Introduction
Contemporary business environment has been experiencing manifold challenges including technological, environmental, economical, and socio-cultural aspects. Many firms and organizations have been forced to develop strategies that will enable them survive the changing environment and the dynamism in the environment (Hollensen, 2010). Such changes in the business environment have given management of various companies and firms had time trying to figure out what strategies to apply. More especially there has been increased competition with the contemporary environment as compared to the classical era (Ghauri & Cateora, 2009). Businesses have had to develop competitive advantage especially within their marketing strategies in order to survive.
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One of the most affected industries is said to be the Fast Moving Consumer Goods (FMCG) industry, where many firms have joined the industry leading to increased levels of competition. FMCG Industry has also been referred to as the Consumer Packaged Goods and deals basically in the production, distribution as well as the marketing of various consumer goods already packed. Fast Moving Consumer Goods refer to different products that are normally consumed at given and regular intervals (Doole & Lowe, 2008). Other than the basic function of FMCG Industry of selling, marketing, financing, and purchasing that is sometimes coupled with outsourcing especially with regards to distribution, the industry is also engaged in other activities that may act as auxiliary to the firms involved (Ghauri & Cateora, 2009). Such activities include the operations within each firm, production in some cases, supply chain management, the general running of the firms through management and many others.
The FMCG Industry is considered unique due to many reasons. First is the fact that most of the goods produced are in most cases substitutes of each other. The other reason is the kind of products sold which are required to be disposed off soonest to avoid the spoiling of the goods thus preventing any losses that may be incurred (Onkvisit & Shaw, 2009). FMCG on a different perspective are sometimes multinational firms and do engage in the production of the commodity. Their commodities are consumed directly by consumers and in most cases they are in form of foodstuffs and drinks (Czinkota & Ronkainen, 2009). This paper will pick on one of the varied sections of the industry within the FMCG while trying to analyze it.
Energy Drink Market Study
This is one of the kinds of firms that are found in the bigger umbrella of the FMCG. Firms within this section of the industry basically specialize in the manufacturing and distribution of different drinks that are believed to be adding energy to human beings or rather the consumers. Energy drinks are believed to have originated from the Scotland where there were firms that produced a form of Iron Brew, which was named Irn-Bru. This started in around the 1901 but has since then grew to be what it is in the contemporary business (Scribd.com, 2011). A main concentration in this paper will be the Red Bull, which was believed to have been started in the 1962. Red Bull was basically a formula to produce some energy drinks that were very useful to the track drivers as well as in the treating of the jet lag.
Red Bull today has become a name of a firm within the FMCG Industry producing the Red Bull energy drink of which researchers have indicated that it has so many nutritious values especially regarding the development of energy. Red Bull has become one of the most consumed drinks that give people energy especially in sporting activities, driving, and in treatment of the jet lag. This paper attempts an analysis of the marketing strategies and challenges experienced within the firm and actions they are taking in order to reduce the challenges and face the turbulent business environment with required vigor.
Key Global Strategic Challenges Facing Red Bull
Red Bull as one of the firms within the Energy Drinks producers and distributers is facing a lot of challenges in an attempt to ensure that it survives turbulent business environment. Some of the challenges Red Bull has faced since its inception is the idea of negative publicity, health implication, aging population factors, and the political factors. The following discussion gives an analysis of each of these challenges within the Red Bull firm (Doole & Lowe, 2008).
Negative publicity has been on the idea that the Red Bull product marketing strategy has given vey unappealing concepts to the respondents. The idea that was unappealing to the majority of the respondents and the consumers was the ‘taste, color, and the idea that it stimulates the body and the mind. Any marketing strategy that is meant to work has to focus the consumers and the respondents in mind giving very positive publicity thus attracting many consumers (Ghauri & Cateora, 2009). The firm suffered so many blows from the idea of the negative publicity where they lost a good number of consumers in the industry leading to poor performance within the same.
Another challenge that Red Bull faced was the fact that most of the ingredients used in the manufacturing of the product was unappealing not only to the consumers but also to the various countries. As a result, their globalization strategy was always met with hostility when most of the countries the firm wanted to extend its operations to refused reasons based on the ingredients used in the manufacturing of the product (Branine, 2010). Some rumors spread that the ingredients used in making the Red Bull product was the taurine from the bull’s testicles and the Red Bull itself was liquid Viagra giving it even a more negative perception from the countries and the various consumers (Hollensen, 2010). The other reason is the kind of products sold which are required to be disposed off soonest to avoid the spoiling of the goods thus preventing any losses that may be incurred (Onkvisit & Shaw, 2009). Since one of the best marketing strategies for a firm is to ensure that it reaches to an extensive market as possible, Red Bull was not able to and as such it was faced with so much challenge in terms of expansion and growth (Scribd.com, 2011).
