Presentation Red Bull Final

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Gesuino Angius 16361 Andrea Mazzucchelli 17753 Marco Rossetti 14938 Eleonora Frigo 17628 Sabrina Migliaccio 901441 Janni Schmidt Hansen 901419 Florence Herve 17160 International Strategy

Agenda:

Agenda A brief overview over the company Results Competitive situation Strategic choices Organizational choices Conclusion International Strategy & Multinational Corporation 2012

Overview of the company:

Overview of the company The energy drink company located in Salzburg, Austria, has been founded in 1984 by now billionaire Dietrich Mateschitz . At that time, the launch of this new product created a new product category: the tonic drinks. Started selling in Austria in 1987, and expanded in Singapore in 1989, Hungary in 1992, etc… until it reached 4 billion cans sold annually in 164 countries. Nowadays, it regroups 8,294 employees in 164 countries; around 4 billion cans are sold annually worldwide. High-growth rate: +23.54% growth in 2011 Innovative product strategy leading to an excellent product differentiation. The brand is particularly known for its adrenaline marketing and in-your-face approach to customers. International Strategy & Multinational Corporation 2012

Overview of the company: The product:

Overview of the company: The product Today consisting of 4 brand products : Red Bull Energy drink, Red Bull Sugarfree , Red Bull Energy shots and Red Bull Cola Characteristics : advertised by the company as to « vitalize body and soul »: composed of caffeine , taurine and vitamins , it is said to increase vigilance, performance and concentration. Issues: as this product contains components reputed as dangerous , such as taurine, it has been prohibited in certain countries for years . In others , it is still sold in pharmacies, for instance. In the past few years , Redbull faced a massive controversy after a few cases of death were linked to Redbull drinks consumptions . International Strategy & Multinational Corporation 2012

Results – Profits and growth:

Results – Profits and growth - Red Bull Gmbh produces the world's leading energy drink with 4,159 in 2010 and 4,631 Billion cans sold worldwide in 2011 (in 2006 it sold just 74.9 Milion cans ). -The main reasons for such positive figures include outstanding sales , especially in key markets such as the USA (+11%) and Germany (+10%), and also in other markets such as Turkey (+86%), Japan (+62%), France (+35%) and Scandinavia (+34%), combined with efficient cost management and ongoing brand investment . - The most important rival in the fastest-growing segment of the soft drink market is Monster with almost 2 Billions cans sold in 2011 ( followed closely by Burn ), while Rockstar (PepsiCo Inc .) and Burn ( CocaCola Company) sales aren't significant because most of their sales don't come from the energy drink market segment . -With the 2008 financial crisis the segment knew a short period of slackening caused by the US depression started with the Sub-prime lending . It was promptly overcome with the continuing penetration of emergent markets . -The sales growth graph shows that the product life cycle is still in the growth phase ( it didn't reach the maturity phase ). International Strategy & Multinational Corporation 2012

Results – Profitability:

Results – Profitability The return of investment capital is the percentage amount that a company is making for every percentage point over the WACC ( Weighted Average Cost of Capital). More specifically the ROIC is the percentage return that a company makes over its invested capital. However , the invested capital is measured by the monetary value needed , instead of the assets that were bought . Therefore invested capital is the amount of long term debt plus the amount of common and preferred shares. The graph shows that all companies ( except Monster from 2008 to 2010) have a good ROIC, because only the 20% of the non- financial firms in NYSE database are able to post an ROIC above 10% for each of the last 4 years . Burn ( CocaCola Company) get unequivocally the best performance in 2008 and in 2009, but starting from 2010 it was approached from Rockstar (PepsiCo Inc .) and exceeded from Red Bull , while Monster's Roic has known an heavy decline until 2010 catching up in 2011. International Strategy & Multinational Corporation 2012

Results - profits and growth:

