Energy Drinks in Afghanistan - Case Study Example

Energy drinks in Afghanistan Table of Contents Introduction 3 RED BULL: A brief overview 3 Country Analysis 4 Industry analysis 5 Analysis 8 References 10 Introduction Afghanistan or Islamic republic of Afghanistan is situated at the centre of Asia. The country constitutes the major portion of the western Asia. It is geographically situated to the eastern part of Iran and north western part of Pakistan (CIA “Afghanistan”). With almost a 30 million population the country offers huge trade markets for the companies entering the Afghan market. The business environment of Afghanistan can be very satisfying as small amount of investment may lead to high margin of profits. At the same time the country still remains a challenging environment for the business ventures (AISA “Business Environment). Now in the context of the report the company which has been chosen in order to carry out the research is Red bull. It has been proposed that the company will be entering the Afghan market to launch their energy drink. The report will emphasize on the external environment of Afghanistan. In order to present the external business environment of Afghanistan PESTEL analysis will be used. The report will also highlight on the industry of the energy drink in Afghanistan. In this context Porter’s 5forces model will be used. Apart from that the report will also carry out a market analysis of Red Bull in the context of Afghan market. SWOT analysis will be used to accomplish it. Finally the report will underline the possible mode of entry of red bull in the Afghan market. RED BULL: A brief overview Red bull GmbH is an Austrian based energy drink manufacturing and marketing company. It was originally initiated from Krating Daeng of Thailand. The company is presently headquartered at Fuschl am See, Austria, European Union. The company has around 9000 employees throughout the world. In the year 2011 the company has sold a record 4.5 billion can of red bull in around 161 countries and generated staggering revenue of 4.25 billion Euros. Country Analysis This is in general that a company which is moving into a new country always conducts a PESTLE analysis which helps them to get an idea of the people, legal aspects and other factors of that country. PESTLE analysis is a strategic tool, which studies Political, Economical, Social, Technological, Legal and Environmental factors. Therefore every organization who wants to get into the international venture needs to have proper information of the destination country (UnWomen, N.d.). Political – The political aspect of PESTLE analysis gives us information regarding the political scenario of the country. It includes the government’s intention towards the new entrants, the present political circumstances of the country and other related aspects. Afghanistan has a democratically voted government. The countries political aspect is characterized by weak rule and corruption. Frequent attacks on the country have also added to its instability. Economical – It includes the issues like the economic stability of a country, the level of income, and other economical factors. The economic condition of the country is recovering from the past few decades. With the fall of Taliban’s the economy has certainly strengthened. Another reason for its stability is the revival of the service sector and agricultural sector. Social – Social factors plays a major role for a company taking international venture. It analyzes the culture, religion, caste etc. of the target country. Afghanistan is characterized by various social ills due to civil war. Issues such as kidnapping, poverty, banditry and disparity of women hugely affect the social standings of Afghanistan. Technological – Technological factor analyzes the technical infrastructure of a country such as information system, electronic data exchange and management information system. Afghanistan hugely lacks the technical infrastructure within the country. However the American army is making use of some upgraded technology in their country. Legal – It refers to issues like, rules and regulation pertaining to that country. It takes into account the Rights, Consumer protection etc. The country has weak laws and therefore the legal aspect of Afghanistan is below the level of set standard. Environmental – This comprises of the natural Environment of the country. In the context of Afghanistan issues such as pollution, soil erosion and deforestation is concerning the government. Industry analysis In order to analyze the energy drink industry of Afghanistan Porter’s 5 forces model has been used. It illustrates threat of new entrants, bargaining power of buyers, threat of substitute’s products, bargaining power of suppliers and existing rivalry (Porter 6). Threat of new Entrants New entrants are described as the companies that are presently competing within the market but can enter the market and act as a potential threat to the company. Since Afghanistan do not offers favorable external business environment, therefore the threat of new entrants is low. Threat of substitute’s products A substitute product is the product of same category