All about Red Bull Company Dilemmas - Essay Example

Red Bull Strategies College: Introduction Red Bull is one of the prominent corporations of the 21st century in the production of energy drinks industry (Rosenberg, 2011, p.50). The company was founded in 1984 by Dietrich Mateschitz, an idea Mateschitz generated after a short trip in Thailand. Red Bull drinks are meant for boosting body energy hence increasing the consumers’ level of concentration and attention, as well as help in incentivizing the body metabolism. The company’s brand enjoys a global market share of about 60% in the energy drink production industry, while at the time making annual sales of more than a billion cans worldwide. In 2008 alone, Red Bull in the U.K. made total sales of over 113 million liters in one year. However, the company’s success can only be attributed to a number of factors such the incredible strategies the management applies along other factors. This essay will focus on the company’s strategies as well as give possible dilemmas that are facing the company. First, it is essential to critically analyses the corporation in order to have a clear understanding of the dilemmas that the corporation is facing. The analysis will cover aspects such as competition, market, analysis, SWOT analysis, as well as management analysis among other key elements that are crucial for the company’s survival in the current wave of global stiff competition. A concise Red Bull SWOT analysis shows that the company enjoys a number of positive attributes that make it remain competitive in the market. Effective marketing campaign appears to be among the key attributes that have built the company’s strong brand. However, the analysis also shows that there exist a number of negative aspects that hinders the company from fully exploiting its potential. Such aspects exist in the product development as well as in the marketing approaches. There exist a number of strengths of the product with product brand recognition remaining the key strength. This has resulted from the fact that Red Bull was the first energy drink company to be established in USA, and the company has already won the consumers’ confidence over time by producing top class drinks. The brand is so popular that some consumers think that the name Red Bull is the general name for all energy drinks and use it even when referring to other brands in the same industry. Production of high quality drinks has also played a vital role in building the company’s brand. Most of the customers show satisfaction with the drink and claim that for sure the drink boosts their body energy. Marketing strategy is another major aspect that has helped the company a lot in its tremendous growth. Since its conception, the company has been effectively marketing its two brands using various approaches of marketing like media as well as giving out free cans in public places like colleges and concerts just to mention a few. This has enabled the company to build a strong brand both in the domestic and in the international market. The company’s marketing strategy targets youths who are in their 20s and 30s as well as the club goers. The company’s unique tactics of advertising such as the popular slogan “Red Bull gives you wing,” have widened its market share significantly (Markides, 2008, p.79). It also engages in other marketing strategies such as buzz marketing whose main target is shops, stores, bars, and clubs. Sponsoring sporting activities like the famous Red bull race as well as application of viral marketing strategies. Despite the brand’s general success, the product has a number of weaknesses that may limit its growth especially with the stiff competition that the industry is facing. The major weakness is the fact that its drinks are primarily made up of corn syrup. Recent researches have associated corn syrup with numerous detrimental healthiness effects hence giving it a negative reputation among the people. Another major weakness of the product is the fact that the high levels of caffeine in the drink are said to be posing serious health risks. There have been various publications in various health journals explaining the health risks associated with corn syrup and high levels of caffeine. This is likely to limit the growth of the company or make its loose a major market shares unless the management comes up with swift measures to curb the problem. Production of only two flavors can also be termed as a major weakness of the company especially in the modern world where variety cannot be overlooked whenever talking about production. The lack for product variation has made the company decrease its market share in a significant way especially during this competitive environment. Moreover, the brand is said to have a relatively higher price than the ones offered by its competitors (Markides, 2008, p.89). There exist a number of opportunities for the company that can make it remain competitive both in the domestic and in the global market. One of the key opportunities is the expansion of the company’s product line (Urbany and Davis, 2010, p.89). Currently the company produces only two flavors namely Red Bull Sugar free as well as Red Bull Total Zero meaning that there is still a huge market that the company has not reached especially those people who do not take those two flavors. Changing the formula used in making the drinks would be another vital opportunity that can expand its market. This would involve excluding those elements that are associated with detrimental health effects such as excessive caffeine and corn syrup. In addition, lowering the price of the product may also enable the company grow its customer base. This may be achieved by reducing the price of the current drinks or by introducing other drinks that are of low prices. This would be an effective approach of reaching out those customers who do not afford the current flavors as well as help in curbing competition from the competitors (Markides, 2008, p.82). Stiff competition can be termed as one of the major threat facing Red Bull towards the success of its products. The company market share has been negatively impacted by the extreme competition that has accrued in the recent years due to introduction of other major similar corporates that are producing similar drinks at a relatively low price while at the same time offering a variety of flavors. Such companies include the AMP, Rockstar, and the Monster among others (Urbany and Davis, 2010, p.89). The energy drink industry has been experiencing a large number of new comers in the recent years purposely to exploit the big market of energy drinks since this seems like it is the new trend in people’s lifestyle. Another major threat of the company is the fact that consumption of healthy foods has gained a lot of popularity in the modern society. The unhealthy ingredients in the drink are likely to lower its popularity drastically if proper measures are not taken (Markides, 2008, p.89).    