Red Bull is the world’s leading energy drink brand, distinguished by its innovative products, marketing techniques, and dedicated client base. As the market for energy drinks expands, Red Bull is seeking new ways to broaden its product options and attract new consumers. Red Bull has chosen to launch a new range of coffee-flavored energy drinks for that purpose. An exploration will be done of the distribution channels and techniques that Red Bull should consider in order to optimize the success of this new product line in this article.
Places Red Bull is Sold
Energy drinks from Red Bull may be purchased at various retail and food service establishments, including supermarkets, drugstores, health food stores, bars, and restaurants. This strategy allows Red Bull to cover the widest demographic possible and keep its products easily available to the average customer. The new coffee-flavored energy drinks could be sold at cafes, specialty coffee shops, specialty beverage stores, and even vending machines.
Analyzation of Red Bull’s Current Distribution Channels
Red Bull distributes its products in both traditional and unusual ways. It employs several techniques to expand its market share. Red Bull’s marketing approach is direct-to-consumer (Bremser et al., 2018). Their items are available on Amazon, Walmart, and their website. Wholesalers concentrated their efforts on supermarkets, drugstores, and department shops. Red Bull has employed a range of digital marketing methods to reach its target audience. Social networking, digital advertising, and industry influencers are all used in marketing. Red Bull has a significant retail presence. One will collaborate with merchants to create innovative window coverings and advertising strategies. They also attend festivals and other events to raise brand recognition and sales. Red Bull uses a range of distribution strategies to increase its market share (Kuang, 2022). Red Bull might grow its market share via direct-to-consumer marketing, conventional distribution, online marketing, and retail activation.
Place Strategy
Red Bull’s location strategy is focused on convenience and accessibility. It thus entails placing their goods at convenience shops, petrol stations, supermarkets, vending machines, and other merchants worldwide. The method has been quite effective for Red Bull, allowing them to reach a large audience that would otherwise be impossible to contact (Fernanda & Syafrizal, 2019). Red Bull has increased its market share and brand awareness due to this approach. Red Bull can reach clients in many areas, making it simple for customers to locate and buy their products. The technique also enables Red Bull to retain a presence in numerous areas, which is critical for any successful company. The approach has also allowed Red Bull to differentiate itself from its competition. Red Bull can retain a competitive edge and generate consumer loyalty by being accessible in different areas. Furthermore, the approach has helped Red Bull to create a significant position in the energy drink sector, allowing them to stay competitive.
How the Distribution Decisions Affect the Other Ps
The distribution selections for Red Bull’s new coffee-flavored energy drinks have various effects on the other Ps of the marketing mix. First and foremost, it will have an impact on the product itself. Red Bull can contact more prospective consumers and ensure its product is readily accessible by having it available in numerous places. It will also have an impact on the product’s price. By selling the product in numerous areas, Red Bull will be able to establish competitive pricing for its product, allowing them to remain competitive in the energy drink industry (Raewf et al., 2021). Finally, it will have an impact on Red Bull’s promotional operations. Red Bull will be able to market its product in several locales by having a presence in numerous locations, allowing them to reach a larger audience. It could also aid in the development of brand awareness and client loyalty.
Recommendations
Red Bull may use several ideas to enhance its distribution choices and economic performance. First and foremost, they should concentrate on increasing their presence at convenience shops, petrol stations, and supermarkets. They will be able to contact more prospective consumers by growing their presence in these venues, enhancing brand awareness and customer loyalty (Fernanda & Syafrizal, 2019). They should also look at new distribution channels, such as internet merchants and subscription services which will help them to reach a larger audience. Finally, they should investigate strategies to boost their visibility in vending machines since it will allow them to give quick access to their goods to clients, enhancing ease and accessibility.
4 Ps
The new coffee-flavored energy drink’s distribution choices will directly influence the other Ps of the marketing mix. Pricing considerations, for example, will be influenced by the cost of distributing the product via multiple channels. Promotional choices must consider the many channels through which the product is distributed and the target consumers for each channel. Furthermore, distribution channels will influence product selections since specific packaging may be required to fit various retail shops (Kuang, 2022). Finally, placement considerations must consider the product’s availability in each channel and the rivalry for shelf space (Kuang, 2022). All of these factors must be considered when considering distribution choices for the new coffee-flavored energy drink.
Place Strategy’s Impact on the Profitability
Bull has attracted a broader audience by making its product widely accessible and available in different places. This has enabled them to boost their sales, which has resulted in increased earnings. Furthermore, the approach has enabled them to retain a strong presence in several areas, helping them to develop brand awareness and loyalty (Chen & Keung, 2019). As a result, it has allowed them to maintain their position as the industry leader in energy drinks and stay ahead of their competition. Furthermore, the location strategy has enabled Red Bull to differentiate itself from its rivals and acquire a competitive edge allowing them to continue to be lucrative and successful.
The objective of the present study is to investigate the relationship between Red Bull’s sales promotion and sales volume. Red Bull is a renowned multinational currently leading the energy drink market by a significant margin. The entity is also the industry’s pioneer after being the first maker of such brands. A unique aspect concerning Red Bull touches on its unique top-notch marketing campaigns involving breath-taking stunts. The company’s marketing strategy is costly, necessitating the need to check whether the promotions cause real effects on sales volume, which directly affects profitability. Marketing activities basically motivate people to consume a brand’s items through awareness creation that leads to consumers’ favorable conduct towards the advertised organization. Thus, promotions that do not cause sales increment lead to resource wastage and losses. Investigating the link between sales promotion operations and sales volume provides a fundamental procedure for verifying the endeavors’ effectiveness, though many businesses neglect the process.
This study uses empirical data gathered from a precisely selected population to accomplish its mission. The work shows the association between Red Bull’s marketing operations and sales size. The researcher uses self-administered questionnaires to gather information from 260 respondents involved in the targeted company’s distribution channels. The specific fellows include employees, energy drink wholesalers and retailers, and consumers. The study further employs regression and correlation analysis to scan the link between the two variables under study. Equally, the inclusion of qualitative and quantitative data in the research work makes the mixed approach appropriate for the work. The study’s findings reveal a significant positive correlation between sales promotion activities and the volume of sales for the examined firm. The investigation follows two hypotheses, all of which become highly supported by the end of the investigations. Data tables and percentages play a major role in the analysis section, with the results obtained revealing the genuine connection between Red Bull’s promotion messages and sales size. Therefore, the questioned merchants confirm that they sell more Red Bull energy drinks during every new marketing episode.
Background Information
Red Bull is a substantially unique firm based on its successful operations in the U.S. and many other parts of the world. The multinational is headquartered in Austria, Europe, where many expect the firm to dominate, as opposed to the global market (Hardy, 2021). However, Red Bull proves itself peculiar by ruling even the American market, despite the prevailing ‘buy America, build America’ mentality among many U.S. citizens. According to Bayighomog et al. (2020), at least two aspects allow businesses to succeed in economies away from the home market. These factors include the provision of superior products that local investors cannot produce or inimitable marketing strategies. Accordingly, Red Bull’s general formulation and the fact that many other firms already produce similar products make the former reason behind market dominance nonexistent in Red Bull’s case. That way, there is a high possibility that the global energy drink giant acquires its brand superiority from marketing activities. The same aspect explains the organization’s success in the U.S. As a foreign firm, many people expect the likes of Coca-Cola, a home beverage company, to lead Red Bull in the U.S. economy, which is not the case.
