unit 4 mini project

Columbia Southern University

December 21, 2015

Company of choice: Red Bull

Introduction

Also referred to as SWOT matrix, SWOT analysis is an organized method of planning that is used to analyze and gauge the weaknesses, strengths, threats and opportunities that are involved in a business venture or a project (Quincy, 2013). It is a basic framework that is used to generate strategic alternatives from an analysis of a given situation. This analysis often appears in business marketing plans and is applicable in either business unit levels or in corporate levels (Blake, 2015). It can be done for a product, a person, an industry, or a particular place. The Acronym SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Often deploying this framework helps a firm to become fully aware of its position in the competitive market and also aides in both decision making and strategic planning. As a company, Red Bull has over the recent years encountered various challenges including competitive rivalry which have raised concerns about the overall wellbeing of the company and its stand in the marketplace. This paper will be divided into four sections and will attempt to discuss the strengths, weaknesses, threats and opportunities of the company through the application of the SWOT analysis.

Section One: The Strengths of Red Bull

The strengths of Red Bull include its marketing strategy, its geographical presence, category leadership, market share, and alliances.

Business Marketing Strategy

Red Bull has deployed very tactful and beneficial marketing and promotional activities which have helped the company to build a strong foundation and a name for itself. Activities such as extreme sports sponsorships have helped to increase customer awareness of the product and also grasp and maintain the loyalty of customers to the brand. The brand’s marketing strategy has been magnificently implemented to bring a strong identity to the brand which brings with it unwavering customer loyalty.

Geographical Presence

Red Bull’s broad geographical presence has been so strong and is a major contributing factor to its positive and long-term growth. This is unlike most other companies in the market which often stagnate after reaching their maturity stage. The company’s quick global expansion has worked to earn it an undisputed position among the world’s leading energy drinks, and despite facing growing competition, Red Bull is still aggressive in further expanding its customer base and market share.

Category Leadership

Another one of Red Bull’s astounding strengths has been in its ability to be consistent in establishing a strong brand global image which has made it to be strongly identified as an energy drink in a vast majority of countries. Red Bull does not only work to establish its brand, it also struggles to maintain it, which has been successfully done over the years despite rising competition.

Market Share

Red Bull is also associated with a strong customer base hence a very large market share, which is also one of its core strengths. Without its customer base, the brand would not have been as successful as it has been since its inception. The large market share brings with it massive net incomes and large volumes of sales which make the brand dominant and boost its standing in the market. Furthermore, Red Bull was one of the first energy drinks to be developed and popularized in the west, making it synonymous in the cognition of customers.

Alliances and Diversification

Alliances with companies such as Cadbury Schweppes have helped the company to increase its marketing distribution by reaching other segments such as hospitals and vending machines thus increasing its consumer base. The brand is also diverse and operates in other sectors. It operates and owns a variety of lifestyle magazines which cover subjects such as soccer, celebrity news and motor vehicle racing. These two aspects have greatly influenced the success of Red Bull as a company, making it what it is today.

Section Two: Weaknesses

The weaknesses of Red Bull can be summed up as pricing, being controversial, production methods, limitations in its product category, vulnerability to customer preferences

Pricing

The pricing of Red Bull’s product may be a great weakness that may work to bring the company to its knees, financially. The pricing of Red Bull’s energy drink is way above the average price of other regular energy drinks. This price element may cause customers to rethink their choice of energy drink to purchase, thus reducing Red Bull’s consumer base which will work to alter the company’s position in the competitive market. Having higher prices than competitors will make consumers to opt for other producers of similar products.

Controversial

The Red Bull energy drink contains relatively high levels of caffeine and taurine which makes it highly susceptible to regulatory controls. These controls tend to deviate the product from its original taste and this may deter the already established customer base, making them to seek other alternatives to quench their needs. This a major weakness that will drastically lower the incomes to the company.

Limitations in product category

Also another weakness that is greatly affecting the company is the limitation of being highly dependent on one product. This product is the energy drink. The company fails to be innovative and create new products that will sustain the company if the other product fails. This is unlike its competitors who have multiple products, each of which has the capability of sustaining the companies in case one product fails. It is also because of the diversified product portfolio that Red Bull’s competitors are quickly acquiring larger market shares, hence gaining on it.

Customer Preferences

This weakness implies that any slight change in the consumers’ taste can drastically affect and weaken the company’s revenue. For example, customers may become more health conscious with time, preferring to reduce their consumption of caffeine which happens to be Red Bull’s basic ingredient in its energy drink. Such an occurrence could negatively affect the company.

Production Methods

Another one of Red Bull’s weaknesses can be found in its methods of production. All production of the Red Bull energy drink has always and is still being done from Austria, and the company has been somewhat reluctant to extend and expand its production facilities beyond the borders of Austria. This forces the company to pay considerable export and shipping costs during the distribution of its products. This reluctance to open new facilities in other countries and continents constrains the company’s capacity to increase its production volumes.

