Abstract
Red Bull GmbH is a global energy drink production company established in 1987. Its headquarter and entire product manufacturing operations are localized in Austria. From there, Red Bull services over 145 countries through the company’s regional distribution hubs in Tokyo, Dubai, Singapore, Paris, and other cities. Since the foundation, the organization has had three shareholders: Chaleo Yoovidha (49%), his son (2%), and chief executive officer Dietrich Mateschitz (the remaining 49%). This report will comprehensively assess key areas of Red Bull’s long-term success, such as the company’s leadership style, organizational structure, internal culture, product lines, corporate and business strategies, and competitors, as well as Human Resources management and performance evaluation criteria adopted within the organization’s framework.
Summary
Red Bull is an Austrian-based energy drink conglomerate with a global presence in over 145 countries. Founded in 1987 by Chaleo Yoovidha, his son, and CEO Dietrich Mateschitz, the company produces and distributes its signature drinks under stringent standards via regional centers in the UK, France, North America, Japan, UAE, and Singapore. The company emphasizes both commonality within markets and individuality at the product level to maintain profitability. The focus on customer experience perpetuates an internal culture that highly values employees – the approach that allowed Red Bull to endure since its inception and top the competitive industry of energy beverages worldwide.
Raichaudhuri (2010) points to Red Bull’s organizational structure as a hybrid, combining both functional and divisional models in order to achieve success through franchising. All four products marketed by Red Bull – the flagship product Red Bull energy drink, Red Bull sugar-free, Red Bull Energy Shots, and Red Bull Cola – are designed with young urban professionals in mind. Despite dominating its market for over two decades, Red Bull lost a market share to several competitors that have gained ground against the company’s monopoly. For instance, since 2000, Red Bulls’ dominates 29% of the market, with Monster Energy Drink being closest at 23% (Cirillo 2009).
The company employs an innovative franchising model with decentralized operations in marketing and manufacturing. To gain a presence in the youth market, they have employed aggressive strategies such as viral marketing to distribute free samples of their energy drinks to universities. Furthermore, they sponsor sports personalities and celebrities, charities and entertainment events, which allows them to relatively easily enter a lucrative youth market. With 6900 employees hired globally, this strategy has been largely successful for the energy drink giant.
By training regional managers at local centers and supplementing the company’s marketing moves with performance teams from headquarters, the brand has managed to establish a strong presence across generations Y and X, as well as in sport-related events, leading to its business success.
Leadership and Management
Red Bull is a multinational company headquartered in Austria, managed by Dietrich Mateschitz since its licensing in 1987. Its majority ownership (49%) lies with Chaleo Yoovidha (owner of TC Pharmaceuticals, Thailand) and his son (2%), while the remaining 49% belongs to Mateschitz himself. Getting 90% of its capital from two major owners, Red Bull finds the remainder 10% through bank loans. The core values driving Red Bull include identity, authenticity, credibility, masculinity, and perseverance. Following them consistently has etched the company onto popular culture as well as traditional sports media platforms. In turn, this made Red Bull one of the key players that have defined the energy drink industry for the greater part of the last three decades.
Red Bull has built a global empire due to its successful, one-brand distribution network. On the one hand, regional headquarters in Tokyo, Dubai, Singapore, France, the UK, and North America have their own CEOs and marketing teams. On the other hand, all of them adhere to the core principle stated by the Austrian HQ – focusing on marketing the product directly to consumers (Scribd). To complement this platform-agnostic strategy Red Bull owns a company that develops and operates sugar-free variations and non-Red Bull drinks, for example, LunAqua in the USA, a water brand that contributes to even greater market reach.
Under the leadership of Mateschitz, who has established himself as a successful promoter of the German Blendex toothpaste, Red Bull has employed a strategy of aggressive marketing to promote their products. This approach relies on viral campaigns and sports sponsorship as key tactics for successful brand recognition (Gorse et al., 2010). Moreover, an extensive research and development team works to make sure that each product is designed with aesthetic differentiation in mind yet has global appeal. Red Bull’s distribution partners are not part of the company’s payroll but rather independent customers who may receive additional benefits (Scribd). As a result, despite facing some difficulties due to a negative association with the drink’s unhealthy nature, the company has found the solution to retain leadership by tailoring its products for particular countries around the world. In Austria and the USA, they offer one variation of the formula, while in Thailand, a sweeter, less carbonated version is sold.
Company Culture
Red Bull’s quest for a unique and recognizable brand began in 1984. After two years of extensive research and heavy investments, the company created 200 distinct packages to shape its identity. By the time Red Bull was licensed to operate, the company had also developed “Spreading Our Wings Worldwide” – the vision and the foundation of the organization’s culture (Cirillo, 2009; RedBull). Red Bull differentiates itself from its carbonated beverage competitors by presenting a distinctive visual identity with blue and silver colors, as well as taller and slender can dimensions. The company also sets higher prices to maintain the status of premium branding in the eyes of consumers. Additionally, Red Bull’s mission statement further highlights its commitment to maintaining high standards while aiming for global success in an efficient yet profitable manner.