Results - profits and growth Regarding profits growth rates , all four companies have a similar rising trend: during the crisis time 2008-2009 they suffered from a recession . Only Rockstar obtained a positive 14.17% growth , mainly because this data englobes all the brands of the Pepsi Company. For 2010 and 2011, the four companies managed to get out of the negative growth and started making profit again at a very fast pace (the more profitable in 2011 was Redbull with a yearly growth of 23.54% and the less profitable of the four was Rockstar with 16.05%) As for profits , we are able to compare accurately only Redbull and Monster; in fact , the other two are brands are parts of multinational companies Pepsi and Coca Cola. On the graph on the right, we can see that in 2011 Redbull outperformed Monster with more that the double of its profits : Redbull registered a profit of 914 million dollars , while Monster ended up with 442 million dollars of profits . However , the two companies have an identical growth rate which put them in serious competition , especially regarding international distribution development . This performance is particularly outstanding considering that , as Redbull states on its website, growth and investment are financed through the operating cashflow , which means without the help of external financing . This ensures financial stability and risk limitations for the firm , and is a proof Redbull generates sufficient cash to maintain and grow its operations . As a result , Redbull is currently considering expanding its activitie s in Brazil, and asiatic markets such as India, Japan and China. International Strategy & Multinational Corporation 2012

Results – Conclusion:

Results – Conclusion Sales of the drink grew quickly from the beginning and Red Bull now dominates the world's energy -drink market with a 40% global market share . In all key areas such as sales, revenues , productivity and operating profit, figures recorded were the best in the company's history so far. After extensively analysing Red Bul l we came up with various ways in which Red Bull can maintain its market share within this competitive market by using marketing mix strategies to gain competitive advantage in its target market against their major rivals. In the close future especially last 12 months , Red Bull should maintain to develop its international scope, through entering new markets and increasing its strong grip in countries that it already exists in. The best markets at the moment would be markets where energy drinks are only beginning to takeoff ( ie : Southern Europe), and not markets such as the UK, due to the ever-increasing pressure from rival drinks . To sum up Red Bull has obtained very good results concerning profits, sales and profitability, expecially if we think that the company has to contend the market with more than 100 competitors (not only main rivals but lots of competitive local rivals as well). International Strategy & Multinational Corporation 2012

Competitive situation – Porter’s five forces:

Competitive situation – Porter’s five forces International Strategy & Multinational Corporation 2012

Competitive situation – Porter’s five forces:

Competitive situation – Porter’s five forces The threat of entry Is low, because strong barriers ex. brand loyalty, distribution channels, dominants etc. The threat of substitutes Is very high, because of the tremendous availability of energetic products ex. other energy drinks, energy powder, sport drinks, energy pills etc. International Strategy & Multinational Corporation 2012

Competitive situation – Porter’s five forces:

Competitive situation – Porter’s five forces The bargaining power of buyers Is relatively high, because of the availability of numerous similar soft drinks drinks, ex. it pressures competition and prices. The bargaining power of suppliers Is high, because of often price changes in commodities, ex. oil, metal, sugar etc. however, the constituents are easily available, and therefore it can be argued that the TBPOS is low. The extent of rivalry between competitors Is high, because there are various competitors of energy drinks, but also ex. water, soft drinks, vitamin water etc. International Strategy & Multinational Corporation 2012

Competitive situation – Pressure for local responsivenss:

Competitive situation – Pressure for local responsivenss Differences in consumer tastes and preferences (from March 2012 Red Bull has launched three new flavour as a “Special Edition” in a limited number of European countries )¹ Difference in infrastructure and traditional practices (low infrastructure’s levels required; the company has been able to choose the right environment and to understand how to implement its strategy with local teams)² International Strategy & Multinational Corporation 2012

Competitive situation - pressure for local responsivenss:

Competitive situation - pressure for local responsivenss Differences in distribution channels (in addiction to the most common channels , like supermarkets , hypermarkets , kiosks - the brand has been able to achieve a channel of direct distribution to its customers )³ Host – Government demands ( Denmark , France and Norway have not allowed Red Bull sales for years )⁴ Red Bull seems to be far away from a localized marketed adaptation. International Strategy & Multinational Corporation 2012

Competitive situation – Positioning:

Competitive situation – Positioning International Strategy & Multinational Corporation 2012 In the competitive situation matrix Red Bull is positioned in situation C, because the pressures for cost reductions is high, however, the pressures for local responsiveness is low.

