Why is it profitable for a stable like redbull to race in the F1 championship - Research Paper Example

? It is profitable for a stable like Redbull to race in the F1 championship Inserts His/Her Inserts Grade Inserts Tutor’s Name 16 March 2011 Background or Introduction Promotion is one of the profit-generating areas of marketing. The research focuses on the promotion strategy of marketing. The research further focuses on the relationship of the promotion strategy and product strategy, place strategy, and price strategy. The research centers on the profitability of a stable like Redbull to race in the F1 championship. In terms of the Redbull products, Dubrin (2008) emphasized Red Bull’s corporate strategy includes its marketing strategies; the strategies include product, price, place, and promotion factors (Kruz, 2010). Dornbusch and Fischer (1990) emphasized price is the amount that the buyer and seller agree as payment for each Redbull beverage product. Place represents where each product is displayed. Promotion includes advertising. Promotion also includes paying the sales person to advertise the company’s Redbull products. In this case, Redbull is eager to invest lots of cash to sponsor a car racing team. In return, the company expects to recuperate the expenses from the increase in the sales of the Redbull products. The target market includes all markets located in countries around the world, especially countries where the Redbull racing team is mentioned, such as news stories. Generally, pricing includes selling products at equilibrium or fair market amounts. Palmer (2004) insists the company continues to financially grow despite the presence of the current global recession. The company’s present strategy focuses on product and service promotion to increase its net profits and dividend distribution. Further, the Redbull company continues to retain its huge share of the beverage market segment by implementing customer –based marketing programs (Kruz, 2010). The programs include filling the needs of the niche market – people needing energy boosting drinks. The offering of the company’s energy-enhancing products is grounded on the Redbull branding strategy. The racing includes the expansion, and customer delivery activities precipitating to the company’s leadership in the energy drink market segment in terms of net profits and revenues in the local and international market place (Feldman, 2007). Redbull continues to creatively enhance its popular beverage image by maximizing scarce assets to fulfill the company’s aim and objectives. To be profitable in the racing and marketing areas, the Redbull company incorporates innovation, challenge, and passion in its customer-based marketing activities. Aim and Objectives In terms of consultancy, Helfert (2001) reiterated the aim of the Redbull company in sponsoring its own formula one racing team is translate the cost of sponsoring the Redbull races into increases is the profits of the Redbull beverage products. To achieve the aim, the company generates several objectives. First, the company uses the races to advertise the Redbull products. To achieve the aim, Kotler (1994) opined the company generates objectives. The objectives geared towards achieving the Redbull team’s aim. One of the objectives is to initially sponsor a formula one racing team. Next, the company pursues a spectacular performance in the races. Specifically, one of the team’s objectives is to win the world constructor’s drivers’ championship. Second, the team wanted to win the world driver’s champion. Third, the company wants to retain its current position in the racing championships and current Red Bull market segment. Literature Review The Formula one championship is characterized as auto racing. Maguire (2007) opined there is only one person inside the vehicle during each race. The Formula represents the rules or policies that each car racer must comply with without exception. The Formula one championships is includes Grand Prix races set in different countries. The results of the Grand Prix race are used for ranking the top racers qualifying for the World Championships. From the name alone, the Formula one racing tournaments are characterized by cars with the highest possible speeds in the world. Kruz (2003) proposes Redbull is one of the qualifying teams in the Formula one racing championships. The team is sponsored by the popular brand, Red Bull. The Redbull company has its headquarters in Austria. Further, the Redbull company won the recent 2010 Formula one constructor’s championship. McDonald (2007) The splendid racing record is a great feat considering the company has been in the racing business for only six straight years. Likewise, the company’s sponsored driver, Sebastian Vettel, won the 2010 world championship. The team’s formula one racing vehicles use incorporate the maximum racing power the tried and tested Renault engine. Together with Mark Webber, the Redbull Formula One racing team won the 2010 world championship using the RB6 body frame. The Renault engines proved too super in the race tracks when compared to the racing power of the McLaren engines. Likewise, the Renault engines outmatched the Ferrari engines in the 2010 World Formula One racing championship. According to Mun (2005), the Redbull team of Sebastian Vettel and Mark Webbers placed first and second in the Brazilian Grand Prix. Mayo (2007), emphasized the sponsorship of the racing team falls under the promotion strategy of marketing. The Redbull products are advertised during news reports of the formula one race. Advertising the company’s products will increase the demand for the Redbull beverage. In terms of marketing, Niven (2006) stated promotion is one of the four aspects of marketing. This is where the company sponsors it own formula one racing team. It is very costly to pay for the expenses of a racing team. To increase the profitability of the Redbull products, the