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Red Bull

1. INTRODUCTION

The aim of this assignment is to select an organisation and discuss how the macro environment has influenced its marketing decision making, for the at least 12 months, and how it is likely to influence its future decision making in the first part. In the second part this study will also need to use the same organisation and discuss how the marketing mix is used by the strategic to gain competitive advantage in its chosen sector against their major competitors.

The main purpose of the Macro Environment Analysis is to identify potential threats and opportunities to chosen industry for organisations as an entire that are external the control of the chosen industry. Therefore it is usually comprises all factors that influence an organisation and its marketing decision making. Main unmanageable and external factors that influence an organisation's decision making, and affect its strategies and performance. These factors comprise the political, technological changes, economic, and social conditions, legal and demographic trend and natural forces. (WEB 1)

This assignment critically evaluates some fundamental concepts which are start to the company introduction and then analyses strategic marketing plan for Red Bull and find out PEST analyses of the company. These include political, social, economical and technological factors. These researches also consider and discuss how the marketing mix is used by the strategic to gain competitive advantage in its chosen sector.

We will find out to answer the questions “How the macro environment has influenced its marketing decision making?” and “How it is likely to influence its future decision making?” after the completing a macro environment analyses of the organisation.

PART A
1.1Company Introduction

Red Bull is one of the biggest soft drink successes over the past the years. The slim blue silver can has developed a following among those who claim that it helps them with virtually everything to work better and play better. Yet Red Bull has a 70 to 90 percent market share in over 100 countries universal. During the past 15 years, the drink has been copied by more than 100 rivals, but such companies as Anheuser-Busch and Coca-Cola have been unable to take market share away from Red Bull. [Selling Power (September, 2004)]

In 1982, Dietrich Mateschitz, the founder of Red Bull became aware of products called “tonic drinks” which enjoyed extensive popularity in Asia. Energy drinks containing taurine, glucuronolactone, caffeine and important vitamins and carbohydrates are claimed to help with physical endurance, improved reaction, speed and concentration and a feeling of well being. In the present days more than a billion cans of Red Bull are consumed each year around the world. Red Bull was launched in the UK in the mid-1990s of Austrian parentage.

According to a Zenith International 2001 survey that, in 2001, it was the UK's third biggest soft drink by value, behind Coca-Cola and Pepsi Cola. In the energy and sport drink sector, estimated to be worth £750mn, it had an 86 per cent brand share by 2000, more than double the combined sales of Lucozade's energy and sports brands. The advertising slogan of the Red Bull is “The Drink That Gives You Wings” and focuses on the stimulant properties of the drink.

This is Red Bull's international slogan for its energy drink. Red Bull is a popular drink amongst men in particular, with its largest consumers consisting of athletes, students, and night-clubbers in need of a late night lift. However, the brand is marketed to ‘opinion leaders and hard-working people with active lifestyles', as the company's website claims.

1.2 Strategic Marketing Plan

1.2.1 PEST Analysis of Red Bull

The PEST analysis is one of the useful techniques used in the analysis of the Macro environment. The PEST analysis comprises economic, political, technological and social factors.

1.2.1.1.Political factors that, if Government imposes health and safety restrictions on the amount of energy drinks that should be consumed, it would affect the amount of energy drinks that are bought and also introduces import and export charges on the energy drinks market, it may increase or decrease the amount of energy drinks that are imported and exported.

1.2.1.2. Economical factors that, inflation would increase the price of drinks and at the same time, consumer's real disposable income will reduce. For that reason, consumers are likely to buy less energy drinks, as they are not necessities.

1.2.1.3. Social factors that, if Red Bull decides to launch its product in a new country, its costs may rise, as it will have to produce different language labels. Another big issue for the social factors that, as the population of youth's increase, energy drinks companies may see an increase in the amount of drinks sold.

