red bull sm

CONTENTSMISSION STATEMENT EVALUATION......................................................................................................5

VISION STATEMENT EVALUATION (based on “building your company’s vision, published in Harvard Business Review)...................................................................................................................................5

1. MACRO-ENVIRONMENTAL ANALYSIS AND INDUSTRY ATTRACTIVENESS.........................................8

Porter’s Five Forces...........................................................................................................................8

1. Threat of new Entrants:.........................................................................................................8

2. Bargaining power of suppliers.............................................................................................10

3. Bargaining Power of Buyers.................................................................................................11

4. Threat of Substitutes:..........................................................................................................12

5. Determinants of Rivalry among Existing Firms:...................................................................14

Overall Industry Rating:...............................................................................................................15

SUMMARY OF PORTER’S 5 FORCES ANALYSIS:................................................................................16

PEST ANALYSIS:....................................................................................................................................17

1. Political Aspects.......................................................................................................................17

2. Economical Aspects.................................................................................................................17

3. Social Aspects..........................................................................................................................17

4. Technological Aspects..............................................................................................................18

EXTERNAL FACTOR EVALUATION (EFE)................................................................................................19

EXPLANATION..................................................................................................................................19

2. COMPANY AND COMPETITOR ANALYSIS:-.......................................................................................21

CPM (competitive profile matrix)....................................................................................................21

EXPLANATION:.............................................................................................................................21

3. MICRO-ENVIRONMENTAL ANALYSIS AND INTERNAL COMPANY RESOURCES:................................22

1. MANAGEMENT OF VALUE CHAIN............................................................................................22

Support Activities:.......................................................................................................................22

Primary Activities:........................................................................................................................23

CORE COMPETENCIES......................................................................................................................24

STRATEGIC COST MANAGEMENT PROCESS:....................................................................................25

FINANCIAL TREND............................................................................................................................26

INTERNAL FACTOR EVALUATION (IFE).............................................................................................27

EXPLANATION:.............................................................................................................................27

STRATEGIC ANALYSIS AND RECOMMENDATIONS:..............................................................................29

4. STRATEGIC ANALYSIS AND RECOMMENDATIONS:..........................................................................30

GENERIC STRATEGIES......................................................................................................................30

Reasoning....................................................................................................................................30

Strategy.......................................................................................................................................31

Pros/cons.....................................................................................................................................31

Corporate Strategy......................................................................................................................31

Market Penetration.........................................................................................................................31

Product Development......................................................................................................................32

Current Strategy..........................................................................................................................32

SOURCE OF COMPETITIVE ADVANTAGE......................................................................................33

STRATEGY AND PROPOSED CHANGES.........................................................................................34

MATCHING STAGE:..............................................................................................................................35

1. TOWS MATRIX.........................................................................................................................35

2. SPACE MATRIX.........................................................................................................................36

3. GRAND STRATEGY MATRIX......................................................................................................37

4. IE MATRIX................................................................................................................................38

5. BCG..........................................................................................................................................39

MATRIX ANALYSIS AND TOWS SUMMARY.......................................................................................40

DECISION STAGE..................................................................................................................................41

STRATEGIC IMPLEMENTATION............................................................................................................43

5. STRATEGIC IMPLEMENTATION:.......................................................................................................44

STRUCTURE & CULTURE..................................................................................................................44

RESOURCES......................................................................................................................................44

STRATEGY # 1: TAURINE FREE RED BULL.........................................................................................44

STRATEGY # 2: DIVERSIFYING INTO SPORTS DRINKS MARKET.........................................................45

SYNERGIES IN VALUE CHAIN............................................................................................................46

PITFALLS IN STRATEGIC IMPLEMENTATION.....................................................................................46

SCORE CARD....................................................................................................................................48

DIAGNOSTIC SURVEY OF PRIMARY AND SECONDARY MANAGEMENT PRACTICES:.........................49

BIBLIOGRAPHY:....................................................................................................................................55

“MISSION AND VISION EVALUATION”

RED BULLL GIVES YOU WIIINGS...

MISSION STATEMENT EVALUATION

"We are dedicated to upholding Red Bull standards, while maintaining the leadership position in the energy drinks category when delivering superior customer service in a highly efficient and profitable manner. We create a culture where employees share best practices dedicated to coaching and developing our organisation as an employer of choice."

Mission statement is evaluated of following nine components:

customers products or services geographically where does the firm compete concern for growth and profitability Philosophy (basic beliefs, values, competence or major competitive advantage) Self-concept Concern for public image Concern for employees

Red Bull’s mission statement does not talk about who their customers are. This may be reason why Red Bull targets athletes, students, professionals, clubbers, concert singers, etc. Whereas it talks about its product which is energy drink. They have not specified the geographical locations. Concern for growth and profitability is highlighted in their mission statement. Their philosophy is to maintain Red Bull standards. It is stated that company’s mission is to maintain the leadership position in energy market, but this part of the mission statement should be included in vision statement under BHAG goals.

As far as self-concept is concerned, mission statement lacks proper description what are company’s major strengths and competitive advantage. Concern for public image is also not included in the statement. However, this statement has clearly stated about concern for employees.

VISION STATEMENT EVALUATION (based on “building your company’s vision, published in Harvard Business Review)

“To spread our wings over the world"

Mission statement has to be evaluated of the following basis:

1. Core ideology (enduring character of an organization)

a. Core purposeb. Core values

2. Envisioned futurea. BHAG (big, hairy, audacious goals)b. Vivid description

Vision statement’s main purpose is to describe where company wants to go. When vision statement is created for a company it talks about dreams and hopes for your business. Based on the above stated elements Red Bull’s vision should include core values which are guiding principles by which a company navigates. Guiding principles are not about how company would capitalize on an opportunity, it is about values core purpose and values on which a company stands. A company can change its entire product line and enter into a new market segment but core values remain the same. Core purpose defines the need which a company seeks to satisfy.

BHAG are ambitious plans which a company aims to achieve in a specified period of time. Vivid description describes what will be the outcome of achieving BHAG. Red Bull’s vision statement should be:

“We create a working environment in which employees are respected and are trained to maximize their skills. We seek to provide reliable products to our customers and will never compromise on cost for quality. We will maintain our leadership position in the energy drink market. Through this we aim to increase profitability and become a brand which is well known in energy drink market.”

MACRO-ENVIRONMENTAL ANALYSIS AND INDUSTRY ATTRACTIVENESS

1. MACRO-ENVIRONMENTAL ANALYSIS AND INDUSTRY ATTRACTIVENESS

Porter’s Five ForcesApplying Porter’s five forces to the Pakistani energy drink market allows us to garner a retrospective view of the potential attractiveness in terms of profitability of the industry. We first must analyze the industry through the five-force template, which will allow us to more accurately gauge the industry in terms of its potential. When discussing the beverage industry, we are referring to not only the Red Bull’s import from Austria via Dubai, but because Red Bull Pakistan is a wholly owned subsidiary of Red Bull Austria. We are also including the distribution industry, because Red bull has its distribution partners (DPs) Chawla Group for its distribution all over Karachi. Therefore, all our analytical studies will follow both the importing and distributing, from the perspective of Red bull, which in fact comes under one industry: the beverage industry.

1. Threat of new Entrants:

A THREAT OF NEW ENTRANTS YES

1 Do large firms have a cost performance advantage in your segment of the industry?

2 Are there any proprietary product differences in your industry? X3 Are there any established brand identities in your industry? X4 Do your customers incur any significant costs in switching

suppliers?X

5 Is a lot of capital needed to enter your industry? X6 Is serviceable used equipment expensive? X7 Does the newcomer to your industry face difficulty in assessing

distribution channels?X

8 Does experience help you t o continuously lower cost? X9 Does the newcomer have any problems in obtaining the necessary

skilled people, materials or suppliers?X

10 Does your product or service have any proprietary features that give you lower costs?

11 Are there any licences, insurances, or qualifications that are difficult to obtain?

12 Can the newcomer expect strong retaliation on entering the market?

Large firms do have a cost or performance advantage in our segment of industry. Although energy drinks are similar in their nature, they differ greatly in their ingredients and its concentration level. Energy drink market is growing like a weed. Companies are striving to

put out the best energy drink designed for the potential customer that they have in mind. They are concerned with packing whatever ingredients they can to improve the stamina and physical performance of human beings. Therefore, the primary difference that distinguishes many energy drinks is the ingredient list.

