Business in the Sports Industry - Case Study Example

Sports Business

Introduction

The sports industry is one of the largest industries across the world. The industry has been steadily growing over the past years in terms of its revenues which have increased from 152 billion dollars to 300 billion dollars. The sports business industry is made of several different segments that have made it a diverse industry. Some of the sections of the industry include the sports businesses that are comprised of the sport marketing firms, sport-governing bodies, and the sports sponsorship industry. The sports industry offers a wide variety of jobs which are varied as per the segments and the businesses of the industry. This case study examines various factors that influence the success of the Red Bull Racing Formula One team in the sports industry.

Background of the Sports Business

The Red Bull Racing is a Formula One racing team which is owned by the Red Bull beverage company. The team races under an Australian license which is situated in the United Kingdom. The team races for the Formula One team with the Scuderia Toro Rosso team which is also owned by the Red Bull beverage company. The Red Bull Formula One racing team was formed in 2004 after the beverage company decided to buy the Jaguar Formula (F1) One racing team from the Ford Motor Company (Júnior, Angulo-Meza & de Oliveira Mourão 2015). At the time, the Jaguar Formula One was at the peak of the international auto racing. The company thought of purchasing the racing team because it had previously sponsored the Jaguar Formula One team and its drivers.

Before the purchase, the Jaguar Formula One (F1) team was among the top global sports while the Red Bull was also expanding globally. However, the team was not popular in the United States. To raise the popularity of the team in the U.S., the company purchased the F1 team since it had already put measures in place to search and groom young American drivers who would drive the Red Bull cars. The Red Bull is a highly profitable company which sought to use sports to promote its brand (Júnior, Angulo-Meza & de Oliveira Mourão 2015). The company chose to become the F1 team owner and then transformed to Red Bull Formula One Team as a marketing strategy to promote its products. The team became the first Australian licensed team to win the Constructors’ Championship Title in four consecutive years, which were 2010, 2011, 2012, and 2013.

Growth and Development of Key Trends

The growth and development of the Red Bull Formula One racing team are associated with the partnerships made with various organizations. One of the organizations that have contributed to the success of the team is the AT&T Company which is a global leader in communications technology. The Red Bull Racing has dominated the technologically advanced sports in the world (Marino et al. 2015). The team has been able to successfully advance in the sports industry due to its partnership with the AT & T Company which has been providing the race vehicles to help the team with its ever-improving levels of telemetry and analysis.

The ability of AT&T to become innovative has transformed the sports business of the Red Bull and given the business a competitive edge in the sports industry. The Red Bull has managed to take better care of its customers and grow its market share due to the innovativeness of the AT&T Company. In fact, AT&T Company is a big part of the Red Bull Formula One team (Marino et al. 2015). The Red Bull and AT&T companies share a similar culture of innovation. They have partnered to come up with creative ideas that have enabled them to obtain a competitive edge in the market.

The Red Bull Racing team has been able to attain a global network in the sports industry. The team has been able to acquire virtually real-time data and connection to its base in Milton Keynes due to the advanced network that is offered by the AT&T Company (Marino et al. 2015). Nonetheless, through the AT &T Company, the team has also been able to acquire upgraded security services that have enhanced the security of the information and assets of the team. The team has been able to grow and develop due to its enhanced reaction and response to security issues that helps it to reduce risks, deal with the threats and deflect the unwanted activity in its network.

Furthermore, the growth and development of the Red Bull Formula One team are associated with its unified communications and mobility. A unified communication and collaboration solution has been provided by the AT & T Company to support and encourage a closer working relationship between the team and the company to enhance the team’s innovativeness in the sports industry (Rogers 2014). Again, the AT&T Company has provided the team with an Enterprise Mobility Management (EMM) solution to help in managing the racing’s mobile devices; this enables the engineers to exchange highly secure information that is important to the team using tablets or smartphones.

The Red Bull Racing Team has also been able to grow and develop in the sports industry due to its partnership with the Citrix Company. Citrix Company has enabled the team to make innovation advancement on the global market that has changed the course of Formula One Racing (Rogers 2014). Since the Citrix Company became a Red Bull Innovation Partner, the team has been able to have access to networking technology that has enabled it to collaborate around the globe. Together with such technological company, the Red Bull Racing Team has been able to put cutting-cars on the track making it easier to exercise the best strategic-day strategy.

The Citrix Company, through its partnership with the Red Bull Racing team, has been able to create a broad partnership that will promote the brand of Red Bull Company with prominent logo attachment on the body and gear of racing cars. This company has made the Red bull racing competitive on the track by offering an opportunity for a more holistic partnership, especially the onsite technology showcases and technical collaboration (Rogers 2014). There is no doubt that if this racing team continues with its partnership with the Citrix technology company, it will attain a winning culture for a worldwide audience.

