Weaknesses
Red Bull does not have a very diversified product line although they do have a sugar free version, they may be missing out in other drink sectors
Some people do not see the value in less 0z. for more money
Not as experienced as big companies such as Coke and Pepsi
I think that the major weakness we are seeing here is that Red Bull has all of their eggs in one basket. The only thing that Red Bull has is the original drink and a sugar free version. If you look at most every other beverage company, they have a well-diversified product line with much to offer to their customers. I think that people like diversity in their lives and do not want to be drinking the same thing day in and day out, which Red Bull can not offer right now
Opportunities:
Red Bull can extend its product line
Consumers have recognized Red Bull through their marketing and sponsoring activities
Red Bull is still a pretty new product and still have opportunities to expand to new markets
More people are starting to look for alternative beverages besides just soda and coffee to get their caffeine
New Technology in research and development poses the opportunity to improve current product and create new ones.
The fact that the energy drink market is still growing gives Red Bull the opportunity to grow with it. Red Bull just needs to make sure that they take advantage of the growing market and do not let other companies with more to offer move in and start to take away more market share.
Threats:
The federal government could put strict restrictions on the energy drink market
Many people are concerned with their health, and energy drinks are perceived to be unhealthy
New entrants coming into the market are offering more bang for the buck while presenting more options
Big players such as Coke and Pepsi could use their resources to steel market share
Red Bull could lose its “cool” factor because it has oversaturated the energy drink market.
I think the big threat here is that the government could possibly put strict regulations on energy drinks because of health concerns. If Red Bull were to not meet one of the regulations that the government could possibly put into place, then Red Bull would fail and they do not have any other product to keep the company afloat. With health conscious consumers and new studies always coming out on different products, if a study found Red Bull to be very unhealthy then people would likely not buy the product as much
Overall SWOT Analysis:
Of the above, the primary strength of Red Bull is that they have a strong Brand image and is perceived as the premium energy drink on the market which gives consumers the motivation to pay more for Red Bull than any of the other energy drinks on the market. The marketing strategy also has a very strong conceptual fit with the product. My plan will not jeopardize any of the strengths that Red Bull currently has, but use those strengths in other areas to diversify them.
The main weaknesses and threats are that Red Bull is not a very well diversified product and other energy drinks are coming onto the market with more to offer. With my plan it will diversify Red Bull so that they are not just in the energy drink market and it will also improve what they are doing in the energy drink market. Another weakness is that the government could possibly put strict regulations into place. With the plan of diversifying the product line, it would lower the threat of going out of business if Red Bull were pulled off of the market.
Alternatives
Do Nothing
Red Bull is still the leader in the energy drink market and people seem to be willing to pay the higher price for the drink. Their current marketing efforts have seemed to work thus far.
Pluses:
They can focus on what they have been good at this far
Easy to execute
Does not cost any more money to put into place
Does not run the risk of messing up what has already been put into place
Minuses:
Does not address the diversification problem of the line
Other energy drinks may continue to take market share if nothing is done*
Analysis: This could be a good option because Red Bull is still a very profitable company with a very strong brand image. The fact that other energy drink companies are taking some market share may be unavoidable. For example when Henry Ford introduced the Model A he had most of the market share in the automobile industry, but once people caught on they started taking away some of the market share. This did not mean that Ford was becoming less profitable
Execute a line and Brand extension
Red Bull should extend its line to come out with new flavors of the current Red Bull energy drink as well as come out with drinks that were not in the energy drink sector. New drinks could be soda’s, sports drinks, energy shots ect.