As if these were not enough, Red Bull faced another marketing challenge of aging factor. Their main target was between ages 16 and 29 whom are believed to be very energetic unless otherwise. The elderly are considered weak people who need a lot of energy in enhancing their daily requirements in terms of development and productivity. This means that had they concentrated on the weak in the society to give more energy especially the elderly and the sick then their strategy of marketing would have worked (Doole & Lowe, 2008). One of the best examples of energy drink extensively and fruitfully marketed is the lucozade that is promoted to the sick who are just recovering to give them more energy.
Politically, Red Bull suffered serious challenges especially in France and Denmark where the energy drink has been banned by the government of such countries. Banning of the drink would meant that it cannot be sold anywhere within the country hence affecting the productivity and expansion of the firm. The banning of the product has been associated with political activities given the fact that the product was being sold mostly within pubs (Scribd.com, 2011). Some people to date assume that the drink is alcoholic and have no idea that it is an energy drink that gives people some energy. Such banning has minimized the possibility of the firm growing to different regions as some of those regions have been influenced by the decisions reached by the two countries, France and Denmark (Yaqoob, 2010).
Analysis of the Marketing Strategies
The strategy of promoting wellbeing and not a lifestyle has given the firm some strength hence influencing majority of the consumers. The greatest mistake the firm did is targeting the wrong age. Individuals of ages 16 to 29 are those who are after lifestyle more than they are after the well-being. Focusing on such age brackets with different needs especially inclined to the lifestyle rather than well being was a poor strategy and the management ought to have looked into that and corrected the strategy (Branine, 2010). The people they should have targeted are those who sincerely need energy especially the sick and the elderly who have very little energy content necessary for the attainment of their daily chaos. Therefore, the management should have developed a proper marketing strategy which appeals to the elderly and the sick unlike the marketing strategy that never appealed to the elderly or to the age bracket that they were targeting (Carter, 2010).
Advertising on the lifestyle and the well being were an achievement and attraction points to various consumers. Despite the fact that their marketing strategies were not appealing they continued to make sales due to the fact that they advocated for selling a well being and not a lifestyle. Most people who were interested in the well being purchased the products enormously and this gave them the increased volumes of sales that have ensured that they are still in the market. The other reason is the kind of products sold which are required to be disposed off soonest to avoid the spoiling of the goods thus preventing any losses that may be incurred (Doole & Lowe, 2008). There are those consumers who have poor health and when they hear of products that can change their well being the buy in desperation and eventually develop a liking for the product. It was for this same reason that Red Bull managed higher sales revenue despite the fact that their marketing strategies were so poor.
The firm’s viral marketing was successful as those who purchased the product were able to pass the information to other people. Viral marketing applies the use of other consumers in passing the message to other people who may be interested in consuming a particular commodity (Usunier, 2005). The message they had in their marketing strategies had some potential in influencing the firm’s growth through attracting some few who were to pass the information to the others. Although the viral marketing strategy worked to some extent, the management of the firm and especially the marketing department should stop taking risks associated with such kind of strategies since they mostly end up failing and cannot be effective in industries with high number of firms hence increased competition levels (Onkvisit & Shaw, 2009).
It is important therefore for Red Bull to transform and translate the unconventiality in marking the marketing strategies decisions. This is because the performance of a firm depends on the sales revenue that is able to surpass the expenses and achieve the growth and expansion objectives. Attaining the different objectives of marketing and the firm as a whole requires serious marketing strategies taking into considerations the various firms within a given industries (Ghauri & Cateora, 2009). Overcoming competition is an important aspect of a firm if it has the vision and mission of being the best. After all, one way of attaining competitive advantage is through ensuring that the firm is more competitive than the others.
Product Distribution
Red Bull product has been identified in the market as one of the energy drinks. There is therefore a need to critically analyze the product versus the market in order to obtain the best strategy for distributing the product. Product mix is important to all firms especially those that are existing in the market with increased level of competition (Branine, 2010). Critical application of the product mix will give a firm a competitive advantage hence Red Bull should consider engaging in the product mix to acquire the competitive advantage necessary for enhancing attainment of the objectives and the goals of the firm. Red Bull product mix should focus on the product mix of other competitors by taking on their weaknesses an enhancing its strengths for the purposes of continued operations in the industry (Pierceall, 2010).
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Changing or Retaining the Current Product Mix of the firm
Product mix refers to the product lines, items, specific product or service, and the various brands produced and distributed by a given firm. Components of product mix include the service, package, brand, product item, product line, and the combined assortment of the above aspects. Red Bull has only one product with three product lines that is, Red Bull Energy Drink, Red Bull Energy Shot, and Red Bull Cola. It has been using the three lines in achieving its trading activities within the industry. Each product line has varied regular and sugar free versions (Hollensen, 2010). Through the use of the three product lines, Red Bull has developed marketing strategies in ensuring that it gains a portion of the market share compared to other firms. It has been able to establish strong brand equity within its distribution and this has extended globally making the firm to reap from the global brand (Yaqoob, 2010).
