller number of data falls under along the line. 



ANOVA
	df	SS	MS	F	Significance F
Regression	1	98469.48	98469.48	196.0689	6.76E-08
Residual	10	5022.187	502.2187
Total	11	5022.187





	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	-628.061	127.5628	-4.92355	0.000602	-912.289	-343.834	-912.289	-343.834
X Variable 1	0.049864	0.003561	14.00246	6.76E-08	0.04193	0.057799	0.04193	0.057799



Quantitative techniques 

Interval and Hypothesis testing were used to determine the outcome of the tests. In interval testing, sample data from sales information of the company was used to determine the overall performance of the company about profitability. It used numerical data to calculate the cost-effectiveness of the company. After that, the results from the calculations were used to determine the demand function, which is the aim of this study. 

Economic tools 

The economic tools that are used to calculate the demand curve of the enterprise’s products take into consideration the sales price and the demanded quantity. Therefore, for this case of the Anheuser-Busch Brewing Co., a considerable amount of sales data has to be estimated to determine the demand curve. The demand curve for this company take a curve like a format starting from the left side of the graph at the highest point then drops while extending towards the right side along the x-axis. The increase decrease in commodity price will increase the demand for the commodity in the market, and an increase of the price will shift the curve to the left a drop in the demand. The demand function P = a – bQ where P is the price, Q is the quantity demanded in the market. Profit maximization occurs when MR=MC and when TR-TC is greatest (Arnold & Shockley, 2001). 

The above graph represents the changes in the commodity required in the market about its price. For a commodity to increase in sales in the market, its price has to be reduced. From the graph at D1, commodity prices are high and thus the low demand from the people whereas the demand on D2 is very high with the very low price charged for each product. 

Results and Discussion 

Results From the above study, indicate that the company has great opportunity to grow in the world market. The regression analyses, quantitative techniques, and the economic analyses used all point at one instance of growth opportunity for the company. A close comparison of the techniques used shows a correlation that is an indicator of the anticipated growth in for the company (Arnold & Shockley, 2001). 

Regression analysis display that the firm has a high possibility of making progress that can be related to its past activities which have enabled it to achieve such significant market shares. A graph plotted comes up with a line rising towards the right side of the chart. Additionally, the demand function (P = a – bQ) when used to plot a graph it shows similar results as that of the regression analysis. The displayed curve on the chart slants towards the right side an indication that a decrease in the price of the commodity results in an increased sales for the company. The inverse relationship between price and demand is the common economic phenomenon that businesses have to fight against to ensure optimum sales and revenues are realized in a competitive market (Arnold & Shockley, 2001). 

Conclusions and recommendations 

Finally, beer market has a much liking by people across the world. The study on Anheuser-Busch Brewing Co. has revealed a substantial market share owned by the company in the global marketplace. Research on its demand function indicated that the firm employed significant measures to create its market share for it to maintain the significant market share than any other similar company. The company strategized on persistency in the initial years after its establishment for it to realize a competitive edge in the industry. It was also discovered that the corporation had employed the skill of acquiring other companies to remain strong and competitive in the market. The brewery business should be studied on its effectiveness in setting prices that are competitive in the market. 

The study recommends a further study on other techniques that the company used which might not have been researched while trying to understand other techniques that were employed by this company. 

Reference 

Arnold, T., & Shockley, R. L. (2001). VALUE CREATION AT ANHEUSER ‐ BUSCH: A REAL OPTIONS EXAMPLE. Journal of Applied Corporate Finance , 14 (2), 52-61.