There are many established brand identities in this industry such as blue ox, power plus, power house, Gatorade. Except power plus all the existing brands in this industry belongs to foreign companies.

Customers do not face any significant costs in switching suppliers, as they are free to choose any brands they wish. No factor restricts them to use any particular brand. It is easy, cheap and convenient to buy any other brand they wish. Wholesalers do not find it difficult to import energy drinks in Pakistan because they do not need a lot of capital to do so. The new comers face difficulty in accessing distribution channels in Pakistan. This is because of the agreements made between the distributors and companies under which distributors are allowed to circulate only company related brands. New comers face excessive cost to turn these distributors in their favour. Mostly, other brands of energy drinks do not have a franchise based system but only they are imported by whole sellers who make them available in markets and create a competition in the industry.

Distributors on the other hand, have to make sure that product is available throughout the country and therefore face high costs. Red Bull has 5 distribution partners who are responsible for everything after landing of this product to Pakistan’s franchise of Red Bull.

Most of the foreign energy drink brands sold in Pakistan have manufacturing plants in their home country; they come to Pakistan via importing of whole sellers, while in Pakistan they mostly focus on distribution channels and marketing. Therefore, this also shows how different companies will compete more on distribution channels than the product itself.

Experience does helps in continuously lower costs. This is because of strong distribution partnership made between the company and distributor. Main cost faced in Pakistan by these foreign companies consists of distribution cost. Good relationship created through long term business dealings with distributors ensures distributors confidence and lower bargaining power over the company itself.

There are some basic requirements that need to be fulfilled before entering this industry. In Pakistan people have misconception about the product ingredients and its side effects. Therefore some restrictions are placed by government before initiating any of such projects. Government needs to be assured of product quality and standard. Therefore before starting a business, company needs to get permission for business.

New comer expects strong retaliation on entering the market. This retaliation comes naturally as Red Bull is strong brand, almost acting like a monopoly. Therefore, as a monopolist it is expected for them to maintain its position and derail anyone who comes as an obstacle.

Overall, it can be concluded that it has high barrier to entry and thus more profitable for firm. Main reason for this is the necessity of strong distribution channel required for widespread availability of the product and strong brand names that exist in the market.

2. Bargaining power of suppliers

D BARGAINING POWER OF SUPPLIERS YES ~ NO1 My inputs (materials, labour, suppliers, services etc.) are standards

rather than unique or differentiated.X

2 I can switch between the suppliers quickly and cheaply. X3 My suppliers would find it difficult to enter my business or my

customers would find it difficult to perform my function in house.X

4 I can substitute my inputs readily. X5 I have many potential suppliers. X6 My business is important to my suppliers. X7 My costs of purchases has. X

The inputs are standard rather than unique or differentiated. This is because Red Bull operating in Pakistan is a just a franchise which imports basic products from the supplier in Austria and Dubai and sold it in Pakistan through 5 distribution partners. Therefore the product that these distributors get is standardized.

Suppliers of the ingredients of Red Bull (Water, sucrose, glucose, sodium citrates, carbon dioxide, taurine, agave, glucuronolactone, caffeine, inositol, niacin, pantothenic acid, vitamin B6, vitamin B12, caramel and riboflavin.) are needed by other industries as well and Red bull has the option of switching its suppliers because the inputs are standard therefore Red Bull has a power over their suppliers. But on the other hand, the suppliers have number of other industries to supply to therefore they also have a power in the industries, therefore this force is getting a neutral rating.

Red bull’s suppliers would find it difficult to enter this business. This is because managing a distribution system from such a distance is very complicated and involves huge amount of resources. Suppliers are getting their work done though distributors at reasonable and competitive rates. Suppliers’ involvement into distribution system might result in additional cost, therefore they are most likely not interested in entering into distribution business. Red bull’s business is important to its suppliers as it generates great deal of revenue for them and cost of purchase does have a significant influence on the overall costs. (65 per can) cost is incurred when this product is imported.

3. Bargaining Power of Buyers

B BARGAINING POWER OF BUYERS (To what extent your customers locked into you?)

1 Are there a large number of buyers relative to the number of firms in the business?

2 Do you have a large number of customers, each with relatively small purchases?

3 Does the customer face any significant costs in switching suppliers? X4 Does the buyer need a lot of important information? X5 Is the buyer aware of the need for additional information? X6 Is there anything that prevents your customer from taking your

function in house?X

7 Your customers are not highly sensitive to price. X8 Your product is unique to some degree or has accepted branding. X9 Your customers’ businesses are profitable. X10 You provide incentives to the decision makers. X

Red Bull, who is originally from Austria where it is still produced, distributes their energy drink in over twenty countries. So it would be not very useful to restrict the target market to the geographic areas as well as the psychographic segmentation for the targeted consumer that’s because for a product like Red Bull it would be far too narrow as it cuts across lifestyles, demographics and socio-economic boundaries. So the best solution would be to set the target market as a behavioural segmentation. The reason for that decision is because in a behavioural segmentation the individual’s relationship with the product and the use and benefit sought from the product. Red Bull is not just an energy drink it is primarily a utility drink to be taken against mental or physical weariness or exhaustion. Its use helps to increase endurance and heighten alertness as well as reactions and generally spoken the use of Red Bull helps to cope with the challenges of everyday life, which includes work, leisure and sports. Three main stereotyped uses can be identified.

The bargaining power of buyer is low in this industry. Although there aren’t a large number of customers and customers don’t incur any costs in switching brands, the industry seems pretty attractive in terms of buyer power. First of all, the customer doesn’t require any important information regarding the product. It’s an energy drink with its apparent functionality and there’s no need to convey additional information concerning the usage of Red Bull. Red Bull caters to a niche market in Pakistan and it is not price sensitive. The price of Red Bull has gone 65 PKR to 135 PKR and yet there has been no visible change in the sales.

The branding of Red Bull has carefully implemented. It has a very strong presence in the market. The company promotes the Red Bull brand directly to Generation Y, the so-called 'millennia’s': people born after 1981 who are believed to be cynical of traditional marketing strategies. Also the company basically focuses on Viral Marketing, expecting that growing numbers of target consumers 'catch the bug' and its reputation spreads. Globally Red Bull associates its brand with youth culture and extreme and adventure-related sports – one

example of which is that Red Bull sponsors its own team in NASCAR Sprint Cup Series. However in Pakistan there are no extreme sports that Red Bull as a brand can relate to. Red Bull concentrates on students, working men and women (professionals) who need to stay up at night and people participating in sports Red Bull drinkers are considered dynamic, energetic and happening personalities; the traits that the urban population of Pakistan most wants to relate to.

Red Bull suppliers are called the Distribution Partners. There are a total of 5 Distribution Partners in Pakistan. Red Bull sells to the DPs, which in turn provide to the consumers. Formerly Red Bull was only available at limited outlets, now Red Bull is available at every store of prominent cities. The distributors have to incur a high cost due to this mass distribution. To counter this flaw Red Bull lets the DPs deal with the final price. This helps in making Red Bull’s primary customers’ business profitable.

The above mentioned arguments leave us with the idea that buyer power is low in the industry because consumers do not have enough choices to switch to other brands and they are ready to pay higher prices.

4. Threat of Substitutes:

C THREAT OF SUBSTITUTES(Some other product or service that performs the same job as yours).

1 Substitutes have performance limitations that do not completely offset their lowest price. Or, their performance is not justified by their higher price.

2 The customer will incur a cost in switching to a substitute. X3 Your customer has no real substitute. X4 Your customer is not likely to a substitute. X

Most energy drinks are carbonated drinks that contain large amounts of caffeine and sugar with additional ingredients, such as B vitamins, amino acids and herbal stimulants. Red Bull falls in this category. Energy drinks are used to satisfy the need for quick mental alertness. Several substitutes were in the market for energy drinks even before energy drinks were introduced. For example, coffee can be substitute for Red Bull because of the general perception of consumer that its consumption promotes mental alertness, was discovered in 9th century. A number of other substitutes for energy drinks are:

8-ounce Beverage Caffeine content in milligrams

Coffee, Brewed 80-135

Coffee, Espresso (2 ounces) 100

Coffee, Instant 65-100

Tea, iced 47

Tea, instant 30

Tea, green 15

Hot cocoa 14

Chocolate Milk (8 oz) 5

SOURCES: National Soft Drink Association, US Food and Drug Administration, Bunker and McWilliams, Pepsi, Slim-Fast.

