Written Analysis of the Case

Group D - BlueFLAG Members

Jhoer T. Geronaga, Shiela L. Nierre, Engr. Mark Obejero
Noni D. Nierre Jr., Jennifer L. Geronaga,
 Mission Statement

Giving Wings To People And Ideas

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 Vision Statement
Red Bull GmbH are dedicated to upholding Red Bull
standards, while maintaining the leadership position in the
energy drinks category when delivering superior customer
service in a highly efficient and profitable manner. We
create a culture where employees share best practices,
dedicated to coaching and developing our organization as
an employer of choice.

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 Current Strategy

Red Bull is a differentiated product within

its market and a focused-differentiated
product within the beverages industry

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 Brief Company History - How it started?
• In 1976, Chaleo Yoovidhya introduced a drink called Krating Daeng in Thailand,
which means "red bison" in English. It was popular among Thai truck drivers and
laborers.

• 1982: Dietrich Mateschitz gets the idea for Red Bull from Krating Daeng.

• 1984: Mateschitz co-founded Red Bull GmbH with Yoovidhya and turned it into an
international brand. Each partner invested US$500,000 of savings to found the company.
Yoovidhya and Mateschitz each held a 49 percent share of the new company. They gave
the remaining two percent to Yoovidhya's son, Chalerm, but it was agreed that
Mateschitz would run the company.

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• 1987: Red Bull Energy Drink debuts on the Austrian market and becomes an
instant success.

• 1992: Red Bull expanded to Hungary and Slovenia.

• 1994: It entered Germany and the UK

• 1997: the United States (via California)

• 2000: the Middle East in 2000

• In 2008, Forbes magazine listed both Chaleo and Mateschitz as the 250th richest people
in the world with an estimated net worth of US$4 billion.

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 Financial Analysis (Ratio Analysis)

Year 2009 2008 Remarks

A. Liquidity Ratio

Quick Ratio 0.87 0.88 The figures shows that the company
cannot meet the maturing current
liabilities. The company can only pay
.87 per dollar of its current liabilities. It
is also an indicator that the company is
effiecent in using its short-term
Current Ratio 0.91 0.92 financing facility

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Year 2009 2008 Remarks

The figures shows that company is

B. Debt Ratio 0.73 0.76 operated using debt as their financing.

Year 2009 2008 Remarks

The figures shows that the company

company is finance by debt more than
C. Leverage Ratio 2.68 3.10 using their own resources

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Year 2009 2008 Remarks
D. Profitability Ratio

The figures shows decreasing GPR and

is indicator that the company is less
effiecient in controlling direct cost
comparing 2008 vs 2009. Although the
GPR 91.90 93.75 GPR are very high.

The figures shows decreasing operating

margin. This is an indicator that the
company is less efficient in controlling
its operating cost. The operating
margin is very low comparing it to GPR.
The company has more indirect cost
Operating Margin 8.77 11.72 rather than direct cost
Just like the figures above NPR is
decreasing. This is an indication that
the company is less efficient in
NPR 5.84 6.87 converting sales into profit.

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Year 2009 2008 Remarks
E. Asset Management
The figures shows that the company is
less efficient in converting assets to
Asset Turn-over Ratio 0.39 0.31 revenue.
Although the company is less efficient
in converting total assets to revenue it
is efficient in converting fixed assets to
Fixed Asset Turn-over Ratio 12.76 10.83 sales.

The figures shows that the company is

less efficient in managing its inventory.
Inventory Turn-over 2.29 1.36 But it is increasing in figures.
Analyses:
The financial ratios indicates that the company has been declining its
profitability. Even though the company is still positive in its Net Income it is also
declining. The higher operating cost contributes to the decreasing profitability.

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 Marketing Audit (5Ps)

• Products: Red Bull is a carbonated, berry energy drink with benefits of

increased endurance, concentration, memory, vigilance and speed.

• People: Red Bull is marketed to both males and females based upon the
events Red Bull has sponsored and the associations that are conveyed
through the brand. The dominant markets for Red Bull are the teenagers and
young adults aged 15-19.

• Placement: Red Bull being the leader in the market for energy drinks, has
been able to control the Placement and Distribution of their product.

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• Price: The price of Red Bull’s product are higher compare to their competitors. It
is the most expensive non-alcoholic drink in the market. High price was because
of its image of being premium and high quality product.

• Promotion: To improve the method of communicating the product and to

drive consumer engagement and loyalty, the company uses a wide range of
innovative promotional offers.

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 Management Capabilities

Dietrich Mateschitz

•He worked hard for the companies such as Jacobs and

Unilever for a few years and became the director in the
marketing department of Blendax.
•At the start, people are hesitant to buy the drink, but with
his marketing background and professionalism and a
powerful marketing campaign, the company slowly took
off.
•The success of the company was attributed to being focused
with its goals.

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 Core Competencies

• The brand has established an image for power,

speed, and recklessness as it dominated the
market across the globe for the energy drink
category.
• Based on the pricing strategies of Red Bull it
positioned its product into a premium quality.

