Whether Red Bull Should Invest In The Formula 1 Racing Championship Next Year Or Not - Essay Example

? Whether Red Bull should invest in the Formula Racing Championship next year or not? Table of Contents Data Presentation & Data Analysis 9 Finding1 9 Objective 1 9 Finding 2 11 Finding 4 15 The reason for such a huge investment was that Red Bull wanted to expand its brand on a global scale and the only way to do this was by investing in global activities. The company chose sports events because these events matched with the brand image of Red Bull energy drink. The marketing strategy went hand in hand. It strengthened the brand image of Red Bull. F1 championship also provided it by extraordinary revenues as mentioned above and also helped in increasing sales. Brand awareness was created by the event. The company was able to grab a large chunk of market share from its competitors. The details of the marketing share have already been discussed under the third objective. 16 Conclusion and Recommendations 16 Conclusion 16 1. Introduction……………………………………………………………………………………………5 2.Aim and Objectives………………………………………………………………………………….6 2.1.Aim……………………………………………………………………………………………………6 2.2.Objectives………………………………………………………………………………………….6 3. Research Design……………………………………………………………………………………..6 3.1 Research Methods…………………………………………………………………………….6 3.2 Data Collection………………………………………………………………………………….7 3.2.1 First Objective………………………………………………………………………………..7 3.2.2 Second Objective 7 3.2.3 Third Objective 8 3.2.4 Fourth Objective…………………………………………………………………………………………………8 3.3 Validity and Reliability………………………………………………………………………….9 4. Data Presentation & Data Analysis 10 Finding 1 10 4.1 Objective 1: To analyze and identify whether it was a good decision on part of the company to start up with this heavy investment marketing activity……… 10 Finding 2 11 4.2 Objective 2: Analyze and compare the past results of the Formula 1 championship over the last six years and identify the success position of Red Bull Racing during this time span…………………………………………………………………………..11 Finding 3 18 4.3 Objective 3: Find out whether the Formula 1 championship has created an impact on the brand’s image and did it help increase the energy drink’s sale…………………………………………………………………………………………………………… 18 Finding 4…………………………………………………………………………………………………….19 4.4 Objective 4: Recommend whether the company should invest in the Formula 1 racing championship next year i.e. 2011……………………………………19 5. Conclusion and Recommendations …………………………………………………….20 5.1 Conclusion 20 5.2 Recommendations 22 References 24 Introduction Red Bull was founded in 1984 by Dietrich Mateschitz. He fine-tuned the formula of a tonic drink and developed a unique marketing concept for the drink. In 1987 Red Bull energy drink hit the market for the first time and started selling on the Austrian market. Red Bull entered its first foreign market Singapore in 1989 and then Hungary in 1992. United Kingdom followed in 1995 and in 1997 United States. Since then, over 30 billion cans of this popular energy drink have been consumed, highest consumption being in 2010. Red Bull is currently being served in more than 160 countries with annual sales of approximately 4 billion cans (Red Bull Company, 2011) Red Bull is not just an energy drink, it’s a brand. Red Bull has become a renown brand and has well-managed to create its strong brand image worldwide. Red Bull energy drink is associated with adventure and targets the consumers who have a taste and longing for thrill and extra-ordinary excitement levels. Its target market is basically the group of people with fun active lifestyle. Red Bull has a blend of certain high-quality ingredients that vitalizes body and mind. These ingredients together improve stamina, alertness, concentration, speed of reaction and also stimulates metabolism (Red Bull Company, 2011) Red Bull has always believed in heavy brand investment. As its marketing strategy, Red Bull avoided usual methods of marketing and relied heavily on buzz marketing or word of mouth. Other than the buzz marketing Red Bull has developed an international campaign of sponsoring events. These events mainly comprise of sports events like mountain biking, surfing, snowboarding, rallies, Formula 1 racing, etc. Sponsorships require heavy investment by the company. So far Red Bull has been successful in maintaining these sponsorship events. The company associates the drink’s image with such activities because it seeks to promote a cool brand image and increase the brand power. Red Bull’s slogan “It gives you wings” is widely used in these marketing activities (Paddock Magazine, 2010; Kotler 2000) Formula 1 racing is a part of the marketing activities carried out by Red Bull. It is widely believed that energy drinks are specially made for drivers and athletes. Red Bull has hit the bull’s eye in sponsoring the right events that go with the image of the energy drinks. It was in 2005, that the company started up with this heavy investment activity. Red Bull has currently two teams participating in the Formula 1. In 2005, the company purchased an already existing Formula 1 team that was owned by the Ford Motor Company. The team was put up for sale because the owner thought it was not a compelling business option anymore. Red Bull built its own team using the Ford Motor Company’s. The team was named Red Bull Racing formerly known as the Jaguar racing when it was under the Ford dynasty. For five whole years Red Bull Racing struggled and finally in 2010 it won the Formula 1 race and the drivers’ championship (Red Bull Company, 2011) The research is based on the Red Bull’s investment in the Formula 1 racing. The research will answer certain questions about this heavy investment and will also provide with a future outlook of this investment. The research revolves around the past, present and the future scenario of the Red Bull’s investment in the Red Bull Racing Formula 1 team. Aim and Objectives Aim The aim of this research is to find out whether it will be a wise decision for Red Bull to invest in the Formula 1 racing championship next year keeping in view all the past results. Objectives 1. To analyze and identify whether it was a good decision on part of the company to start up with this heavy investment marketing activity. 