1.2.1.4. Technological factors are also important for the company's as well. Red Bull can use the Internet to help advertise and promote its products. It can also sell large quantities of its product direct to its consumers. It is a new way to communicate with consumers that is cheap and efficient market research method. More hi-tech technology may enable companies to produce more drinks at a cheaper cost and at the same time improving the quality of the packaging.

The functional sector concentrated on energy drinks, with brands such as Red Bull dominated. Meanwhile, the focus for sports drinks is replenishing carbohydrates and electrolytes quickly, and rehydrating the body after exercise. This subsector is still dominated by Lucozade Sport with £34 mm in sales in 2000, but Coca-Cola intends to prelaunch its Powerade brand to capture a significant share, using “Get Up, Stay Up” as its campaign theme. Lucozade Sport is producing a new sector that is in tune with changes in lifestyles and reflects the development of physical & sport activity. [Hawkes (1997), Johnson (2001), Newnham (2001)]

Analysis of the external and internal environments of an organisation influence marketing decision making to choice and compare the marketing proposition that, The UK total cold drinks market is large and competitive area in which, many famous and influential brands with large marketing budgets competing for share. Therefore, the market can be an ever-evolving test for brands that wish to continue to grow in a category that is currently worth £3.55 billion.

In the cold drinks market, increases in the soft drinks category have been slowing. However, growth has been driven considerably by the energy drink sector, which was worth an estimated £940 million in 2003 and more than £392 million in 2004 and still has grown 26% since 2003. (ACNielsen) The Energy drink category continues to grow at pace with brand extensions and new entrants to the market emerging every year. This represents both a challenge and an opportunity for the category's leading brands. [Mintel Energy & Stimulant drinks Market Report August 2006].

Red Bull is competing in the soft drink market and they are the driving forces in the rapidly increasing energy drink market. A close assessment of their websites reveals that they have a similar focus in their messages, so they seem to be competing for the same customers. However, the message delivery is very different. This would seem to indicate that they are not concentrating their strategic objectives on stealing market share or overall market share growth. Instead they recognise that the whole market share pie is rising. For that reason it seems logical that each company would be concentrating on bringing in a greater number of the consumers new to the energy drink market.

1.3 Red Bull's Market Segmentation, Targeting and Positioning

At this point, the concept of market segmentation, targeting and positioning are key to the success of firms marketing efforts. According to Kotler and Armstrong (2004, 2006) provide a useful definition: “Dividing a market into distinct groups with distinct needs, characteristics, or behaviour who might require separate products or marketing mixes”. Segmentation is important because firms cannot appeal to all customers at once, especially not with the same offering. Rather, firms need to design products and services that fit with particular groups of individuals. Firms can segment their market in a number of ways, including geographical which is mainly people who are situated in the city, as they are likely to be really busy and tired. Red Bull seems to have a cooler in most bars and clubs in the city as well as in convenient stores.Demographic, mainly concentrate on men and women of all ages but focusing on people aged 16-29. Psychographic for example, the people who are tired or stressed and want to relax and have fun and finally behavioural segmentation especially students and young professionals to boost energy during work long day at work.

The type of marketing strategy that should be employed will vary on the target market. Choosing an appropriate target-marketing strategy will depend on a number of factors. Once a firm has selected the segment within which it wishes to compete, it must then choose a specific position within said segment where it will distinguish itself [Kotler and Keller, 2006]. The requirement of market positioning refers more broadly to the notion of competitive advantage.

According to Porter (1985) firms should first identify the unique structure of their industry, in terms of the five forces model which are, the threat of new entrants, the bargaining power of suppliers and buyers, the threat of substitute products and the intensity of rivalry amongst competing firms that, influence levels of competition. Therefore, Red Bull should then choose to compete on the basis of one of three generic strategic, whether that is overall cost leadership, differentiation or focus (Porter, 1980).

