Red Bull should also consider some of the issues that revolve around this country in terms of the nature of their economic climate. For instance, statistics show that the Korean tax breaks usually apply to small and medium sized enterprises. In addition, it has been shown that a substantial part of the Korean infrastructure may take up their tax breaks. The credit crunch within South Korea has eased tremendously thus making it easier for Red Bull to operate there.
2.3 Social Factors
The demand for higher quality and healthier foods is not just a direct result of an increase in disposable income but also change in lifestyle of South Korean society. Most of them are now widely informed and very particular about what they purchase. This is a word of caution to the Red Bull Company as it intends on penetrating the market. They must strive to convince the consumer in South Korea that their products are indeed worthwhile (Coyner & Song, 2008).
Moreover, health conscious issues have had a negative impact on the demand for some energy drink brands. For example, the ingredients contained in most of the energy drinks, such as taurine and caffeine, were perceived to be unhealthy. The market has seen an increase in the demand for more healthy substitutes, as society is becoming more health conscious, while energy drinks are being avoided.
Trade Unions within Korea were largely associated with a military-like approach. However, such characteristics are slowly diminishing due to the forces of globalization. Red Bull should be prepared for this and should also be aware that most informal sectors are the ones that are unaffected by organized labour.
2.4 Technological Factors
South Korea is leading several key in the world, especially in the fields of and . It has a very advanced and high-tech and is a world leader in such as , , , and (Bureau of East Asian and Pacific AffairsMarch 2008).The rivalry competition of the past decade has motivated aggressive Korea and global firms to consider a wide variety of ways to satisfy business requirements more efficiently. Many innovative business solutions are based on adoption and exploitation of information technology. In the present day, Korea’s information technology advancing has bought big impact in alternative business strategies and organizational decision making.
For Red Bull, it needs to understand and consider about the effective logistics operation which are directly influenced by information technology. Red Bull can assess the efficiency of logistics to reduce the time taken for procurement, production, distribution and transportation; provide just in time (JIT) service to gain competitive advantage. As there is increasing internet usage and online shopping, Red Bull can take advantage of this by engaging in e-commerce such as order online and use the internet to match the supply and demand to provide value-added services to target supplies and customers. High- tech packaging may also take into consideration. South Korea’s high technology environment may be creates an opportunity for Red Bull in certain aspects; on the other hand, it may also be a threat. Red Bull can also package their products by using some material which is biodegradable.
3. COMPETITIVE ANALYSIS
3.1 SWOT
Before Red Bull establishes itself into the Korean market, they need to examine their business using the SWOT analysis and the Competitor analysis.
3.1.1 Strengths
Red Bull has been successfully distributed into various international markets hence the company has lots of know-how that how to penetrate into the new market effectively.
Moreover, Red Bull has certain benefit that cannot be found in the other energy drinks, which is that the Red Bull can reduce the levels of negative substances in the body such as cortisol. This aspect can be useful to overcome local energy drink brands and also, be able to cover the unhealthy image.
3.1.2 Weaknesses
Red Bull has been battling with number of litigation in regards to their product ingredients. Some individuals and media presses have argued that if Red Bull is consumed regularly, it may cause heart attacks or other heart related disease. As it has mentioned earlier, many Koreans are looking for a quality food or beverage and trying to avoid unhealthy one. Hence, such litigation can also be arising in South Korea once Red Bull is established (Coyner & Song, 2008).
3.1.3 Opportunities
Red Bull is one of the most recognized energy drinks internationally. The product has succeeded in many countries such as U.S, Hong Kong and Australia. In other words, Red Bull’s brand equity is quite strong in the rest of the worlds. Since past few decades, large numbers of South Korean people have experienced going overseas and many of them have become aware of Red Bull therefore the number of Korean consumers, who aware of the product, would keep increasing.