Section Three: Opportunities

Despite the company’s weaknesses discussed above, it still has a number of opportunities to grow and develop further than how it currently is. Among such opportunities include product line extension, new emerging markets, diversification etc.

Extension of the Product Line

In this opportunity, the company can decide to incorporate a variety of new flavors and formats into their current product. Doing this should assist the company to secure and expand its already existing market share. However, doing this will require that the company devises and adapts a product extension strategy.

New Emerging Markets

There are still large unexploited markets which the company can decide to venture into. Expanding into such markets holds promising growth for the company. With this in mind, Red Bull can make a wise choice and decide to accelerate its marketing sponsorships in such markets.

New Production Facilities

Going outside the borders of Austria may prove to be a wise move which will make its retail prices more competitive. Large but weak markets such as Asia should be the top priority for the company if it wants to increase its production volumes and eventually its consumer base. Being a major sponsor of popular sporting events, the company can set up production facilities in many countries that frequently host sporting events.

Boosting its already effective branding Campaign

Building on the already effective marketing campaign will also work to increase its consumer base and market share.

Targeting Boomers

Another opportunity to be exploited by the company is new users other than its youthful customer base. The current consumer base is made up of mostly youth and school going individuals. Expanding this base to other older individuals will also increase its market share.

Reformulation of products

Red Bull can also acquire new customers by cross-pollinating and coming up with a mix of energy drink and other popular drinks such as coffee and tea. Having a coffee or tea flavored energy drink will blur the line between coffee, tea, and energy drinks and will work to draw in more coffee consumers to the new product.

Packaging Health Benefits in the Energy drinks

Red Bull could also choose to exploit incorporate health products into their beverage, thus promising sustained health benefits on top of energy. They can do this by using other ingredients, not just sugar and caffeine. This will create category growth and rouse interest in more potential consumers.

Embrace Content Marketing

Currently, Red Bull operates by not publishing their business strategies. It should however try and embrace creating storytelling materials which will attract listeners, readers and viewers to the brand.

Other opportunities open to the company may be to completely buy off other competitor companies. Red Bull can decide to offer an irrefutable sum of cash to purchase shares from competing companies or buying them entirely. This ensures and secures the company’s survival in the market. Beside this, Red Bull may also decide to partner with its leading competitor and jointly manufacture and produce on product which they can avail to consumers. This will also work to increase revenues for the company.

Section Four: Threats

Compétition

This threats represents the biggest monster to the company since it is unpredictable. It is becoming more dangerous since most of the upcoming companies are really trying to copy Red Bull’s marketing strategies.

Marketing Costs

Today’s mature markets have made it harder to conduct marketing in and are increasingly becoming costly to exploit compared to the past. This threatens Red Bull’s standing in the market.

Negative public image

Red Bull has been grossly affected by negative publicity being portrayed by the media. It has been regarded as being harmful especially to teenagers if consumed in large quantities. This threatens the survival of the product since a majority of its consumer base is made up of teenagers and the youth population.

Stale Product

Red Bull’s chief product is at the risk of eventually coming to be stale in the market. Because the market for the company will soon become saturated, it will become increasingly difficult to appeal to core customers further on.

Decline of the North American Economy

North America is Red Bull’s stronghold in terms of market base and the decline in its economy means reduced demand from consumers, for the product. Reduced demand means reduced revenues for the company.

Increased Health Concerns

The sugar content of the Red Bull energy drink has raised serious concerns from the public regarding the health implications associated with the drink. These concerns have dampened the company’s promotional efforts and have worked to reduce the consumer base from the company.

Product tampering

The company also faces the threat of product tampering by criminals or individuals with vendettas against the company. A good example of this threat is the recent occurrence where someone blackmailed the company and threatened to contaminate the energy drinks with faeces. Such threats usually work against the company if they ever come to fruition.

Patent Issue

The fact that the company has no patent rights to its product means that it cannot sue any individual or company that tries to reproduce their product. This is a big threat that will definitely discredit the company and will lead to its downfall.

Other minor threats that may face the company include lawsuits from companies that have patent rights to the company’s product. Such lawsuits will drain the company of its finances and may force it to close down. Another threat nay be corruption and mismanagement of the company.

Références

Blake, M. W. (2015). 5 Tips to grow your stat-up using SWOT analysis. Sydney.

Quincy, R. (2013). SWOT Analysis: Raising Capacity of your Organization. Rutgers School of Social Work.

Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2015). Concepts in strategic management and business policy: Globalization, innovation, and sustainability (14th ed.). Upper Saddle River, NJ: Pearson