International marketing strategy for Red Bull energy drink expansion

International expansion is one of the growth strategies that are embraced by companies in order to improve their bottom-line/profitability. In this paper, we present an elaborate international marketing strategy for Red Bull energy drink. The marketing plan begins with an introduction into the concept of international expansion and marketing and a brief overview of the company. A review of the main conclusions and recommendations is then presented. This is then followed by a discussion of internalization strategy. In this section, the context as well as context and reasons for the firm's internationalization initiation or expansion decision, as well as a discussion of the stage of internationalization at which your chosen firm finds itself. The next section is a discussion of the foreign market segmentation and targeting strategies. Under this section, we justify our choice of a market concentration or diversification strategy, incremental vs. simultaneous entry, the number of countries you will be penetrating or expanding into, and the specific country (ies) we have chosen to focus upon. We also explain our international market screening process. An environmental analysis then follows. This is carried out using the SWOT and PESTEL tools. A description of the market and the company is also carried out.

This is then followed by an elaborate international marketing objectives presentation on the basis of the SWOT analysis. The foreign market entry strategy is also presented. The next is the product mix presentation section. This is then followed by a recommendation and conclusion section.

Introduction

In an elaborate effort aimed at maintaining a competitive edge and profitability amidst intense competition within the domestic markets posed by both local companies and international firms, several companies are forced to adopt an international expansion strategy in order to experience growth, corporate development as well as increased profitability. As consequence of such realities, the past few years have seen a rapid increase in the number of multinational companies seeking to set foot and market their products in emerging economies line Brazil, Russia, India as well as China (BRIC countries) as noted by Fan (2008). In this paper, we present an elaborate and detailed international marketing plan for Red Bull, the premiere energy drink.

Internationalization

Red Bull has for a long time been fascinated by the concept of internalization. At the moment, the company is dominant player within the American and Western European markets. The Asian markets like China and India presents a virgin ground for Red Bull products. The company should therefore launch its products in China due to its enormous potential in regard to population and their spending power.

Foreign Market Segmentation and Targeting

The selection process for the international market

Before Red Bull decides on the specific international market to launch its marketing campaign in, it must first of all involve itself in a rigorous selection process. This is important for the company to avoid making poor decisions that might make it to take very stupid approaches and hence negatively impact its performance. As Hollensen (2004) noted, there is a need for the company to evaluate its target country on the basis of general as well as specific criteria of the concept of international market segmentation.

The general criteria to be used in the evaluation of target country include a review of the product, market and marketing factors. For Red Bull, there is a need for the development of sub-segments in each of the countries that have been selected. The general and specific criteria are indicated below:

Geographic locations

The location of a given target country is important since it has a direct influence on the culture, nature and size of the target market. In our case our choice of China is based on the very fact that it is the 3rd largest country in the world with the largest population in the world also being found in the same country.

The most suitable location is the northern part of the country. This is because it forms the center of the Chinese civilization. The country also has several waterways that can help in supporting overseas shipping.

The northern part of China is the most appropriate site to establish the Red Bull. This is because its make the nerve of the Chinese and most of the dwellers are civilized compared to other parts of China. It also has a good number of water points which can be used in assisting the shipments of products to other countries around the globe. However, the Chinese's climate is extremely different with other climates in the region. For example, China usually experiences sudden natural disasters such as Monsoon across and Typhoon especially along the southern and eastern coasts.

Language

Most of the people in China speak Chinese, since it's their national language. But there are presence of other various groups of Chinese like Mandarin, Wu, Min and Cantonese since there are a number of groups in the region and cities. This factor can never be ignored since corporations need a very effective communication for the sake of negotiation, persuasion as well as dealing with various forms of written contracts. These must be done in the language of the host nation. Effective language is noted by Lee (2011) to be important since it helps in reducing the misunderstanding between the company and its stakeholders (clients etc.).

Political factors

Political factors must be considered since they directly impact the operations and profitability of corporations. China, being as communist state has very strict rules and corporate laws that have a very strong political backing. The laws, regulations and policies which the Chinese government enacts may directly influence the operations of Red Bull.

Demography

The population of China is noted by PRB (2012) to be 1,311 million citizens. A majority of this population (68%) is aged between 15-64. 20% of the population is under 14 years old while the rest of the population is aged 65 and over. This is of great benefit to the Red Bull company since its target market is the young individuals. The Chinese population is also noted to have upgraded its earning potential to that of upper class. This has resulted to a large number of newly rich. This is due to the rapid growth of the Chinese economy. The number of Chinese millionaires is expected to double in the coming years as compared to 2011 (Moore, 2011).

Economy

The last couple of years has seen China rise as a significant player in the global politics and economy. In 2010, it attained the fete of being the world's second largest economy. The nation is flouted by many to have overtaken the U.S.A. In regard to its GDP.

Lifestyle and trend the growth rate of consumer trend in China was dramatic raised for the past decade. The new generation's way of life differs a lot from traditional Chinese. They are more confident and tend to accept and adapt to new trends. Besides, their personality has shifted towards being became more adventurous (Project China, 2012).In addition, healthy eating trend are presently in vogue. . The living standard of Chinese people is also higher and better than before.

