Strategic Analysis and Recommendations for Red Bull

Table of Contents

Task 1: Introduction
Industry and Company Outline
Red Bull’s Mission and Vision
Red Bull’s Strategic Process
European Market

Task 2: External Analysis
Red Bull’s PESTEL Analysis
- Political Factors
- Economic Factors
- Socio-cultural Factors
- Technological Factors
- Ecological or Environmental Factors
- Legal Factors
Porter’s Five Forces
Opportunities and Threats

Task 3: Internal Analysis
Strategic Drift
Bowman’s Strategic Positioning
Mckinsey 7s Model (Organisational Performance)
- Strategy
- Structure
- System
- Style and Culture
- Staff
- Skills
- Shared values
Strengths and Weaknesses

Task 4: Strategies
Red Bull TOWS
Porter’s Generic Process
Ansoff Matrix (Strategic Planning)
BCG Matrix
Strategic Partnership
Financial Strategy
Research and Development Strategy

Task 5: Evaluation
SAF model
Suitability
Acceptability
Feasibility
Conclusion
References

Task 1: Introduction

Industry and Company Outline

Red Bull GmbH is one of the largest companies globally in terms of innovation. It is this competitive edge in innovation that enabled the company to transition its product from an unstable drink to a leading energy drink globally. The Austrian company was founded in 1987 and has so far grown to occupy the largest share of the energy drink market selling 7.5 billion cans in the year ending 2019 (Groendahl & Metcalf, 2020). Red Bull’s main strength is in its marketing campaigns. Instead of following a traditional approach to mass marketing, Red Bull generates brand awareness through the creation of a brand myth by engaging customers in multiple activities and experiences including extreme sports events. Red Bull also owns sports teams such as Formula One team, football clubs such as Red Bull Salzburg and so on (Kuijk, 2018). Other marketing activities include music engagement through Red Bull Records as well as celebrity endorsements. Apart from its sports-centred marketing being innovative, the cost of this approach is lower than the conventional methods used by other beverage companies such as Coca-Cola (Fontinelle, 2020). Despite its marketing success, the company faces the problem of lacking a patent for the company’s product formula. As such, many companies used Red Bull’s secret ingredients to develop competing products. Furthermore, Red Bull has received negative press regarding the potential health risks associated with some of its products.

Red Bull’s Mission and Vision

The mission statement of Red Bull reads, “Giving wings to people and ideas”. As inferred in the statement, the company does much more than manufacture soft drinks. It intends to make its products and services distinct from those of its competitors. This mission is based on a vision to maintain the industry leadership position in the energy drinks category by delivering superior customer service using a highly efficient and profitable manner (Groendahl & Metcalf, 2020). The vision is also to create a culture where people can freely create and explore new ideas through sharing best practices, coaching and developing the organization as the employer of choice. This vision ensures that Red Bull remains innovative and creative as it pursues its short-term, medium-term and long-term goals.

Red Bull’s Strategic Process

The success of Red Bull’s innovative marketing strategy based on selling a lifestyle relies on the development of greater brand awareness. Based on the slogan, ‘Red Bull gives you wings to fly’, Red Bull has been able to develop a vibrant market of youth between the ages of 18 and 35 years (Herwina & Nuraisyah, 2018). Unlike other beverage companies, Red Bull relies on the sponsorship of sporting events and the provision of free products to athletes by underwriting sports competitions and athletes. Moreover, the company focuses on ‘place strategy’ offering the product to largely entertainment sports and nightclubs. Through this marketing strategy, Red Bull is able to make more than $4.2 billion in annual sales as the strategy cultivates brand loyalty thus improving sales revenues.

European Market

Red Bull brand is present in more than 171 countries in the world with the leading growth markets being India, Brazil and Eastern Europe. In Europe, Red Bull accounts for up to 71 per cent of the total energy drink market share (Groendahl & Metcalf, 2020). However, it faces strong competition from other soft drink giants such as Coca-Cola and Pepsi among others.

Task 2: External Analysis

Red Bull’s PESTEL Analysis

To identify threats and opportunities that Red Bull faces, it is essential to assess its macro-environment. Kuijk (2018) indicated that PESTEL analysis is an important tool used to identify factors related to opportunities and threats facing the company. For the purpose of this report, Table 1 presents some of the factors to consider.

Table 1: PESTEL Analysis Red Bull

Abbildung in dieser Leseprobe nicht enthalten

Source: Author’s own work

Political Factors

Red Bull is affected directly or indirectly by government laws, political stability, consumer rights and laws and labelling among other issues. For instance, in 1986, Red Bull was banned from entering the UK and other European markets due to high caffeine and taurine rates (Asiedu, 2016). These bans and restrictive policies have led to the company putting in place proper measures to address environmental issues, human and labour rights as well as consumer issues. The EU has also imposed certain regulations on the advertising of sweetened drinks including energy drinks on some platforms.