PowerPoint Presentation:

Strategic choices - competitive strategy Company turnover increased by 12.4% from EUR 3.785 billion to EUR 4.253 billion. A total of 4.631 billion cans of Red Bull were sold worldwide in 2011, representing an increase of 11.4% against 2010. Red Bull cuts down its costs spreading them on big production. Red Bull saves energy. With recycling cans Recycling a can requires 95% less energy than producing a new one. High pressure for cost reduction International Strategy & Multinational Corporation 2012

PowerPoint Presentation:

On sports sponsorship , Red Bull , invests 40% of turnover (4 bill. Dollars 2011). Without an exclusive target, but with a perfect philosophy: Red Bull is with all that is adrenaline. From Formula 1 to MotoGP , Motocross sports by road, from skateboarding to surfing, bungee jumping from BMX to Felix Baumgartner (50 mln . Dollars). « Buzz Marketing» They can distribute samples at discounted or company price for promoting their brand. Besides that they should give brochures that states Red Bull’s benefits. This emphasis for cost reduction increase the save and the investiment too. Red Bull invests in .... Strategic choices - competitive strategy Promotion International Strategy & Multinational Corporation 2012

PowerPoint Presentation:

In France it was banned until 2008 In Norway and Denmark Red Bull is classified as a medicine It wasn't sold in Canada It was also available only in pharmacies in Japan Differentiation strategy But... Red Bull is sold in more than 160 countries . Its composition is the same in every country Red Bull differentiates its production in: Red Bull sugar free (with Aspartame). Red Bull energy shot ( the same ingredients as Red Bull Energy Drink but without carbonation ). Red Bull Cola flavoured . Red Bull 250cl TAURINE 1000 mg GLUCORONOLACTONE 600 mg CAFFEINE 80 mg NIACIN 20 mg VITAMIN B6 5 mg PANTOTHENIC ACID 5 mg VITAMIN B12 0,005 mg SUCROSE 21,5 g GLUCOSE 5,25 g International Strategy & Multinational Corporation 2012

Red Bull’s international strategy:

Red Bull’s international strategy Red Bull is switching from an International strategy to a global standardization strategy due to the increasing competition in the market which led to a higher pressure for cost reduction . Red Bull faces : low pressures for local responsiveness increasing pressures for cost reduction ; International Strategy and Multinational Corporation

Red Bull’s international strategy:

Red Bull’s international strategy Red Bull is produced at a single facility in Austria and then distributed around the world via local subsidiaries and importers/distributors. Increasing price competition due to a policy of product proliferation implemented by competitors made RB plan to open new production plants in Czech Republic, Hungary, India and China to seek economies of scale, location economies and penetrate new markets (India and China) where local players deal with low labor cost. International Strategy and Multinational Corporation

Standardized or customized products:

Standardized or customized products Red Bull’s products don’t differ among western countries. In some A sian countries (e.g. Thailand), though the “core” product doesn’t vary from the “western” one, Red Bull had to change the product’s promotion and brand positioning according to the local culture and needs. E.g. in Asia Red Bull is seen as a lowly health tonic drunk by thai blue collar workers whilst in the West it is associated with the young e-generation, epitome of “cool”. Red Bull’s products have a high degree of standardization but , in a few Asian countries, local culture requires an adaptation of the promotion to positionate the products effectively. International Strategy and Multinational Corporation

International strategy:

International strategy It has also to be said that, in spite of the increasing pressure for cost containment, Red Bull does not aim to achieve a low cost strategy, typical of a global standardization strategic choice, but to reach a differentiation advantage in order to set a premium price. The performances above the average (ROIC, profit growth) and the world leadership in terms of market shares seems to confirm the coherency of Red Bull’s international strategy with the competitive situation. The adopted strategy should allow Red Bull to face cost containment needed to compete in a market by offering a standardized product in almost all the countries served in order to reach location/scale economies. On the other hand the low/medium degree of customization among markets doesn’t seem to require the adoption of a Localization Strategy since the costs appear to be higher than the related benefits. International Strategy and Multinational Corporation

