Whether Red Bull should invest in the Formula 1 Racing Championship next year or not - Thesis Example

? Whether Red Bull should invest in the Formula Racing Championship next year or not? Contents Contents 2 Introduction 4 Aims and Objectives 5 Aims5 Objectives 5 Research Design 6 Research Methods 6 Data Collection 7 Validity and Reliability 8 Data Presentation and Analysis 8 Marketing Strategies of Red Bull 9 Factors Triggering Red Bull to Invest in Formula One Championship Events 10 Evaluation of the Cost of Investment and Returns for F1 Championship Events 11 Future Considerations for Red Bull inh the 2011 Period Based on the 2010 Period 13 Comparison between Red Bull and McLaren in F1 Championship Sponsorship Activities 14 Conclusions and Recommendations 14 Conclusions 14 Recommendations 14 References 15 Introduction The Red Bull has turned out to be on the most popular brands in the drinks and beverage market owing to its production of energy drinks that has helped the concern in gaining a whole new market altogether. Commencing its business in 1984 through the pioneering works of Dietrich Mateschitz the company during 2006 commanded a market share of around 49 percent in the global drinks market. The categorisation of the drink as an energizer holds back in the Thailand culture where the same is known as “Red Water Buffalo”. Further the brand gains a larger market space owing to the use of strategic marketing activities incorporating the creation of “buzz words and also through the sponsorship activities for extreme sporting events. The target segments for the brand consist of groups like students and athletes and also bars focusing on energy drinks. The sponsorship activity carried out by Red Bull for extreme sporting events helps the company in building a separate image of itself in the global drinks and beverage market. An estimate made during 2004 reveals that around $600 million have been spent by the company on sponsorship events involving Formula One racing events, sponsoring athletes or other musical and cultural functions. A comparison made with Coca Cola shows that where Coca Cola expended around 9 percent of its marketing revenues on sponsorship events, Red Bull happened to expend around 30 percent. (Roll, 2006, p.199). Another estimate obtained during the 2001 period shows that this sponsorship activity of Red Bull in extreme sporting events helped the same to conduct a sale of around 1.6 billion cans worldwide. This figure when compared to the 2000 period reflects a rise in around 80 percent in the company’s sale paradigm (Gelder, 2005, p.248). The paper in this connection aims to conduct a research on whether Red Bull should continue investing in the Formula One events by reflecting on the probable advantages or opportunities that it can gain through such activities. Aims and Objectives Aims The main aim of the project is to evaluate the future of investing activities of Red Bull in the large scale sponsorship activities pertaining to extreme sporting events. In that it focuses to understand the potential of previous investment made by the company in this area and the advantages and opportunities gained on that behalf. The project also aims to compare the sponsorship activities of Red Bull to the activities of other companies also investing in sponsorship activities. Further the project also aims to understand the factors and situations evaluated by Red Bull before rendering potential investments in such directions. Objectives To understand the different marketing strategies of Red Bull To understand the reasons as to why Red Bull invests in Formula One championship events To evaluate the expenses or the cost the company incurs behind making such potential investments and the revenues that the firm tends to gain on that behalf To evaluate the future considerations as to whether Red Bull should continue investing in the sponsorship activities for Formula One championship for the 2011 period keeping in view the expenditure and the opportunity scenario for the 2010 period To compare the investment activities of the company in the extreme sporting events by drawing in examples of other firms investing in the same manner Research Design Research Methods Different types of research methods like primary, secondary, case study based and also qualitative and quantitative data research methods can be incorporated for conducting a particular research activity. However for the paper in question the focus is mainly rendered on secondary and case study based research methods. Again the paper also focuses to incorporate both qualitative and quantitative data sets for analysing and evaluating the research questions drawn above and thereby finding steady inferences. Use of secondary research methods is emphasized for the paper in that the use of secondary research helps the researcher in gaining access to large volumes of authentic data sources like books, articles and journals. Further with the advancement and growth of internet the secondary research sources can be easily accessed in by the researcher thus helping in gaining large volumes of authentic data sets pertaining to the required research. Secondary research activities also help the researcher in minimising the cost of the research activity in that it does not require the incorporation of separate persons for the conducting of interviews. Further it also helps the researcher to save in time that can be used for other qualitative activities. The research under question would require both qualitative and quantitative data sets in large numbers which can be easily gained through secondary research (Stacks, 2010, p.152-154; Onkvisit and Shaw, 2008, p.254-256). Again the paper in question for its specific focus on a company like Red Bull and its sponsorship activities in Formula One championship events takes into view the help of Case Study based research. Case study based research helps the researcher in analysing an event from different angles. Thus it helps in both enhancing the quality of the research conducted and in finding potential results. Case Study based research activities also helps in narrowing down the research objective to a fixed criteria and thus enhances the focus of the research activity in question (Naumes and Naumes, 2006, p.54-65; Mackey