Limitation Faced by Red Bull - Essay Example

Strategic Management Management in any organization holds special importance. An organization cannot have competitive edge until and unless there is proper management. Absence of efficient management leads to an inappropriate goal setting and hence, towards the failure of the organization. Any business entity standing alone must have a proper management. Strategic management Strategic management is the essence for the success of any organization. You cannot achieve your goals without having an idea of what you want to achieve. On similar lines organizations cannot work towards a common goal until and unless they have a clear picture in the form of a mission, vision and objectives. These three important statements serve as a track or guideline and assist each and every individual to work in a way that not only conforms to what organization is intended to do and has stated, but also leads toward successful completion of tasks in a distinctive way. Before getting into the discussion of strategic development it is important to understand the meaning of strategy. According to Dobson et al (2004), it is about achieving competitive advantage through distinctiveness- delivering a unique value addition to the customers, and having a clear view of how to position yourself uniquely in your industry. In order to make the concept clear I will shed light on Red Bull; a famous energy drink on which a lot of work was done in order to tactically develop proper and advantageous market strategies. To tailor this product according to the diverse needs of individuals, they positioned the drink as an energy drink coupled with adventurous advertisements and sponsorship of famous sports known as formula 1 (F1). Whenever an organization plans to make any strategy, it needs to carry out an analysis in a way that not only takes into account the strength and weaknesses of the organization but also the environmental factors that might act as a stimulator or may hinder their performance (Joyce and Woods 2001). This analysis is very much useful and is mandatory to be carried out. Limitation faced by Red Bull: Red Bull saw growth potential in western markets and launched their product by making changes in the old THAI product. However, while launching their product they had to face few limitations as well. There was a huge criticism regarding the Red Bull energy drink in terms of its ingredients. When the product was first launched it took about 3 years for the approval of its sales in Austria, however, Hungary became its first foreign market in 1992. The exotic nature of its ingredients was one of the reasons that it got banned in Germany and France and in Norway it was found at pharmaceutical stores and was sold as a medicine. The stringent rules and regulations of Europe did not allow the use of such exotic ingredients and it took a lot of time for Red Bull to get approval for its sale. One of the most controversial ingredients used in Red Bull was glucuronolactone that was rumored to cause brain tumor. However, in addition to this, another controversy about Red Bull was using it as a mixer with alcohol. It was because of the fact that Red Bull contained caffeine and when caffeine is mixed with alcohol it reduces the drowsiness that a person feels after getting drunk and because of less drowsiness people go for huge consumption of alcohol which causes serious heart problems in future. In addition to this, the regulatory bodies of that time also created hurdles during the launch of the product because of the exotic ingredients. Change direction: Strategic management is a process that focuses on the long-term goals rather than short term goals (Sadler and Craig 2003). Keeping this in view, Red Bull did not only concentrate on its short term goals but long term as well. Various theorists have proposed different functions of carrying out strategic development. Some say that strategic development is a highly formalized and static process focusing on the strategic plans rather than actions (Dyson and O’Brein 1998). Others are of the view that it is an effective tool for organizational change (Green and Jones 1981). This is evident from the case study of Red Bull that when they adhered to one product only, they faced a huge competition as it was not difficult for competitors to give a serious set back to a company dealing in one product only. Strategic development concept gave rise to the organizational change and they decided to move towards launching other products and a mix of product and services that, although, did not earn them huge profits but at least helped them maintain their position in the market and kept the competition alive in the market. After having faced a lot of criticism and limitations, Red Bull decided to adopt such strategies that focus on change. They decided to launch some other products as well because there were huge competitors to their energy drink and for keeping themselves into the market they need to adapt change. In order to maintain their image as a market leader they focused on the development of other products such as herbal tea. In order to launch herbal tea test, marketing was carried out and tea had the ingredients that were meant to boost the metabolism. This takes us to the point that they remained in line with the energy drink and so, manufactured the herbal tea. In addition to this, a fast food chain was also started that offered Australian food as well as international food. They also adopted