Impact of the Internal and External Environmental Forces

The internal environmental forces are the ones within the team that influence its success in the sports industry, whereas the external environmental forces are those that are outside and influence the success of the team. One of the internal forces that have had an impact on the team’s success in the sports industry is the marketing strategy of the company (Kunz et al. 2016). The stakeholders of the Red Bull have decided that they will rebrand their team as Aston Martin Red Bull Racing beginning from 2018 as their new marketing strategy.

According to the organization’s stakeholders, rebranding the team will enable it to enter the sports industry as an independent engine supplier. The team’s stakeholders claim that the team’s new title and innovation partnership will also enable it to acquire a brand new advanced performance in the sports industry and at the Red Bull’s base in Milton Keynes (Kunz et al. 2016). The stakeholders also claim that the rebranding of the team will create the right environment and provide the team with a competitive edge in the sports industry. Strengthening the partnership with Aston Martin is a step that will lead to an advanced performance for the team.

Other than the partnership with Aston Martin, AT& T Company and the Citrix Company, the Red Bull has entered a long-term partnership with PUMA which is one of the global sports brands. PUMA is an external entity that is likely to impact the operation of the Red Bull sports business. PUMA has become the official supplier of race-wear for the team. Again, it is a global sports brand organizations whose partnership with the Red Bull Race team will have significant impacts on the teams marketing campaigns.

The global partnership between PUMA and the Red Bull Racing team will have a significant impact on the team and enable it to become competitive because it will have an opportunity to feature in the high profile of PUMA’s brand and marketing campaigns. This partnership creates a perfect opportunity and platform for the sports business to communicate the Red Bull Racing to a wide demographic across the world through the PUMA lens (Júnior, Angulo-Meza & de Oliveira Mourão 2015). Studies indicate that PUMA has worked with a high profile Formula One Teams across the world as an official partner. This brand company supplies the teams with innovative fireproof performance racewear which has contributed to the high performance of the Formula One Teams.

Competition is another external factor which influences the Red Bull Racing Team. Kunz et al. (2016) argue that the Red Bull has been facing competition from several Formula One Racing Teams. However, the team has been able to outwit its competitors by having partnerships and professional sponsors who have helped the racing team to create a wide range of activities ranging from motorsports, cliff diving, spectacular air racing using stunt planets among other racing activities. Other than the live event sports, the team has also been able to remain competitive due to its partnerships with various innovation companies that have enabled it to create computer gaming and e-sports. The team identified this approach to create attraction to its wide range of the target audience.

Organizational Culture

The Culture of the Red Bull Formula One Team is characterized by team partnership and innovative partnership. Some of the Red Bull’s innovative partners include the Siemens PLM, IBM Spectrum Computing, DMG MORI, AT&T Company and among others. The organization’s culture is based on partnerships since the stakeholders believe that through these partnerships, the team will be able to unite the world’s best composite experts and aerodynamics as well as the best manufacturing masters (Aversa, Furnari & Haefliger 2015). The team’s stakeholders believe that the through partnerships, the organizations will be able to come up with innovative ideas that will lead to the production of exciting products for the customers and enthusiasts across the world.

Over the past years, Red Bull Formula One has been able to reach out to the young audiences across the world through its brand identity by organizing exciting events as well sponsoring and being involved with more than 500 extreme sports. The team has been able to tailor its content strategy to integrate a wide variety of different sports to enthusiast all over the world (Aversa, Furnari & Haefliger 2015). Currently, the team has its own multi-platform company known as the Red Bull Media House. In the media, there is a Red Bull TV where the viewer can watch various ranging branded content and live events direct from the channel.

In 2014, Red Bull partnered with the Metro UK to come up with Red Bulletin which would allow the Red Bull to produce various publications with a wide-ranging branded content regarding culture, Lifestyle as well as sports. All the events and sports organized by the team have enabled Red Bull to become a high profiling organization within the sports industry (Kunz et al. 2016). Each event organized by the Red Bull essentially acts as a branded content that has enabled the team to present its content to millions of people across the world with a variety of engaging products.

Among the various companies in the sports industry, the Red Bull Formula One Team has been able to effectively make use of the lack media attention in the industry. Many of the sports organization have neglected the media attention in the industry. The Res Bull Formula One Team has been able to take the ownership of various people and teams involved in the extreme sports to endorse the sports and promote the brand indirectly (Kunz et al. 2016). With its sponsorship marketing strategy, this sports organization has been able to capture and inspire extreme sports fanatics and associated many exciting and engaging sports with the caffeine-filled drink; this has helped the organization to outwit its competitors and obtain a competitive edge.