company must focus on the products’ price. Price is another aspect of the marketing process. Some of the Redbull clients will relate the price of the Redbull products with the prices of the Redbull competitors. The clients will prefer to buy the competitors’ products if the prices of Redbull products are significantly higher than the prices of the competitors’ products. advertising the company’s products in the racing circuits increases the demand for the Redbull products. Further, Palmer (2004) opined the company must focus on improving and retaining the product. The product quality of the Redbull products affects the clients’ demand for the Redbull products. The clients will prefer to buy the competitors’ products if the competitors’ products generate significantly higher quality when compared to the Redbull products. The advertising of the Redbull products in the races influences the clients to imprint on the minds of the current and prospective clients that the In addition, Porter (1980) theorized the company must sell its Redbull products in places strategically located to reach the current and prospective clients. The car racing advertisements increases the demand for the company’s beer products. The company can profitably sell its Redbull products in groceries, malls, and other places to reach the current and prospective clients. The sponsorship of the Redbull racing team increases the demand for the Redbull products being sold in malls, groceries, community store, and other display centers. Stickney (2009) realized after the racing team makes the Redbull brand very attractive, the Redbull team must focus on its supply chain management strategy to translate the popular Redbull brand into cash inflows. First, Redbull must ensure suppliers perform their chain function well. The suppliers deliver the raw materials needed to produce the finished goods. Without the suppliers, the company cannot produce the products needed by the customers. Without the products manufactured, the company cannot make a sale. Without a sale, the company cannot generate cash inflows to defray the operating and marketing expenses needed by the company. Without the profit, the company will have to close shop because of bankruptcy. Second, Redbull manufacturing plants perform their chain function well. The company maximizes human labor and other factory overhead expenses to convert the raw materials into finished goods, revenues, and profits. Smith (2007) insists the manufacturing process includes the work in process beginning inventory, raw materials purchased during the month, and raw materials remaining during the end of the accounting period. Third, Redbull must ensure the warehouse and delivery to clients chain function well. The company stores the finished goods in its major warehouses in each city, community, or state. The warehouses are responsible for delivering the goods to the company’s display centers and stores. The stores are the delivery points where clients can purchase their needs, wants, and caprices. Fourth, RedbullMeigs, Meigs, and Meigs (1995) theorize the Redbull company must ensure suppliers perform their intermediary chain function well. Some companies sell their goods and service through intermediaries. Intermediaries include the department stores, grocery outlets, hardware and construction stores, movie theatre stores, office stores, school stores, and community stores. Fifth, Redbull must ensure suppliers perform their transport chain function well. The airline and trucking companies deliver the finished goods to the display centers, warehouses, and delivery the raw materials from the suppliers to company’s production facilities. Lastly, Redbull must ensure suppliers perform their customer chain function well. The customers buy the finished products. The customer is generally the last step the in supply chain management process. Conclusion Based on the above discussion, promotion is one of the profit-generating strategies of marketing. Promotion increases the demand for the company’s products. The price strategy influences the promotion strategy in terms of increasing profits. The place strategy influences the promotion strategy in terms of increasing profits. The product strategy influences the promotion strategy in terms of increasing profits. Indeed, it is very profitable for a stable like Redbull to race in the F1 championship References Dornbusch, R. and Fischer, S. (1990). Macroeconomics. New York : McGraw-Hill Publishing Co. Dubrin, A. (2008) Essentials of Managment. New York : Cengage Press. Feldman, M. (2007) Crash Course in Accounting and Financial Analysis. New York : J. Wiley& Sons. Helfert, E. (2001) Financial Analysis: Tools and techniques: a guide for managers. New York : McGraw-Hill Professional. Kotler, P. (1994) Marketing Management. Analysis Planning. Implementation and Control. New York : Prentice-Hall. Kruz, A., (2010) F1 Pocket Companion 2010. New York ; Chequered Press Maguire, M. (2007) Financial Statement Analysis. New York : Grin Press. Mayo, H. (2007) Investments: An Introduction. New York : Cengage Press. McDonald, M. (2007) Marketing Plans: How to Prepare them, How to Use Them. New York : Butterworth –Heinemann Press. Meigs, R., Meigs, W., & Meigs, M. (1995). Financial Accounting. New York : McGraw-Hill. Mun, J. (2005) Real Options Analysis: Tools and Techniques for Valuing Strategic Investments and Decisions. New York : J. Wiley & Sons. Niven, P. (2006) Balanced Scorecard Step by Step: Maximizing Performance and Maintaining Results. New York : J Wiley & Sons Press. Palmer, M. (2004). International retail restructuring and divestment: the experience of Tesco. Journal of Marketing Management, 20(1). Porter, M. (1980) Competitive Strategy. New York : Free Press Smith, R. (2007) Business Process Management and the Balanced Scorecard. New York, N.Y: J. Wiley & Sons. Stickney, C. (2009) Financial Accounting. New York : Cengage Press. Read More