another business line which was of publishing magazines in Europe that contained articles about sports, social trends, night life and music. However, these businesses did not become as much successful as was the Red bull energy drink. In a survey it was found that the Red Bull, during the period of its success, had built strong customer equity and brand resilience among the consumers. Despite of the presence of various other energy drinks, the brand resilience for Red Bull was very low. This was perhaps because of the single product strategy of the Red Bull that they did not go for product line and became successful by remaining focused on whatever they were producing. Strategies Red Bull did not opt for: Theorists are of the view that if any product does not earn profits for the company, in that case they should go for exploiting the opportunities and tailoring the product that provides maximum utility. Thus, strategic development refers to innovation and means of exploiting change as an opportunity for a different business, product or service (ehow.com 2005). We can say that strategic development is about finding a favorable situation for changing the business, product or service depending on what the organization aspires to do. Red Bull did go for strategic development of new products, but they took this decision at a very late stage. If Red Bull would have gone for the product line extension and towards introducing new products under the same category earlier they might not have suffered from huge losses. One of the criticisms about Red Bull was that it did not taste good. People were of the view that it has medicinal taste and lemony base and that was not the problem with other energy drinks. In fact, they were produced in many flavors and that provided the variety to the consumers and they deviated from the Red Bull. This gave a serious set back to Red Bull. In addition to this, they remained focused on one product. They did not go for producing other types of beverages famous at that time. As their product had a good position in the market, they should have gone for new product launch that should be in line with the energy drink. Development initiatives: One of the theorists has proposed that the development initiatives should be such that they add value to the parent organization and lead to the strengthening of the parent organization image in the market (Delany 2000). Red Bull took such initiatives that did not only add value to their already exiting image but attracted people again towards their old brand i.e. Red Bull. After having seen Red Bull working and entering into other businesses their energy drink again became famous as it was evident from the survey where people reported less brand resilience to Red Bull. However, these development initiatives are discussed in detail under strategic development of their product and marketing strategies opted by them. Case study Strategic development of the product: Historical background: Red Bull: a famous energy drink was introduced by Mateschitz in western markets. After seeing its growth, he decided to launch the product in western markets as he saw great potential over there. He was on his trip to Thailand that he found a thrilling drink named Krating Daeng translated in English as “red water buffalo”. He changed the name of the product according to the needs and preferences of the western people and gave it a name of Red Bull. However, in order to increase the marketability of the product and to make it according to the taste of the western people he also added some ingredients and removed some other so that it conforms to the taste of the people. However, in addition to this the other changes that were made in the product to make it more acceptable and popular among western people included making the drink carbonated and packaging it in a slim bottle and silver can. Thus, the strategy of packing the drink in glass bottles that was initially carried out changed to silver cans. Thus, Red Bull went through several tactics of carrying out its strategic development and developed the old energy drink into a new product named “Red Bull”. Marketing strategies: Developing competitive marketing strategies is critical to the success of every organization. Marketing strategy comprises of different strategies that include market segmentation and target marketing. In addition to this the product decisions that constitute of 4 Ps i.e. product, price, place and promotion are also important (Ferrel and Hartline 2008). Many of the theorists and researchers are of the view that designing effective marketing strategies lead the organizations towards achieving competitive advantage (Handlechner 2008). An organization can achieve competitive advantage by delivering higher quality product or service, through properly analyzing the needs of the market and tailoring their offerings on the basis of the market needs and targeting the segment having greater potential and paying special attention to the marketing mix. However, in addition to this there are other factors that also influence the marketing strategies designed by the organizations. Presence of competitors, market trends, and customers are most important of all those factors (Schnaars 1998). Marketing strategies occupies a special place. Without developing effective strategies, organizations cannot strive hard towards achieving their goals (Jain 1998). So in order to have a clear road map it is mandatory that organizations must develop strategies that conform