Besides the substitutes mentioned above, need for mental alertness or extra energy can also be satisfied by consuming dark chocolate. Other soft drinks such as Coca Cola, Dr Pepper, Mountain Dew, Sprite 3G, Pepsi and others containing caffeine can a be substitute for energy drinks.

Presences of many substitutes in the market that are easily available pose a certain threat to energy drinks. These substitutes are easily available in shops and have a better distribution as compared to Red Bull’s distribution.

Switching costs is the price we pay for switching to another product. These include exit fees, search costs, learning costs, cognitive effort, emotional costs, equipment costs, installation and start-up costs, financial risk, psychological risk, and social risk. As none of the above stated cost can be associated with energy drink market, threat of substitute is high.

Another very important factor which has increased threat of substitution is about Taurine content of energy drinks especially Red Bull. Presence of taurine in Red Bull has a negative impact of consumer because they believe it is extracted from bull urine. This reason has created a misconception in the minds of consumers. However, company claims that Taurine used is synthetically produced. Some studies also suggest that taurine caused anxiety, irritability, high sensitivity to noise, and self-mutilations. When compared with coffee or tea there are no controversies or side effects. Also consumption quantity of energy drinks is limited, because over consumption can cause heart troubles. This suggests that consumers are likely to substitute.

Therefore, threats of substitutes if high as strong substitutes are present in the market and consumers have a misconception about certain ingredients contained in the drinks.

5. Determinants of Rivalry among Existing Firms:

E DETERMINANTS OF RIVALRY AMONGST EXISTING COMPETITORS YES ~ NO1 The industry is growing rapidly. X2 The industry is not cyclical with intermittent overcapacity. X3 The fixed costs of the business are a relatively low portion of total

costs.X

4 There are significant product differences and brand identities between the competitors.

5 The competitors are diversified rather than specialized. X6 It would not be hard to get out of the business because there are

no specialized skills and facilities or long term contract commitments etc.

7 My customers would incur significant costs in switching to a competitor.

8 My product is complex and requires a detailed understanding on the part of my customers.

9 My competitors are all of approximately the same size as I am. X

The energy drink industry in Pakistan has a high concentration ratio, meaning that fewer firms hold the larger part of the market. Especially since this market is smaller in Pakistan then in other countries and also has a slower growth rate. This can be due to the higher prices of the product. This means that energy drink industry is less competitive and this fact makes the industry favourable.

The intensity of rivalry in the industry is defined by many characteristics as explained below.

There are a small number of firms in the industry with a high market share as opposed to many firms with similar market shares. The highest rivalry towards Red Bull is followed by Power Horse. Market growth rate is low and the existing firms have to fight for market.

Customers here can freely switch their brand preference without incurring any costs, which is an unfavourable factor for the industry.

Though there is little difference in the product itself, Red Bull has created an image, such that consumers are very brand loyal, making it a positive for the industry.

Exit barriers are high in the industry due to the high technology and research and development used in making and designing of the products. An energy drink has special

ingredients, which use expensive and rare raw materials, and need specialized skills and expertise and expensive fixed costs involved. The rivals are not diversified as most of the firms have similar backgrounds and history, which makes the industry stable and favourable. Though Pakistani industry do not have direct franchise of rival brands, but whole sellers import them and put them in competition with Red Bull.

The energy market industry has already experienced an industry shakeout, as many new entrants jumped in, with a forecast of high industry growth, but then all the incompetent firms had to exit, since supply exceeded demand. For instance, Blue Ox discontinued in 2005.

The energy drink industry has rather predictable business cycles as demand increases with advent of sports events and exams. The competitors are smaller than Red Bull, thus other competitors may constantly try to employ strategies to gain more market share.

The analysis leaves us with the conclusion that the energy drink industry has more characteristics that are negative than positive. The slow growth rate of market and high exit barriers all make an industry unfavourable and difficult to operate in.

Overall Industry Rating:

Favourable Moderate Unfavourable1) Threat of

new entrants7 3 2

2) Bargaining power of buyers

3) Threat of substitutes

4) Bargaining power of suppliers

5) Intensity of rivalry among the competitors

SUMMARY OF PORTER’S 5 FORCES ANALYSIS:

The beverage industry with its 60 years of established presence is unattractive for energy drinks because of facts discussed above through Porter’s Five Forces. Red Bull is well positioned in this industry so as to attain a competitive edge, though industry is unattractive but more other companies are importing other energy drinks, which is increasing the competition in the market. Importing procedures are also easy in Pakistan only heavy taxes are paid and energy drinks can be imported effortlessly. Buyers are in a niche market hence the higher prices are of no concern to them so they have low bargaining power. This is also a reason why the company set up of Red Bull does not include tall organization structure, only few people are involved in the management and rest is taken care by distribution partner (DP) i.e. Chawla group.

PEST ANALYSIS:

1. Political Aspects Red Bull was introduced into the market as a new non-alcoholic drink with a new concept, namely energy drink which comes under beverage industry. There is significant political pressure on the beverage industry in Pakistan. This pressure mostly arises from a high levy of taxes, 15% central excise duty, as well as 18% sales tax, which totals up to about 36% of retail prices. This extremely high double taxation rate greatly deters the players in the industry from charging premium prices for perceived value addition but as Red bull is for a niche market so it charges higher prices which reduces the buyer power. Political factors have no direct impact on bargaining powers of buyers. Secondly, the distribution partners (DPs) also incur a big chunk of cost that is why they import at Rs. 65 per can and sell at Rs. 135 in the market, which shows that supplier power is low.

At first the Health Organisation was suspicious that Red Bull could be a starter drug. Their scepticism even increased after rumours that Red Bull contains ingredients like bull’s galls. However, the fact that Red Bull has been used in Austria for 9 years and in Asia even for 30 years without any complaints led to increased confidence. Furthermore a research proved that Red Bull has stimulating effects like caffeine, but does not lead to addiction. This encouraged the appearance of more brands in the same industry of beverages which is sub divided into the market of energy drinks by importing them from foreign countries and making a competition in the market. Nevertheless Red Bull still needs to be approved by each country where it shall be sold, which is very time consuming and therefore expensive.

2. Economical Aspects Energy drinks face little exposure to economic cycles as they are special drinks, serving a niche market in Pakistan. Their target market include students, office going people/ professionals, who need a “push up”. There are few substitutes and through their well positioned advertisements their sales are increasing, though advertisements are not made in Pakistan as yet. Economic factors like increasing population seem favourable for the industry but the adverse economic condition and decreasing purchasing power is critical.

3. Social Aspects A major social trend in the urban areas of Pakistan has been a shift from drinking coffee or tea in youngsters to improve their efficiency towards energy drinks which creates a sense of style in the youth. This trend has spurned more from impressive distribution networks and less from increased advertising, yet the result is positively in favour of beverage industry including energy drinks. Unlike the 1980’s, where nobody wanted to try something new, people are now much more open for new experiences, as their lifestyles are changing and getting more and more influenced by western culture. The consumers are male and females

Potential Entrants+ + +

Suppliers_

The Industry

Rivalry among Existing Firms_

Buyers+

Substitutes_ _ _

regardless of age, who are very sporty or work very hard. Social factors like changing lifestyle trends in Pakistan, the consciousness of status symbols and an attitude inclined towards foreigners all make this industry highly favourable.

Another very important aspect of the social pressure on Red Bull is due to the increased awareness of Taurine and Caffeine on health. Especially after ban was imposed on Red Bull in Germany after the exceeding limit of cocaine was found in Red Bull cola. Every cola contains 0.01 – 0.03% of cocaine (raw form of cocoa plant) in it but only one lot of Red Bull contained 0.04% of cocaine.

