Red Bull Gmbh

Red Bull GmbH PRINCIPLES OF INTERNATIONAL MARKETING Exam: 72 Hours Individual Home Assignment B.Sc. International Business 19.03.2019 – 22.03.2019 Number of Pages: 10 Number of Characters (Incl. Spaces): 22,746 Student Number: Student Number: Submission: March 22, 2019 72 Hours Individual Home Assignment Principles of International Marketing i. Introduction Red Bull GmbH (henceforth Red Bull) was founded in 1984. The company produces and sells energy drinks to more than 100 countries worldwide. In 2013, Red Bull had a turnover of almost €5 billion and nearly 9,000 employees (MarketLine, 2013). This paper will touch upon Red Bull’s internationalization, the situation of the firm, internally and externally, the most desirable market for expansion and the needed marketing mix, and the best strategic option for Red Bull in the future. ii. Delimitations In this paper, I have limited my use of data to the year 2013 being the latest, as this is the year that the case is from. This is done to be able to utilize the case material to answer the specific exam questions. Furthermore, this means that the external sources and data used will not be from later than the year 2013. This is expected to have an impact on the analyses, discussion, and conclusion of this paper in the sense that it is assumed that Red Bull has not implemented any strategic decisions after 2013. Furthermore, I shall not refer to the case material or the main textbook (Keegan, 2016) with a source, when I use the data from this in the paper. 1. Characterization of Marketing Strategy and Internationalization Theory Looking at the marketing strategy, there are three options for a company: Global, Local and “Glocal”. Global strategy focuses on a very standardized product and branding. Local strategy, on the contrary, focuses on localizing product and branding to fit the specific market that it is on. The “glocal” strategy is the mix of either global branding and a local product or vice versa. After reading the case of Red Bull it is deemed that the company is using the global marketing strategy, as the product and the branding is nearly the same on almost all the markets. Looking at the internationalization theories, factors indicate that Red Bull has followed both the Uppsala model and the Born Global approach. Firstly, it started in Austria and then, after a few years, started to move towards the markets closest by, being Hungary, Germany, and then the UK. Secondly, Red Bull has presumably entered the markets with a low market commitment in the beginning, say by exporting, and has then followed the Uppsala model, as the market commitment has increased gradually from sporadic export to doing FDI (foreign subsidiaries). But, even though Red Bull will likely be categorized as international, it only has one production facility; in the home market, Austria. Thus, it has not reached the last level of market commitment in the Uppsala model. So, 1 Student Number: Submission: March 22, 2019 72 Hours Individual Home Assignment Principles of International Marketing thirdly, while aspects of the Uppsala model fit the case of Red Bull, we also see tendencies of the Born Global approach, as it has expanded very rapidly after its initial internationalization process. 2. SWOT Analysis Internal Situation Strengths Weaknesses - First-mover advantages - Unhealthy products - Leading brand in all markets - Only one production facility - Experience - Narrow product portfolio - Well-known brand - Expensive promotion - Differentiated approach to the four Ps - Bad competitive response in North - Financed on operating cashflows America - Many functions o Off- and on-trade External Situation Opportunities Threats - High growth for energy drinks - Competition, especially in the North o CAGR of 16% American region - Increasing trend for energy shots - Health focus of consumers outside the US - Regulations and bans - The development of non-impulse- - Expansion of non-impulse off-trade oriented off-trade distribution presence – the fashionable image Strengths: Red Bull has several strengths. Among the most significant is the experience and first- mover advantage, which Red Bull still today reaps the benefits from, as the company is one of the leading brands in all regions in which it is represented. Other than that, Red Bull has a strength in its very well-known brand. The level of awareness can be a result of the seniority and that Red Bull’s marketing mix is differentiated from the competitors’. Financially, Red Bull has a strength given that its growth and investment is financed from the operating cash flow. Finally, the Red Bull product can be consumed in various scenarios: to stay awake, be it as a truck driver or a student writing an exam, as a mixer in drinks, and as an energy boost for athletes. Weaknesses: A weakness for Red Bull is that it