Economic Factors

There are many economic factors which have had a significant impact on the way Red Bull Company conducts its business since its inception. For instance, the company has witnessed a global increase in purchasing power, especially in developing countries and market maturity in developed countries which has made their products hugely affordable (Yang, Ge & Li, 2013). However, the company has also experienced the negative impact of the recession and buying power of consumers in other markets. While many substitutes have emerged, Coca-Cola and Pepsi are still the main threats to Red Bull's growth, especially in the carbonated drinks markets when the industry margins are high. Nevertheless, Red Bull is still a dominant force in countries such as the USA (47%), India (+32%), Turkey (+32%), South Africa (+31%), Russia (+18%) and Japan (+11%) due to its effective cost and brand management approaches (Bush, 2019).

Socio-cultural Factors

Like any other product, the attitudes and beliefs of people will impact on the growth of brands. In the case of Red Bull, the company has suffered in terms of growth in some markets due to concerns about health risks, age distribution factors, population growth and career attitudes of people (Comparably, 2020). For instance, these doubts regarding the health and safety status of Red Bull led to its ban in some countries. High unemployment rates have also negatively affected the reception of Red Bull's marketing message which is usually packaged as a drink for working people who are tired and need to rejuvenate. Furthermore, promoted as a fashionable drink for young people, Red Bull could lose on the ageing market in Europe. In addition, consumers today are more open to experiences motivated by ethical issues and a company with a bad reputation will not fare very well. In this case, Red Bull needs to examine the issues it faces critically and determine their direct and indirect impact on its consumers.

Technological Factors

Today, firms are trying to gain a competitive edge in their markets by leveraging and developing their intellectual assets which can enable them to fend off increased competition and improve the quality of products and services. Red Bull uses superior and innovative manufacturing techniques and processes leading to cost efficiency and low prices compared to its direct competitors (Forbes, 2020). The company also relies on social media presence to attract young consumers. Social media has become a major tool Red Bull uses to create Buzz about its products.

Ecological or Environmental Factors

The scarcity of raw materials makes the operation of a manufacturing company even more challenging. In this case, the growing scarcity of various raw materials has adversely affected the ability of the company to grow as an ethical and sustainable company. The company must also adhere to the carbon blueprint set by various governments where it operates. Comparably (2020) revealed that many consumers were shifting from energy drinks to natural drinks and beverages. For instance, it was reported that people want natural drinks instead of adulterated ones.

Legal Factors

Governments in every country that Red Bull operates have the right to restrict and control the type of products and services which are imported or exported into the country. For instance, it is only in 2015 that the Red Bull ban was lifted in France allowing the company to enter the French market (Asiedu, 2016). Currently, Red Bull is still restricted in Denmark and Norway. Furthermore, there have been concerns about Red Bull consumption and consumer health leading to various legislations from ban to adverting controls, especially in the European market.

Porter’s Five Forces

Another important model that helps in evaluating the micro-environment of a business is Porter’s five forces model which assesses the strength of the business and recognizes its competitive position. Bush (2019) explained that this model helps minimize risks associated with losing the competitive edge and ensures the company stays profitable by closely monitoring the industry trends. The following is a detailed analysis of Red Bull’s Porter’s five forces model.

i. Competitive Rivalry – High

There are many beverage companies such as Monster, Rockstar and Full Throttle which engage in the manufacturing of energy drinks (Yang, Ge & Li, 2013). While the market share of Red Bull is greater than that of all these companies combined, this industry continues to grow at an impressive rate thus offering opportunities to competitors as well. These competitors have also similarly diversified their businesses as Red Bull. A high number of competitors implies that the competitive rivalry that Red Bull faces is high.

ii. The Threat of New Entrants – Low

Entering the energy drinks market requires innovation and high capital outlay which makes it hard for newcomers to join. Furthermore, it takes time for a company to establish economies of scale. In addition, it is difficult to develop a global distribution network that can rival that of Red Bull (Forbes, 2020). Due to this, the threat of entrants in the energy drinks industry is low.

iii. Bargaining Power of Suppliers – Low

Red Bull relies on a simple production process that requires few raw materials. These materials are acquired in large volumes from a few companies. The switching cost of Red Bull to another supplier is also low (Comparably, 2020). Since the majority of these suppliers only supply to Red Bull, they have low bargaining power against the company.

iv. Bargaining Power of Buyers – Medium

Though there are many competitors to Red Bull, the energy drink market is still characterized by strong brand loyalty. Due to the high market share of Red Bull, they enjoy a significant level of bargaining power over buyers thus allowing the company to increase prices moderately without losing its market share (Bush, 2019). Moreover, Red Bull appeals to high-end consumers which are not sensitive to prices. In this case, the bargaining power of Red Bull buyers is moderate.

v. The Threat of Substitutes – Low

The primary substitutes for Red Bull are coffee and homemade fruit smoothies. These substitutes are natural and have low health risks. In the case of Red Bull, there have been concerns concerning its safety (Asiedu, 2016). Despite the controversies, regular consumers of Red Bull continue to consume thus a low threat to substitute.

Opportunities and Threats

From the analysis of the macro-environment, there are opportunities and threats that Red Bull should consider in its European market in order to improve its company’s strategy as shown in table 2 (Kaplan & Norton, 2008).

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