2. Analyze the impact of F1 on the brand’s image and deduce whether it was an appropriate promotional tool. 3. To examine the market share, revenues and sales figures of the company and also compare Red Bull’s marketing strategy to the competitor’s marketing strategy. 4. Find out the main reason for the Red Bull’s investment in F1 and recommend whether the company should invest in the Formula 1 racing championship next year i.e. 2011. Research Design The aim of this research can only be fulfilled once there is a completion of each objective. In order to be completed, each objective requires a slightly different research method and thus for each objective research methods have been used accordingly. The research design will discuss and elaborate on all the methods that have been used in the course of this research. For each objective a variety of research methods have been used. There are two main methods of research, primary and secondary. Generally for the research purpose researchers’ start with the secondary data which has been already collected by someone else for some other research purpose. Such data can be used again and again for different research purposes. In this case, research has been conducted mainly using the secondary data. The sources of secondary data that have been used throughout the research include internet articles, reports, books, journals and the company’s own website. Secondary data has an advantage over the primary data collection. Primary data is collected for the first time and may contain some loopholes. In the case of secondary data collection, data has already been collected by another entity and has been used for different research purposes. This provides with a satisfaction that the data available is authentic as it is used by various people for the research purpose. Another advantage of the secondary data is the time restraint. The time period for this research was considerably very short and it was impossible to conduct an efficient primary research. Not only the Red Bulls’ own website but also the Formula 1 championship’s website has been used as the main source of quantitative and qualitative data. Data Collection First Objective For the first objective, the data was collected based on the information present on the internet regarding the company’s history and its marketing strategy. Several articles were reviewed regarding the Red Bull’s marketing strategy. These articles were found using the Google search engine. The company’s history was available on the company’s own official website and was also a part of some articles that discussed the Red Bull’s marketing strategy. Second Objective The second objective required collection of the quantitative data to analyze the results of F1 and their impact on the brand image. To find out whether the Red Bull’s brand image has changed as a result of its investment in the Formula 1 Championship, as a general rule one will think to conduct a primary research. But in this case to find the change in Red Bull’s brand image as result of it being a part of the Formula 1 Championship, secondary data have been used. Third Objective To fulfill the third objective, research was based on the secondary research methods. In order to come up with an explanation for the third objective, Red Bull’s yearly profitability charts were examined that were available on the internet. These annual profitability results were compared to the annual rankings of the Red Bull Racing in the Formula 1 championship. The comparison was used to find out whether there is a link between the ranking chart and the profitability of the company. The market share was also examined over the years and also the competitor’s marketing strategy was compared to the Red Bull’s marketing strategy. Fourth Objective As for the last objective, finally it was recommended whether the company should invest in the Formula 1 Championship next year or not. The recommendation that was made was based on all the statistical facts and qualitative information that was present on the internet and was gathered during the course of this research. Various sources were used to collect such information and facts. The yearly results of the Formula 1 Championship, the annual profitability charts of the company, internet journals and articles, e-books and other related information available on the internet was taken into account to give the final recommendation and the conclusion as well. Validity and Reliability The purpose of research is to provide with valid and reliable information so that it can be later used for discussions and analysis and be a source of secondary data to other entities. It was ensured that unreliable sources of data that may include random information available on the internet were not used. Internet is not a bad source of information but it is difficult to differentiate between the authentic information and the information provided by random unreliable sources. To overcome the validity and reliability concern, library catalogues, e-books, company’s official website and other authentic sources like Forbes and The Nation were used. Such sources provide with the authentic and official information which is both valid and reliable. If false and unreliable sources are used, it may