4. Technological Aspects Technology plays a secondary role in this industry, as it is not heavily dependent on technological advancements like the consumer electronics industry, or the software industry. Because beverage products are non-tech based in nature, technology in this industry is therefore limited to function as a catalyst to improve production. Red Bull gets exclusively produced in Austria from where it is exported to 28 countries including Pakistan. There are two reasons why it does not get produced in any other country. First it guaranties consistency in taste. The Coke sold in UK tastes for examples slightly different from the one sold in Pakistan, in order to meet domestic preferences. Red Bull wants to ensure that it tastes the same all over the world. Secondly in that way the recipe will be kept safely in one place. Technological advancements have enabled buyers to make informed decisions. Red Bull has a string trademark and patent protection.

EXTERNAL FACTOR EVALUATION (EFE)

Opportunities1. Expansion in new markets e.g. Asia 0.13 3 0.392. Diversify in other segments e.g. sports drink 0.15 1 0.153. Extension of product line to increase market

share0.05 4 0.20

4. Increased advertisement in Asian market 0.05 2 0.15. Consciousness of status symbol and attitude

towards foreigners. 0.12 1 0.12

Threats1. Health concerns- high caffeine 0.15 2 0.32. Changing perception of consumer about energy

drinks0.1 3 0.3

3. Consumer income is low/ low purchasing power 0.05 2 0.14. Publicity on the more content of cocaine in Red

Bull Cola0.15 4 0.45

5. Presence of substitutes in the market 0.05 2 0.1

1 2.21

EXPLANATIONExpansion in new market here implies that with increasing population in Asia there is an opportunity to increase the geographical coverage of our product. Product development for new entirely new market is an opportunity because other industries such as sports drink healthy drinks show impressive growth rates.

Energy drinks are not being advertised on local channels and Red Bull should do it to gain an advantage over its competitor. Changing trends and increasing demand for products that are considered status symbols is an opportunity and Red Bull can capitalize on it.

Possible threats for this industry are increasing due to increased awareness of consumers about side effects of caffeine and Taurine. Also, there has been publicity about ban on Red Bull in Germany and France.

COMPANY AND COMPETITOR ANALYSIS

2. COMPANY AND COMPETITOR ANALYSIS:-

CPM (competitive profile matrix)Red Bull Power Horse

Critical success factors weight Rating WeightedScore

Rating Weighted Score

Market shareAdvertising Global ExpansionProduct VarietyProduct QualityCompany ImagePrice CompetitionManagement ExperienceDistributionCustomer Loyalty

0.150.130.120.100.080.070.040.060.080.08

3231332223

0.300.260.360.100.240.210.080.120.160.24

1131322222

0.150.130.360.100.240.140.080.120.160.16

Total 1.0 2.07 1.64

EXPLANATION:Red bull received a score of 2.07 on competitive profile matrix. Yet the company is the doing fairly well than rest of its competitors in Pakistan.

This low figure suggests Red bulls inability to tamper into the market properly. There is a low rating on market share which should be increased by doing market penetration and heavy promotion through advertisement campaign.

Red bull lacks in product variety hence new flavours in energy drinks should be introduced.

Further red bull cannot capitalize on its strengths or retain its existing segment of customers unless its distribution network is improved. It should be given proper shelf space and be easily available at all retail stores. Hence with the expertise of its sales team it can make red bull at customers reach at every outlet. Red bull should make distribution its core competency in order to have a competitive advantage in long run.

MICRO-ENVIRONMENTAL ANALYSIS AND INTERNAL COMPANY RESOURCES

RED BULL GIVES YOU WIINGSSS...

3. MICRO-ENVIRONMENTAL ANALYSIS AND INTERNAL COMPANY RESOURCES:

1. MANAGEMENT OF VALUE CHAIN Support Activities: these include the following:

Firm infrastructure: refers to the number of employees and their management techniques according to which the consumer perspectives relating to a product are identified. New methodologies of communicating with the consumers are adopted, change oriented behaviour is used throughout the organization. Firm infrastructure of Red Bull is very strong globally, as it is a truly global company the structure in all the countries is the same, but the involvement of distribution partners is handled here by the Pakistani management only and sales representatives are the only members of the firm who are not on the direct pay roll of Red bull headquarters. The budget for any event to be organized in any country in also sent from the headquarters and it is the work of that franchise management to effectively manage that budget and make the best use of that budget.

Human Resource Management: HR activities are decided in the head quarters of Red bull in Austria, and they are implemented in all the franchises all over the world. The management of all the franchises are sent to Austria, Dubai, Tokyo, Singapore for training and development programs and performance management teams from Austria go to every franchise management all over the world for evaluating the performance of employees. Hence Red Bull’s HR systems are very strong and globally implemented.

Technology development: Red bull invests heavily in R&D and always try to come up with something unique which serves their name best in order to let them stay the market leader of energy drinks market. As this is a truly global organization every research is done in the headquarters and then implemented globally.

Procurement: Red Bull has more than one supplier and the inputs or raw materials are not unique but rather standard so, it tries to buy those raw materials which are superior in quality, which will allow the final product to be better than the previous one in order to satisfy consumers and meet their demands. Red Bull cannot compromise on the quality of the product hence raw materials which are acquired from different resources are of a premium quality

Primary Activities: these include:

Inbound Logistics: Red bull is a truly global company and has centralised production facility for everywhere to be distributed around the world. Red Bull is manufactured in one factory in Austria, canned and then packed in cases for selling and exporting. Raw materials are handled effectively there in order to produce the best product so that the final product has improved quality every time.

Operations: Innovating new and unique products is one of the competency of Red Bull. Operations are carried out such that new product can be developed by investing more and more in research and development. Consumers’ attention span towards any product is decreasing with time so consumers also expect companies to bring something new every time and Red Bull has been successful in doing so. Operations carried out are according to customer’s specifications and requirements which are unique in processes and produce innovative outputs.

Outbound Logistics: As mentioned previously, Red Bull is truly a global company and it has centralized processes of manufacturing, hence all the cans of Red Bull are manufactured in Austria and for distributing in Asian market they are sent to Dubai. From Dubai then the cans are exported to Pakistan and other Asian countries including India, Afghanistan and Bangladesh. When Red Bull reaches Pakistani market, further distribution for the end consumers is done by ‘Distribution Partners’ (DPs) and now the work of timely delivery to retailers is done by these DPs.

Sales: All the sales are carried out through distribution partners (DPs), Red Bull has strong distribution set up with the help of these DPs. Management of Red Bull is basically managing the franchise of the parent company and they have given their distribution work further. These distribution partners are also the customers of Red Bull, they are also granted credits and Red Bull has a very strong relationship with these DPs.

CORE COMPETENCIES

Red Bull has several competencies are critical for achieving competitive advantage. They are described as follows:

A clear distinctive brand proposition that satisfies customer’s need

As mentioned before Red Bull has a very strong brand presence in that market. Red Bull is familiar with the market and can address their needs quickly and efficiently.

Offering premium and functional drink to the customers.

Red Bull offers a premium drink that serves the office worker, the student and the sportsperson when they need to remain focused and alert. The image and performance of the product is strong and customers are happy with what they are getting from Red Bull.

Formal Franchise

Red Bull doesn’t believe that it has real competition in the Pakistan market. The competition does have an indirect impact on its sales, but they believe that since competitors don’t really have a formal structure they cannot be counted. All the other competitors don’t have an organizational existence in Pakistan and are only imported into the market. This is the reason why having formal franchise is a core competence for Red Bull as it is unique among all the competitors in the industry.

Distribution Partners

Red Bull has deployed a network of Distribution Partners who help in the distribution of the drink. This network is strong and vast. Also it is a totally innovative and unique idea to cater to the vast market that is Pakistan.

Media Houses

A core element of Red Bull is its stringent association with extreme sports. This is the reason why Red Bull has separate Media Houses with employees on payroll of Red Bull who organize events. This department not only includes event managers but also athletes and professional sports photographers. This competency adds a lot to the brand positioning of Red Bull as it is a unique way of promotion.

STRATEGIC COST MANAGEMENT PROCESS:In Pakistan Red Bull incur its cost mainly in one of its operations that is marketing but its managing its cost quiet effectively.

Red bull has a very strong marketing. Red Bull has done a lot of events in Pakistan .Most of the events were related to students competition. Recent events include Paper wings in which students suppose to make paper wings and fly them. The other one was Bobby Bike. Karachi based jump which was held at MCB towers it was a big hit.