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 Corporate Culture

• Profit is not our driver, it’s chasing our potential.

It’s giving wings to people and ideas
• Mateschitz trusted on his gut-feel instead and spent
one year changing the formulation of the drink from
the original Thai version and another two years
adjustment its marketing and communications
strategy.
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 Business Model

Value Creation
Red Bull formed and offers a caffeinated energy drink that the
consumer sees as fun, active, and edgy.

Value Capture
In 2004 Red Bull sold an estimated 1.9 billion cans of energy
drinks in the 120 countries and made around half of the $4.7
billion in revenue, splitting the profits with its Thai licensee.

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The Operating Model
The Austrian company does not produce the energy drink, their Thai licensee
does. While Mateschitz tweaked the original formula to appeal to the
European palate, his company is not a drink manufacturer. Instead, Red Bull’s
capital and labor are expended to create and maintain the strong brand image
of the Red Bull name.
Red Bull sponsors a number of extreme sporting events including cliff diving,
BMX, skiing, flying, downhill and free-ride mountain biking and skateboarding.
Red Bull’s logo can be often spotted on the parachutes of base jumpers and
wing-suiters.

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 PESTLE
Political Factors
Government policies and regulations is part of the political factors that
has a direct effect to the operation of the company. Policies such as tax
reforms has an impact to the company. Political stability of the region
where the company operates is an opportunities for the company. On the
other hand, there are threat factors that can affect the company. Such as
policies of the government in relation to the energy drinks and health of
the population.
Economic Factors
The carbonated beverages have been dedicated on the realm of product
innovation, which help the company maintain its stability and worth in
the whole industry. The economic stability of the state is directly
proportional to the performance of the company.
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Social Factors
The social factors involves the beliefs and lifestyle of the peoples
and most importantly the culture of the region. For example, in
today’s modern world people are inclined to energy drinks. This
culture becomes a chance for the beverage companies like Red
Bull.

Technological Factors
The moderate research and development in the territory of food
and beverages industry has always been an opportunity for the
companies like Red Bull. The automation in business strategies is
surely a great opportunity for the expansion of the business. Other
technological trend such as using the internet is also an
opportunity.

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Legal Factors
The legal regulations are always there to bind the competitors in
the industry. The ingredients need to be specified clearly on each
pack or can. This legal requirement will help the company avoid
any potential law suit from consumers.

Environmental Factors
There are environmental factors that can affect the image of
carbonated beverage companies such as their waste disposal
related policies.
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 PORTERS Five Competitive Forces in the Industry
1. Industry Competitors and Extent of Rivalry: Low
Energy drinks have revolved their niche market into a mass market and a
steady buy for people around the world. Its brand awareness has given them a
significant source of competitive advantage.

2. Threat of New Entrants: Medium

Energy drinks compares in the stimulant drink industry to Coca Cola or
Pepsi in the soft drink industry.

3. Threat of Substitutes: Low

Brand power and customer loyalty have created a low situation for product
substitution.

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4. Bargaining Power of Buyers: Low

Being a small market with strong customer loyalty, it’s possible for the
company to have all of the pricing power and for the customers to have
very low bargaining power.

5. Bargaining Power of Suppliers: Low

Energy drinks have a short supply chain meaning high profit at each stage of the
chain. The production process for energy drinks is uncomplicated, leaving the
suppliers with not much power because there are low input costs.

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 Competitor’s Analysis

Founded in 2001 by Russ Weiner, the son of conservative talk show

host Michael Savage. Rockstar launched into what was the fastest-growing
segment of the U.S. beverage market at the time, energy drinks. Rockstar
sought to differentiate itself from the market leader, Red Bull, by using a
16 oz can size as opposed to Red Bull's 8 oz can, and by marketing itself as
"twice the size of Red Bull for the same price"

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Monster Energy is an energy drink introduced by Hansen Natural Company
(now Monster Beverage Corporation) in April 2002. There are 34 different
drinks under the Monster brand in North America, including its core Monster
Energy line, Java Monster, Extra Strength, Import, Rehab and Muscle Monster.
The company is also known for supporting many extreme sports events.

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 COMPETITIVE PROFILE MATRIX (CPM)
Competitive Profile Matrix (CPM)
Red Bull Monster Rockstar
Critical Success Factors Weight Rating Score Rating Score Rating Score
Product Quality 0.15 4 0.60 3 0.45 3 0.45
Price 0.10 2 0.20 4 0.40 4 0.40
Global Expansion 0.10 4 0.40 3 0.30 3 0.30
Financial Position 0.10 3 0.30 3 0.30 3 0.30
Customer Loyalty 0.15 3 0.45 2 0.30 2 0.30
Market Share 0.10 4 0.40 2 0.20 2 0.20
Management 0.08 4 0.32 3 0.24 3 0.24
Brand Equity 0.15 4 0.60 3 0.45 2 0.30
Distribution System 0.07 4 0.28 3 0.21 3 0.21
0 0.00 0 0.00 0 0.00 0 0.00
0 0.00 0 0.00 0 0.00 0 0.00
0 0.00 0 0.00 0 0.00 0 0.00
Totals 1.00 3.55 2.85 2.70
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 PROBLEM STATEMENT

