Presentation by: Robert Wensley, Brett Lashley, Joanna Alencastro, Peter Jendrolovics

RED BULLHARVARD SUMMER SCHOOL: STRATEGIC MANAGEMENT

INDUSTRY ANALYSIS

SOFT DRINK

SWOT - STRENGTHS

• Nature of market• Diverse market - health, energy and concentrated drinks• Low ingredient and manufacturing costs • High profit margins• Economies of scale

SWOT - WEAKNESSES

•Health concerns•Brand loyalties•Retailers – generic brands

SWOT - OPPORTUNITIES

• Space for innovative products• International market potential•Potential for diet, healthier, or flavored beverage versions•Environmental marketing

SWOT - THREATS

•Threat from cheaper retailer owned brands•PepsiCo and Coca-Cola dominate the market•Large brands’ advertising and marketing budgets•Marketing regulations•Rising obesity levels

MARKET TRENDS

SOFTDRINKS

Health conscious market High barriers to entry Growth of premium market

segment

RED BULL ENERGY DRINK

• Founded 1984 - sales started in 1987

• Founder(s): Dietrich Mateschitz

(Austrian),

Chaleo Yoovidhya (Thai)

• Privately owned

• Headquarters: Fuschi am See, Austria

• Revenue €3.78 billion (2010)

• Net income €650 million (2006)

• Employees 7,758 (2010)

A new industry of functional beverages:

BRAND IMAGE AND VALUE

Euro brands rank and brand valueConstantly innovating – expanding and looking for new opportunitiesAggressively marketing the slogan “Red Bull gives you wings” through advertisement

WORLD WIDE EXPANSION

Red bull is currently available in 162 countries; 4.2 billion cans were consumed in 2010

Red Bull Air Race World Series

Red Bull X-Fighters World Tour

Red Bull Crashed Ice

Red Bull Cliff Diving World Series

STRATEGY DIAMOND

.

Staging

Differentiators

Economic logic

Vehicles

Arenas

Staging: Present on all of the continents(expanded to 162 countries)

Arenas: created new arena-”energy-drink” market

Vehicles :Start from scratch and achieve most of the growth internally

Differentiators: more than a product Image+ life-style

Economic logic:Premium prices due to unmatchable brand characteristics and image

VRINE MODEL

Valuable

Rare

Inimitable and non- substitutable

Exploitable

Red Bull’s capabilities allow the firm to meet the market’s demand

The unique brand image and ”legend” around the product

Lots of competitors that have not been able to follow Red Bull’s success

Totally exploitable, the whole marketing campaign based on it

DOING THINGS DIFFERENTLY

.

Communication strategy

New category: energy drink

market

Packaging

Pricing

strategy

Distribution strategy

BLUE OCEAN STRATEGY OVERVIEW•Simultaneous pursuit of differentiation & low cost•Aims to create new market space, thereby making competition irrelevant•Systematic and reproducible methodologies and processes by both new and existing firms•Various visual frameworks and tools build collective wisdom and allow for effective strategy execution through easy communication•Covers both strategy formulation and execution•3 key building blocks: value innovation, tipping point leadership, fair process•Strategy shapes structure•Requires organizations to develop and align the 3 strategy propositions: value, profit, people

BLUE OCEAN STRATEGYRed Ocean Strategy

Virgin ColaBlue Ocean Strategy

Red Bull

Competed vs. Coke and Pepsi with traditional cola offering

Niche product: carbonated “energy drink” beverage

Waged “war”: Richard Branson in a tank; heavy advertising,

competition for retail shelf space

Virtually uncontested energy drink market

Just another cola Built a loyal following among young adults and party-goers

despite questionable taste

Priced 15-20% lower than the competition

Able to charge a premium w/ new product then lowered prices

to retain value

Competing with low cost strategic position

Competing with differentiation and brand value

BLUE OCEAN: PIONEER MAP

A BRAND LIKE NO OTHER

• Brand connections on different marketing platforms

• Brand identity built on extreme sports arena: • Red Bull Air Race World Championships, Red

Bull X-Fighters, Taurus World Stunt Awards and Red Bull Cliff Diving World Series

• Mainstream sports arenas • NASCAR• Formula 1 • partnerships with NFL and NBA players

MARKETING STRATEGY

• "On-premise is where we believe brands get built.” –Selim Chidiac, CEO North America

• Ubiquitous presence in bars and nightclubs: mixibility with vodka, status and sexiness of the sleek silver and blue can

• “Red Bull gives you wings!”

ADRENALINE MARKETING

• Risqué marketing• In-your-face, adrenaline junky image vs. Coke and Pepsi’s All-American approach

• Decision to foster rumors that Red Bull’s key ingredient, Taurine, was derived from bull testicles

RECOMMENDATIONS

•Geographical growth in emerging markets

•Turn unprofitable sports portfolio into profitable portfolio

•New product lines

NO RED BULL, NO WINGS!

THANK YOU!

SOURCES

Kim, W. Chan., and Renée Mauborgne. Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Boston, MA: Harvard Business School, 2005. Print. Mi, JI, Six Misconceptions of Blue Ocean Strategy. Guanli Xue Jia (Management Scientist) 2008. Cirillo, Jennifer. "Red Bull - Running of the Bull." Beverage World June 2009: 18-21. Web. Bryce, David J., and Jeffrey H. Dyer. "Strategies to Crack Well-Guarded Markets." Harvard Business Review May 2007: 84-92. Web. <http://www.hbr.org>. McDonald, Duff. "The Mastermind of Adrenaline Marketing." Bloomberg Businessweek 23-29 May 2011: 64-70. Web.