Red Bull succeeds by remaining exactly the same. Consumers can choose with sugar or without. There is no other choice. As founder Dietrich Mateschitz says “We don't bring the product to the people, we bring people to the product.” Red Bull marketing maintains a sense of product mystique that makes consumers feel special. Customers can relate to the experience they were having when they encountered the drink and they adjust their values to the attributes of the product.

RED BULL with sugar

PART B

2.1 MARKETING MIX

The marketing mix is the set of convenient, strategic marketing tools that the firm mix produce the response it wants in the target market. The marketing mix consists of everything the firm can do to the control require for its product. Once customer needs or wants are determined, the marketer has to satisfy their customers. And also the marketing mix is often referred to as the implementation stage of the strategy. The first aspect of this implementation is the product itself, which is the ultimate basis for the customer to determine whether his or her being met. Therefore the marketer must match the product as carefully as possible to those needs. The second aspect is the delivery system that, the producer must get the product within reach of the customer in a timely manner. The third aspect is the customer must be made aware of the available and benefits of the product. The marketer is using an advertising strategy to communicate with the customer to purchase the product. The last aspect is the product must be priced right so that, the customer can afford to buy the product and willing to choose it from among competing offer. Figure 2.1 shows the marketing tools under each P.

According to McCarthy's the marketing mix consisted of just four Ps.

Ø Product

Ø Price

Ø Promotion

Ø Place

2.1.1 PRODUCT

Product refers to the product-related elements and includes both goods and services. Product also means the goods and services combination the company offers to the target market. There are some organisations which adapt their products to increase the sales or popularity of those products in particular countries.

Example 1: Coca-Cola perhaps the best known product and brand name in the world. First trade market in 1887, everything about the product such as the bottle shape, the colours and packaging design and the logo design, that has been developed from the world. [Brassington and Pettitt 2003]

2.1.2 PRICE

Price is split off as an element worthy of separate consideration, although this may overemphasize its importance. The amounts of the money customers have to pay obtain the product. Price is the amount of money customers have to pay to obtain the product (Kotler 2004). But in international business, price considerations slightly different than local businesses.

Example 2: IKEA, the Swedish furniture retailer with stores around the world, keeps its prices down by emphasizing self-service, low cost modular designs, and customer pickup and delivery. [Winer 2004]

2.1.3 PLACE

Place refers to delivering the product, and includes business performance that make the product available to target customers. According to Lancester and Reynolds (2004), place is almost certainly the most critical decision for the intercontinental marketer and most important choice is between direct representation from the company or through some kind of distributor or commission agent.

Example 3: Red Bull distributes their product heavily across the country to gas stations, kiosks, convenient stores, grocery stores, drug stores, and college campuses.

[www.danaschumacher.com]

2.1.4 PROMOTION

Promotion means activities that communicate the merits of the product and persuade target customers to buy it. Kotler and Armstrong (2004) explain promotion as “promotion means activities that communicate the merits of the product and persuade target customers to buy it”. Promotion involves selling and it concerns about the type of representation will be adopted. Promotion includes; advertising, public relations, sales promotion, and personal selling.

Example 4: In the 1950s and 1960s, Lucozade is communicating the benefits and offering during recovery from cold and flu. Characteristically, badly children were depicted being given Lucozade at times when they were suffering with colds. Thus, Lucozade became known as the nice part of being ill. [Brassington and Pettitt 2003]

An effective marketing program blends all of the marketing mix elements into an integrated marketing program designed to achieve the company's marketing objectives by delivery value to consumers. The marketing mix constitutes the company's tactical tool kit for establishing strong positioning in target market. The issue is not whether there should be four, six, or ten Ps so much as what framework is most helpful in designed integrated marketing programs. [Czinkota and Kotabe (2001)]

If we look at the figure 2.2 shows the four components of the marketing mix and their many dimensions.

Nowadays marketing is far more customers oriented than before. Therefore the additional the traditional four Ps have been added some more Ps to the mix gives us seven Ps these days. The three extra Ps are:

Physical evidence: In the present day customers usually come into contact with products in trade units and they look forward to a high level of management in new shops such as record stores and clothes shops etc.

