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The Hayes Wheelwright Four Stage Model: Case Study of Red Bull
Since then Red Bull has continued to grow and now holds the largest market share of any energy drink selling 6.970 billion cans in 2018 and over 75 billion since the product launched in 1987. Dietrich Mateschitz was inspired by a functional drink called ‘Krating Daeng’ first sold In Thailand by Chaleo Yoovidhya in the early 1980s. Mateschitz partnered with Chaleo Yoovidhya in the late 1980s to create a new business venture by creating a similar product to ‘Krating Daeng’ with a few modified ingredients to suit the taste pallet of the western world. Since launching Red Bull in Austria in 1987 and the delay in getting the product to international markets in Hungary and Slovenia by 1992, it has continued to grow worldwide. Dietrich Mateschitz is now the 31st richest man in the world with a net worth of $23.7 billion all thanks to his 49% share in Red Bull GmbH.
Brief understanding of Hayes Wheelwright 4 stage model
The Hayes Wheelwright 4 stage model is a basic framework which demonstrates the operations function towards organisational competitiveness. The model consists of 4 different stages (1) internally Neutral (2) Externally neutral (3) Internally Supportive and (4) Externally supportive.
In stage 1 the objective is to minimise the negative impacts and eliminate any mistakes in running of the operation while trying to build a positive reputation and stable client base. Stage 2 is where most companies perform, they adopt the best practice to be on par with competitors but have no strategy to create any competitive advantage. Stage 3 is where a competitive strategy become linked to operations. This is where operators offer better product and incentives in order to increase market share. This stage is where all competitors aim to achieve with the hopes of reaching stage 4 at some point. At Stage 4 operations have built up a highly desirable level of competitive advantage that operations are then able to build a new organisational strategy around it.
Marketing
The marketing strategy adapted by Red bull is unlike any other, rather than following the traditional approach of mass marketing Red Bull created what is called a ‘brand myth’ with their slogan “Red Bull gives you wings”. Red Bull’s aim in marketing was not to sell the product but to sell an experience. They were able to capture their market with the products association with speed and fearlessness.
Red Bull capitalised on the lack of interest in extreme sports to use the 500+ sports as a platform to sell the niche market a product as well as an experience. The idea behind using these events to sell products is that the consumer will see these athletes thrive and will be encouraged to push themselves further. Red bull hold hundreds of extreme sport events around the world such as the Red Bull cliff dive and the Red bull Air Race.
In 2004 Red Bull went that one step further buying the Jaguar Formula 1 racing team and rebranding it as their own. This adds to Red Bull’s image of adventure and adrenaline. Since then they have purchased other successful formula 1 racing teams and gone on to win many titles. They saw purchasing these racing teams as a clever way of branding and merchandising instead of paying other companies to advertise their brand and logos they may as well buy into the sport and invest money in their own success instead of being a part of someone else’s.
Red Bull only uses word of mouth, viral online marketing and buzz marketing for advertising as they believe that print advertising doesn’t match the brand identity and the experience they’re trying to sell. Red Bull uses many platforms of social media to get their message and products across. They even run their own online TV channel called Red Bull TV which will stream most of their event worldwide so they’re easily accessible for anyone interested. A huge breakthrough for Red Bull on social media was the Red Bull Stratos project. The Stratos Project sent a Red Bull Austrian skydiver Felix Baumgartner from near space, 39km into the stratosphere to jump back to land. This gained huge publicity for the brand, breaking world records while linking perfectly to the Red Bull slogan ‘gives you wings’. The live stream of the jump was watched by 8 million people and the video of the highlights has since been viewed 37 million times on YouTube.
Red bull was introduced to the market as a high price energy drink and still continues to cost more to purchase than competitors like Monster and Lucozade. Originally Dietrich increased the price of the energy drink because the co-founder Chaleo already had produced a cheaper alternative ‘Krating daeng’ in Thailand. By having two very similar products at either end of the cost spectrum they were able to capture a bigger market. Consumers are willing to pay more for the premium brands quality and benefits.
In relation to Hayes Wheelwrights 4 stage model Red Bull have held a competitive advantage since launching in 1987 as Red Bull was the first energy drink introduced into the Western market while also having invested in the cheaper alternative. Likewise, other competitive advantages consist of the unique taste and clever marketing strategies. Even though it is believed they have held competitive advantage since the very beginning minor setbacks show that Red Bull have operated at the earlier stages of the Hayes Wheelwright 4-stage model too.
Red bull had a number of setbacks including law suits over their slogan falsely claiming that the product “gives you wings”. The claim stated that the drink hadn’t enhanced consumers’ physical or intellectual ability. Although this claim seems outrageous Red bull had to settle the suit for $13 million as it was deemed as false advertisement. This event would fall into stage 1 of the Wheelwright model drawing negative publicity and dampening their reputation. Red Bull aimed to minimize backlash from lawsuit by offering to pay $10 to anyone who has consumed the energy drink from 2002. They also received lawsuits questioning the quality of the product claiming that the ingredients in Red Bull led to the death of a healthy 25-year-old man who regularly consumed the energy drink and many similar claims to do with health issues. These claims were swiftly put to rest by a statement from Red Bull stating that their product is sold in 171 different countries because health authorities have concluded that it is safe to consume followed by many reports to support this statement.