Technology

The invention of the internet has seen several people in China and globally adopts the use of internet and e-commerce in their daily lives. Millions of Chinese citizens spend hours on the internet. The youth are the largest majority. Technology has also influence commerce and advertisement/marketing. Online marketing is the in-thing.

Environmental Analysis

The need for screening of the target country

Additionally, comprehending the nature of the given market can be a major determinant of the product's success or failure. In light of this fact, the screening of the country should be carried as well before bringing in the product to the Chinese market.

Fine-grained screening

China is a very attractive and competitive marketplace for various business opportunies.What makes the nation best for Red Bull's international expansion strategy is the fact that it was recently crowned the second largest market for the consumer energy drinks worldwide (Marketograohy,2012).This is the first fact that makes the market suitable for a Red Bull product launch. Secondly, the Red Bull's market share in the Asian market is the largest (13% by 2005) (Euromonitor, 2005). The third factor is the fact that the Chinese have the highest buying power in the Pacific-Asian region (Romeschchandra, 2011). The fourth factor is the establishment of special economic zones by the Chinese government (Doole & Lowe, 2004).

As indicated in the macro screening as well as preliminary screening, in the Asian region, factors such as the country's market size/growth and buying power of customers are the main points that Red Bull's internalization plan should ride on. Their plan would therefore be to expand and increase their operations within the global marketplace.

Target market and segmentation strategy

SWOT Analysis

SWOT analysis is a strategic planning too that is used in the evaluation of both the internal and the external market environment in various sectors. It investigates the as strength, weakness, opportunity and threat affecting a given establishment. SWOT analysis of Red Bull Company is indicated below.

Strengths

Red Bull employs an already established distribution network n order to spread tits product into market as well as raise awareness of its brand (Selling Energy, 2002).

The company has concentrated on the building of a strong customer base through the supply as well as marketing of its products at clubs and sporting events

Red Bull usually hosts parties at nightclubs (Ingram, 2004)

Red Bull usually sponsors extreme sporting events so as to order to create a customer base as well as stimulate demand in this particular market segment (Hein, 2001)

Red Bull brand is a market leader. This means that Red Bull as a brand is an already established brand name with brand recognition and equity.

Red Bull has the largest market share in the Asian-Pacific region.

Red Bull has a strong brand image

The small size of the can is the best connotations of strength as noted by Keller (2004).

Red Bull sponsors over 500 extreme sports athletes worldwide.

Weaknesses

Red Bull has a restricted range of product offering, with all its products being brand extensions of the Red Bull energy drink (see Selling Energy, 2002 like as sugar-free and double-size can.

The general lack of effort to innovate has led the company to rely on small product base

Competing products such as iced coffee as well as hot drink presents a stiff competition to the brand.

Opportunities

The BRIC countries presents a perfect international expansion opportunity to the company

The health concerns surrounding carbonated drinks can give it an opportunity to be positioned as and a healthier alternative.

Venturing into the production of other products other than beverages

The health concerns surrounding sugared drinks can give it an opportunity to be positioned as a healthier alternative. Red Bull is sugar free..

Threats

Stiff competition from other products and companies

Associated with various death cases due to overindulgence or mixing with alcohol

PESTEL Analysis

Political

Red Bull was initially introduced to the global market as a non-alcoholic beverage. However, there is a lot of political pressure on the Chinese beverage industry. This political pressure is mostly felt on the levy of import fees and taxes. In China, the import duty for non-alcoholic beverages is 35% plus 17% VAT. This adds up to 54% tax. This deters the company from charging premium prices within the Chinese market. The drink also need to be approved before it is sold in any market. Fortunately, Red Bull has been approved for sale in China but with strict regulations for labeling and taxation.

Economic

China's economic condition will directly affect the sale of the product. Over the years, the rise in the level of disposable income among the Chinese means that more and more people can afford to buy premium drinks such as Red Bull. The global economic crisis has a direct influence on its sale since the Chinese economy is directly affected by the change sin the global economic condition.

Social

The social factor that affects Red Bull marketing strategy are the negative health concerns, global warming (since it is imported and therefore has a high carbon footprint).The longer working hours as a result of the increasing professional demands of the modern Chinese society means that people get tired and lethargic. The need for a "push up" effect can then be satisfied by drinking Red Bull.The increasing level of consumer concern on personal health and diet might also negatively impact its sales.

Technological

Improved methods of manufacturing could help in lowering the cost of Red Bull production. Technology can also be used in spurring innovation of better Red Bull products.The look for an ultimate cure for hangover for instance could be achieved by technological means.

Environmental

Red Bull just comply with the Chinese regulations of environmental safety in regard to transportation, packaging, manufacturing as well as recycling of used cans.

Legal

The company must comply with all legal requirements like the once guiding taxation, health, employment as well as environmental safety.

Strategies to be used by Red Bull in entering into a foreign Market

Selecting the kind of market to put up investment and strategies which can be employed effectively is one task that Red Bull will have to sort out first. The method of entry into a new market means an institutional planning are already in place so that a company products and services can make an entry into a new foreign market, which is vital component to the success of the companyin a new country (Hollensen, 2004). There different kind of entry mode which a company can decide to use when getting into a new market. These methods are hierarchical mode and intermediate modes. However, according to Hollensen (2004) the mode of entry into a new could be easy decided by various internal factors such as mode characteristics, transaction specific factors, products and external factors.