Red Bull’s corporate culture results in a workplace where employees share best practices to maintain the set standards and guidelines. They target an eclectic array of customers, including athletes, live bands, students, professionals, and clubbers at both domestic and global levels. Employees work towards common goals within teams coordinated by managers whose main task is to bring out the best potential in their team members.
Organizational Structure
Red Bull’s organizational structure is a hierarchical hybrid. This means it combines functional and divisional elements to improve adaptability in ever-changing markets. The choice in favor of this model was driven by competition, market dynamics, and technological developments (Daft & Marcic 2009; Raichaudhuri 2010). Led by co-founder and CEO Mateschitz, two major shareholders control the company.
First, Red Bull followed a functional type of organization structure optimized to its franchising strategy. Decisions are centralized under higher-management control at its headquarters in Austria and regional offices worldwide, including Singapore, Tokyo, Dubai, North America (USA and Canada), France, and the UK. Such an approach enables effective operations due to simplified hierarchical decision-making processes (Scribd).
Figure 1: Red Bull’s functional organizational structure
In 2004, the management shifted from a purely functional structure to an amalgamated divisional one in order to foster unified collaboration between employees. By incorporating major departments across divisions of the company – such as R&D and production, marketing, or accounting – personnel was able to draw on their collective knowledge for improved decision-making and product development. This strategy proved particularly beneficial when dealing with customer issues and general crises, such as the incident in 2004 involving an energy drink’s negative effects on human health (Scribd).
Product Lines
Established with the goal of producing and marketing one single product line, Red Bull energy drink has since 2003 diversified its offerings across an additional three distinct ranges. Nowadays, they have diversified to include four different production lines: along with the flagship energy drink, there are Red Bull sugar-free, Red Bull Cola, and Red Bull energy shots. To ensure successful expansion across the board, each new offering was tailored to consumer preferences by taking into account four factors, namely, demographics, psychographics, usage behaviors, and consumption collection (Red Bull). An analysis of all products presented below reveals how adeptly these principles were employed when designing exciting beverages for consumers around the world.
Red Bull Energy Drink
A scientifically-backed beverage, this product offers individuals a revitalizing solution for increased focus and physical performance. Beneficiaries can expect an improved ability to clear their minds and perform better while still having fun, courtesy of the combination of glucose plus taurine, glucuronolactone with sucrose, caffeine, and Vitamin B group (Scribd) – all conveniently integrated into one energy booster.
Red Bull Sugar-Free
This innovative product offers sugar-free energy with additional ingredients like all-natural ingredients, such as acesulfame K, aspartame, and sucralose. It is specifically designed with health-conscious individuals and diabetics in mind, making it an excellent alternative to regular energy drinks on the modern market.
Red Bull Cola
This cola drink is an ambitious challenge to existing industry giants, featuring 100% natural ingredients. Intended to compete with such well-known brands as Coke and Pepsi, this refreshing drink is composed of natural ingredients like kola nut extract and coca leaf extract, which is clearly labeled on each can. Despite its all-organic composition, the product’s launch sparked controversy in Germany with speculation of minute traces of cocaine allegedly found during testing. (Scribd).
Red Bull Energy Shots
This remarkable innovation provides all the power and energy of an original-sized can but in only 60 ml. Red Bull shot became a highly convenient and potent version of their signature energy drink, perfect for individuals on the go, as this portable blend fits easily into bags, glove boxes, jackets, and handbags alike. Moreover, the drink doesn’t need to be chilled.
Competitors
Since 1987, Red Bull has been a dominant force in the energy drink market. Despite two decades of changes in the industry landscape, they remain ahead by maintaining 29% control, while their closest rival, Monster Energy Drink, stands at 23% (Parker, 2005). According to data from 2008 (Scribd), this trend remains true despite shifts within other companies’ respective market shares.
Figure 2: Market share in percentage of different companies
Over the years, a decrease in Monster’s market share has been linked to increased competition from established companies such as Lucozade and Gatorade. Additionally, Kratin Daneng held significant market control in Asia despite their lack of carbonated energy drinks. In 1997, Hansen Beverage Company purchased Monster, which sparked renewed efforts to use marketing tactics similar to Red Bull, like “Unleash the Beast” and “Monster Army” campaigns utilizing events promotions to compete more effectively against Red Bull (Parker, 2005).
As competitors replicate Red Bull’s successful formula and introduce novel energy drinks, Red Bull’s market share has been impacted. Additionally, SHOCK Coffee’s debut in the coffee-energy drink sector reveals a potential new area of competition for Red bull to confront. As these products have no patent protection to protect them, they are able to undercut Red Bull’s pricing power. Consequently, it is expected that more dynamic challengers will arise within the industry setting up challenging circumstances for all players involved – notably including existing frontrunner Red Bull.