Red Bull now controls below half of the energy drink market, with competition threatening a further decline in market share. As the industry’s pioneer, the business once dominated the sector 100%. However, data regarding the industry’s performance shows Red Bull controlling about 30% of what its owners created. Yoovidhya and Mateschitz initially wondered. Significantly about whom to sell the product to due to its newness, according to Hardy (2021). The investors thus introduced the drink to college students, long-distance drivers, and clubbers to make sales. Therefore, all the other players in the segment enjoy the two innovators’ creations, suggesting Red Bull’s supremacy. Nonetheless, the market control’s decline to about 30% says a lot about Red Bull’s future. It is necessary that the investment looks into the various factors that drive its sales and preferences among consumers to intensify them. Speculations already link intensive marketing operations to the industry’s growth and competitiveness, but the specific players must prove the truth behind such speculations. Particularly, knowing that Red Bull’s sales size and profitability depend on its marketing campaigns can inform the firm’s future endeavors to maintain market dominance.
One of Red Bull’s directors, in charge of marketing, is no longer suggesting potential issues to the promotion aspect of the organization. The entity’s history and structure place the two partners in charge of the brand’s creation in different roles (Hardy, 2021). Yoovidhya, the pharmacist, mainly takes control of the research and development facet, while Mateschitz informs the business’s marketing endeavors (Hardy, 2021). The role specialization elements allow the director to exploit their potential to make Red Bull a great brand. However, Mateschitz’s death in 2019 affected the multinational adversely (Hardy, 2021). Therefore, the matter reiterates the essence of determining the link between product promotion activities and sales volume. Ireland et al.’s (2019) analysis of the energy drink market reveals rivalry, consumers’ bargaining power, and new entrants’ influence significantly high. The three elements explain the pioneers’ loss of market to competitors and the need to inspect what works. Therefore, almost everyone in the energy drink market expects Red Bull’s remaining director to adopt game-changing tactics to remain on top, which includes determining the role of marketing campaigns on sales and profitability to make the necessary, correct decision in that line.
Red Bull needs to investigate the need for continued marketing endeavors and whether the organization can relax to enjoy the already realized marketing mileage. Serumaga-Zake and van der Poll (2021) note that product promotion costs organizations real money, with firms realizing hard-to-copy products enjoying the ability to operate with minimal marketing expenses. Examples of such investments include Apple and other luxury goods producers whose items attract unique value among consumers. Proving that Red Bull’s sales volume and profitability remain constant, whether the multinational runs new ads or not, will inform the entity’s diversion of promotional resources to other essential operations. Appreciating this basic facet is only possible through the inspection of the link between marketing and sales volume. Red Bull already adopts the premium pricing strategy after realizing a nitch (Hardy, 2021). The matter means that ascertaining sales volume guarantees returns. Equally, energy drink firms worldwide battle promotion confrontations leading to the utilization of billions of dollars. Therefore, noticing how marketing dollars affect returns will influence organizations to make the necessary decisions, reiterating the essence of the current study.
Research Question and Hypothesis
Question: Does sales promotion endeavors undertaken by Red Bull affect the organization’s sales volume of energy drinks in the U.S.?
Hypothesis:
H0: Red Bull’s product promotion activities and sales volume are not positively and meaningfully connected.
H1: Red Bull’s product promotion activities and sales volume are positively and meaningfully connected.
Research Objective
The present marketing study’s objective is to investigate the influence of Red Bull’s product promotion on sales volume within the U.S.
Need for the Research
Several factors concerning Red Bull and the energy drink industry necessitate the present research. However, the stiff competition in the sector and players’ excessive expenditure on marketing endeavors form one of the central causes of this scholarly examination. According to Houghtaling et al. (2021), firms in the American beverage segment spend trillions of dollars every year seeking consumers’ preferences towards their items. The involvement of financially stable firms in the industry means excessive spending on the matter (Houghtaling et al., 2021). For example, Coca-Cola and Pepsi channel a significant amount of their revenues to the promotion facet. The two organizations dominate the American soft drink industry and undertake every operation possible to extend their dominance.
Moreover, Red Bull’s entrance into the American market in 1997 led to substantial changes in the industry. The firm’s direct targeting of youths and persons with stable finances amounted to real sectoral disruption. Hardy (2021) says that Red Bull exists as a media organization more than a manufacturing firm. The entity’s sponsorship of crazy sporting activities under the “Red Bull Gives You Wings” campaign leads to massive traffic on its promotion channels. The undertakings are costly, meaning that Red Bull spends a significant amount of money on them. The matter motivates several other competitors, including Monster Energy, who use lots of money to remain relevant. Unfortunately, the competition to sponsor expensive promotional activities is blind. Virtually no one cares to know the connection between marketing operations and sales volume or profitability in the industry. The situation reveals utter ignorance among the players, with the consequences threatening to be severe, in case the many dollars spent on promotion do not relate significantly to profitability.
Choosing Red Bull as the investigation’s case comes from several grounds, including the fact that the entity is the industry’s pioneer. Red Bull GmbH created the first energy drink in 1987, a time when no one but the producers knew the role of energy drinks (Hardy, 2021). Sensing the lack of a market pushed Red Bull’s owners to undertake intensive marketing campaigns involving youths and other professionals until a time when almost everybody appreciated the product. Today, the company controls approximately 30% of the market, a significant drop from 100% controlled in the 1980s. Furthermore, Red Bull presently sponsors numerous costly nerve-stracking stunts to attract customers to the product.
The idea behind Red Bull’s costly marketing endeavors is to associate the product’s consumption with possessing wings and power to perform unordinary activities and goals. The Stratos Jump and Red Bull Air Force drives constitute some of the craziest marketing performances meant to win people’s preference for their products (Frings, 2020). Other critical aspects influencing the investigation include the death of Red Bull’s crazy marketer and the entity’s survival under the R&D-oriented directors who may need reliable, evidence-based information to decide whether to progress the intensive marketing campaigns or not. Accordingly, Red Bull remains a highly essential firm in the investigation regarding product promotion’s effectiveness in supporting business profitability by promoting sales volume. The point that virtually no other firm spends more money on promotions, coupled with the other outlined factors, justifies the need for current investigations.
Prior Research on the Subject
Significantly limited research exists on the subject concerning sales promotion’s effects on sales volume. A search of the same topic on several academic databases, including ProQuest, EBSCOHost, Google Scholar, and numerous other websites, returns a substantially low number of results without any covering this specific aspect. Specifying the search period to be the previous five years worsens the situation. Fonkeng (2021) covers the impact of sales campaigns on sales capacity while using Guinness Cameroon as the case for the study. According to the scholar, Guinness is an Irish brewery firm that survives in the Cameroonian market due to targeted product promotion. The beer finds its way to the African nation through shipping operations and other logistics that significantly increase its cost. The situation makes the Cameroonian Guinness costlier relative to the local brews. However, intensive promotional operations by the foreign brand cancel the domestic brands’ home advantage. Based on Fonkeng’s (2021) account, Guinness succeeds by employing multiple promotion methods, including price reductions, premiums, and charming online campaigns, among others. Thus, the results of this study confirm that Guinness Cameroon’s sales promotion practices warrant incessant sales volume and profitability.