Process: The customer services are a number of processes that concerned in making marketing efficient in an organisation. For example, processes for managing customer complaints and identifying customer needs and wants.

People: Customers are probable to be loyal to organisations that, the organisations must provide better service to their customers. Therefore customer satisfaction is very important for the all companies in the targeting market. For example, Customer interfacing personnel and call centre staff are the front line troops of any organisation and thus need to be thoroughly recognisable with good customer relation's practice. [www.thetimes100.co.uk]

At this time figure 2.3 shown that, the marketing mix is not consist only four Ps. There is now seven Ps which is, price, product, place, promotion, physical evidence, people and processes include the modern marketing mix that is mostly important in service industry, but is also important to any type of business where meeting the needs of consumers is given right of way. [www.thetimes100.co.uk]

2.2 Marketing Mix for RED BULL

It is therefore important for Red Bull to develop an effective marketing mix that will enable it to achieve its objectives.

Product

Red Bull increases performance, concentration and reaction speed, improves vigilance and emotional status, and stimulates the metabolism. Consumers drink Red Bull for such benefits as these. In times of stressful work, long school hours and exhausting days, consumers look to a product that vitalizes mind and body, and lucky for them - Red Bull does just that! Red Bull even supplies a sugar free version for the average health-concerned consumer.

Price

A can of Red Bull costs £1.09, a four pack costs £3.80/unit and a case of 8 costs £7.49/unit. These prices approximately match the prices of their main competitors. Research shows that consumers dislike the price of Red Bull; thus, reasonable promotions will be formulated to please the consumer audience.

Place

They distribute their product heavily across the country to gas stations, kiosks, convenient stores, grocery stores, drug stores, and college campuses.

Promotion

Red Bull's current taglines are “Red Bull Gives You Wings” and “Red Bull vitalizes mind and body.” The Red Bull Music Academy and the “Bull's Eye” Web Magazine are used to positively promote our product. The music academy provides a musical outlet for talented young artists to display their musical abilities. The “Bull's Eye” Web Magazine offers upcoming event listings and Red Bull news updates.

Position

Red Bull plays a key role in the energy drink campaign. Target groups have proved that, in general, Red Bull has the best energy drink reputation. According to the studies show that, consumers are attracted to the general appearance and brand of Red Bull.

3.1 Conclusion

After extensively analysing Red Bull I have come up with various ways in which Red Bull can maintain its market share within this competitive market by using marketing mix strategies to gain competitive advantage in its target market against their major rivals.

In the close future especially last 12 months, Red Bull should maintain to develop its international scope, through entering new markets and increasing its strong grip in countries that it already exists in. The best markets at the moment would be markets where energy drinks are only beginning to takeoff (ie: Southern Europe), and not markets such as the UK, due to the ever-increasing pressure from rival drinks.

In the US, the market where Red Bull has been gaining strength rapidly since its 1997 launch, space still remains for growth due to the fact that the brand was only available in half of all US convenience stores in 2002. Due to the ever-increasing popularity of energy drinks, the company's client base also has room to expand and should continue to do so. However, the various lawsuits pursued by the company are indicative of trading difficulties, in particular, the protection of the Red Bull brand, and such difficulties are likely to continue.

Red Bull's 2003 release of sugar-free sub-brand does not appear to have boosted sales. However, despite the first ever variant in the Red Bull portfolio receiving a lukewarm reception, the company may try boosting sales with either another line extension or even through the development of another brand entirely. Within functional drinks alone, the company has many unexplored avenues available to it, such as hydrating beverage for those fortified with vitamins and minerals. This could also be an advantage to Red Bull just in case the market for energy drinks decrease.