The internal factors to be considered during the time of entry are the size of the firm and the kind of experience it has in the international market. Product is said to be the complication and differentiation. The specification or characteristics of mode which is wanted include the control, risk and flexibility. Moreover, there are a good number of external factors such as social culture gap between home nation and host nation, nation risk or the uncertainty of the demand, the size of the market and growth rate, barriers of smooth trade and constant competition could easy influence the decision making process of a company.

Business analysts believes that joint venture from the first entry is the best way for Red Bull to increase their market in the China. The Red Bull as a global partner will have to contribute financial resource, products and technology. The local partner which it will get in China will need to offer local workforce and skills and experience which is required in managing the business in Chinese market. This division of labor will allow individual partner to put more effort on their section of duties. The major advantage of using joint venture is that it reduces market and any political risk which might arise during the operations. It also helps in the managing and overcoming some of the restrictions which normally are enforced by the host government.

The investment made in China could also assist the company to increase relations between tit and Chinese government by having a local partner. However, Red Bull must have to understand the employment such strategy could be so disadvantage if adopted.

The objectives of international market

The objective of market is a crucial component to be considered when making marketing plan. The outcomes of SWOT analysis are important in the documentation and in achieving the marketing objective (Jobber, 2007). According to Jobber (2007) the number of marketing objective which are used effectively are strategic objectives. The objective of marketing plan should be clearer, easy to understand in line with the market where the product is going to be sold. The objective of global market for Red Bull will be carried out in the surrounding where products are already available in the market to emphasized market expansion. The main objective of the market is supposed to be set in the SWOT analysis.

However, SWOT analysis according to Jobber (2007) is the methodthat is used when examining business strategic position in the market. According to Red Bull SWOT analysis the strength and opportunities are some of the important points that a company should employed to achieve the set target. In this regard, the Red Bull global market objective is to enlarge the existing product in the current market. The second focus objective to raise market share in the Asian countries up to 5% by 2017. It's clear that when the market purposes are agreed, the selection of market and market analysis and screening normally follows.

Marketing mix

Red Bull's marketing mix is to be done according to McCarthy's (1964) 4Ps framework. According to this framework, the marketing is done as dictated by four main factors; product, place, price and promotion.

Product

Red Bull energy drink is the only product from the Red Bull Company. However, later on, they adopted an extension to their Red Bull brand (brand extension) to produce three other products namely Red Bull cola, Red Bull sugar free and Red Bull shots. This means that they have successfully differentiated their product range as a way of marketing their product to a diversified marketplace. Red Bull has a very distinctive taste with a "functional taste."

Price

The price of a red Bull can is dependent on the country in which it is bought. Its price is relative higher that the ones of its competitors Monster and Burn. The company has therefore adopted premium pricing strategy aimed at portraying their product to be the most exquisite in terms of quality than its competitors. In all markets, Red Bull use employs a premium pricing strategy. Even though a higher price normally reduces the demand for a given product, Red Bull's case has been different because of the fact that it is the world's best selling energy drink. The premium pricing that is charged for Red Bull is noted to reflect the product's premium quality as well as the potential benefits that can be derived from it.

Promotion

Red Bull employs an aggressive promotion strategy when marketing its products. The company mainly used free sampling and sponsorship in order to promote its products. The free sampling technique is mainly used in persuading students to purchase Red Bull products during their exam periods. During the exam periods, Red Bull sends out their special group of sampling boys and girls to give free Red Bull to the students.

Place

Red Bull usually located its distribution center strategically close to its target market.In regard to this element; Red Bull has not differentiated much since it is readily available in the usual outlets as other competing products.

Recommendation

For Red Bull to successfully launch in the Chinese market, it must adopt a series of actions. These actions include complying with the Chinese laws and regulations of Joint Ventures, rebranding, making the product to be cultural competent by use of Chinese colors of energy such as Red, employing a multicultural workforce and being aware of the cultural dynamics that would affects its workforce. The company may also rely on information technology in the management of its marketing campaign. This could be by means of e-marketing techniques. It should also focus on launching its product with the target market in mind (the young and energetic professionals and any other person who needs a "push up" in terms of energy).The company must push for an adaptation product strategy. Jain (1990) recommended that adaptation strategy is used to make certain changes in a given product in order to match local perspectives. It is however critical that the core product function be maintained though (Hollensen, 2007).

Conclusion

Red Bull is a very strong brand with a very string brand perception and equity. Its areas of weaknesses must be improved by ensuring that the product is also marketed to the males and other market segments. The launch of other brand extensions such as Sugar Free, Shot and Cola would help in easing this problem.Asian and China in particular presents a very wonderful opportunity for Red Bull to expand its operations. An adaptation strategy that would involve repackaging and redesigning some aspects of the packaging would ensure that the product is acceptable among the Chinese citizens. This must be done while maintaining a consistent quality of the product.