to their strategic plans. Thus, the strategic management accompanied by strategic development and marketing strategies is mandatory for the organizations to achieve competitive advantage. Shedding light on the marketing strategies adopted by Red Bull: a beverage company to achieve competitive edge, these strategies helped them to capture the market share of approximately 59% that is not achieved by any of the beverage company in those times. In addition to the strategic development there were certain marketing strategies that were followed by Red Bull for marketing their product to the target consumers. Their sales representatives distributed the cans free of cost as a free sample so that people and especially young generation get an idea of how it tastes. They also offered young college boys to throw parties where they would give Red Bull energy drink to make it famous among them. In addition to this they employed consumers’ educators who were the company’s sales representatives. They were used to go to the places were there were public gatherings like meetings, beaches, exhibitions and give away free samples. Mobile energy drink was also one of the marketing strategies introduced by them where the young college students used to drive cars painted in blue and silver color signifying Red Bull energy drink and they were employed to distribute the drinks among people. In addition to all these marketing strategies, the advertisements were designed in a much thrilling and adventurous manner; they increased the marketability of the product. Young and athletic boys were made the brand ambassadors. They also distributed the cans in offices where the employees had stressful work load conditions. This also made the product famous not only among young generation but also among older people who often experienced stressful situations. Moreover, they marketed their product on gaming consoles; a game named wipe out 2 in Sony play station had Red Bull’s products’ name flash on a virtual race track. This takes us to the point that Red bull energy drink always adopted adventurous approach in their advertisements to attract their target market. Sports sponsorships formed the core of Red Bulls marketing strategy. Initially they coupled their product with team F1, a famous sport; they always used sponsorship of famous sport companies in order to make their product famous among young generation. However, the idea behind coupling and marketing the product with sponsorships of famous sport companies is to develop the image of the product as for adventure-seekers and risk-takers. The packaging of the product is one most unique feature of Red Bull’s marketing; they introduced a can of 250ml/8.3 ounce. No other size of the can was introduced. They introduced slim can of 8.3 ounce rather than conventional size of 12 ounce as used by other beverages. They gave special attention towards the packaging of the product. One of the important points that need to be focused regarding Red Bull was that no product line was introduced. They centered on one product that is Red Bull energy drink and introduced a sugar free drink in 2003. They were of the view that they want to remain focused because whatever they do they want to do that in its best way. Affect of external factors on the marketability of the product: There were some external factors that affected the product a lot. These were the launch of other energy drinks by competitors. Amongst them American Bull and Red Tiger are worth to notice. Many beverage companies like Pepsi and Coca Cola introduced their own energy drinks and thus threatened the presence of Red Bull in the market. Many small companies also came on the picture, poised a competition and got huge success. But the reason for their success was hidden in their marketing strategy that they adopted, which was also similar to the one adopted by Red Bull. However, the launch of a product named Roaring Lion gave a serious set back to the Red Bull as it was introduced by the former employees of the Red Bull; they had a very good idea and complete information about the product. Roaring Lion came in different sized cans which were sold to the bar tenders and were given incentives to use their product as a mixer while Red Bull did not get into association with any alcoholic manufacturer. Introducing the product i.e. Roaring Lion in different sized cans increases their sales as the bar tenders had an easy access to any size of the can they wanted to buy. It was not the case with Red Bull as it was introduced in one size can only. This strategy gave Red Bull the serious set back. Most of the customers of Red Bull had a problem with its taste. They were of the view that though the drink smells good but it has a medicinal and lemony taste. This gave an opportunity to other manufacturers and they introduced their drinks in several different flavors that gave variety to the consumers and hence, resulted in increased marketability of their respective products. Another external factor that affected the product was its target customers. Red Bull focused on young college boys and it was difficult to determine whether or not they will remain loyal to the product as they grew old. Red Bull was not famous among older people because of high sugar content and caffeine. Another major factor was the absence of product line. Red Bull had only one product and a sugar free drink and it had to fight with its competitors with only one product. 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