Promotion campaigns’ concentration affects sales size significantly among large retailers. Zeybek and Ülengin (2021) say that firms operating in highly competitive sectors can realize a competitive edge by intensifying their advertisements. As per the scholars, many businesses offer similar products, with differentiation operations setting each apart. However, every player must try hard to beat the others in connecting to the consumers. That is because virtually everyone in business today can provide quality items to buyers. The corporation with the ability to continuously remind consumers about their products’ availability, utilization, and benefits thus stands to benefit more. The effect comes mainly from the concentration of promotion campaigns, according to Zeybek and Ülengin (2021). Therefore, the researchers encourage investors to spend whatever reasonable and manageable amount of money to support continuous marketing strategy growth in sales volume and profitability. Additionally, large retailers with multiple product lines are advised by Zeybek and Ülengin (2021) to separate each merchandise’s promotion campaign, if possible. The plan makes the awareness facet specific while supporting every item’s sale growth with marketing the activities. Thus, the study reveals a significant connection between product promotion and sales volume.
Sales promotion works by inducing a behavior or action towards a product or service among consumers. Producers and marketers in the beverage sector now use advertising undertaking to encourage buyers to consume more (Wood et al., 2021). The fellows use varied strategies, including the adoption of safe production methods, appealing packaging designs, and sponsorship arrangements. Other schemes utilized for the promotion mission comprise environmentally friendly distribution operations and product communication, all of which feature designs meant to appeal to and stimulate people’s decisions about the specific product. Amalgamating the promotion techniques allows firms to meet the interests of a wider range of individuals. The matter means that more people develop a liking towards the promoted items, leading to increased purchases and profitability. Mawuvi and Sumbo’s (2020) article provides a significantly new but essential aspect regarding sales promotion’s association with sales size. Accordingly, the source backs organizations’ employment of multiple preference-boosting channels, including communication, packaging, and production methods. Therefore, the article reveals the substantial link between promotion, sales, and profitability.
Investigating product promotion cost’s association with sales equally helps determine the two facets’ linkage. Igo1 and Rizal’s (2019) work investigates this aspect by covering a specific consumer good’s brand, PT. Hasjrat Abadi Perwakilan Unaaha. The study features two objectives, including the determination of various promotional blends utilized at the company and their effectiveness. The scholars’ findings indicate that PT. Hasjrat’s reduction in promotional costs by 1.5% in 2016 led to about 1% fall in the year’s sales volume (Igo1 & Rizal, 2019). Moreover, every 1.1 percent increment in the entity’s promotion costs in the following year, 2017, boosted sales amount by approximately 1% (Igo1 & Rizal, 2019). The quantitative figures relating the two facets under examination imply the positive relationship between promotion activities or costs and sales size. Therefore, the investigation suggests that the firm under review, PT. Hasjrat Abadi Unaaha, continues its promotional activities to keep realizing sales growth benefits despite the severe competition in the market.
Lastly, effective sales promotion has the potential to cancel a hurting selling price’s effect and render a firm significantly high returns through increased sales volume. The argument is confirmed by Paper (2019), whose study inspects Sony’s brand trends in the market. The researcher selects the firm’s home theater brand as the item to use for scholarly scrutiny. Thus, Paper (2019) notes that both favorable prices and effective marketing processes boost the organization’s sale of home theater products. Additionally, the scholar finds the effect caused by the two factors superior to when one works independently. Hadi and Hafnidar (2019) insist that promotional undertakings boost people’s favorable behavior and actions toward a brand, with favorable prices promoting deal closure among buyers and the firm’s representatives. Therefore, this article provides noteworthy backing for the current investigations involving Red Bull, the ultimate sales promotion pundit employing inimitable campaigns to glue youths and sports enthusiasts to the brand.
Research Design
The present work adopts the explanatory research design to meet its purpose. Andrew et al. (2019) cheer the technique as the best approach to establishing a causal connection among variables. Investigating a condition or issues to elucidate the associations between variables forms the highlight in this work, with the primary objective being to quantity the influence of sales promotion undertakings on sales volume concerning Red Bull’s case. Unlike the explanatory investigation model, descriptive exploration is suitable for a clearly controlled problem, where the investigator aims to seek relationships concerning causes and indicators (Andrew et al., 2019). The aspect makes the explanatory technique most appropriate in the current work, thus the design’s adoption. Equally, the researcher employs an explanatory scheme of study on a cross-sectional foundation, exploiting the survey technique to gather primary data and the revision of allied literature to develop a secondary basis for data gathering. A cross-sectional field survey method is also used to ration independent and dependent elements at the same time with a distinct questionnaire. The design led to the gathering of quality data for the analysis section that produced the findings leading to the conclusions.
Research Sample
A research sample comes from the selected target population with a connection to the subject under investigation. Accordingly, Red Bull’s California employees and distribution channel members, including agents, retailers, and wholesalers, constitute the study’s population. The point that the California system involved in Red Bull’s delivery line comprises thousands of individuals necessitates the selection of a manageable group with the required information forming the research sample. Thus, the investigator uses both the probability and non-probability specimen selection approach because of their ability to give a reliable depiction of the entire population when combined. Probability sampling uses random assortment, with each component exhibiting a known nonzero opportunity of being selected. Stratified sampling, simple random sampling, cluster sampling, and multi-stage sampling are examples of probability sampling considered for the current work.
On the other hand, non-probability sampling relies on idiosyncratic judgment. Putting a study’s population into sequences of pertinent strata promotes the sample’s representativeness by ensuring each stratum is illustrative, as per Grønmo (2020). Therefore, the investigators use stratified and convenience sampling methods to gather a meaningful collection of Red Bull agents, employees, distributors, and retailers. The adopted approach helps significantly in ensuring that the study exhibits adequate cases from the targeted groups to make an evocative deduction. However, going for the study blindly without determining the right sample size means handling a finite number of respondents. The investigator uses Yamane’s simplified formula to identify about 260 respondents as the best squad to acquire the anticipated information. Appendix 1 provides a summary of each group’s size from the determined total respondents.
Data Collection
The study uses both primary and secondary data to investigate its hypotheses. The primary data comes from Red Bull’s California employees, the energy drink brand’s resellers, agents, wholesalers, and retailers. The secondary data comes from the organization’s archived records available online. The two data sets’ collection proceeds in a manner that makes covering every feature of the research possible. The primary data relates to the employees’ and dealers’ conduct and reactions. Moreover, the (primary) data is original and openly connected to the subject under investigation, making it significantly commanding. The information comes from questionnaires and interviews conducted by the researcher on the study population. The secondary data comes from printed material concerning the entity. The sources include websites, books, and other research articles featuring Red Bull’s performance and marketing information. Closed-ended inquiries are offered on a Likert-type gauge. The researcher applies the commonly utilized business-related Likert scale form due to its ability to allow respondents to offer views in terms of direction and intensity. The intensity scale ratings range from 1 (least agree) to 5 (highly agree).