Red Bull got a budgeted amount from Austria for these events and for this jump show they got Rs.2m.In which they organize the whole show by using promotion tools like panaflexes , red bull models etc. Red bull control their costs by receiving quotations from different supplier of panaflexes .Quotations tender offer are made through several ways : direct contact, advertisement in paper. Lowest price quotation is being considered.

Red bull usually makes a cost effective use of their promotion tools by reusing them with some innovation. The major cost they incur comes from their free sampling which they do a lot.

Recommendation:

Red Bull should minimize its cost by cutting down its expenses. Avoid a lot of free sampling. They can distribute samples at discounted or company price for promoting their brand.Besides that they should give brochures that states the benefits of RedBull.

FINANCIAL TRENDRed Bull is a private limited company. They do not disclose complete financial picture of the organization. In Pakistan Red Bull is solely concerned with import and distribution system therefore all its expenses and revenue is related to the import and distribution system will be discussed.

Few of the expenses incurred by import system are, shipping cost, import duty, excise duty, taxes, promotional expenditures, advertising expenses and transportation. Cost of production and packaging does not come under it as cans come fully packed. These cans are imported in cases, each case contains 24 bottles. Red Bull approximately sells 1800 cases per month, i.e. 21600 cases per year. As each case contains 24 bottles, it approximately sells 518400 cans per year.

Average cost at which they purchase these cans from manufacturer falls in a range of RS 60- RS 70 per can. Therefore estimated cost for Red Bull comes around RS 2,592,000 per month and RS 31,104,000 per year. This cost represents only purchasing cost. After addition of custom duties, promotional and advertising cost, Red Bull sells it to retailers at RS 114 per can, who then sell it at RS 165 in the market. Total revenue generation from sales is roughly RS 4,924,800 per month and RS 59,097,600 per year.

Red Bull spends a huge amount on advertising and promotional activities. From time to time, it organizes social events at different colleges and universities. It has it own unique media house campaigns and unique Red Bull cars are occasionally found on roads for publicity. Then custom and excise duties vary according to Pakistan trading policies. Currently, Pakistani government is pressurized to encourage free trade, thus taxes on imported goods are considerably lower than past. This has enabled Red Bull to enjoy comparatively low cost structure in recent years.

Estimated profit generation is RS 4 10,000,000 per month, i.e. RS 4920,000,000 per year. Net profit margin comes up to 83%. This figure is remarkably better than its competitors who have their net profit margin from 21% to 30%. Red Bull does not face any liquidity crisis, as it as a huge backup of foreign group. Moreover Red Bull makes sure timely inflow of outflow of cash so that it is not left with excessive and unnecessary liabilities and receivables.

Overall, financial position of Red Bull is a lot better than its competitors. It has good amount of resources available for different programs it needs to carry out for importing and promoting Red Bull. Red Bull has managed high profits despite the costly marketing expenses, which shows company efficiency in managing its overall process.

INTERNAL FACTOR EVALUATION (IFE)Key internal factors Weight Rating Weighted

scoreStrengths

1. No strong competitor 0.12 3 0..362. Red bull’s collaboration with distribution partners

(DPs) in Pakistan0.14 4 0.56

3. No visible change in sales even after price increase

0.1 3 0.3

4. Behavioural segmentation for the targeted consumer

0.04 3 0.12

5. Extreme sport promotion for the first time in Pakistan – Red bull Karachi base jump.

0.08 3 0.24

Weaknesses 1. Higher prices 0.14 1 0.142. Presence of taurine in Red bull 0.1 2 0.23. No lab testing by Red Bull management at the

time of launching the product0.12 2 0.24

4. No formal organization structure 0.08 2 0.165. Red Bull is only manufactured in one factory in

Austria0.08 2 0.16

1 2.48

EXPLANATION: Above mentioned are the internal strengths and weaknesses of the company. Strengths are such that they do not have any strong competitor in the energy drinks market which has made them a market leader. They have a very strong collaboration with distribution partners and this collaboration has let their distribution to spread out in the whole country. They have a very strong brand and the population they target are so loyal to this brand that even after price increase no marginal or visible change is seen in the sales of Red Bull throughout the country. This is also because Red Bull targets to a niche who are brand loyal and brand conscious and they do not give importance to money over quality. Globally the segmentation is done behaviourally and this methodology is used in Pakistan too. Behaviours of consumers are noticed and then according to them it is seen where this product should be placed. Another strength or competency of Red Bull is the involvement in extreme sports. The event recently carried out in Pakistan was Karachi base jump. This is also carried out globally and hence it is carried out here as well. This jump was done from MCB towers being the tallest building in Pakistan and was carried out by professional jumpers. This event was covered by professional photographers in the media house of the Red Bull which exists globally and the photographers came from Austria to cover this event in Karachi.

Now coming towards the weaknesses, it has a higher price which is somehow decreasing their market share and sales. If they reduce their prices more people will be able to buy their product. The original formula of Red Bull did not contain Taurine as an ingredient in it, this was added afterwards and this ingredient has been controversial all over the world, so globally this problem has to be solved by deducing such a strategy which will nullify this effect. Red bull is only manufactured in one factory in Austria which turns out to be a weakness in the sense that transportation costs out of Austria are very high which let increased selling prices of the product.

STRATEGIC ANALYSIS AND RECOMMENDATIONS:

RED BULL GIVES YOU WIIINGSSS…

4. STRATEGIC ANALYSIS AND RECOMMENDATIONS:

GENERIC STRATEGIES

ReasoningRed Bull is introduced in the market as energy drink, whereas Red Bull current strategies are focusing more towards sports, thus making it more look like a sports drink. Red Bull claims itself to cater both physical and mental alertness and therefore targets to young professional and sports people. Sports drink is totally a different product line. Its characteristics and composition are different from energy drink. Sports drink does not have caffeine as its ingredient, whereas Red Bull does have. Sports drink basically has electrolytes that help sportsmen in preventing it from dehydration. Energy drink, on the other hand focuses on mental alertness. Therefore Red Bull is trying to merge energy drink with sports drink which is another broad category.

Customers are gaining more and more information about energy drink and they mostly do not prefer them over other substitutes because of their perception about ingredients and after affects. Therefore, it’s important that Red Bull focus on one segment, analyze what are their current need that needs to be fulfilled, how these trend are changing, what is stopping them from purchasing this product, and how these perceptions can be removed from their mind.

Moreover, sportsmen in their professional field have to go through numerous tests to ensure their fitness tests. Excessive level of taurine and caffeine that is found in Red Bull will prevent them from using this product as they might not clear test due to Red Bull consumption. As a consequence, its sales can be affected. Moreover, major sports events such as football and cricket are associated with carbonated drinks. Target market for such sports is much higher than target market for sports event that Red Bull organized. It can be a good source for revenue generation; however it would be difficult to compete with already set market leaders such as Pepsi and Coke.

Cost Leadership

Broad Differentiation

Focused Low cost

Focused Differentiation

Best- Cost Leader

Red Bull has good know how of communicating value to consumers and positioning their brand. Thus, this competitive advantage can be utilized in targeting specifically to young professionals. They in fact, have good promotional campaigns, which target to their market specifically. Moreover, they are trying to keep track of changing taste and needs of customers.

StrategyConsidering facts mentioned above, it is suggested that Red Bull should entirely focus on one segment, which is young professionals. Within this segment, they should differentiate it from other competitors. Therefore, generic strategy that they need to adopt is focused differentiation. This can be done by bringing taurine free Red Bull, as taurine is major controversial ingredient present in Red Bull. For a sports market, which is also an important customer segment, it should come up with totally a new product that caters to entire new segment of sports drink. This new product will not be a red bull, therefore its target market and related strategies will be entirely different from proposed Red Bull.

Pros/consThis will help them to manage their expenses, especially marketing expenses. Currently, major proportion of their expenses is faced by marketing department. Thus it will make them more cost efficient and organized. Focusing on niche marketing will enable them to understand changing customers’ trends and their needs. Through this they will gain competitive advantage by providing unique product features. Porter’s model already suggested presence of high rivalry. Therefore focusing on one segment, and thus comparatively lesser number of firms will help them to satisfy the expectations of their mainstream customers by capitalizing its internal resources and strengths.