and Gass, 2005, p.139). The qualitative and quantitative data sets that would be obtained in the course of the research would be subjected to the designing of tables and charts. Pictorial representation of the data obtained would help in rendering further clarity to the research conducted and thereby enhancing the understanding of the same (Polonsky and Waller, 2010, p.212). Data Collection The data collection activities in regards to the research activity in question would involve gaining the same from a host of sources like books, journals, articles, and websites of the company and similar other authentic data sets published on the internet. Gaining data from books, journals, and articles would reflect on the different sponsorship events conducted by the company and its competitors in order to gain an expanded market space. It would also enable in expanding the theoretical understanding of the factors and triggers behind such investment avenues. The use of corporate websites and similar other online articles would be used to understand the level of profitability and market capitalisation gained by the company along different periods through such sponsorship events. Similarly the same can be conducted in regards to other companies to make a steady comparison of the advantages gained. This study would help to understand the future considerations that need to be taken by the company before making such potential investments in sponsorship activities. Validity and Reliability Regarding the validity and reliability parameters it can be stated that the use of resources like books, journals and other articles published in the internet would serve the researcher in gaining authentic information and thus stands quite valid and reliable in nature. Further the use of other sources like different corporate websites to gain financial and marketing data also renders authenticity in that they are obtained from valid and reliable sources pertaining to the company. Validity and reliability features are kept in mind while conducting the research for the relevant sources in that the two parameters help in enhancing the quality of the research activity and expands its utility dimensions. Use of unreliable and vague data sources are not encouraged in that they would tend to distort the quality paradigm of the research activity and would also lead to erroneous and confusing inferences. Data Presentation and Analysis The data presentation and analysis is conducted based on the five main objectives outlined above and would incorporate an analysis based on data obtained from articles, journals, books and other relevant and authentic company websites. Marketing Strategies of Red Bull Red Bull in order to grab a larger market share in the global drinks market takes resort of a large number of marketing strategies. The first marketing strategy taken over by Red Bull encompasses the rendering of different samples of the drinks to people assembling at joints like sporting events or in drink bars. Rendering of samples gives the customers a feel of the products and excites them to purchase the same. Secondly other aggressive marketing activities taken by the company involve gaining the help of cab drivers to render the samples to the passengers. The company also performs different types of road events ranging from sport to music to attract the people to the venues whereby the samples are distributed. Thirdly apart from the rendering of samples and attracting customers to separate events, Red Bull also happens to become the official sponsor promoting athletes to take part in different types of sporting events on a global scale. This strategy taken by the company helps in internationalising the brand image of the product. Moreover in the fourth case the company also takes an integral part in different events like air shows wherein fleets of aeroplanes are designed to promote the brand. Fifthly the branding and packaging rendered to the cans using blue and silver colour also helps in enhancing the brand position for the same in regards to the various competitors in the drinks market. Finally in the sixth case the company in taking part in sponsoring events like extreme sports helps in creating a trendy image for itself in the drinks market and thereby works to attract a good number of youth populations. The marketing strategies for Red Bull help in creating a niche market for the product with a price set above the average price level for drinks in the stated market. Moreover the marketing strategies taken by the company also helped it in covering around 70 percent of the global market for energy drinks during the 2003 period (Onkvisit and Shaw, 2008, p.292, Markides, 2008, p.176). Factors Triggering Red Bull to Invest in Formula One Championship Events Red Bull in order to compete with international brands in the drinks market and to carve out a separate brand image of being an energy drink provider started working on some strategies. Other than relying on traditional marketing and promotional activities like word-of-mouth communication techniques or through the issue of samples through organising specific events the company focused on rendering huge investments to take part in sponsorship activities for extreme sports. The Chief Executive Officer of the company remarked to this end that such sponsorship activities for Red Bull would help in both enhancing and developing the brand image amongst its competitors in the energy drink market and would also help the company in gaining a niche market. Red Bull during the 2004 period is observed to have acquired the racing team of Formula One Jaguar. Moreover, Red Bull also embarked on this strategy of sponsoring high end sporting events to help in largely penetrating the global market base and among people pertaining to different age groups. A graphical comparison reflects that during the 2004 period such sponsorship and marketing activities helped Red Bull in gaining around 60 percent of customers pertaining to the age group ranging from 14 to 19 years in Austria and around 30 percent in United Kingdom (Darden Business Publishing, n.d., p.4, 6). Figure 1 (Darden Business Publishing, n.d., p.6) Red Bull in addition to naming the Formula One brand as the Red Bull Brand also worked on other avenues to sponsor