Pluses:
Existing customers will have the option to try different flavors and have diversity in their energy drink endeavors
People may be likely to buy a different flavor of Red Bull when they crave something different rather than just buying a different brand
If something were to happen to the energy drink sector than Red Bull would be able to still stay afloat with other products
Minuses
It will cost a lot of additional money to start a new product line
If the extension were to fail, it would be a wasted effort
Cannibalization of the current product
Analyses:
This seems to cover the major problems that I encountered while conducting my SWOT analysis. It covers the problem that other energy drink companies have more to offer than Red Bull and also that if the energy drink sector where to take a hit (govt regulations, health concerns ect.) than Red Bull would not automatically fail. There is a high cost associated with creating new flavors and product lines, but if it is executed correctly they should be able to lower the threat of changes in the external environment while also making more money. The one thing that Red Bull would really need to watch out for is tarnishing the good name that they currently have by coming out with a new product that people do not like. My recommendation to this would be to possibly give the new products a different name and make it separate from Red Bull
Start marketing more heavily to different types of consumers
Red Bull could start running more T.V. advertisements and reach people who may not be into extreme sports or nightlife. They could run ads that show people in the workplace using Red Bull or someone who is simply just in the need of a “pick me up”
Pluses
Ability to reach a larger demographic
Minuses
May not be a good conceptual fit with Red Bull’s brand image
High cost of running television advertisements
Analysis:
Red Bull has a good marketing strategy in place right now, but they may not be reaching their full potential on the amount of people that they could Market to. Right now Red Bull is only reaching people who are into extreme sports or night life. They are almost completely missing people who are in the working world and may need something to get them through the workday.
Recommendation
My recommendation is to go with the line and brand extension. When going over my situational analysis it seems to cover the major problems that I see wrong with what Red Bull is doing currently.
I found the major problem to be that Red Bull has no diversification and focuses solely on 1 product. With the external environment playing a huge role in the success of businesses I think that it is necessary for companies to diversify themselves because they cannot control what the external environment is going to bring.
-Alt #1 (Do nothing)- Although Red Bull is a very successful company and is the leader in the market, they are doing nothing to protect themselves if the energy drink sector were to take a hit. With this being the main problem that I have found, I do not think that staying with the same plan is the smartest idea.
-Alt #2(Line and brand extension)- With a Brand extension it would give Red Bull some protection if the energy drink sector were to take a hit.
-Alt #3(Market more heavily to different type of consumers)- once again, this is not helping much at all if the energy drink sector were to tank
Another major problem is that other energy drink companies are starting to break into the market and take away Red Bull’s share in the market. These new energy drinks also have more to offer than Red Bull with more oz. per dollar and a variety of different flavors.
-Alt #1 (Do nothing)- it is inevitable that Red Bull will lose some of the market due to competitors. People now see that the energy drink market is a very profitable market so they are going to move in. although it is inevitable, doing nothing does nothing to slow it.
-Alt #2(Line and brand extension)- By coming out with more flavors of the current Red Bull beverage, people may be more willing to try the new Red Bull than a new competitor.
-Alt #3(Market more heavily to different type of consumers)- This may keep Red Bull in the mind of the consumers when they go to buy an energy drink, which will keep them more likely keep buying Red Bull
When looking at the problems that Red Bull is now facing and what they could currently face in the future, it seems that the smartest decision would be to go with a line and brand extension. The other alternatives cover some of the problems, but not as well as coming out with a extensions.
Marketing technique
Red Bull has a strong marketing strategy in place can stick with the same strategy because it has worked and has a good conceptual fit with the drink. Only minor changes will need to be made in order to let people know that Red Bull is now more than just the energy drink that everyone has come to know and love. During the sporting events that Red Bull is sponsoring they can give out free samples and make it known that Red Bull is more than just an energy drink now. They can also have their reps and distributors set up displays in the stores that sell Red Bull.
Some of my suggestions would be to come out with an every day soda that people drink for pleasure, sports drinks consumed after an event (like Gatorade). I think that both of these products would go well with Red Bull because the current product is similar to a soda and it is also a performance drink. For the product extension they would come out with a few flavors that go well all year round and then also have seasonal flavors. New flavors may also entice the “stay up all night partying” user to mix it with their drink of choice.
With this strategy we can also use parts of alternative number three which is to start marketing more heavily to different types of consumers. Especially if Red bull starts making an every day drink that is consumed for pleasure and not performance, they can start running some television ads similar to that of Coke and Pepsi.
In the end I would say that Red Bull should use a little bit from all of the alternatives that I have put into place, but I feel that alternative number two would help to eliminate the largest problem at hand.
by
timmo10 (student)