Data Analysis
Data gathered during the study using various tactics was structured and organized appropriately for analysis. The analysis part uses the statistical package for social scientists (SPSS), version 19 software for descriptive and inferential data examination. In descriptive statistics, the collected data is abridged using tables, percentages, and frequency distribution to scrutinize the respondents’ demographic characteristics. Moreover, a mean score and standard deviation are employed to offer condensed data to test the link between perceived and expected sales volume with changing promotion levels.
Demographic Profile of Respondents
Appendix 2 shows the demographic data of the respondents, where the population comprised mostly of males, at 52.9%, compared to females, who constitute 47.1%. Thus, the male respondents contributed more, according to the data, compared to the females. The group further falls into four distinct percentile clusters, according to their ages. The largest percentage belongs to respondents between 25 and 35 years, followed by that between 36 and 45 years, the two making about 79.2% of the entire sample. Respondents within the 20 to 24 age bracket are 11.0%, while the lowest fraction is for persons belonging to the age above 46 years, constituting 9.8%. Consequently, the conclusion from this analysis is that most of the persons taking part in the study are middle-aged.
Occupation of Respondents
Appendix 1 further shows the various respondents’ occupations and dealings along Red Bull’s distribution line. Based on the data, the fellows belong to four groups, including retailers, suppliers, wholesalers, and general distributors. Accordingly, retailers make up the largest team of respondents, with 65.4%. Agents occupy the second slot, making 15.4%. Distributors come in the third position and constitute 11.5%, while employees form 7.7% correspondingly.
Perception toward Sales Promotion
Appendix 3 shows the study population’s views towards the association between Red Bull’s product promotion campaigns and sales volume. Based on the gathered data, candidates with a mean score of 8.22 approved that every Red Bull’s marketing stunt causes a significant instantaneous rise in the brand’s sales volume, leading to the sale of more cans and liters of energy drink. The data implies a meaningful connection between the firm’s promotional undertakings and the volume of the product consumed by consumers. Thus, buyers’ desire to associate with the new powerful show or statement depicted by Red Bull’s powerful marketing campaigns leads to increased product preference and consumption.
Correlation Analysis
The correlation coefficient summarizes the connection between two variables using a distinct numeral that is between -1 and +1. The current work undertakes a correlation analysis, with Pearson’s correlation coefficient, on the independent and dependent parameters to search the existing connection. Shekar (2020) provides specific guidelines for finding the correlation between variables using this approach. The scholar notes that a correlation factor (r) between 0.1 and 0.29 implies a weak connection, while that between 0.3 and 0.49 is moderate (Shekar, 2020, n.p). Furthermore, the link between parameters is strong if the correlation constant exists between 0.5 and 0.9, while such is very strong when the figure falls between 0.9 and 1.0 (Shekar, 2020, n.p). Thus, with a coefficient constant of 0.91, the study finds Red Bull’s sales promotion operation’s influence on sales volume very strong, appendix 6.
Multiple Regression Analysis
Regression analysis predicts a numerical value of a given parameter based on the size of another factor under the experimenter’s control. Multiple regression analysis displays the impact on sales volume by identifying the degree and course of the association between the two study parameters. The investigation conducts the analysis at a 95% confidence level. The investigator conducted normality, homoscedasticity, and collinearity checks before the regression analysis to check and eliminate errors.
Regression Analysis between Independent and Dependent Variables
Appendix 4 provides summary results for the regression analysis between the study’s independent and dependent parameters. The “R” section represents the multiple correlation coefficient value, R (Shekar, 2020). The constant (R) is an important measure of the prediction superiority for the dependent variable, sales volume. The acquired R-value, 0.842, designates an excellent degree of forecast among the variables. Moreover, the “R Square” segment is the coefficient of determination figure, which is the amount of change in the reliant parameter explainable by the independent variable. Appendix 4 returns 0.709 for R Square, meaning that Red Bull’s product promotion illuminates 70.9% variation in sales volume. The findings thus imply that the other variables affecting Red Bull’s sales in California, but for marketing activities, influence a small portion of about 10.9%. Further investigation is necessary to examine which specific marketing element causes the most impact for the organization to fine-tune its promotion endeavors.
Hypothesis Analysis
Appendix 5 shows the results of the hypotheses regression analysis for the work. The predictor variables coefficient is statistically substantial at less than 5%; thus, the alternative hypothesis concerning product promotion is sustained. From the regression analysis, sales promotion exhibits a positive and weighty influence on sales volume, with a beta value of 0.864 and a p-value of 0.000 (p<0.05). Consequently, the study approved the proposition that Red Bull’s rigorous product promotion and sales size in California are positively and meaningfully linked.
Conclusions
The study aimed to identify the impact of sales promotion on Red Bull’s sales volume. The quantitative research approach is applied to examine the effect connection between the two factors. The study population involves 260 dealers in the Red Bull distribution line within California. The sample selection process for the work involved a stratified random sampling technique, with structured questionnaires employed for data collection. Tables are utilized to present data acquired from the investigations. The experimenter uses SPSS -19 software to analyze data. Results from the analysis phase return a positive association between Red Bull’s sales promotion and sales volume, with r = 0.91. In conclusion, Red Bull spends substantial money on sales promotion, and the organization reaps significantly from the investment. The remaining director should purpose to progress the company’s intensive marketing operations to maintain market dominance. That is because competitors already produce rival products with identical formulations, with others even offering them at lower prices. The beta value of 0.864 and a p-value of 0.000 (p<0.05), make the alternative hypothesis that ‘Red Bull’s product promotion undertakings and sales size are certainly and evocatively connected’ correct. Thus, Red Bull’s massive sales size over the years is pegged on the nerve-taking continuous marketing initiatives, which must continue for the firm to keep enjoying. The firm should continue undertaking similar studies over time to determine whether the trend will persist in the long run.
References
Andrew, D. P. S., Pedersen, P. M. & McEvoy, C. D. (2019). Research methods and design in sport management (Second). Human Kinetics.
Mawuvi, E. J. & Sumbo, D. J. (2020). The impacts of sales promotion on the sales volume of alcoholic beverages in Tamale, the northern region of Ghana – Evidence from different parts of the world. [Bachelor thesis, University for Development Studies]. Researchgate.
Red bull soft drink is one of the multinational corporations operating in many countries around the globe. In the Middle East, the corporation is present in many countries particularly in Saudi Arabia where it has based its manufacturing headquarters. The company specializes in the manufacture of high-energy content soft drinks providing various benefits to the users particularly those involved in high performances such as sports (McNaughton 3).
The products of the company are currently being sold in over 160 countries around the globe. In addition, the growth of the company in the market share has been remarkable. Over the past year, the company’s global market share was approximated to have grown by over 15% with Saudi Arabian subsidiary contributing around 30%. The expansion in the market share has been exacerbated by the increasing growth in the returns on investments approximated to be over 39% in the last financial year.
The company focus is to sustain the highest industrial values at the same time positioning itself as the energy soft drink leader in the market (McNaughton 3). In addition, the company is focusing on delivering superior customer value in a more efficient and cost effective process.
Moreover, the company aims to increase its presence in the world soft drinks market particularly in the fast growing and developing Asian markets. The aggressive global expansion strategies have enabled the company to establish itself in many countries around the globe. The company plans to apply similar strategy to enter into the Asian market particularly in the Far East countries.