Red Bull’s Operations
The company’s production is centralized in a designated facility, where energy drinks are manufactured and canned before being distributed globally. Remarkably, the production process can be tailored to customer requirements. Such an approach leads to creating innovative products that reach the intended market via regional Distribution Partners (DPs). These DPs ensure timely delivery from the parent company to the end consumer, hence contributing to their productive and mutually beneficial relationships with the central office.
Furthermore, such a model lets Red Bull successfully run almost 7000 locations globally, showcasing an example of flexible and adaptive business behavior (Raichaudhuri, 2010). Regional headquarters are based in Dubai, Tokyo, Singapore, the UK, and several locations in the US. Yet, regardless of the location, all Red Bull employees – except for sales representatives – receive their salaries via direct payments from Austria. Also, the Austrian headquarter approves, issues, and controls the budgeting for marketing events and advertising initiatives from local franchise management. As a result, the company’s marketing activity is consistent and well-recognized across the continents, which has become key to Red Bull’s global brand awareness.
Corporate and Business-Level Strategies
The company has adopted an ambitious global marketing approach incorporating a variety of activities, including extreme sports events, art exhibitions, and video gaming. Their objective is to gain the attention of younger customers, as well as sports professionals. For example, they have employed celebrities like Eminem to sponsor their “Red Bull EmSee Battle Rap Championships” contest (Red Bull). Moreover, social media platforms such as Facebook are used to better understand customer needs and preferences, enabling them to create customized products that make the brand’s offering distinctly individualized.
Through sponsorship activities and sports team ownership, Red Bull has extended its presence into American football, ice hockey, motor racing, and soccer. Additionally, their Mobile Energy Team (MET) program provides students with an opportunity to promote the brand by driving specially designed Red Bull racers – cars decorated with a large canister of the product on top – while completing daily missions in businesses or at major sporting events (Red Bull). As part of their responsible marketing strategy for good causes, Red Bull also sponsors charitable initiatives worldwide, for instance, the “Don’t Walk Charity Fashion Show” at the University of St. Andrews in Scotland (Scribd).
HR, Strategies, and Processes
The Red Bull HR team is renowned globally for its strength and efficiency, having achieved this through the implementation of programs at their Austrian headquarters that are then implemented in all franchises around the world. Managers from global branches attend regional HQs to undergo relevant training and development initiatives so they may realize success within their own areas, while performance management teams from Austria offer further aid with employee evaluation (Scribd).
Red Bull has employed a top-down approach to their marketing strategy, utilizing regional sales and marketing teams. The availability of the product is controlled for increased mystique and demand amongst youth who view it as an essential part of Generation X culture or ‘poor man’s cocaine’ (Gorse et al., 2010). Additionally, Red Bull focuses on nightlife advertising to cater to younger generations, a.k.a. Generation Y.
Red Bull’s strategic decision to avoid traditional sports drink competition (with drinks like Gatorade or Lucozade) has yielded successful results; the brand consequently gained an integral foothold in Generation Y and X markets while simultaneously cultivating a strong presence as a sports property. Through creative sponsorships, new ownerships, and innovative properties within the industry itself, Red Bull successfully established their name across all levels of the sport.
Conclusion
Red Bull has thrived in a swirling and highly competitive energy drink market for the past 24 years. The company survived bad press because of the allegedly unhealthy nature of its drinks. Reb Bull has also efficiently dealt with intensifying competition as energy drinks became remarkably popular and similar products flooded the market. In the end, Red Bull’s revolutionary marketing techniques and innovative management approaches have allowed the organization to prosper again. Today, the company’s product line is diverse, and its market share is steadily growing while competitors are forced to adopt their strategies in order to keep up. These facts allow us to suggest that the brand will remain solid in today’s ever-evolving marketplace.
References
Case study analysis at: http://www.scribd.com/doc/17095337/Red-Bull
Cirillo, J. (2009). Running of the Bull. (Cover story). Beverage World, 128(6), 18-22. Retrieved from EBSCOhost.
Company website at: www.redbull.com
Daft, R. L., & Marcic, D. (2009). Understanding Management. Ohio: Cengage Learning. Pp. 160-173
Gorse, S., Chadwick, S., & Burton, N. (2010). Entrepreneurship through sports marketing: A case analysis of Red Bull in sport. Journal of Sponsorship, 3(4), 348-357. Retrieved from EBSCOhost.
Parker, P. M. (2005). 2006-2011 World Outlook for Energy Drinks. World Outlook Report 2006-2011: Energy Drinks, 1. Retrieved from EBSCOhost.
Raichaudhuri, A. (2010). Managing New Ventures: Concepts and cases on entrepreneurship. New Delhi: PHI. Pp. 112-117
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