With continuous development and innovations, it is expected that competitor will come with more appealing product in this same segment. Therefore Red bull should make it compulsory to remain consistent as far as differentiation is concerned. However, as threat of entry are comparatively low, chances for new entrant is not that high. Another problem with this strategy is continuous changes in customers needs. For this purpose, Red Bull should invest extensively in researching consumer psyche, behavior and consumption pattern.

Corporate StrategyTwo recommended corporate strategy from its competitive advantage is product development and market penetration.

Market PenetrationUnder this strategy it is recommended that Red Bull further explores target market of young professional and students. Red Bull needs to maintain a regular check on changing customer’s needs. Within this target market they should try to differentiate themselves by

introducing taurine free Red Bull. This is important as customer needs keeps on changing with time, and taurine is a major ingredient that discourages potential customers from actually using this product. Marketing know how and brand name will make it possible to compete effectively with other competitors. Their financial strength provides them with enough resources to keep track of changes in customers’ requirements.

Product DevelopmentUnder this strategy, completely new product targeting sportsmen should be introduced. Main reason behind this is huge difference between ingredients and characteristics of energy drink and sports drink. Red Bull is already well known for promotional campaigns relating sports events. They can use their build image for promotion and quality on their new product. Media House scheme will help them in achieving this objective.

Current Strategy

Target MarketAlthough red bull is marketed as energy drink, which usually focuses on mental alertness only rather than physical alertness, Red Bull claims to combat both physical and mental fatigue. The beverage was targeted at people who sought increased endurance, speed, concentration and alertness. Red Bull does not only target young people mainly students who need more alertness, or professionals who work hard and are looking for something to boost their energy levels, Red Bull is also targeting people who needs energy for extreme sports activity. Three broad categories will includes

The AthleteIt is usually a person who takes his sport very serious, what means he wants to get the best out of his body. Therefore you can say that Red Bull is part of his diet and sport life. So in this case Red Bull is for him a very good and easy way to improve his endurance or speed.

The Worker This could be anyone who has to work hard such as a manager or a street worker. Anyone who wants to get pushed up and would rather like to have a Red Bull than a coffee.

The StudentThis could be one of those students who have to pull an all neither due to upcoming exams or meeting deadlines for assignments or reports.

Red Bull has been associated with sports throughout its operation. Few examples are windsurfing, snowboarding, cliff driving, Formula 1 racing, and base jumping. These sports involve elements of adventure and risk. Red Bull's association with F1 Racing, one of the world's most glamorous and expensive sports, also helped enhance its image as a trendy drink. Analysts said that the company's sponsorship of extreme sports that required stamina

and energy was also just right for the image of the beverage. In Pakistan all these sports are not so common, but still Red Bull manages to sponsor few sports event held in different universities, schools and other areas. Recently they also had base jumping, at MCB tower.

SOURCE OF COMPETITIVE ADVANTAGERed Bull has a strong marketing strategy for communicating product value to customers. The strategy for building the brand has been created around a simple goal. Whenever a consumer is in need of energy, the company wants then to automatically think of Red Bull. The brand uses traditional media channels, but more important has been the role of word of mouth marketing, playing on associations with energy, danger and youth culture. Red Bull associates itself with numerous sports events along with young professionals and students who need a high energy level. This has been fostered through an alignment with extreme sports and adrenalin-fuelled activities, as well as street culture and music events. Through happenings such as these the roles of engagement and brand experience play a critical role. These campaigns have created a strong brand name globally. Such a strong brand name makes it natural leader among all energy drink providers. As a result of marketing campaign, in almost all countries where it operates, it has managed to attain at least 70% of market share. Moreover, Red Bull also has good distribution system to make sure that target customers get the product. However cost structure for these extensive marketing programs is expensive and constitute major chunk of their total cost.

Red Bull contains, per 250 mL (8.4 U.S. fl.oz.) serving, about 21.5 g sucrose, 5.25 g of glucose, 50 mg of inositol, 1000 mg of taurine, 600 mg of glucuronolactone, vitamin B — 20 mg of niacin, 5 mg of vitamin B6, 5 mg of pantothenic acid and 5μg of vitamin B12 , 80 mg of caffeine. Red Bull has unique proprietary feature due to these ingredients and its composition. Red Bull also has good financial strength to analyze changes in customer’s needs and wants.Red Bull offers a product that has unique attributes that are values by the customer. For example Red Bull claims that it has the most unique taste and customers may even agree to it. Customers perceive Red Bull to be different from all the other energy drinks and this allows the company to charge a premium price. Red Bull passes its costs mostly to the customers in form of the high price. The reason why Red Bull has been successful in broad differentiation is because it has a vast network of sales team who successfully communicate the strengths of Red Bull. Also having a highly skilled product development team is also a plus point. It’s corporate image for quality and uniqueness also plays a major part in its success.

STRATEGY AND PROPOSED CHANGES

Analysis on target market and sources of competitive advantage shows that currently it is doing broad differentiation. It has broad segment of young professionals, athletes, and

students. They are trying to differentiate themselves mainly by brand name, advertising campaigns and taste.

Sports drink which has sportsmen as a target market and energy drink with another target market are two broad categories, which should not be merged together. Important sports event which has a large target market is saturated by other carbonated drink providers. Changing customer needs required a more focused approach to keep oneself updated about such changes. Extraordinary marketing skills can be adopted more impressively on a specific customer segment. As per the proposed generic strategy discussed and its reasoning it is recommended that Red Bull should change its current strategy of broad differentiation into focused differentiation.

MATCHING STAGE: It includes 5 matrices which are evaluated as follows:

1. TOWS MATRIX Strengths Weaknesses

1. No strong

competitor 1. Higher prices

2. Red bull’s collaboration with distribution partners (DPs) in Pakistan

2. Presence of Taurine in Red bull

3. No visible change in sales even after price increase

3. No lab testing by Red Bull management at the time of launching the product

4. Behavioral segmentation of the target market.

4. No formal organization structure

5. Extreme sport promotion for the first time in Pakistan – Red bull Karachi base jump.

5. Centralized production facility for the global market

Opportunities S-O Strategies W-O Strategies1. Expansion in new

markets e.g. Asia1. Expand in Asian

markets as there is no real competitor (S1,O1)

1. Establishing new production facilities in different regions in world, decreasing transportation cost (w1, o1)

2. Diversify in other segments e.g. sports drink

Establish DPs in unattended Asian countries (s2,o1)

2. Bring an energy drinks that has no Taurine (w2,o3)

3. Extension of product line to increase market share

3. Targeting a new segment called experiencers. (s4,o2)

4. Increased advertisement in Asian market

4. Diversify into sports drink market.(s5,o2)

5. Consciousness of status symbol and attitude towards foreigners.

Design Promotional campaigns taking advantage of changing trends. (s5,o5)

Threats S-T Strategies W-T Strategies1. Health concerns- high 1. Bring a new 1. Introduce new

caffeine product that has no caffeine as we have no competitor (s1,t1)

caffeine free energy drink (w2,t1)

2. Changing perception of consumer about energy drinks

2. Introduce taurine free Red Bull (s4,t2)

2. Introduce new taurine free energy drink (w1,t1)

3. Consumer income is low/ low purchasing power

4. Publicity on the more content of cocaine in Red Bull Cola

3. Conduct an official lab testing of red bull in order to remove the misconceptions of people. (T2,W3)

5. Presence of substitutes in the market(especially sports drinks)

2. SPACE MATRIX

Conservative FS Aggressive

Defensive ES Competitive

-5 -4 -3 -2 -1 +0 +1 +2 +3 +4 +5

A firm in the Aggressive quadrant should use its internal strengths to (1) take advantage ofExternal opportunities, (2) overcome internal weaknesses, and (3) avoid external threats. Therefore market penetration, market development, product development, backward integration, forward integration, horizontal integration, conglomerate diversification, concentric diversification, horizontal Diversification or a combination strategy can all be feasible.

Some of the aggressive strategies best suited for red bull should be :

Introduction of new taurine free Red Bull Diversification into Sports Drink Market Extensive promotional campaigns directed at the targeted market to take advantage of

the changing trends in Pakistan. Conduct an official lab testing of red bull in order to remove the misconceptions of

people in Pakistan.