Environmental analysis
The environmental analysis tool will be applied to analyze the macro-environment that affects the company operations as well as the external factors that may affect its products. The macro-environmental factors include the political, economical, social technological, and legal. The external factors are critical considerations in the company’s internationalization strategies.
Political factors
Red bull soft drink is a multinational company operating in many countries especially in North America, Europe and Asia. As such, its products are sold in a wide spectrum of political environments. Moreover, Red bull soft drink consumers are spread across the political divide found in all parts of the world. Therefore, political consideration is very important factor for the company especially when introducing a particular product in the new international market.
For instance, the company is manufacturing and distributing most of its products into the Asian market from one central position found in Australia. Such operation has exposed the company to political tussles with the government threatening to close its operations. In addition, the nature of the products of the company has been questionable in some countries particularly in the Middle East where alcohol content is highly strict.
In some countries, the products of the company have been burned due to the ingredients that have been used. The political factors have disadvantaged the company particularly in competitive energy drinks’ market. These political conditions have seriously influenced the company’s sales particularly products with high caffeine levels.
Economic factors
The current economic situation around the world has a profound effect not only on the company’s products but also on the general production capacity. The recent economic downturn experienced in America and Europe has a considerable consequence on the domestic market. Sales for the high-energy content soft drinks have reduced as majority of consumers switched to other competitive products as their income reduced.
Reduction in sales was also experienced in many parts of Europe as well as in many countries in Asia where the company operates. However, this presented an opportunity for the company to introduce cheaper high-energy soft drinks in the market. Moreover, in such an economic environment, the company must increase its capital flow in order to avoid negative effects of the economic shocks.
However, as the parts of the world are experiencing the effects of the economic downturns, China, the biggest target market was experiencing an economic boom. In the last two years, China has experienced rapid economic growth with increased consumer spending. In addition, the Chinese government has encouraged its nationals to buy products and services that offer increased value.
The economic situation major Asian markets have presented the greatest opportunity for the company to introduce and sell its products. In addition, the Chinese population consists majorly of the younger generation who are the target market for the company products. The economic factors in the developing Asian markets are favorable for the company internationalization strategy.
Social and cultural factors
The company products are sold in open cultural events particularly in sporting events. Moreover, its target market of younger generation pursues vogue and vigorous activities such as sports. The lifestyles are similar in almost all parts of the world. In addition, the company products ingredients are simplified to meet the energy needs of such kind of activities.
The ingredients of the products have high calories contents with improved energetic elements a characteristic that is praised highly by many sports participants. In essence, all the soft drink products that the company has launched into the market have been popular among the younger generation and the high performers. The company has portrayed its products as having revolutionized the sports fraternity.
Moreover, the company has been keen to focus on the needs and wants of the target market. In general, younger generations as well as those in high performance sports need drinks with high-energy content. Indeed, almost all the products of the company have achieved that objective.
Legal environment
As indicated before, the company is operating in many countries around the world with various legal regulations. Moreover, these countries have their own domestic companies that produce similar competing products. Commercial regulations are varied ranging from preferential regulations to corporate laws.
The company is facing many challenges and including corporate tax regulations, tariffs as well as increased costs in terms of distribution since its manufacturing is centrally placed. Such legal obligations have increased the risks for the company.
Besides, most of the products take long time before being introduced in the market because of legalities relating to distribution channels. The legal challenges have contributed negatively to the growth of the company’s international market share.
Marketing mix
The company will be using various marketing strategies to position its products into the worldwide soft drink market. Included in the market skimming strategies are product and pricing strategies, placing strategies, and promotional strategies.
Product and Pricing strategies
There are varieties of soft drink brands that the company produces. The innovative capabilities of the firm will ensure the development and production of products offering varied choices for customers. Moreover, the company has recently launched another product into the market. The product will be improved to suit the customer needs and bring convenience, a mixture of value and quality.
As expected, the quality and value addition attract high prices. Most of the company soft drinks are middle-high particularly non-carbonated water. However, most of the company products are targeting high-end customers. The high-quality high-prices strategy will be applied particularly to outperform the competitors.
In addition, the product and pricing strategy will aim at widening the spectrum of customers the company is targeting. In fact, the company has been targeting customers at high-income level. Nevertheless, with the entry of more competitors, the company will be forced to widen its scope and capture middle and low-income clientele.
Placing strategies
The company will adopt the business to customer distribution channel in order to directly deal with its customers. Direct interaction with the customers will lead to the development of the products that suit the customer needs. Moreover, the direct sales of its products will lead to the expanded market share. However, the company stores around the world are still limited given the fact that the company manufacturing is centrally placed. Therefore, the company should expand its distribution stores to reach all manner of customers.
The promotion strategies
The promotion strategies will include advertising, public relations, and sales promotions. The company will be using innovative advertising to attract and inform its customers about the company products both in mass and digital media. Besides, the company will utilize its products association with sports to appeal to many people as well as a method of maintaining its public relations.
The success of the company on public relations will improve the company goodwill and attracts the public attention. Further, the company will provide special offers to associated sports people as a good way to stimulate and retain its customer’s loyalty.
Strategic planning
The company will take advantage of its current leadership in the energy soft drink to position itself in the new markets. Even though the latest statistics indicate global slump in the company growth in market share, the growth of Red bull in terms of market share is still increasing and approximated to be over 21% in the last financial year.
The growth indicates the strength of the company brand and reputation as well as the confidence the consumers have on the company brands (Russell 6). The firm will utilize the advantages gained from the current position in the world energy soft drink to expand into the new and potential markets.
The company will also use competitive prices to position itself into the new market such as Indonesia where prices are considered very sensitive. The prices of the soft drink will be lowered targeting the middle-end markets particularly the younger generations. Moreover, the company will utilize its resources to develop superior products with additional flavors considered special by the locals.
In addition, the company will break away from its traditional high-end prices and offer competitive prices for its new products. In other words, the company will lower prices of most of its products to customer with low income. In essence, the company will reduce the price differentiation between the products. In other words, the company products will continue to be the premium products in terms of prices (Moth 7).
However, to gain popularity among the younger generation customers and wide demographic accessibility the company will reduce the prices and increase the volume of growth in the targeted markets. The company will also utilize its brand image to position its products into the new markets.
For instance, the company association with sporting events will be utilized to market the products into the new markets. The company will sponsor events and manage a wide range of extreme sporting events, which will be associated with the company products. The association with such sporting events will be additional competitive advantage as the knowledge of the company products will increase particularly among the lovers of sporting events.
Through purchasing relevant facilities, teams and sponsoring live events, Red bull aim to succeed in the future through sustaining a larger mainstream audience and loyal customers (Russell 9). In essence, the company will utilize its competitive advantages to develop and sustain its market growth in the internationalization strategy.
Timing and mode of entry
Entering into the international market requires advanced knowledge of the market in terms of the competitors. To enter into the new markets, Red bull soft drink has to utilize the market entries that will increase its competitive advantage. The market entry available to the firm includes franchising, joint ventures and utterly held subsidiaries.