lead to wrong conclusion and recommendation and will distort the whole purpose of the research. It will not only lead to invalid and unreliable information but will also result in false-judgments. Inaccuracy will be the biggest threat because the whole analysis can go wrong. It was taken care of that the reliable sources of information are used and that the purpose of this research remains intact. Data Presentation & Data Analysis Finding 1 Objective 1 Looking at the past history of the company, it all started in 1987. Each year the sales of the company kept on doubling. Initially Red Bull did not rely on aggressive marketing. It started off with the buzz marketing. Investing in the Formula 1 Racing team was a very cunning approach made by the company. It was in 2005 that the company made its first investment in the Formula 1 Racing Championship. It bought Jaguar Racing Formula 1 team and renamed it Red Bull Racing, followed by a purchase of another team in the same year. Formula 1 is part of the Red Bull’s global marketing strategy. The first investment that the company made in Formula 1 was of $400 billion which was to be invested over the span of three consecutive years. For the founder of the company, taking part in the Formula 1 was more important than winning the championship. In addition Red Bull had acquired two teams on the Formula 1 Racing Championship. Owning two teams at the same time provided with more number of prospects to win the racing championship. In the very initial seasons Red Bull Racing managed to make to the top ten teams of the Formula 1 Championship. This was kind of a sponsorship event as the team was being sponsored by the company. This created a buzz in the global market because there was a new entrant into the Formula 1 Racing Championship which in every season is the centre of attention of the whole world. Buzz always proves to a positive sign for a brand. People, who were not aware of the brand before, were now aware because they could associate it with the famous Formula 1 Racing Championship. Another reason that could be looked at to deduce the Red Bull’s sensibility in making the decision, was the time taken for the Red Bull Racing to reach the top. As compared to the other teams in the Formula 1 Racing Championship, it took only a short span of six years for the Red Bull Racing to reach the top. It started in 2005 and managed to remain amongst the top 10 teams of the Formula 1 Racing Championship since then. In 2009, the company invested ?25 million to give a boost to its Formula 1 team. This heavy investment proved to be successful and in year 2010, the Red Bull Racing won the Formula 1 Racing Championship and got the first position as the constructor. So as far as the question arises whether the investment was a good decision or not, it simply cannot be denied that the investment was a good decision taken by the company. Though the idea was to invest this heavily on a short-term basis but instead it proved to be long-term venture after one success and another (Paddock Magazine, 2010; Sylt, C. & Reid, C 2010) Finding 2 Objective 2 Since its initial seasons, Red Bull Racing has managed to maintain its position in the top ten teams of the Formula 1 championship. In 2006, Red Bull racing found the best driver who proved to be luck for the team. This driver was none other than Sebastian Vettel who was champion-in-the-making. After Sebastian Vettel joined the team, the ranking of the Red Bull Racing improved and it was this marvelous driver who won the Formula 1 Racing Championship in 2010. The whole sponsorship event had a very positive impact on the brand image of Red Bull. It was such a strong impact that when general public was questioned about energy drinks, the first name that came to their mind was Red Bull. Red Bull was able to establish a strong brand recall. Red Bull used F1 as a promotional tool. This was a very clever and appropriate strategy followed by Red Bull Company. It helped build a strong recall of the brand. This was also done because during the event, from cars to the racers’ kit, everything carried symbol and slogan of the popular energy drink (Kotler 2000; Pelsmacker, Patrick, Maggie & Joeri 2004) Through this sponsorship event Red Bull was able to establish that it incorporates thrill, adventure and excitement. It proved that it is vitalizing and is for the people who want active lifestyle. The year 2010 turned out to be a year of celebration for the Red Bull Racing team. Red Bull Racing won the Formula 1 Racing Championship in 2010. Red Bull Company cherished this moment as it created an unbreakable image of the brand because it was associated with the event. The company hit the highest revenues and sales figure in 2010. It created a very positive impact on the brand image of the Red Bull energy Drink (Formula 1 racing, 2011; Rendle.S, 2011) Even in year 2011, Red Bull Racing was fortunate enough to maintain its top ranking position (Formula 1 Racing, 2011) Finding 3 Objective 3 Sales and Revenues Formula 1 championship did manage to create an impact on the brand’s image and resulted in increased sale of the energy drink. Since the brand became available in the market, each year the sales of this renowned energy drink increased. In some years the sales even doubled (Red Bull Company, 2011) Formula 1 Racing Championship helped to create a stronger brand image of the energy drink. The brand was associated with the Formula 1 Championship since 2005. In the initial years this helped to create a buzz but did not have a significant impact on the sales of the Red Bull energy drink. Initially people became aware of the drink and started associating it with the Formula 1 Championship because the company was running two teams in the competition. When