3. GRAND STRATEGY MATRIX

RAPID MARKET GROWTH

Quadrant II Quadrant I

RED BULL

WEAK COMPETITIVE STRONGPOSITION COMPETITIVE

POSITION

Quadrant III Quadrant IV

MARKET GROWTH

Red Bull stands in quadrant I, which put it in an excellent position to take advantage of external opportunities as well as take risks aggressively when needed. Red Bull should concentrate on the current markets through market penetration and development. Product Development, vertical and horizontal integration can put its resources to efficient use. Whereas slight diversification can reduce its risks. Grand Matrix suggests Red Bull should:

Penetrate market by increasing promotional campaigns. Do product development by introducing taurine free Red Bull. Diversify by entering into sports drink market. Consider new geographical and demographic segments. Forward Integration by acquiring more Distribution Channels.

4. IE MATRIX

The IFE Total Weighted Score

Strong Average Weak

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

High I II III3.0 to 3.99

Medium IV V VIThe EFE Total

2.0 to 2.99 RED BULL

Weighted Score

Low VII VIII IX1.0 to 1.99

HOLD AND MAINTAIN

Divisions that fall into the III, V and VII cells employ HOLD and MAINTAIN strategies. In the case of Red Bull it should:

Go for market penetration by increasing promotional campaigns in Pakistan Introduce taurine free Red Bull Develop new product for sports segment.

5. BCG Relative Market Position

High Medium Low

Red bull energy drink Red bull sugar free

Question Mark Red Bull cola Carpe Diem Botanic Water (relaxing,

harmonizing and vitalizing)

Cash Cow Dog Carpe Diem Kombucha (Classic,

Quince and Cranberry) Red bull energy shots (sugar free also

available)

The BCG matrix draws our attention to the cash flow, investment characteristics and needs of the organizations various divisions.

The Question Marks have a low relative market share position in a high growth industry. Red Bull’s division Red bull cola is placed in this quadrant.

The Stars represent divisions with a high relative market share in a high industry growth rate. Red Bull energy drink and sugar free divisions lie here.

Cash Cows have a high relative market share in a low growth industry and Red Bull energy drink and sugar free divisions lie here. None of Red Bulls divisions falls in this. Dogs mean low relative market share in a slow or no growth market. Red bull energy

shots is represented in this quadrant.

The BCG matrix suggests following strategies:

Promotion of Red Bull cola should be carried out in Pakistan to spread awareness in Pakistani markets.

Product Development by introducing taurine free red bull and other flavours. Establishment of more Distribution Partners in unattended Asian countries.

MATRIX ANALYSIS AND TOWS SUMMARY

Alternative Strategies IE SPACE GRAND BCG COUNT

Forward Integration X X x 3

Backward Integration X X x 3

Horizontal Integration X X x 3

Market Penetration X X X x 4

Market Development X X x 3

Product Development X X X x 4

Concentric Diversification - X X 2

Conglomerate Diversification - X 1

Horizontal Diversification - X 1

Joint Venture - 0

Retrenchment 0

Divestiture 0

Liquidation 0

Product development, market penetration and diversification received the highest scores which is complying with our strategies in QSPM. Market penetration can be done through introducing a taurine free version of Red Bull and unrelated diversification can be done by going into a different segment of sports

DECISION STAGE

QUANTITATIVE STRATEGIC PLANNING MATRIX FOR RED BULL

Strategic AlternativesCritical Success Factors Weigh

tTaurine free Red

BullExpansion in sports drink

marketStrengths AS TAS AS TASNo strong competitor 0.12 4.00 0.48 1.00 0.12

Red bull’s collaboration with distribution partners (DPs) in Pakistan 0.14 4.00 0.56 4.00 0.56

No visible change in sales even after price increase 0.10 2.00 0.20 2.00 0.20

Behavioral segmentation for the targeted consumer 0.04 3.00 0.12 3.00 0.12

Extreme sport promotion for the first time in Pakistan – Red bull Karachi base jump. 0.08 3.00 0.24 3.00 0.24Weaknesses Higher prices 0.14 2.00 0.28 1.00 0.14Presence of Taurine in Red bull 0.10 4.00 0.40 3.00 0.30

No lab testing by Red Bull management at the time of launching the product 0.12 3.00 0.36 3.00 0.36No formal organization structure 0.08 ---- ---- ---- ----

Centralized production facility for the global market 0.08 1.00 0.08 1.00 0.08SUBTOTAL 1.00 2.72 2.12

Critical Success FactorsWeigh

tTaurine free Red

Expansion in sports drink

marketOpportunities AS TAS AS TASIncrease in Asian population 0.10 2.00 0.20 2.00 0.20Increased demand for healthy drinks 0.05 2.00 0.10 3.00 0.15Increase in demand of energy drinks 0.15 2.00 0.30 4.00 0.60Regional advertisement 0.05 3.00 0.15 ---- ----Changing trends and increasing peer pressure 0.10 3.00 0.30 4.00 0.40Threats Health concerns- high caffeine 0.15 1.00 0.15 4.00 0.60

Misconception amongst people about product ingredients and side-effects 0.15 4.00 0.60 4.00 0.60Consumer income is low/ low purchasing power 0.05 2.00 0.10 2.00 0.10

Ban on Red Bull in Germany due to cocaine issue 0.10 2.00 0.20 4.00 0.40

Presence of many substitutes in the market(especially sports drinks) 0.10 3.00 0.30 4.00 0.40SUBTOTAL 1.00 2.40 3.45

SUM TOTAL ATTRACTIVENESS SCORE 5.12 5.57

For the decision stage, we chose two strategies:

1. Introduction of taurine free red bull2. Diversification into sports drink market

As they best suit market development, market penetration and product development, as they are recurring in most matrices. With taurine free red bull, we can penetrate the market and raise the market share and diversification according to the market analysis and future demands.

As the scores for both the strategies are very close so we will implement both of them. Strategy of Taurine free Red Bull is in accordance with product development and other strategy is in accordance with diversification

STRATEGIC IMPLEMENTATION

RED BULL GIVES YOU WIIINGS…

5. STRATEGIC IMPLEMENTATION:

STRUCTURE & CULTUREAll the strategies to be implemented are initiated from the Austrian Management Head and then it trickles down to management of different countries. In Pakistan for example it reaches the Business Head who is the head of both Pakistan and Afghanistan divisions. This strategy is communicated to the Brand Manager and National Sales Manager of the division who convey the strategy further down the hierarch. The culture of Red Bull is very change oriented and is flexible with any amendments applied to way business is done. The company is adaptable to any strategy as long as it is relevant and maintains Red Bull’s image as the high-end energy drink.

RESOURCESTo implement any strategy the most important resource is the human resources. The entire hiring takes place according to business needs. The whole process is conducted abroad. The training and development for the South Asia division takes place in Dubai. Red Bull has soaring sales all around the world and is the largest energy drink company of the world. Red Bull 2008 sales figures showed the brand’s continued growth in the UK energy drink market, with end of year sales of 329.5 million cans; an increase of 14%, or over 40 million cans, year on year. In Pakistan alone, Red Bull had sales of 48 crores PKR. Thus, Red Bull has the necessary funds to execute relevant strategies.

STRATEGY # 1: TAURINE FREE RED BULLThere has been a lot of misconception about this one ingredient of Red Bull; Taurine. There is much hue and cry about Taurine being the extracted from bull urine or bull semen. Taurine is a conditionally essential amino acid. Taurine is naturally occurring in our body, mainly in muscle, brain, heart and blood. While it's true that Taurine is found in bull urine and semen, it is not the source of Taurine in the pharmaceutical or food industry. The Taurine used in products you may purchase to use/eat/drink etc, does not come from animals - and definitely NOT from bull semen or urine. It is almost always synthesised from other chemicals/compounds without any animal-based input.

We suggest that Taurine be replaced by Arginine, a chemical which is used in the energy beverages that plays an important role in cell division, the healing of wounds, removing ammonia from the body, immune function, and the release of hormones and it is one of 20 natural amino acids.

Arginine can be bought by the same suppliers of different ingredients of Red Bull and wouldn’t have to compromise on quality. The composition of Red Bull will not differ much either as Arginine as the same effect as Taurine and can be used in the same quantity, which is 1000 mg in a 250 ml drink.

If it is well marketed as a Taurine free Red Bull we will be able to cater to those individuals in our targeted segments who believe that Taurine is bad for health and is taken from Bull excretion.