Franchising
The company will utilize the business knowledge of other local soft drink companies acting as a franchisee in host countries to expand the company’s business activities. Red bull soft drink will utilize the market leadership in energy soft drink market to provide capital, technical skills, and business expertise (Moth 7).
The firm will also use this mode of entry in China where there is uncertainty in political and economic conditions. The uncertainty in the Chinese market makes this mode of entry more suitable. The major advantage of this mode is that the company will not need to bear the costs and risks related to development and entry into the new market.
The cutback in overheads and threats allied to charters enlarges the corporation’s efficacy in searching for the fresh bazaars. However, the corporations will hardly have any power over the trade dealings mostly where the bylaws call for the businesses to observe the eminence ideals.
Joint ventures
Red bull also has the option of utilizing the most commonly used entry mode by firms all over the world. Using this entry mode, Red bull soft drink will form an alliance with similar firm in the new market in order to attain the greater position. In most cases, the joint venture will require that the company have equal share in terms of costs benefits (McNaughton 6).
Nevertheless, the equal sharing arrangement will take away the control of some operations of the firm. In order to achieve stringent direction and have superior allocation entitlements, Red bull must devote additional finance to the mutual schemes. The advantage with this entry mode is that risks and costs associated with operating into the new market will be shared.
In addition, Red bull will gain market knowledge from the joint venture firm as well as be capable of exploring new market. With little regard to the conflicts that might arise from the joint venture, the firm will take advantage of the local firm’s capability of influencing the local government to allow the company to enter, establish, and dominate global markets.
Utterly held auxiliaries
Utterly held subsidiaries imply that Red bull will have to cuddle a hundred percent allotment of the far-off units. For the firm to own a subsidiary in these new markets, Red bull must establish a new entity with full operations or fully acquire an existing firm. The acquired firm must be well built within the industry. Red bull stand to gain a lot from this mode as the company will easily promote its products (McNaughton 7).
The reason is that the firm will have tight control over business operations because of full ownership. In addition, compared with other modes, the firm will implement its own strategic plans and does not risk losing the competitive advantage as well as technical skills to other firms. Apart from full control and reduced risks, the firm will enjoy full benefits of expanding into the new market.
Managing, measuring and controlling the marketing effort
The company will utilize its financial management capabilities developed over the years to manage its marketing efforts and internationalization programs. In particular, the company will direct its financial resources into the marketing activities that have high capabilities of adding more value to the firm.
In other words, the company will spend more into marketing activities likely to contribute to increased returns in terms of market growth and expansion. The marketing activities will be measured in terms of sales volumes generated, the popularity of the brand as well as in terms of growth in investments to the company over a specified period.
In addition, the company will streamline marketing activities to only those considered beneficial. Moreover, marketing efforts will be directed to specific areas where the company hopes to introduce its brands or in places where the performance of the company brands against those of the competitors are waning.
Works Cited
McNaughton, Marissa 2012, How Social Was The Red Bull Stratos Live Jump Publicity Stunt? PDF file. Web.
Moth, David 2013, How Red Bull uses Facebook, Twitter, Pinterest and Google+. PDF file. Web.
Russell, Michael 2012, BRAZIL: Red Bull gets green light for Brazil facility. PDF file. Web.
This paper identifies Red Bull as a unique company that has demonstrated the ability to achieve success through innovative and unconventional ways. Its unique marketing strategy stands out as the hallmark of the company’s innovation. Through its market innovation, Red Bull has been able to maintain a dominant market position in the global energy drink market.
Its expansion into Asia has however been incomplete because of the company’s minimal market presence in the region. This paper proposes a cautious market expansion into Japan through a joint venture with Oronamin-C.
This plan (coupled with the company’s innovative market strategy) should provide an optimum market mix that sets Red Bull in a position to achieve significant success in Japan. Consequently, Red Bull should succeed in Japan.
Introduction
Red Bull has made a huge name in the world for its innovation. The product was initially an Asian product but an Austrian entrepreneur tailored it to suit the taste of the western market. Red bull’s development therefore emanated from a copyright transfer (from Thailand) that saw it transition into a carbonated drink with a strong western appeal.
Many factors make Red Bull a popular energy drink; however, its market innovation sparks the interest of this paper. For example, Red Bull has shown strong market resilience in the wake of intense criticism (IBS Centre of Management Research 2). Indeed, Red bull has been able to transition from an unstable drink to a popular energy drink with global recognition.
During the onset of the product launch (in Europe), there was a lot of opposition from health departments regarding the possible health effects of the drink. Consequently, the product received a poor reception in major European markets including France, Denmark, and Norway. In fact, in France, Red Bull (in its “natural” form) only gained acceptance in 2008 (IBS Centre of Management Research 2).
Red Bull’s innovative attribute stems from its unconventional marketing strategy, which hinges on buzz marketing. At its launch, Red Bull had adopted conventional marketing strategies but its failure prompted a change of tact.The failure of the first marketing strategy dented the company’s financial well-being by $12 million (IBS Centre of Management Research 2).
However, with the refocus on its unique marketing strategy, Red Bull became the envy of many beverage companies. Red Bull’s reliance on an unconventional marketing strategy defines this study’s interest because its sports-centred market strategy is innovative. Interestingly, the established cost of this innovation is lower than the conventional marketing costs adopted by other beverage companies.
The main operational challenges for Red Bull stem from the lack of a patent for the company’s product formula. Consequently, many companies have used Red Bull’s secret ingredients to make rival products. In addition, Red Bull has received negative press for the potential medical risks its product poses (these risks are however in contention).
Red Bull’s innovative market strategy bases its principles on the sale of a “lifestyle,” which is hinged on brand awareness. The company’s market slogan is “Red Bull gives you wings to fly.” Red Bull’s target market is a vibrant youth between 18-35 years.
Unlike other beverage companies that rely on traditional media to sell their products, Red Bull relies on sponsoring sporting events and providing free products to athletes (the company has underwritten several sports competitions and sponsored dozens more). Furthermore, the company has concentrated its “place strategy” to avail its products mainly in nightclubs and entertainment spots.
Red Bull’s innovative marketing strategy has seen it rake more than $4.2 billion in annual sales (IBS Centre of Management Research 3). The future social and commercial impact of Red Bull’s innovative marketing strategy is therefore positive because this strategy creates brand loyalty and improves sales revenues.
The three main reasons for the success of Red Bull’s market strategy is its representation of a subculture, concentration in a niche market (as opposed to a mass market) and the perceived social benefits of consuming the drink (support for sports) (IBS Centre of Management Research 2).
This paper explores the international business opportunity for selling Red Bull to the Japanese market (using the company’s innovative marketing strategy). The paper centres on three analyses – an analysis of the international business opportunity, an analysis of the proposed business opportunity, and an analysis of the financial projections.
Analysis of the International Business Opportunity
Red Bull has received wide acclaim for its product launches (in some Asian markets like China and the Philippines) (IBS Centre of Management Research 1).
However, there is still a lot of pessimism regarding the company’s success in Japan. Some observers fear that Japan has different market dynamics that may hinder the success of the product in this market (Euromonitor International 1). The truth in this fear is unconfirmed but the understanding of Japan’s unique market dynamics mirrors the economic, political, and legal environments that affect its market operations.