the Red Bull Racing secured its position amongst the top ten Formula 1 teams, it created a positive image of the brand. However, it was not until 2009 when the things totally began to change. In 2009, the team acquired second rank amongst the top ten teams of the Formula 1 Racing Championship. This created a very positive impact on the brand image. Followed by the year 2010, the brand saw new peaks. The Red Bull Racing won the Formula 1 championship and created the most positive and forceful impact on the Red Bull’s brand image. According to the sale figures, 4,204 billion cans of Red Bull were sold worldwide in 2010. The sales in 2010 increased by 7.6% as compared to sales figure obtained in 2009. Sales, revenues, productivity and operating profits increased to such an extent that the figures recorded were the best in the company’s history so far. As result of winning the Formula 1 Championship, there was also an expansion in the media activities. The company enjoyed fame and success to its fullest in 2010 and continue to do so even in 2011. So it is obvious from the sales figures and the results of the Formula 1 championship that the sales, results of the formula 1 Championship and the Red Bull’s brand image have proved to be directly proportional up till now (Red bull Company, 2011) The revenue results of the past five years also help to build a clear picture of the standing of the energy drink. Year by year revenue has increased and there was a significant percentage change in revenue each year. This also means that The Red Bull holds the biggest market share amongst the market of energy drinks (Roaring Haus Studio, 2011) Fiscal Year Revenue Percentage Increase 2006 $3.70 billion N/A 2007 $4.19 billion 13.24% 2008 $4.28 billion 2.15% 2009 $4.43 billion 3.50% 2010 $5.12 billion 15.58% When these revenue results are compared with the rankings of the Red Bull Racing in the formula 1 Championship, it can be clearly identified that in 2010 the team won the championship and it was in the same year that the company earned the greatest revenue with the highest percentage change (Roaring Haus Studio, 2011). Carrying this relationship forward, it was also found that the brand’s image became more solid. Market Share As far the market share of Red Bull is considered, it varies across different countries because now it is a global brand. In some countries Red Bull has managed to acquire 80% of the market share. Specifically, in 2005 Red Bull enjoyed a market share of 47% in the US. Over the span of last five years the market share of the Red Bull increased. But overall, in the world market of the energy drinks, Red Bull has yet to acquire a high market share. It holds 42.8% global market share and is planning to expand its market share to 50% in the coming five years (Forbes, 2005; The Nation, 2010) Competitor’s Strategy Coca Cola is a huge competitor of Red Bull when it comes to the market of soft drinks. Coca Cola invests heavily in its promotional strategy. It sponsors many international events like world cup, Olympics etc. Red Bull wanted to grab the market share and also compete with its competitors on fair grounds. It altogether used a unique approach of sponsoring events. Instead of going for simple field sports events, Red Bull chose to invest in events that were thrilling, adventurous and global at the same time. The strategy worked and Red Bull was able to grab a significant chunk of market share. There are several other competitors of Red Bull who have tried to copy Red Bull but have failed. They have tried to copy the drinks’ formula and its marketing strategy but none of them have been able to get even close to the Red Bull’s brand success. Finding 4 Objective 4 The finding of this last objective of this research is actually based on the findings of the first three objectives that have already been discussed. It was found that the company made the right decision to invest this sponsorship activity. Though the intention of this investment was based on a short-term marketing decision but it proved to be fruitful for the company in the long-run. The second objective was related to the team Red Bull Racing’s ranking since it set foot on the ground of the Formula 1 Racing Championship. It was found that the team had well managed to remain amongst the top ten teams of the Formula 1 Championship since 2005 and till 2009 did not fall below the seventh rank. The year of 2009 was a turning point when the team managed to secure the second rank. 2009 then followed the year 2010 which was the year of victory as the team won the Formula 1 Championship. In 2011 the same top rank was maintained. The third objective helped to find the relationship between the sales of the company, the Formula 1 Championship results and the impact on the Red Bull’s brand image. All three variables were found to be directly proportional. In order to explain the finding of the last objective, the crux of the findings of the previous three objectives has been discussed again. When combined together, all these findings indicate that it will be a good decision on part of the company if it invests in the Formula 1 Racing Championship next year. The investment will help to secure the brand image as the sponsorship had a very positive impact on it. Over the last and the current year, the team has secured the highest rank, which has resulted in enormous revenues and a strong brand image. The Red Bull energy drink has been in limelight since the Red Bull Racing won the Formula 1 Championship for two consecutive years. This time the brand is under extraordinary spotlight (Formula 1 racing, 2011) Reason and Benefits The reason for such a huge investment was that Red Bull wanted to expand its brand on a global scale and the only way to do this