motorcycle racing and other extreme sporting events. This helped the company to gain a larger consumer space which turned out to be quite conscious in purchasing branded drink products. Thus another estimate made during 2006 shows that the sales for Red Bull reached a level of around 2.5 billion on a global scale where United States contributed to around 1 million. (Jensen, Weston and Wang, 2008). Evaluation of the Cost of Investment and Returns for F1 Championship Events Red Bull in order to gain a larger market space in the global markets for energy based drinks is found to render large scale investments especially for events like Formula One Championships. After acquiring the Jaguar brand in 2004, Red Bull is found to have invested around 58.3 million Pounds during the 2005 period for the cause of sponsorship activities in the sporting event. However during the 2009 period the investment for the same rose to around 106.8 million Pounds. The above figures reflect a significant rise in the investment activities by Red Bull in sporting championship events (Sylt and Reid, 2011). The same can be reflected through a graphical representation as follows. Figure 2 (Sylt and Reid, 2011) The periods reflect as 1 and 2 are 2005 and 2009 respectively in the graph. In terms of revenue, Red Bull’s continuous sponsorship activities in events like F1 Championship led the conduct sales in volumes for the 2010 period around 4204 billion number of energy drink cans. This figure reflects a 7.6 percent rise in comparison to the sales volume recorded for the 2009 period. Again in terms of sales revenue the same reflects a growth of around 15.8 percent quoting a rise from EUR 3.268 Billion in 2009 to around EUR 3.785 Billion during 2010 (Red Bull, 2010). This can be reflected graphically as follows. Figure 3 (Red Bull, 2010) Future Considerations for Red Bull inh the 2011 Period Based on the 2010 Period The marketing position for Red Bull pertaining to the 2010 period reflects high amount of stability pertaining to the revenue gained by the company from the sales activities. Speaking on sales volume during 2010 the company earned a figure of 4.2 billion pertaining to the number of cans sold. Sales revenues gained increase during 2010 recording a rise from 15.8 percent from 2009. Revenues for the 2010 period amounted to $5.175 billion. Moreover the revenue gained by the firm amounting to around 3.8 billion Euros during 2010 is considered enough to counter the investment activities to be made for the F1 event. Moreover it is also stated that the expenditure pertaining to marketing activities for Red Bull amounts to around 10 times the spending of the company renders for the F1 events. Thus the position reflects a high amount of potential and stability for future investment plans of the company in F1 Championship events for 2011 (McDonald, 2011, Red Bull, 2010). Comparison between Red Bull and McLaren in F1 Championship Sponsorship Activities Like Red Bull, McLaren with its partnership with Mercedes also focuses on large scale investment activities in the F1 Championship events. It has developed a marketing team that tends to take care of the investment functions and evaluates the returns tending from such. Moreover the company is also working on the potential development of its cars to help catch the sponsorship and event development activities of Red Bull (Meenagham, 2011, McLaren, n.d., Blachford, 2011). Conclusions and Recommendations Conclusions Red Bull with its pioneering activity in the production of energy based drink products has become able to grab a large market opportunity for its drink cans. However the company is further keen on internationalising its image through large scale promotion activities that also involves taking part in sponsoring extreme sporting events. Sponsorship of sporting events like Formula 1 Championship events helps the company in market penetration activities. It also helps the company in gaining a huge amount of sales revenue and volumes enough to cover up the investment made. However the company also earns steady competition from other players who are also tending to invest on like events and thus must develop other strategies. Recommendations In terms of recommendations the company to sustain its stand in the investment sector for Formula 1 Championship events needs to render more focus on the development of drivers and cars. Conducting the same through the opening of training schools would help in enhancing its relationship with the championship events and thereby broaden its brand enhancement options. References Onkvisit, S., and Shaw, J. (2008). International marketing: strategy and theory. Taylor & Francis. Markides, C. (2008). Game-changing strategies: how to create new market space in established industries by breaking the rules. John Wiley & Sons. Jensen, R., Weston, S., and Wang, Y. (2008). How Do Fans React When Sports Teams Are Named After Corporations? The Sport Journal. 11(1). Retrieved on January 20, 2012 from: http://www.thesportjournal.org/article/how-do-fans-react-when-sports-teams-are-named-after-corporations Darden Business Publishing. (No Date). Red Bull. Retrieved on January 20, 2012 from: http://faculty.darden.virginia.edu/farrisp/IMC/files/pdf/RedBullM-0663.pdf Red Bull. (2010). Company Figures. Retrieved on January 20, 2012 from: http://www.redbull.com/cs/Satellite/en_INT/Company/001242939605518?pcs_cid=1242937556133&pcs_c=PCS_Product Sylt, C., and Reid, C. (2011). Dietrich Mateschitz: Red Bull's F1 returns show no sign of decelerating. The Independent. Retrieved on January 20, 2012 from: http://www.independent.co.uk/sport/motor-racing/dietrich-mateschitz-red-bulls-f1-returns-show-no-sign-of-decelerating-2362609.html McDonald, D. (2011). Red Bull's billionaire maniac becomes a media mogul. Bloomberg Businessweek. Retrieved on January 20, 2012 from: http://www.msnbc.msn.com/id/43112711/ns/business-us_business/t/red-bulls-billionaire-maniac-becomes-media-mogul/#.TxlDQaX9Mp1 Meenaghan, G. (2011). McLaren continue to play second fiddle to Red Bull. The National. Retrieved on January 20, 2012 from: http://www.thenational.ae/sport/formula-one/mclaren-continue-to-play-second-fiddle-to-red-bull McLaren. (No date). McLaren a Technology Company. 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