Economics of Organisations - The British Pub and Economic Implications Arising from Its Death - Assignment Example

……………………………………………………………………………….xxxxxxxxx .………………………………………………………………………………….xxxxxxxxx .…………………………………………………………………………….xxxxxxxxx Course .………………………………………ECONOMICS OF ORGANIZATIONS Title …………………THE BRITISH PUB AND ECONOMIC IMPLICATIONS ARISING FROM ITS DEATH Word Count 1465 PART A Lager that is sold in supermarkets and off-license stores is no different from the beer available in a pub’s tap only that the mode of packaging brings in the difference. But since cultural and social change is imminent in most parts of U.K, the pub business is hanging on a whisker as consumers consider sipping their drinks from their comfortable homes while watching a comedy show for example than spending in the pub. This cultural change is blamed for the collapse of the British pub as argued by BELK, ASKEGAARD and SCOTT (2012). It’s for this reason that the publicans add no value to the business because of these changes that have gone to an extent of striking heavy economic implications on the British Pub industry. Cultural changes in the region have been blamed for the decline in the Pub business according to Christopher Snowdon who highlights the changes as unnecessary and uncalled for. Snowdon in his paper, “Closing Time; who’s killing the British Pub” refers to a number of well-calculated reasons that help convince the masses on the rapid decline of the pub business in U.K where he relates the consumer preference of lager to the decline. As noted earlier, consumers have developed a habit of consuming alcohol from supermarkets and consuming it at the comfort of their homes than in the pubs. As a result, the outcome has had a big impact on the viability of some pubs. This type of competition has resulted to the edging out of Pubs from the market and rendered supermarkets and off-license stores as perfect shopping joints for alcoholic products and explains the rapid decline of pubs in the whole of U.K (RICKARD, S. 2006). This is a classic example of firms failing to understand their markets and practice the best methods that enhance their competitive advantage. These changes are responsible for the consequence of economic change and include better domestic living conditions, shrinking of the working class and the decline of the heavy industry just to mention but a few as argued by BELK, ASKEGAARD and SCOTT (2012). PART B The Pub companies (PubCo’s) business model can be simulated to an overall price-taking firm that makes economies of scale savings from buying services such as insurance, legal services, interior décor among others in bulk and transfers the savings made to the tenant at an affordable lower price as compared to the contrary. Due to reasons like not willing to apply for a mortgage on the pub, the PubCo model easily offers a low-cost method of getting tenants into the pub trade. However, when a deal is too good you have to think twice and wise decision-making in this case is not an exception as argued by BELK, ASKEGAARD and SCOTT (2012). Having benefitted from the model, the tenant is advised to strictly abide by the model’s rules and regulations where he must buy the pub’s drinks from the PubCo above the market rate and this has contributed towards the closure of most pubs in U.K. This model is more of a business cartel that restricts its members to purchase its products. PubCo’s also have been blamed for the rapid decline of the U.K’s Pub estate due to selling of their stock to their tenants but Snowdon reports that they still have control over 40% of the available pubs in Britain. From a close stance, one is able to notice that pubs are been edged out by excessive taxation and regulation from the Government. Elasticity is about the responses from supply and demands are merged together and the quantity of the product where it is analyzed for particular measure. In this regards, the commonly used form of elasticity is price elasticity of demand. Through this theorem, the elasticity for beer and wines in pubs is compromised and greatly affected as argued by BELK, ASKEGAARD and SCOTT (2012). Despite the economy growing at a faster rate, pubs are closing down at a high rate due to recession periods that make technical appearances during the economic times and are responsible for the closing down of pubs in U.K. This is because zero mitigations policies were enacted to ensure recession does not eat to the profitability of small businesses as it is the case for pubs. PART C Snowdon’s school of thought is captured and highlighted in the policy situations where there is VAT Reduction, lower rates for cooked food, amendment of smoking ban and the abolishment of cumulative impact zones. The school of thought has been widely adopted by different governments when enacting laws that govern its income source. The Government’s main source of income is through taxes and by halving all alcohol duty in the name of bringing it closer to the European average is a big joke and is expected to culminate in the collapse of the British pub (Business and Enterprise Committee 2009). This is because taxation does not only raise government revenue but increases prices which discourage the consumption levels of alcohol-related products as argued by BELK, ASKEGAARD and SCOTT (2012). In this regard, lowering the duty to a considerable level will yield justice to the struggling business avenue by reducing the cost of living, generating more and more job opportunities and reduce alcohol fraud which has been imminent since Margaret Thatcher introduced the new alcohol bill in 1989 (WARWICK, C. 2000). VAT is another factor that needs to be closely monitored and controlled from a central point. This is because it is capable of reducing the cost of food and drinks in pubs for example and will as a result motivate alcohol consumers to prefer pubs rather than in their homes. Supermarkets and off-license stores operate differently and may not be operating under the PubCo’s. In this regard, the VAT on their stock is calculated and placed lower as compared to the Pubs operating under the PubCo’s. This might be the reason why preference is slowly shifting from the pubs to the supermarkets and off-license stores because of the difference in pricing of alcohol products and food sold for cooking (Faber and Faber Mass Observation 2009). Therefore, this policy of reducing the VAT for alcohol and food sold in the pubs will be a good gesture to revelers and alcohol consumers at large as argued by BELK, ASKEGAARD and SCOTT (2012). In conclusion, tax discrimination in this case can or should be blamed for the poor performance and sudden collapse of the British pub. The tobacco industry thrives on the success of the British pub and in the event that controversial laws are set in place with the interest of a few people, then it’s likely to elicit some mixed reactions towards the same (Bowers, S. 2008). For instance, binge drinking and intensive cigarette smoking may be associated with health related problems like Cirrhosis and lung cancer respectively. This has long term effects on the economy of any country if a lot of people indulge in the two. If the situation gets out of hand, task labourers will be a scarce result and will at an advanced stage translate to an economic problem. However much the tobacco companies argue about peer pressure being the lead to teenager smoking, the pricing should be in a way that it discourages smoking as well. Snowdon argues that the smoking ban imposed on the U.K should be abolished in order to resuscitate the British Pub with an aim of challenging the consumer’s habits of buying drinks from the supermarkets (ODOWD, ADRIAN. n.d). These policies are likely to bring sanity to the business environment and improve the service provision status to exemplary levels (LERNER, J. 2012). His argument is however blinded to one side i.e., the repercussions that will arise from teenage smoking after the ban is lifted and concentrates mainly on the success of the British pub. It is paramount to note that taxation and other forms of regulation have been on the forefront and should be blamed for the collapse of the UK pub industry where other factors like smoking ban and alcohol duty have elevated the issue to imaginary heights as argued by BELK, ASKEGAARD and SCOTT (2012). According to Snowden, these bans and duties should be banned and scrapped off from existence and functionality in order for the UK pub industry to regain normalcy. Also, Snowden notes that the blame that PubCo’s have played a culpable role in the decimation of the British pub has been amplified as little evidence is attached to the blame and as a result, something ought to be done to reduce taxes (Snowden 2014, p. 40). Businessmen should have come together to make good policies and recommend to them government to ensure recession does not affect their business but greedy and self-worth could not allow a noble cause. References BELK, R. W., ASKEGAARD, S., & SCOTT, L. M. (2012). Research in consumer behavior. Vol. 14 Vol. 14. Bingley, U.K., Emerald. http://www.emeraldinsight.com/0885-2111/14. Berry, M. (2012). Smoking ban: Majority of licensees want smoking legislation amended for pubs. Morning Advertiser, 3 July Bowers, S. (2008). Pub beer flattened by smoking ban. Guardian, 4 January BRITISH BEER & PUB ASSOCIATION. (2007). Statistical handbook: [a compilation of drinks industry statistics]. 2007. 2007. London, Brewing Publications. Business and Enterprise Committee (2009). Pub companies – seventh report Faber and Faber Mass Observation (2009). The Pub and the People, London: (first published 1943) LERNER, J. (2012). The architecture of innovation: the economics of creative organizations. Boston, Mass, Harvard Business Review Press. ODOWD, ADRIAN. (n.d.). UK will review partial smoking ban in 2010, MPs committee told. BMJ Publishing Group Ltd. http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=1283213. RICKARD, S. (2006). The economics of organizations and strategy. Maidenhead, McGraw-Hill Education. WARWICK, C. (2000). Princess Margaret: a life of contrasts. London, André Deutsch. Read More