Some of the strategies applied by the management to make the company remain competitive include effective marketing, introduction of another flavor, continuous building of a premium brand among others. As mentioned above, the company is operating in an industry that is experiencing extreme competition from well-established companies as well as not ignoring the high number of new comers that are joining the industry. Companies such as Monster and AMP joined the industry and made a number of changes to Red Bull’s drinks since they had already carried out a research and fully understood the weakness of the company. At the moment, Red Bull produces two brands, which occur in 20oz, 8oz, 16oz, and 12oz, cans. This is not enough for making the company to remain competitive in the market (Obłój, 2013, p.42). Therefore, the management has to come up with other better strategies that will make the company survive or increase its market share. In order for the company to maintain its growth, the management has to adopt a hybrid of strategies. A combination of product development strategy, market penetration as well as diversification are some of the strategies that can make the company have an upper hand in the energy drink industry. Diversification would open new opportunities for the company in the future with product development and market penetration enabling would enable the brand remain competitive in the current market. This can be achieved in numerous ways as explained below (Markides, 2008, p.89). The first recommendation is the diversification of the targeted market (Obłój, 2013, p.42). The company has been primarily targeting the youths as its main target in the past two decades, a strategy that has proven effective. However, the high level of competition requires the management to diversify its target market by making the product ideal for all people irrespective of their age or gender. The second strategy that may be effective would be the introduction of a variety of product lines. Introduction of new products in their line of production could prove to be a prudent idea by significantly increasing the company’s sales among other aspects. Their newly produced flavors or products are likely to rapidly gain popularity especially considering the fact that Red Bull is a well-established energy drink brand. With a variety of products in the market, the management can easily identify the fast moving flavors or products hence focusing their attention on them. Researching for the flavors that are likely to do well in the market can be an easy task since it would be a matter of just watching how the competitors’ flavors are doing in the market. The company’s competitors have introduced more than twenty flavors in the market, hence making such idea an easy one to implement since it would be a matter of choosing the most effective brand and make some improvements on it (Markides, 2008, p.89). Introducing new flavors might not be very expensive for the company since its brand is well recognized and has already won customers’ confidence. Moreover, the company has adequate resources to undertake such a move, which might at times be cheaper even than the company’s expenditure on marketing the current products. The third strategy that the company can apply is the introduction of an alcoholic energy drink. Most of the energy drink consumers are men in the age bracket 20 to 40 years as well as college students. Studies show that most of the energy drinks are consumed by men in social places like in bars, proving that introduction of an alcoholic energy drink might be another stepping-stone for the company’s growth. Red Bull is very popular among college students or the youths in general, who mix the drink with liquor. Therefore, introducing such a blend may make it become one of the most popular brands like the famous Four Loko Brand that made huge sales in USA. However, this flavor would be most suitable for the overseas market since according to FDA, it is illegal to sell products that contain both alcohol and caffeine. If the blend could be successful, Red Bull can easily widen the gap between it and that of the competitors (Markides, 2008, p.89). Other recommendations that might be effective for the company include lowering the price of the products or maintaining the current price but then introduce cheaper flavors as explained above. Another include adoption of a distribution strategy that is effective like the one used by Coca Cola company (Roll, 2005, p.145). This distribution channel would involve exporting concentrated syrup to various bottlers who would finalize the production process by mixing the syrup with water. Package and dispense the product to vendors and warehouses. Doing so is likely to reduce the production cost hence increasing the profit margin or creating a room for a retailing price reduction. Production cost would decrease with respect to reduction of human resource currently needed for bottling faclilities. Additionally, transporting syrup would be cheaper than transporting canned drinks. In terms of marketing, the management should focus on areas visited by the young adults such as music stores and concerts. Internet marketing is another strategy that the management cannot overlook. Considering the fact that most of the energy drink consumers are young people who spend a lot of time in the internet and social media, the company is likely to increase its total sales as well as strengthening its brand by marketing in the internet (Roll, 2005, p.145). In conclusion, Red Bull Company has proven to be one of the leading brands in the energy drinks production industry. It has dominated the market for a long period especially in the domestic market even though it has been posed to a number of the threats with competition being the major threat. This threat is arising as a result of the increasing number of new comers who are joining the industry including well-established corporates such as AMP, Monster and Rockstar. In order for the company to sustain its market share, which is under a serious threat, its management has adopted a number of strategies that include introduction of another flavor as well as effective marketing. However, these moves are not enough considering the unfavorable competition that the industry is experiencing. Adoption of a hybrid of strategies is the key aspects that may make the company remain competitive. This can be achieved in a number of means with the main approaches being introduction of more flavors or even trying an alcoholic energy drink blend. Other strategies include lowering the price of its products, doing bit of corporate restructuring specifically by changing the distribution channel as well as improving its marketing tactics. The management should lay special focus on the youths by advertising in the areas that they are likely to visit as well as in the social media. Online marketing has been proven effective in the 21st century, and it is one of the “must do” that corporates have to adopt in order to have an upper hand over their competitors. Bibliography Markides, C. 2008. Game-changing strategies: How to create new market space in established industries by breaking the rules. San Francisco, CA: Jossey-Bass. Obłój, K. 2013. The passion and discipline of strategy. Roll, M. 2005. Asian Brand Strategy: How Asia Builds Strong Brands. Basingstoke: Palgrave Macmillan. Rosenberg, M. 2011. Business advantage. Cambridge: Cambridge University Press. Urbany, J., & Davis, J. H. 2010. Grow by focusing on what matters: Competitive strategy in 3 circles. New York, N.Y: Business Expert Press. Read More