produces and sells an unhealthy product. As will be mentioned under threats, this does not correlate well with the increasing health focus. Also, related to the product being unhealthy, Red Bull has only two flavor variants of the energy drink, which can make it riskier for Red Bull if the product e.g. gets bad publicity. Then the company would not be able to rely on other product while finding a solution. Also, Red Bull spends around 40% of revenues on promotion, which is a rather large amount. Another weakness appears to be the competitive response of Red Bull. When Monster gained market shares from Red Bull in the US, one of the main 2 Student Number: Submission: March 22, 2019 72 Hours Individual Home Assignment Principles of International Marketing reasons was Red Bull’s slow response to the competitor’s launch of larger cans. Furthermore, it might prove costly to only have one production facility in Austria from which the company produces and distributes products to subsidiaries and distributors. Opportunities: An opportunity for Red Bull is the growing market for energy drinks. The compound annual growth rate is 16%. Another is the increasing popularity for energy shots outside of the US market. This is mainly in Europe, Asia and Australia. It is a possibility to pursue for Red Bull, as they have the strengths to do so. Finally, a big opportunity for Red Bull is the development of non- impulse-oriented off-trade distribution. This creates an opportunity for Red Bull to develop new packaging formats. Threats: Red Bull has to accustom itself to some threats. First of all, there is the competition. Especially in the US, Red Bull must react to fierce competition, in particular from Monster. Another big threat for Red Bull is the increasing health focus around the world. This will be elaborated on in question 5. When, as mentioned, Red Bull sells a rather unhealthy product, this can have negative impact for the company. In relation to this, regulations and bans pose a threat for Red Bull, as seen with bans in France and Denmark among other countries. Also, the development of non-impulse- oriented off-trade distribution, also an opportunity, creates a threat for Red Bull’s fashionable brand. 3. International Market Selection and Marketing Mix In this question (3), the sub-questions (3.1-3.4) will be answered. The answers will mainly be relying on the Market Attractiveness – Competitive Strengths (MACS) analysis from 3.1. I will limit my elaboration to the criteria with the highest weights. 3.1 MACS Analysis The criteria for the determination of the market attractiveness has been found and weighted looking at Red Bull’s specific situation. The GDP per capita (World Bank, 2013) is an important criterion, as it says something about the purchasing power of the consumers in the market. As Red Bull sells at a premium price, this is weighted 15. Furthermore, consumption, in liters and growth in consumption (Euromonitor, 2013) are important criteria, as it shows whether Red Bull can expect a demand for its products. The most important of the two is the consumption in millions of liters, which is why this is weighted with 20 and growth in consumption is weighted 10. Finally, the psychic 3 Student Number: Submission: March 22, 2019 72 Hours Individual Home Assignment Principles of International Marketing distance from the home market, Austria, is important focusing on the cultural differences that Red Bull might encounter when expanding further on the market. This is measured from Hofstede’s cultural dimensions (not counting indulgence) (Hofstede-Insights, n.d.) This means that the lowest is the best. This criterion is weighted by 15. Conclusively, it is shown in Table 11 it is shown that Japan has the highest score and is the most attractive market. This is mainly due to its high GDP per capita, political stability, consumption and low psychic distance. In table 2 is the competitive strengths of Red Bull in correlation with the four markets2. First is how the product fits the market demands. This criterion is important for Red Bull, because it gives an indication of whether the product will be well received by consumers in the market. Therefore, it is weighted by 20. The prioritization, Japan as the best, is made from the knowledge that sales in Japan (80%) is mentioned as one of the reasons of the recent success of Red Bull. In the other countries, China has the largest nominal consumption and growth in consumption of the countries, which is why the country ranks number two, looking at the product fit. As with the product fit, there is no data, specifically, on the local market network of Red Bull in these markets. The criterion gives an indication of the liability of foreignness that Red Bull might encounter when expanding further on the market.

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