Revenue Streams

According to Júnior, Angulo-Meza and de Oliveira Mourão (2015) the Red Bull Company invested four times more money into its Formula One team in 2015. The team had lost its sponsorship from the luxury auto brand Infiniti, and the costs rose from 9.2 million dollars to 265.9 million dollars. Again, in the year 2016, the beverage company invested 54.8 million dollars in the team from 1.7 million dollars in 2015. About profits, studies indicate that the team made a net profit of 520 000 dollars in 2015 on a revenue of 267.2 million dollars (Júnior, Angulo-Meza & de Oliveira Mourão 2015). The company invests in the team because it is also a marketing cost for its drinks since it enables the company to get high octane exposures.

Investing in the team is a good marketing strategy for the products of the beverage company. Every team owner desires to continue improving the performance of his/her team while reducing the amount of money it invests in the team, this is what the Red Bull Team had been doing in the past decade (Júnior, Angulo-Meza & de Oliveira Mourão 2015). The Formula One racing cars are designed the year before they race on track so that the company can have enough time to pay for the bulk of investment in them.

Marketing Strategy

The Red Bull has been acknowledged as a company that has a high sense of profiling and ability to connect with niche communities. The company is renowned for their ability to connect their product with the millennial demographic. The Red Bull Racing is a brand that embraces the content and the epic moments of the 21st-century generation. The sports business has recognized that it can extract results by putting its products which has a true functional benefit into space where emotion and authenticity are paramount. This strategy has enabled the beverage company to be renowned on the market as a company which has excelled in authentic consumer engagement.

The Red Bull has also come up with eSport that enables it to sponsor and work with professional video game players. This indicates that the organization understands the consumption pattern of the media for the 21century consumers and it is able to execute accordingly knowing that the context-rich experiences come first and content second. Red Bull offers a wide range of great events and great entertainment which is not only valuable to those inside the eSport community, but also to those outside the community (Aversa, Furnari & Haefliger 2015). The Red Bull sports business has also been able to penetrate the sports industry because of its consistency aligning its brand with sports and activities which exist within the framework of our cultural awareness and with the people who live lifestyles that most of us are not brave enough to live.

The racing sports business has ventured into creating amazing events and content around their brand in a way that allows the customers to interact with it. The investment of this team into eSport surpasses what the sports business has been doing in the past decade. Through the eSport, the sports business can engage its target audiences through the great content that it provides during the live events and on the social media, this has enabled the sports business to stay connected to the community on the pulse of competitive gaming (Aversa, Furnari & Haefliger 2015). The team has continued to engage the e-sport fans from all corners of the world thereby obtaining a competitive edge in the sports industry.

Conclusion

The Red Bull Racing Team is one of the best Formula One Teams across the world. The team races under an Australian license which situated in the United Kingdom. The team races for the Formula One team with the Scuderia Toro Rosso team which is also owned by the Red Bull beverage company. Over the past years, Red Bull Formula One has been able to reach out to the young audiences across the world through its brand identity by organizing exciting events as well sponsoring various sports. The team has been able to channel its content strategy to integrate a wide variety of different sports to enthusiast all over the world. With its sponsorship marketing strategy, this sports organization has been able to capture and inspire extreme sports fanatics and associated many exciting and engaging sports with the caffeine-filled drink; this has helped the organization to outwit its competitors and obtain a competitive edge.

Reference list

Aversa, P, Furnari, S and Haefliger, S 2015, ‘Business model configurations and performance: A qualitative comparative analysis in Formula One racing’, Industrial and Corporate Change’, vol. 24, no. 3, pp.655-676.

Júnior, SFG., Angulo-Meza, L and de Oliveira Mourão, CL, 2015, ‘Condorcet Method with Weakly Rational Decision Makers: A Case Study in the Formula 1 Constructors’ Championship, Procedia Computer Science’, vol.55, pp. 493-502.

Kunz, RE, Kunz, R, Elsässer, F, Elsässer, F, Santomier, J and Santomier, J, 2016, ‘Sport-related branded entertainment: the Red Bull phenomenon, Sport, Business and Management: An International Journal’, vol. 6, no. 5, pp. 520-541.

Marino, A, Aversa, P, Mesquita, L and Anand, J, 2015, ‘Driving performance via exploration in changing environments: Evidence from Formula One racing’, Organization Science, vol. 26, no. 4, pp.1079-1100.

Rogers, GC, 2014, ‘Red Bull–It Gives You Wings! An Examination of the Emotional Experiences That Drive the Brand for the Popular Energy Drink’, Journal of Integrated Studies, vol. 5, no.1, pp. 112-18.