Labatt Blue Case Study
1) ‘For most of this century, two firms have dominated the Canadian market for beer - John Labatt Ltd. and Molson Brewing Co. Ltd.’ ‘The two companies account for 82 percent of national beer sales.’ As stated in the textbook, 2) ‘Labatt Blue is the best-selling Canadian Beer in the world’. Knowing this, you have to wonder, why; in the article Game Theory: Opening Up the Brewing Industry, do these two beer companies choose to acquiesce and allow entry into the competitive industry that is the beer market. To start, ill define Game Theory by the definition in the 3) textbook, ‘The analytical framework in which two or more individuals, companies, or nations compete for certain payoffs that depend on the strategy that the others employ’.
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5) Industry analysts suggest that a 1 percent share of the beer market is worth about 16 million in profits. Knowing this information, it could be in the microbreweries best interest to at least try to enter the market.
According to the textbook6), Molson and Labatt currently dominate the beer market. The way the textbook writes the article Game Theory: Opening up The Brewing Industry ties into the definition of game theory perfectly in the sense that it is a way of explaining analytically how two or more companies compete in their industry to achieve certain payoffs. It’s all so strategic. This article really helped me to understand how companies compete in the market, and the strategies you can use to really achieve success in your industry.
There is a solution to this article. Basically what the textbook7) is telling me, is that if Molson and Labatt fight and lose the battle of the entry of the microbreweries it will cost Molson and Labatt $18 million, while acquiescing (letting them gain entry) will cost them $16 million in lost profits. They will be saving $2 million by letting the microbreweries enter. However, if Molson and Labatt choose to fight the entry, the microbreweries know that they are better off staying out of the market as then they will not lose their $1 million to
5) Industry analysts suggest that a 1 percent share of the beer market is worth about 16 million in profits. Knowing this information, it could be in the microbreweries best interest to at least try to enter the market.
According to the textbook6), Molson and Labatt currently dominate the beer market. The way the textbook writes the article Game Theory: Opening up The Brewing Industry ties into the definition of game theory perfectly in the sense that it is a way of explaining analytically how two or more companies compete in their industry to achieve certain payoffs. It’s all so strategic. This article really helped me to understand how companies compete in the market, and the strategies you can use to really achieve success in your industry.
There is a solution to this article. Basically what the textbook7) is telling me, is that if Molson and Labatt fight and lose the battle of the entry of the microbreweries it will cost Molson and Labatt $18 million, while acquiescing (letting them gain entry) will cost them $16 million in lost profits. They will be saving $2 million by letting the microbreweries enter. However, if Molson and Labatt choose to fight the entry, the microbreweries know that they are better off staying out of the market as then they will not lose their $1 million to