Originally established in Thailand in 1962 under the name Krating Daeng, Red Bull was incorporated in 1984 with its head office in Austria. It is now a market leader in the energy drink segment with presence in over 130 countries and an employee base of over 3,900 worldwide. It recorded a turnover of $2.6 billion in 2006 with a whopping 300% increase in global sales as compared to the year 2000. Starting with its first international foray in the neighbouring Hungary in 1993, it has since then entered and established a foothold in various key markets like United States, Germany and United Kingdom. Through its well developed network of local subsidiaries in these and other key markets, it manages to make its products available in more than 100 countries. The brand Red Bull has a reputation of unconventional marketing strategies, first mover in the energy drinks market and a strong player in the overall functional drinks market.
This report is based on Red Bull GmbH’s international development and is divided into four distinct sections. Firstly, the key strategic challenges that it faces internationally in the functional drinks sector would be identified and evaluated. Secondly, the existing product mix of Red Bull and any suitable changes to the same will be analysed and discussed. Third section of the report will talk about Red Bull’s existing market entry mode into non-domestic markets and relevant alternative strategies. The final section will cover the company’s existing approach to product promotion/advertising and distribution and if they can act as a source of competitive advantage in the future. The report will be concluded with a summary of overall assessment of the company.
Section 1: Key strategic challenges for Red Bull in the functional drinks sector
Red Bull is a major player in the functional drinks market which comprises of energy drinks and sports drinks. The market for functional drinks is dominated by both specialized manufacturers like Taisho Pharmaceuticals and Extreme Beverages, as well as large beverage companies like Pepsi, Coca Cola etc. Red Bull’s market leader position in the functional drinks market and, more specifically in energy drinks segment is being constantly challenged by new innovative brands. In order to not only survive but maintain its leadership position, it must have a clear focus for international competitiveness.
Red Bull’s International Competitive Focus (Porter’s Prescription for International Competitiveness)
According to Porter’s prescription (see Appendix 1), first consideration should be given to the most demanding customers. Perhaps the most common reason to expand globally is the recognition of opportunity existing in the foreign markets (Jeannet & Hennessey, 2004, p.253). Originating from Austria, Red Bull needed to expand due to the limited size of the Austrian market. Despite initial hiccups in the domestic market and loss of market share at the hands of ‘me too’ competitors in Germany, Red Bull has now a got stronghold in the markets like United States, United Kingdom & Germany where the demand for functional drinks is largely driven by the modern hectic lifestyle and thus, the concept of energy drinks is established and accepted by the consumer. The persistence, perseverance and unconventional approach to marketing displayed by the company’s leadership ensured the success of its global expansion strategies. The company’s innovative marketing strategies have been developed keeping in mind the nature of the product which has a niche market and its target consumers who are young urban professionals, people aged between 16 & 29, college and university students. Finding the right location is an important consideration, hence the company has set up a network of local subsidiaries in certain key markets with great potential in distribution and efficient logistics.
Factors in international markets as a determinant of...