PowerPoint Presentation:

International Strategy Workgroup Vertical differentiation Production and marketing decisions are CENTRALIZED in the offices of upper-level managers Organizational choices

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International Strategy Workgroup Horizontal differentiation Organizational choices The typical FUNCTIONAL STRUCTURE of the domestic firm remains a FUNCTIONAL STRUCTURE as Red Bull expands abroad b ut in a worldwide area structure

PowerPoint Presentation:

International Strategy Workgroup Coordinating Mechanisms Organizational choices Red Bull coordinates its subunits through CENTRALIZATION a nd FORMAL INTEGRATING MECHANISMS

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International Strategy Workgroup The organizational choices vs the strategy adopted So these choices are COHERENT with the strategy adopted

Conclusion:

Conclusion An innovative product leading to a highly competitive market Red Bull actually created a demand for a market that was not existant at the time Nowadays, the energy drink sector is a highly competitive market generating billion of dollars a year A controversial product Red Bull is still a controversial product leading to differences in distribution and advertisement worldwide through added security and regulations from different countries This complexifies the production and distribution process, still far from a localized marketed strategy International Strategy and Multinational Corporation

Conclusion:

Conclusion An effective strategy and brand identity Cost-effective production: recycled cans, lower production costs than its main competitors Revolutionay marketing and endorsement / sponsorship strategy: Red Bull managed to build a strong and attractive brand identity, from movie production to sports contests sponsorships This created an important base for customer loyalty, an additional asset for Red Bull However, the strategic decisions and production processes are still highly centralized, which could become a problem as the brand expands its markets’ presence International Strategy and Multinational Corporation

Conclusion:

Conclusion A highly successful company with a positive future ahead: The company currently has a 40% market share in the energy-drink sector, making it the world leader Its capital structure allows the firm to ensure a stable growth rate: in fact, growth and financement are financed only through the operating cash flow As the yearly growth rates so far have been really promising so far (+23.54% in 2011), a low debt ratio is an added stability for the brand The company shoud experience a global development in the following years, backed up by its present strong assets International Strategy and Multinational Corporation

PowerPoint Presentation:

International Strategy Workgroup Red Bull THANK YOU FOR YOUR ATTENTION Gives you wings

Reference list:

Reference list Overview of the company www.redbull.com www.bloomberg.com Results www.redbull.com www.monster.com www.bloomberg.com www.ycharts.com www.finapps.forbes.com Competitive situation www.redbull.com Market analysis 2012-2017 trends – corporate strategies – analyst R. Lucie , October 2012 www.drink - brands.com International Strategy & Multinational Corporation 2012

Reference list:

Reference list Strategic choices http :// www.google.it / url?sa = t&rct = j&q = balance+sheet+red+bull+pdf&source = web&cd =2&cad= rja&ved =0CCkQFjAB&url=http%3A%2F%2Fwww.bonitete.si%2FBoniteteHomepageFiles%2FMode%2FCreditReport_Austria.pdf&ei=IPd2UMHWMan54QSszIHQAg&usg= AFQjCNFn56SvMWfqIopFLcI6olbFVkcblw www.redbull.com www.wikipedia.com Strategic choices (international strategy) www.redbull.com xerfi global: soft drink companies 2010 http://www.unet.univie.ac.at/~a0025537/php/ABWLs/FKMarketing/store2/Internet_Exercise_RedBull.pdf Marketing essays: Red Bull (http:// www.ukessays.com /essays/marketing/red- bull.php ) http://www.docstoc.com/docs/65155374/Red-Bull-and-the-Energy-drink-market Red Bull's marketing strategy: From the localization and then to an international Red Bull Strategy In International Market The Internationalisation of Red Bull ( studymode.com ) Organizational choices www.redbull.com xerfi global: soft drink companies 2010 www.wikipedia.com International Strategy & Multinational Corporation 2012

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