In conclusion, strategies that manipulate the market share division are more appropriate to a mature product segment. As long as the energy drink total market grows, both companies should focus on solidifying their consumer base. After the growth of the product market itself stabilises, than focus in marketing will change to emphasise product switching. Red Bull could develop a brand new product which it could market to its existing client base, but they would firstly have to undertake a lot of research to see whether the new product would be suitable.

4.1 Bibliography

* Bradley, F. (2002) International Marketing strategy 4/e, published by FT/Prentice Hall,

* Brassington, F. and Pettitt, S. (2003) Principles of Marketing 3/e, published by Pearson Education Ltd.

* Cateora, P. and Ghauri, P. (2005) International Marketing Management 2/e, Published by McGraw-Hill Education

* Czinkota, M.R. and Kotabe, M.(2001) Marketing Management 2/e, published by Thomson Learning, South Western

* Czinkota, M.R. and Ronkainen, I. (2007) International Marketing 8/e, Published by Thomson Learning, South Western,

* Doole, I. & Lowe, R. (2004) International marketing strategy: analysis, development and implementation (4th edition), published by Thomson

* Kotler, P. and Armstrong, G. (2006) Principles of Marketing 10/e, published by Pearson Education, Inc. , Upper Saddle River, New Jersey

* Kotler, P. and Armstrong, G. (2008) Principles of Marketing 12/e , published by Pearson Education, Inc. , Upper Saddle River, New Jersey

* Lancaster, G. and Reynolds, P. (2004) Marketing, published by Palgrave Macmillan, New York

* Lancaster, G. and Reynolds, P. (2005) Management of Marketing, published by Elsevier Ltd.

* Lancaster, G. and Massingham, L. and Ashford, R. (2002) Essentials of Marketing 4/e published by McGraw-Hill Education

* Michael, R.C. and Masaki, K. (2001) Marketing Management.

* Winer, R.S. (2004) Marketing Management 2/e, Published by Pearson Prentice Hall, Pearson Education Inc. New Jersey

* Wilson, R. and Gillingan, C. (2005) Strategic Marketing Management

Internet Sources

* http://www.marketingteacher.com/Lessons/lesson_what_is_marketing.htm

* http://tutor2u.net/business/marketing/what_is_marketing.asp

* http://www.thetimes100.co.uk/theory/theory

* www.danaschumacher.com/Red%20Bull/RedBullCampaignPaper.doc

* http://conferences.anzmac.org

* www.smartdraw.com

5.1 References

* Brassington, F. and Pettitt, S. (2003) Principles of Marketing 3/e, published by Pearson Education Ltd.

* Czinkota, M.R. and Kotabe, M.(2001) Marketing Management 2/e, published by Thomson Learning, South Western

* Kotler, P. and Armstrong, G. (2004) Principles of Marketing, 10th edition. Upper Saddle River, NJ: Pearson Education

* Kotler, P. and Armstrong, G. (2006) Principles of Marketing 10/e, published by Pearson Education, Inc. , Upper Saddle River, New Jersey

* Kotler, P. and Keller, K.L. (2006) Marketing Management, 12th edition. Upper Saddle River, NJ: Pearson Education

* Lancaster, G. and Reynolds, P. (2004) Marketing, published by Palgrave Macmillan, New York

* Porter, M.E. (1980). Competitive Strategy: Techniques for Analysing Industries and Competitors. New York: Free Press

* Porter, M.E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press.

* Winer, R.S. (2004) Marketing Management 2/e, Published by Pearson Prentice Hall, Pearson Education Inc. New Jersey

Internet Sources

* WEB 1: http://www.businessdictionary.com/definition/macro-environment.html

* WEB 2: http://www.whatmakesagoodleader.com/macro-environment-analysis.html

* WEB 3: Mintel Energy & Stimulant drinks Market Report August 2006

* WEB 4: Selling Power (sep 2004)

* WEB 5: http://www.thetimes100.co.uk/theory/theory

* WEB 6: www.smartdraw.com

* WEB 7: images.google.co.uk

* WEB 8: www.danaschumacher.com


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