Design of product and process of manufacturing
There are 5 features which a company addresses in order to create a successful product; quality, cost, speed, dependability and flexibility. Reb Bull GmbH has covered all 5 features which enhanced the performance of the operation. Red Bull is a private company so it is near impossible to get exact figure but it is estimated that the production cost per can is very low. The manufacturing cost of carbonated drinks is usually extremely low leading to huge profit margins. This is why many fizzy drinks have the ability to invest the majority of returns towards further research and development, and advertising. Even though the cost of production of Red Bull may be low this does not mean they have sacrificed the quality of their product. Today Red Bull cans weigh significantly less than years ago and are smaller in size, which saves precious raw material and money spent on transport. These changes help reduce the cost of production. Any reduction in cost of production just increases profit margins and ability to partake in mass production. This progression helps the organisation move towards the 4th stage of the Wheelwright model as they are able to retain loyal customers while creating incentives for new ones.
As previous mentioned Red Bull is sold worldwide due to the health authorities approving its standards. Red Bull is known as a premium energy drink for its taste, quality yet it comes at a relatively high price. Red Bull still remains one of the most expensive energy drinks on the market even though it comes in a smaller 250ml can. The idea of luxury is known to come at a higher price. The marketers’ at Red Bull GmbH aim to sell an experience with their products. By keeping prices high and stable they’re creating a loyal customer reputation where it is worth spending extra in order to receive maximum satisfaction and benefits. This falls into stage 2 of the Wheelwright Model where brands aim to be on par with competitors. Similar products like Lucozade and monster fall within the same price bracket as Red Bull yet they offer larger portions at that price. Lucozade offer larger cans of 330ml as well as larger bottles, whereas Monster just offer a large 500ml can. Speed and dependability is another huge factor Red Bull have improved on since launching. Red Bulls main aim in this sector was to minimise the time wasted between beginning of production and reaching the customer. They have adapted a ‘wall to wall’ concept. This means that the cans are manufactured and filled in the same site helping them save time and money on transport. It is estimated that since adapting the ‘wall to wall’ concept they have saved 11,845 tons of CO2 emissions from entering our environment which is roughly the equivalent to 16.2 million kilometres travelled per year by trucks. In addition to this the energy used to run these manufacturing plants 80% of energy comes from renewable sources. Red bull predominantly uses trains and boats as their mode of transport to get product to market as the cans are small and light it is easy to move large quantities quickly. By changing the size and material of the cans this created a competitive advantage as other competitors are unable to transport the same amount of their products for the same price. This highlighted advantage of the transportation of high quantity of products shows that this particular operation falls into stage 3 of the Wheelwright model. Stage 3 is where competitive advantage comes into play and the level most business aim to perform.
Flexibility is important as it allows a business to grow and adapt to changes in market demands and consumer expectations. Due to a huge increase in variety of products in market Red Bull needed to expand their brand identity from just one particular drink in one flavour. Red bull started added artificial flavours and ventured into different product types such as sugar free coconut flavour, red bull cola, Red Bull energy shot and what they call the ‘edition line’. The edition line consist of many different flavours linking artificial flavours to colours e.g. the yellow edition is pineapple flavoured, the orange edition is tangerine flavoured and so on. This showed Red Bulls initiate to please a forever growing market. Red bull introduced these flavours to remain on par with competitors (this was done to remain in stage 2 of wheelwright model).
The Red Bull can design although it is a very simple design it is eye catching due to its striking colour combination and clean cut lines. Dietrich mateschitz was cautious when launching Red Bull in Austria to hold on to the branding of Krating Daeng as any change could cause decrease in sales in a very small, sensitive market at the time. Krating Daeng used the charging bulls’ image which suited the red bull brand identity of fearlessness, strength and endurance.
Red Bull tried to stay as true to their brand identity when introducing the new range of Red Bull flavours. They held onto the strong bull image and the aluminium silver can then adding different vibrant colour depending on flavour. The thinking behind the branding of the new flavours was in order to retain competitive advantage and remain in stage 3 of the Wheelwright Model was to keep as close to the original design as possible.
Overall performance and business strategy
As Red Bull is a private company they do not have to share any financial reports. This stops competitors from seeing their strengths and weakness’ in their business strategy. Even though we cannot avail of these records we can full heartedly say that Red Bull GmbH is a very successful operation with huge profit margins due to their marketing strategy, design and manufacturing processes and taking full advantage of the progression in technology.
Red Bull very clever business strategy of creating a product that has been marketed to promote a fun, exciting life style is the main reason behind their success. Mateschitz and Chaleo have developed the idea that energy drinks aren’t just for the original market of overnight truck drivers in Asia but for people looking for an exciting lifestyle. They didn’t stop by just getting their product into bars and nightclubs they continued promoting their product until they were in bigger chain corner shops around the world. Since launching into international markets in 1997 Red Bull have gained between 70 and 90% of energy drink market share in over 100 different countries. Even though their product has tried to copied by competitors like Coca Cola they have not been able to take their high market share percentage away from them.
In 2018 Red Bull sold 6.790 billion cans, this is an increase of 7.7% from a very successful 2017 with sales increasing by over 10% in Brazil, India, Western and Eastern Europe and Germany. This increase in sales in combination with the decrease in cost of mass production shows that Red Bull are still striving for the next best thing.
Conclusion
The Hayes Wheelwright Four Stage model is a great, insightful process which allows us breakdown the production process and sets standards for operations to strive for. Red Bull has operated at each stage of the Hayes Wheelwright model from setbacks like lawsuits to moments of greatness with the Red Bull Stratos project. Red Bull took a risk in approaching the marketing and business strategy in such a unique way but the risk has definitely paid off. The idea of selling an experience instead of just a product was truly brilliant and growth in sales and market share is proof of this.
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