STRATEGY # 2: DIVERSIFYING INTO SPORTS DRINKS MARKETA sports drink is a beverage to help rehydrate and replenish electrolytes, sugar and other nutrients, which are used up after strenuous exercise, training or competition. Sports drinks are different from energy drinks. Sports drinks replenish electrolytes and are generally isotonic. Energy drinks provide sugar and caffeine only with no other benefits. Sports drinks are linked to the science of nutrition and sports medicine and often provide rehydration, boost sports performance and aid muscle recovery. They often include electrolytes, carbohydrates, and proteins in the form of amino acids and peptides. The functional energy drink market consists of energy drinks, neutraceutical drinks, smoothies (milk and juice blends) and sports drinks.

The sports drinks market is approximately US $300 billion in terms of sales worldwide in 2008. The global sports drinks market increased by 10% in 2008. Currently the sports drink market is targeted not only at athletes but also towards health-conscious general consumers and the largest growing segment of the sports drink market is for non-athletes. This market shift has led some sports drinks manufacturers to specifically target and develop products aimed at non-athletes, such as low-sodium or low-calorie sports drinks. New growth will likely be driven by reaching new demographic groups; the introduction of new brands, brand and flavour extensions; and an increased focus on exercise in health and well being. The sports drinks market covers a wide range of products from advanced specialist sports nutrition for body builders and athletes to products for common consumer. Approximately 38.3% of market sales are distributed through on-trade retailers.

Red Bull does cater to sportspeople but their main focus is on sports that require mental alertness. Since Red Bull increases mental alertness, Red Bull is successful in that field. We want Red Bull to cater to sports like tennis and swimming where individuals are looking for a drink that offers hydration and electrolyte replenishment.

This new sports drink will be launched under the brand name of Red Bull. The production will take place in the plant is Austria as it is centralized. Sports drinks basically contain different forms of sugar and water. Red Bull already has sucrose and water content in it. Fructose and glucose can be purchased from the same suppliers. If we exclude caffeine,

niacin and Taurine add different forms of sugar and minerals then the composition would be of a sports drink.

SYNERGIES IN VALUE CHAINFor implementing either of the strategies we see three major synergies in the existing value chain of Red Bull. There are as follows:

RAW MATERIALS PROCUREMENT

PRODUCTION

Red Bull has a very strong Research and Development department. Whichever strategy we chose to implement research and development will play a major role in it. This department has helped Red Bull launch its other brands and we would need its support in the launch of Taurine Free Red Bull and Sports Drink. Since most the raw materials are the same. We will have synergies in terms of procuring sucrose, glucose and the vitamins. Both the strategy entails addition of subtraction of certain elements of composition of the drink. This is why the production can take place in the centralized production plant at Austria.

PITFALLS IN STRATEGIC IMPLEMENTATIONLack of ownership: The most common reason a plan fails is lack of ownership. If people don’t have a stake and responsibility in the plan, it’ll be business as usual for all but a frustrated few. Diversifying into sports drink or launching a Taurine free Red Bull will require people to take liability for the execution of the strategy.

Lack of communication: If the plan doesn’t get communicated well across the organization employees won’t understand how they will contribute to it. To launch into a new industry Red Bull has to convey the details of the strategy well.

No progress report: There’s no method to track progress, and the plan only measures what’s easy, not what’s important. If the strategy execution isn’t properly monitored there are chances that the pitfalls that may come will go unnoticed.

No accountability: Accountability and high visibility help drive change. This means that each measure, objective, data source, and initiative must have an owner. Red Bull needs to have every employee what part does he or she play in the strategy implementation and take responsibility for it.

Lack of empowerment: Although accountability may provide strong motivation for improving performance, lack of empowerment among employees will be a great hindrance. Otherwise, they may resist involvement and ownership. It’s easier to avoid pitfalls when they’re clearly identified. If Red Bull wants the strategy implementation to be a success it needs to give every employee employees the authority, responsibility, and tools necessary to impact relevant measures

Red Bull may have issues with the suppliers regarding the provision of the chemicals that Red Bull doesn’t currently use. Also the production facilities may not be able to foster the production of two sets or Red Bull and a whole new extension into Sports drinks.

SCORE CARD

DIAGNOSTIC SURVEY OF PRIMARY AND SECONDARY MANAGEMENT PRACTICES:

Answer the following questions using a scale from 1-5, where 1=inferior to industry peers, 3=about the same as industry peers, and 5=superior to industry peers.

Strategy Inferior Average Superior

The company has a clearly articulated and widely understood strategy. 1 2 3 4

The company has strong external antennae and quickly anticipates external shocks, emerging opportunities, and market downturns.

1 2 3 4 5

The company has a very good understanding of its competitors and can anticipate competitors’ moves.

1 2 3 4 5

The company is focused on extending/improving its core business or businesses and is committed to growing them aggressively.

1 2 3 4 5

Subtotal of Strategy score:

Execution Inferior Average Superior

The company’s products and services consistently meet customer expectations. 1 2 3 4

The company consistently improves employee productivity. 1 2 3 4

The company’s programs and initiatives consistently achieve desired outcomes. 1 2 3 4

The company’s IT systems enhance its ability to execute its value proposition. 1 2 3 4

Subtotal of Execution score: 15

Culture Inferior Average Superior

The company sets demanding performance standards for all of its employees. 1 2 3 4

The company consistently raises the performance bar. 1 2 3 4

The company’s culture is exciting, engaging, and fun. 1 2 3 4

The company has clear values that people in the company abide by. 1 2 3 4

Subtotal of Culture score: 16

Organizational Structure Inferior Average Superior

The company makes decisions quickly. 1 2 3 4 5

The company minimizes bureaucracy. 1 2 3 4 5

The company’s business processes are simple. 1 2 3 4 5

The company effectively cooperates across the organization. 1 2 3 4

Subtotal of Organizational Structure score: 11

Talent Inferior Average Superior

The company has great “talent” and “bench strength” at each position. 1 2 3 4

The company successfully develops talent. 1 2 3 4 5

The company designs jobs that intrigue and challenge talented employees. 1 2 3 4

The company’s senior management is personally involved in recruiting and developing talent. 1 2 3 4 5

Subtotal of Talent score: 17

Quality of CEO/Board Leadership Inferior Average Superior

The CEO is uncanny at spotting opportunities and problems before others. 1 2 3 4

People at all levels of the organization feel connected to the CEO. 1 2 3 4

The CEO matches words with actions (“walks the talk”). 1 2 3 4

The company’s board members know the business and have a significant stake in the success of the company.

1 2 3 4 5

Subtotal of CEO/Board score: 11

Innovation Capability Inferior Average Superior

The company is continually transforming or reshaping its industry. 1 2 3 4

The company’s products, devices, or innovations are better than those of its competitors. 1 2 3 4

The company does not hesitate to cannibalize its existing business or businesses. 1 2 3 4

People who have new ideas are respected and enjoy high status in the company. 1 2 3 4

Subtotal of Innovation score: 12

M&A Growth Inferior Average Superior

The company consistently identifies good M&A possibilities. 1 2 3 4

The company rarely overpays for mergers & acquisitions. 1 2 3 4

The company is consistently better than its competitors at integrating mergers and acquisitions.

1 2 3 4 5

The company’s mergers and acquisitions achieve most of their projected cost and revenue benefits.

1 2 3 4 5

Subtotal of M&A score: 5

Total score: 103

This score shows that the company is doing well as compared to its peers in the industry. It is focusing on the improvement of its core business and is committed to growing them aggressively. Company is improving employee productivity by arranging the trainings for them. Red bull spends so much on the training and development of its employees.

The culture of the company is so flexible that where ever it conducts its activities and events they promote the culture of that country. Company’s culture is very exciting, engaging and fun.

The company has great talent and its continuously developing their talent. They have their athletes who perform in their events just to show the level of energy they got and promoting the brand.

Red bull should consider its innovation capabilities and do some innovations in its brand by launching some other variants which could be widely acceptable or by diversifying in other sector like sports drink industry.

BIBLIOGRAPHY:

http://www.drawert.com/red_bull_3.php

http://www.bized.co.uk/compfact/redbull/redbullindex.htm

http://tutor2u.net/business/strategy/core_competencies.htm

http://www.researchwikis.com/Sports_Drinks_Marketing_Research

http://www.redbull.com.my/product.asp

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