Even though there has been an exceptional performance taking into considerations the fact that it has only one product, there is need to change the product mix by introducing either a different line of the same product or coming up with new products (Scribd.com, 2011). It is said that the firm never produced Red Bull for the first time but rather developed on an existing product at that time. This means that if it can do better with one product then there is a possibility of doing even much better when there is increase in the product mix (Branine, 2010). After all, if one line fails then there is a likelihood of the company to use proceeds from the other product lines to offset the failed product line.
Ansoff Product mix matrix assist firms to establish a balance between the various concepts of marketing. It takes combinations of differential in markets that is whether new or existing and the differential in products. The following shows Ansoff Matrix method for the marketing mix.
Since Red Bull has only one product, there is need for the firm to use the product marketing penetration since the product exists as well as the market for the product. There is need for the firm to increase the product lines in order to enjoy the benefits of differentiation. Differentiation is a concept that gives businesses and firms the ability to reach out to many different markets through various marketing strategies (Onkvisit & Shaw, 2009). Red Bull must innovatively and inventively develop some new product lines as this will also enable the firm to diversify the risks involved as well as the productivity and profitability hence leading to expansion and growth (Bized.co.uk, 2011).
Market Entry
For a number of years, Red Bull has applied the localization method in entering the market. This strategy in market entry has worked so well especially within the China market where the firm successfully launched its products through the strategy (Ghauri & Cateora, 2009). Localization strategy involves ensuring that everything is familiar to the consumers in order for them to feel at home with the various products produced by a firm. To a lager extent localization would mean adapting a given commodity to the needs and the wants of a particular community or market that firm is targeting for the purposes of increasing the sales volume as well as the market share (Doole & Lowe, 2008). Localization strategy is effective especially where a firm enters a market characterized with so much competition amongst the firms probably due to small market or numerous firms competing for the same market.
Localization strategies have proved very effective for Red Bull especially in reaching out for newer markets within the industry. It has been able for the firm to extend its globalization and expansion strategy with the idea of making every other product look familiar to the consumers. The single reason why the strategy has been effective is because of distributing only one product. The strategy may not be applicable to any firm that has varied products and services targeting different forms of the market. This is because it will be expensive trying to make the entire products produced familiar to a given market in order to entice them to purchase it (Scribd.com, 2011).
Entering the energy market drinks section of the Fast Movement Consumer Goods using the localization strategy for Red Bull has been less expensive giving it more market share. Red Bull has been embarking on missions of adapting its products to the various groups of the targeted market (Branine, 2010). For instance, when the firm wants to reach the truck drivers they ensure that the entry to that market is through giving reasons as to while the drink is good for the truck drivers hence achieving the best in terms of market growth especially in form of market share and enhancing productivity as there will be more consumers consequently leading to increased profitability (Kotabe & Helsen, 2007).
Recommendations on the Market Entry
The strategy is enabling the firm to achieve a lot within the turbulent, competitive, and dynamic industry of energy drinks. It is highly recommended that the firm should continue employing the marketing strategy as this has proved effective both in terms of costs and benefits (Hypnosebylancome.blogspot.com, 2010). Localization marketing strategy in entering new and existing markets has proved to be very cost effective for firms producing very few commodities such as the Red Bull that only distributes one commodity though with different product lines (Czinkota & Ronkainen, 2009). It is however advisable that this should be coupled with other market entrance strategies so that in case one fails the other may take over.
For Red Bull firm, another appropriate strategy for entering the market is through market penetration from the Ansoff Matrix of marketing. This is because the Red Bull products exist in the market as well as the market. Market penetration would mean entering deep into the already existing market thereby increasing the market share and the profitability of the firm (Branine, 2010). This means that if it can do better with one product then there is a possibility of doing even much better when there is increase in the product mix. Combination of localization marketing strategy and market penetration strategy will be effective in ensuring that the firm remains with its market share whilst increasing it and achieving a desirable productivity and profitability objectives and aims. When one of the strategies fails then the other will be in force ensuring that the consumers are updated and given the required information regarding the product being manufactured or produced and distributed by a given firm.
Distribution – supply chain and logistics
Distribution is one of the marketing mix that asserts that the produced products sold at favorable prices need to be at the right place and time. Distribution is also a function of production as the process of producing a product ends with consumption (Ghauri & Cateora, 2009). For a commodity to reach consumption point then there must be various ways through which the product reaches the consumer. Such process of moving a commodity from the production point to the consumption point is known as the distribution function. It is important for a firm to have a good channel of distribution to aid the movement of the product from the production entry to the consumption point.
Whereas many firms have distributed or decentralized distribution channels, it is always advisable to have a centralized distribution channel where all the expenses and strategies of distribution are centralized hence ensuring that every factor of distribution achieves its objectives (Yaqoob, 2010). Centralization of distribution gives a firm the opportunity to study the channels and rectify them where possible especially with respect to costs and benefits and whether they are likely to meet the required demands of the consumers (Chan, 2011). Distribution that is centralized give rise to competitive advantage in terms of costs associated with the distribution process. The competitive advantage obtained gives a firm an opportunity of increasing the productivity and profitability with increasing market share in terms of new consumers of the products joining the consumption of the market.
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