was by investing in global activities. The company chose sports events because these events matched with the brand image of Red Bull energy drink. The marketing strategy went hand in hand. It strengthened the brand image of Red Bull. F1 championship also provided it by extraordinary revenues as mentioned above and also helped in increasing sales. Brand awareness was created by the event. The company was able to grab a large chunk of market share from its competitors. The details of the marketing share have already been discussed under the third objective. Conclusion and Recommendations Conclusion The whole purpose of this research was to find out whether the Red Bull Company should invest in the Formula 1 Racing Championship next year or not. The aim of the research was fulfilled by collecting relevant data, analyzing it properly and then using it in the best way to come up with the findings of each objective separately. According to the research that was conducted, it was found out that it was a wise decision by Red Bull Company to invest in the Formula 1 championship. Red Bull not only invests in Formula 1 Championship but it also invests in many other sports activities. Formula 1 Championship requires an extravagant investment unlike any other sports activity. Investing in Formula 1 Championship has been a part of the Red Bull’s global marketing strategy. It has helped to develop the brand’s global brand image. Formula 1 Championship takes place in different parts of the world, thus wherever it takes place, the brand is taken there. This event has given the brand a global coverage and has expanded the company’s media activities (Paddock Magazine, 2011) Red Bull has a huge number of competitors but the brand has managed to capture the highest market share of the market for energy drinks. Some competitors have tried copying its formula but have failed to do so. So far investing in the Formula 1 Championship has proved to be successful for the company and its brand image. Red Bull has gone global and people all over the world now associate this energy drink brand with such activities. Red Bull needs to maintain this global image and needs to maintain its market share. In order to do so Red Bull needs to keep on investing in such globally recognized events. If it does not invest in the Formula 1 Racing Championship next year it might hamper its global brand image. The maintenance of the global brand image is not the only reason for this conclusion. As discussed in the data analysis section, Formula 1 Championship has resulted in increased sales of the Red Bull energy drink cans. So to follow up with the increased sales, the company needs to invest in the Formula 1 Championship. Otherwise it may lose its image, its top rank in the Formula 1 Championship and also the sales. This is a high time for the company to invest in the Formula 1 Championship because it has gained success over two consecutive years. In such a scenario the company should not bail out. Recommendations Though it has been concluded in the course of this research that there should be an investment made in the Formula 1 Championship for the next year, but there are certain recommendations that have been given along as well. These should be kept in mind along with the conclusion in order to come up with the best decision. The world is facing economic instability in most parts of the world. Profits have been shrinking over the last few years. Unemployment has taken its toll. Most of the parts of the world are also facing political instability along with economic instability. In such a scenario The Company is recommended to cut down its investment budget in the Formula 1 racing Championship to some extent. Other than these sporting activities, the company can also focus on some social responsibility events. It will not hamper the sporty and cool image of the brand but instead people will associate with the brand on personal level. Another recommendation would be that Red Bull is a well established Company now and has some corporate social responsibility. It can help reduce unemployment by providing certain job opportunities. The Red Bull Company is highly recommended to keep in view the pros and cons of such a heavy investment, because keeping in view the economic instability, such heavy investment in marketing activity can also backfire. So the basic crux is that in such prevalent conditions, Red Bull should cut down its marketing budgets to moderate level. References Sylt, Christian & Reid, Caroline. Red bull gives Formula 1 team ?25m boost in bid to win the title. 2010 Wikipedia (2010) Red bull Racing Red Bull Company (2011a) How it all started Red Bull Company (2011b) World Wide Expansion Red Bull Company (2011c) Company Figures Wikipedia (2011) Red Bull Kotler, Philip. Marketing Management. Upper Saddle River, N.J: Prentice Hall, 2000. Print. Rendle, Steve. Red Bull Racing F1 Car: An Insight into the Technology, Engineering, Maintenance and Operation of Red Bull Racing. Sparkford: Haynes, 2011. Print. The Paddock Magazine. Dietrich Mateschitz - A Different Beast Altogether. 2010 Formula 1 racing (2011a) Results All Team 2005 Formula 1 racing (2011b) Results All Team 2006 Formula 1 racing (2011c) Results All Team 2007 Formula 1 racing (2011d) Results All Team 2008 Formula 1 racing (2011e) Results All Team 2009 Formula 1 racing (2011f) Results All Team 2010 Formula 1 racing (2011f) Results All Team 2011 Roaring Haus Studio. Red Bull Marketing Plan 2011-2012. 2011 Forbes. The Soda with a Buzz. 2005 The Nation. Red Bull beverage aims for top spot in energy-drink market. 2010 Pelsmacker, Patrick D, Maggie Geuens, and Joeri V. Bergh. Marketing Communications: A European Perspective. London: Pearson Higher Education, 2004. Print. Read More