Japan’s Economic, Political, and Legal Analysis
Economic
Japan’s economic environment is appropriate for the launch of Red Bull. Indeed, the country’s economic system bases its foundations around free-market principles that support international trade (Karan 353). Currently, Japan’s per capita income is $45,903 (above most of its Asian rivals and very close to America’s $48,442) (World Bank 2).
This high per capita income means that Japanese consumers have the market power to buy premium products (in fact, the IBS Centre of Management Research (2) explains that Japan has a per capita consumption of 1.7 litres). However, Japan’s level of foreign investment falls below many industrialised nations.
Compared to the US, UK, Germany, Australia and France; Japan has the lowest rate of foreign direct investments (Jetro 10). This low level of foreign investments has a mixed impact on the launch of Red Bull in the country because it signifies minimal competition (at least from foreign competitors), but at the same time, it signifies a poor environment for foreign businesses to thrive).
Political
Japan enjoys political stability from its constitutional monarchy system. The political system is therefore undemocratic but it recognises the importance of embracing free-market leadership. This way, there is little political interference with the market operations.
Though not ideal, Japan’s political environment poses minimal threat to Red Bull’s launch in the country. Indeed, there is an adequate political will to support the launch of new and foreign products in the Japanese market (Jain 5).
Legal
Japan’s legal environment has made its economy to be among the most liberalised, industrialised and efficient economies in the world. However, Meiners (370) warns entrepreneurs against starting small businesses in Japan because government policies do not favour such businesses. This situation is uniquely different from the US because small businesses in the US receive government support.
Asia Law (2) reports that Japan’s tax regimes may be as high as 65%. Small businesses are therefore discouraged from venturing into this market. However, since Red Bull is a global enterprise, this legal challenge does not severely affect its operations (IBS Centre of Management Research 2).
Finally, like Japan’s governance structure, its labour laws borrow from the European model. Asia Law (2) says that Japan’s labour laws are somewhat paternalistic.
This situation gives employers less flexibility. However, the Japanese labour force bends to the intrigues of the global labour force (for example, lifetime tenure is making way for new job flexibilities) (Asia Law 2). Broadly, these changes are good for foreign investors because they increase the opportunities to source competent employees.
Trade Area and Cultural Analysis
Geographically, Japan comprises of four islands. However, the country’s state-of-the-art infrastructure facilitates the transportation of goods from one part of the country to another.
Apart from logistical challenges, Japan’s geography does not significantly affect Red Bull’s intended venture. Since Red Bull targets young people as its main demographic group, Japan offers a good market for the product because recent population estimates show that the largest population is aged 15-64 years (Karan 34).
Moreover, in a country that has more than 120 million people, a youth budge of more than 60% provides a good market for any company that targets young people (Karan 34).
A possible challenge created by Japan’s demography lies in language barrier. With a majority population speaking Japanese, it is difficult to market a product that originates from a non-Japanese background. Nonetheless, providing a tailor-made product to suit the typical Japanese consumer solves this problem.
Apart from Japan’s sporting culture, no significant customs or traditions affect the sale of Red Bull. Martial art is the most common sport (the Japanese also practice other western sports such as baseball and football).
Motor sport also has a significant following in Japan because there are many Motorsports events that have received corporate sponsorship within the country. Drifting is also another type of sport that has quickly gained prominence in the Asian country and it offers an opportunity for more corporate sponsorship (IBS Centre of Management Research 2).
Considering Japan’s demography and social customs, the main strengths and weaknesses of launching Red Bull in this market is the presence of a sporting culture and the challenges posed by marketing the product in a predominantly Japanese-speaking country.
The sporting culture provides good grounds for Red Bull to market itself as a corporate sponsor (because it has achieved good success with this strategy in other parts of the world). Therefore, complemented by its global dominance, Red Bull is set to have a competitive advantage over other rival products in the sporting industry.
However, since Red Bull’s appeals to a western market, it may experience a market penetration challenge in the Japanese culture. This way, Red Bull’s competitive advantage may be lost to other “Asian-oriented” energy drinks such as Otsuka’s Oronamin-C brand (a common energy drink in Japan).
Operation of the Proposed Business
Organisation Type and Ownership
Red Bull’s market entry strategies in major world markets are inconsistent. Unlike other international brands like Heineken, Red Bull adopts a multifaceted market entry strategy. Japan offers very competitive market dynamics, which may prove to be problematic for Red Bull. Indeed, many market observers have expressed their pessimism regarding Red Bull’s success in this market (Euromonitor International 1).
The market domination of Oronamin-C brand and Coca Cola inform this pessimism. Both products control more than 70% of the market share (Euromonitor International 1). It is therefore difficult for Red Bull to challenge this market dominance because it lacks the same resources as its competitors (like Coca Cola).
Based on these dynamics, it is crucial for Red Bull to adopt a non-aggressive approach and seek a joint venture with another local company (preferably, Oronamin-C) (Euromonitor International 1).
Many advantages are associated with pursuing joint ventures. One advantage that Red Bull will enjoy is risk sharing and the availability of local market knowledge (Trost 18). Another advantage that may be realised when pursuing a joint venture strategy is the joint financial strength that the companies will enjoy. This advantage will boost the company’s resources to expand to all parts of the country.
However, some of the main disadvantages associated with the joint venture strategy are the loss of management control, the possibility of failing to recover capital, slow decision-making, high chances of disagreement between partners, and the possibility of both partners having different views regarding their business (Trost 18). Based on these dynamics, Red Bull will only enjoy a 50% ownership of its market venture.
Product
Red Bull’s venture in Japan centres on selling Red Bull as an energy product. Compared to other energy products in the Japanese market, Red Bull’s perception as a sports drink is its unique feature throughout the world. The value created by the product will be a “lifestyle appeal” to all its consumers. The product’s price will largely be in tandem with international pricing (about $2).
Potential Suppliers: Since this paper proposes a joint venture strategy for Red Bull, the potential suppliers for the product will be the existing supplier for the joint partner. Ideally, since the Oronamin-C brand already has a dominant market presence in Japan, Red Bull should use its supply channel to distribute its products throughout the country.
Inventory Policy: The influence of the partnership also shows in the formulation of the company’s inventory policy. However, since there are many uncertainties regarding Red Bull’s success in the Japanese market, the demand flow policy should be the main inventory policy.
This policy does not articulate a definite inventory control; instead, every order generates a subsequent supply of the same quantity ordered (therefore, the realisation of supply inefficiencies disappears) (Gilliam 51). Nonetheless, the establishment of a minimum inventory level is crucial to ensure there are no significant inconsistencies in the demand or supply schedules.
Manufacturing Plans: Red Bull’s manufacturing strategy centres on the construction of new plants. This strategy is costly but it depends on the success of the joint venture. Indeed, if there is excess capacity to produce the product from the joint venture partner, Red Bull should pursue this strategy and avoid the risks of injecting a huge capital for building another plant.
Transportation
Again, Red Bull’s transportation strategy centres on the success of the joint venture. There is therefore no need to set up a new transport system because the local partner will provide one. This way, the company will significantly reduce the costs of operations and benefit from accessing new markets (serviced by the existing transportation network).
The risk associated with this transport strategy is the possibility of the partner treating Red Bull as a secondary product. However, if the transport network is expanding and enough equipment is available to service both companies, there are not going to be any problems.