As the pioneer in the energy drink

segment, Red Bull must maintain its
leadership position in a maturing energy
drink category. Based on the financial
data from 2006-2008, Red Bull must find
a way to arrest the declining operating
margin and net profit ratio.
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 ALTERNATIVE COURSES OF ACTION

1. Take advantage on the image built by Red Bull as it is recognized

everywhere to expand business globally (Market Development).
2. Continue to develop market strategies through a thorough market
analysis, and innovative marketing approaches. Create a market
development strategy to maintain its current customers, tap the non-
customers, and study the competitor’s customers (Market Development
and Penetration).
3. Develop products with new taste and flavor profiles to cater to a wider

segment in the market. (i.e older people) (Product Development).

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 SOLUTION/RECOMMENDATION

1. Take advantage on the image built by Red Bull as it is

recognized everywhere to expand business globally.
2. Continue to develop market strategies through a
thorough market analysis, and innovative marketing
approaches. Create a market development strategy to
maintain its current customers, tap the non-customers,
and study the competitor’s customers.
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 ATTACHMENTS

Strengths Opportunities
1. Category Leader 1. Emerging markets
2. Marketing Strategy 2. New production
3. Broad geographic presence 3. Product line extension

Weaknesses Threats
1. Category limitations 1. Economic recession
2. Pricing 2. Competition – Substitutes products
3. High marketing cost 3. Negative publicity
4. Copy problematic
5. Controversial

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TOWS/ Matching
Matching:

1. S1,S2,S3 – O1,O2,O3 : Market Development and Penetration. Take advantage

on the strong brand image established by the company globally.
: Strengthen promotional activities through sponsorship to
increase brand awareness
: Continue to expand geographic presence to ensure positive
long term growth even if the market reached its maturity
through continuous product line expansion.

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2. W1,W2,W3 – T2,T3 : Market Positioning. Intensify brand awareness by
maximizing the sponsorship activities of Red Bull that will result to consumer
engagement with the product. To instill in their mind that the product offers a
premium quality experience that gives value to their money.

3. W4, - T2, T3 : Product Development. Red Bull should secure a patent for its

product to protect your formulation and technology or intellectual property.

4. W5 – T3 : Brand awareness. Red Bull product has been controversial because of

the ingredients such as high caffeine and taurine contents which make the product
vulnerable to regulatory control. Also it has an image of being unhealthy and can be
dangerous.

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 QUANTITATIVE STRATEGIC PLANNING (QSPM)
Alternative 1 Alternative 2

Opportunities Weight AS TAS AS TAS

1. Emerging Market 0.20 4 0.80 3 0.60
2. New Product 0.10 4 0.40 3 0.30
3. Product Extens ion 0.20 3 0.60 2 0.40
4. 0 0.00 0 0.00 0 0.00

Threats Weight AS TAS AS TAS

1. Competition- Subs titute products 0.20 4 0.80 4 0.80
2. Negative publicity 0.20 3 0.60 2 0.40
3. Economic Reces s ion 0.10 2 0.20 2 0.20
4. 0 0.00 0 0.00 0 0.00
5. 0 0.00 0 0.00 0 0.00

Alternative 1 Alternative 2

Strengths Weight AS TAS AS TAS

1. Category Leader 0.20 4 0.80 4 0.80
2. Marketing Strategy 0.20 4 0.80 4 0.80
3. Broad geographic pres ence 0.10 4 0.40 4 0.40

Weaknes s es Weight AS TAS AS TAS

1. Category Limitations 0.10 2 0.20 2 0.20
2. Pricing 0.10 3 0.30 3 0.30
3. Copy problematic 0.10 3 0.30 2 0.20
4. Controvers ial 0.10 4 0.40 3 0.30
5. High marketing cos t 0.10 2 0.20 2 0.20
TOTALS AMDG BY BlueFLAG 6.80 5.90
STRATEGIC POSITION & ACTION EVALUATION (SPACE)

FP
Conservative Aggressive
7

CP IP
-7 -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7
-1

-2

-3

-4

-5

-6

-7
Defensive Competitive
SP

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Internal Analysis: External Analysis:
Financial Position (FP) Stability Position (SP)
Liquidity 6 Rate of Inflation -5
Leverage 6 Technological Changes -2
Debt ratio 6 Price Elasticity of Demand -3
Profitability 5 Competitive Pressure -2
Asset Management 6 Barriers to Entry into Market -2

Financial Position (FP) Average 5.8 Stability Position (SP) Average -2.8

Internal Analysis: External Analysis:

Competitive Position (CP) Industry Position (IP)
Market Share -1 Growth Potential 6
Product Quality -1 Financial Stability 6
Customer Loyalty -2 Ease of Entry into Market 6
Technological know-how -1 Resource Utilization 5
Control over Suppliers and Distributors -2 Profit Potential 6

Competitive Position (CP) Average -1.4 Industry Position (IP) Average 5.8

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