and performs the same function as the existing product does. The substitute product of an energy drink can be fruit juices, glucose drinks etc. Moreover an energy drink is not mandatory to gain energy to there are also other options. In Afghanistan presence of different glucose drinks and availability of fruits in Afghanistan has caused above average threats of substitute products. Bargaining power of buyers The bargaining power of the buyer refers to the capability of consumers to bargain and lessen down the price of the commodity. In other words bargaining power depends on how quickly the buyer identifies other sources. The availability of energy drinks such as blox, hell, monster, LSV and other local brands has given rise to an increased bargaining power of consumers. Bargaining Power of Suppliers Suppliers are also other organizations which provide raw materials, service and sometimes even manpower to the host organization. The bargaining power suppliers refer to their capability to increase the price of the raw materials. There are huge numbers of suppliers available for energy drinks in Afghanistan. Therefore the bargaining power of suppliers is low. Existing Rivalry This force reflects the competition within the industry. Rivalry among industry is about the intensity of competition among the organizations pertaining to energy drink manufacturing and selling industry. Companies such as blox, hell, monster, LSV and other local brands can give significant competition to Red bull. Market analysis In order to analyze the market of Red Bull in the context of the Afghanistan market a SWOT analysis can be accomplished. SWOT analysis can be used to evaluate the position of a company in the market, process of sales and distribution, business ideas etc (Pehlchen 2007). Strength Red bull holds a huge brand name and brand value throughout the world. The company has its presence in more than 150 countries Unique and innovative product. Weakness The pricing of the product is main weakness of the company. Previous issues have caused poor publicity. Opportunity A health conscious drink and therefore can easily get the acceptance in foreign market. Presence in other fields such as Formula 1 can have huge impacts. Expansion of the product line. Threats Competitors such as monster, LSV can act as a huge threat to the company. Low cost substitute products. Analysis The economic condition of Afghanistan has been distressed for decades due to the political instability of the country and elongated period of drought. Moreover due to very low level of income among the Afghan population, lack of proper banking system, increase in interest, poor credit facilities hugely reduced the demand for domestic as well as imported goods. Moreover the higher inflation rate has also slowed down the economic growth. This has been one of the major reasons that the consumers exhibit lower buying capability. Afghanistan has always been referred to as the tea drinking country. However the study of consumption pattern of energy drinks in Afghans revealed that the Afghans score high on energy drink consumptions. Even the marketers have addressed that the energy drink sector is witnessing a massive growth. But the boom is mainly due to the category of people which belongs to the higher income group. Therefore the issue of affordability of high priced energy drink like Red bull still remains among the middle income and lower income groups. The transportation system of the country is in a dreadfully situation. Most roads and highways are in awful situation. The only well performing transportation of the country is the railway network of around 25 kilometer which Turkmenistan and Uzbekistan from the Afghan soil. Therefore the distribution system also gets hampered. Apart from this the country also suffers from huge shortage of the skilled labors and causes crisis in the manufacturing process of the country. Apart from the mentioned issues one of the most highlighted issues pertaining to Afghanistan is the rising number of drug addicts in the country. The situation has reached to an alarming stage; the overall count of drug addicts is dreadful. The instable government and the aforementioned issues have led to serious confusion for the companies who seeks to enter the Afghan market. Therefore for an organization which seeks to cater to foreign market must contain a proper strategic choice over the mode of entry and it should be seriously evaluated before opting for a particular approach (Ramaswami, and Agarwal, 2). References AISA. “Business Environment.” n.d. Web. 31 May 2012. Agarwal, Sanjeev, and Sridhar N. Ramaswami. Choice of Foreign Market Entry Mode: Impact of Ownership, Location and Internalization Factors. 1991. Web. 31 May 2012. CIA. “Afghanisatan.” n.d. Web. 31 May 2012. Pehlchen, Beate. Analysis of the Chilean Tourism Market - Products and Opportunities for the Destination Pucón and the IXth Region. Munich: GRIN Verlag, 2007. Print. Porter, Michael, E. Competitive Strategy: Techniques for Analyzing Industries and Competitors : with a New Introduction. New York: Simon and Schuster, 1980. Print. UnWomen. “Pestel Analysis.” n.d. Web. 31 May 2012. Read More