Since the importation of some product ingredients is necessary for Red Bull’s operations, the company will have to avail specific documents that are synonymous with international trade. One such document is the consular invoice, which determines the balance of payment between countries (Credit Management World 12).
The document also establishes that the products imported to Japan meet the state’s import regulatory standards.
An insurance policy certificate is also another important transport document needed for importation, but depending on the terms of trade between the company and Japan, the stipulations in this document varies. Finally, relevant certificates need to be availed for transportation. These certificates include the certificate of inspection, certificate of origin, and weight list certificate (Credit Management World 12).
Market Strategy
Pricing Policy
The premium-pricing model outlines Red Bull’s best chance of effectively gaining a positive perception among Japanese consumers (Berends 44). This strategy has succeeded in other parts of the world (like Apple’s dominance of the US market). Therefore, compared to the competition, Red Bull’s price will be slightly more expensive.
This pricing model exploits the consumers’ perception that expensive products are of higher quality, safer and more desirable. This premium-pricing model is also in tandem with Red Bull’s aim of selling a “lifestyle” that most young people would admire. The currency used in the pricing model will be the Japanese Yen because this currency is Japan’s national currency.
Different cost measures add to Red Bull’s pricing model, including the transport costs, tax, tariffs, and the overall cost of producing the product. The minimisation of transport costs occurs through the joint transport agreement discussed earlier in this paper. However, the overall cost of producing the product relies on the tax and tariffs imposed on the product. The imposition of a profit margin of 25% will also occur.
Promotional Program
The Red Bull promotional program will remain true to its international model of sponsoring sports events. Sponsoring Japanese athletes will also form a critical part of the company’s promotional plan. This way, the product will maintain its advantage over other energy drinks in the country.
Therefore, advertisements through conventional media – like television, newspapers, or radio will be minimal. This promotional plan not only outlines the company’s first year marketing strategy but the company’s long-term promotional strategy too.
Finances
Red Bull’s first few years of operation will be costly. In addition to the initial capital, additional investments and incremental capital will boost Red Bull’s penetration in the market. Most of these capital investments will improve the company’s production and distribution facilities.
Growth expectations show that the company will break-even in five years. The income statement below describes the projected finances for the first three years of operation.
Pro forma Income Statement for First Three Years Operation.
2013
2014
2015
Sales
$26,729,620
$29,239,060
$32,124,920
Cost of Goods Sold
$16,357,250
$17,310,840
$18,407,470
Operating income
$10,372,370
$11,928,220
$13,717,450
Expenses
Administrative
$3,345,920
$3,847,810
$4,424,960
Marketing
$4,182,400
$4,809,760
$5,531,230
Total Expenses
$7,528,330
$8,857,580
$9,956,210
Earnings before interest and taxes
$2,844,030
$3,270,640
$3,761,230
Taxes
$1,023,850
$1,177,430
$1,354,040
Net Income
$1,820,180
$2,093,210
$2,407,190
The pro forma statement below outlines the projected cash flow
Pro forma Cash flow Statement.
2013
2014
2015
Opening Balance
$15,000,000
$18,000,000
$22,000,000
Cash received
Cash Sales
$24,729,620
$28,239,060
$31,124,920
Credit Sales
$2,000,000
$1,000,000
$1,000,000
Interest
$750,000
$350,000
$350,000
Sundries
$100,000
$100,000
$100,000
Total Cash received
$27,579,620
$29,689,060
$32,574,920
Cash purchases
Stock Purchases
$6,357,250
$7,310,840
$8,407,470
Trade Creditors
$500,000
$800,000
$900,000
Other Creditors
$400,000
$450,000
$475,000
Operating Costs
$7,528,330
$8,857,580
$9,956,210
Capital
$2,000,000
$3,000,000
$5,000,000
Other
0
0
0
Total Cash payments
$16,785,580
$20,418,420
$24,738,680
Cash Increase/Decrease
$10,794,040
$9,270,640
$7,836,240
Closing balance
$25,794,040
$27,270,640
$29,836,240
Pro forma Balance Sheet.
2013
2014
2015
Asset
Cash
$9,040,367
$13,680,908
$32,699,802
Total Short-term Asset
$9,040,367
$13,680,908
$32,699,802
Long-term Assets
Capital Assets
$1,200,000
$3,200,000
$4,200,000
Accumulated Depreciation
$800,000
$1,440,000
$2,280,000
Total long-term Assets
Total Assets
$10,440,367
$15,440,908
$34,619,802
Liabilities and Capital
–
–
–
Short-term Notes
–
–
–
Long-term liabilities
–
–
–
Total Liabilities
–
–
–
Earnings
$4,559,633
$440,908
$19,619,802
Shareholder’s Equity
$10,000,000
$10,000,000
$10,000,000
Total Equity
$5,440,367
$10,440,908
$29,619,802
Total liabilities and Equity
$5,440,367
$10,440,908
$29,619,802
Sources and Uses of Funds Statement
The sources of funds for the international venture will come from the company – Red Bull. However, since a joint venture strategy is in the offing, funds pooling will occur. The availability of a larger capital pool is therefore possible for both companies.
These funds will expand the production capacity and the existing transportation network for both companies. Other auxiliary activities that complement the company’s fund use include marketing and administrative activities.
Country Statistic
Based on the volume of international trade that Japan enjoys, international business complements 3% of the country’s gross domestic product (Jetro 10). The joint venture between Red Bull and Oronamin-C adds to this international trade balance.
Partner Information
There is minimal information regarding Oronamin-C’s financial information. However, in the April-June quarter of 2011, the company reported net sales of $3,682,320. Its operating income for the same quarter was $591,982 (Jetro 10). These figures show that the company is making a lot of profit from its Japanese venture. Red Bull hopes to merge its financial resources to join this positive financial outlook.
Relevant Laws
Over the past years, Japan’s laws have tried to reduce legal obstacles to international trade. However, the country’s state laws still govern sensitive businesses. For example, Red Bull’s venture into Japan will be subject to anti-monopoly and competition laws. These laws will govern Red Bull’s intended joint venture with Oronamin-C.
In addition, since Red Bull is an energy drink, the launch of the product in Japan will also be subject to health laws. These laws ensure that the drink complies with Japan’s health safety standards. Comprehensively, Red Bull’s venture into Japan is mainly subject competition and health laws.
Conclusion
Red Bull has managed to remain relevant through the international market because of its robust marketing strategy. Its expansion into Asia has been largely successful because of its successes in China and the Philippines.
This paper’s proposal for the company to venture in Japan is largely cautious because Japan’s energy drink market is highly concentrated. However, since this paper proposes a joint venture plan, most of the risks associated with operating in a concentrated market diminish. Consequently, Red Bull will achieve significant success in this market.
Works Cited
Asia Law 2005, Doing Business in Japan. Web.
Berends, William. Price and Profit: The Essential Guide to Product and Service Pricing and Profit Forecasting, New York: William R. Berends, 2004. Print.
Credit Management World 2012, Export Documents. Web.
Euromonitor International 2011, Red Bull plans Asian expansion. Web.
Gilliam, Dean. Quantum Leap: The Next Generation, New York: Ross Publishing, 2005. Print.