Also, Most of the South Korean teenagers, especially high school students, are studying extremely hard to enter the top local universities. From nearly 3years prior to take the university entry exam, the students barely sleep and rather study. According to Lee (2006), 62.6% of high school students sleep less than 5 hours a day thus most of them are highly relying on the energy drinks to keep them awake. This statistic shows that the Red Bull may successfully supply their products to such target audience.
3.1.4 Threats
The biggest threat to the Red Bull would be the major local competitors, such as Bacchus and Vita500, which already dominated the South Korean market. Those brands already have strong brand equity therefore many other energy drinks have been failed to beat them.
3.2 Competitor Analysis
Even though there are many different numbers of energy drink brands existing in South Korea, two major companies, Bacchus and Vita500, are dominating the industry. Bacchus is the highest selling local energy drinks for over 40 years thus Korean consumers recall Bacchus if they need to boost their power. Another major brand is called Vita500, which is the vitamin drink that made in Korea from the year of 2001. Since before it came out, most of the energy drinks have focused on appealing the products’ function; boosting energy. However, Vita500 promoted them selves by mentioning specific ingredient, vitamin, to avoid health concerns and also tried to appeal its superb taste. As the results of that, Vita500 have competed all the competitors except Bacchus (Shim, 2007).
Besides, there are number of other energy drink brands in South Korean market that Red Bull needs to concerns include:
- Youngbichun
- Vita1000
- Condition
These and many more companies are distributed in the Korean market and this means that Red Bull should be ready for the intense competition.
However, Red Bull has numbers of competitive advantages to overcome existing local competitors. Most of the energy drinks in South Korean market perceived as pharmaceutical products due to they are sold at the pharmacies. Unlike those products, Red Bull is distributed to large retail chains and the local supermarkets thus they can be perceived as a daily consuming goods. Also, the industry’s major consumer group in South Korea would be the teenagers or university students. They may think of the energy drinks that are sold at pharmacies are less trendy compared to Red Bull.
Moreover, Red Bull’s packaging looks cool and convenient compared to other energy drinks that are contained in a bottle. Also, there is a sugar free line for those who are sensitive about the calories intake. Consequently, the company is able to increase its sales by marketing their product to all different kind of consumers (Speadace, 2007).
3.3 Perceptual Map
Figures below show the positioning map of the current competitors. Fig.1 represents the levels of energy boost and the level of nutrition, and Fig.2 in context of the levels of energy boost and the taste.
Fig.1 Energy boost levels / Nutrition Fig.2 Energy boost level / Taste
Red Bull would be positioned near Bacchus, having energy boost as high as Bacchus, but slightly lower for the nutrition level. However, the taste is much better than the Bacchus. Red Bull would have almost highest levels of energy boost and the tastes, and yet nutritious in the consumers’ mind.
4. TARGET MARKET ANALYSIS
In South Korea, energy drink beverage has become part of the mainstream market due to vast response from the young, energetic consumers. The demand for energy drinks could be a direct result of people’s lives becoming busier. Hence, it is very important for Red Bull to clearly identify their target market in the populated South Korea beverages industry are foreign brand attempting to penetrate this market.
Due to the culture and lifestyles differences, Red Bull need to carefully identify and segment its target audiences into different niche segmentations by considering the demographic, psychographic, geographic factors of the audiences, and the degree of competitiveness within that segment. The targeted market must be accessible, measurable in terms of their overall performance, distinctive from one another, and of course profitable (Kennedy Library Home 2008).
The main target audiences for Red Bull in South Korea will be almost the same as other countries. It is going to target young adult consumers’ ages 16-29 both females and males, who live fast-paced, hectic lifestyle while barely making it through long days and nights of working, classes and studying. The consumers who fall into this category are young urban professional, post secondary school students, truck drivers, club goers, athletes or sports lovers and consumers who are looking for a drink to keep their day going and feel energetic. Koreans’ busy and stressful lifestyle, especially high school and university students have made this target market more favorable.
The second target audiences will be consumers who substitute vitamin supplement or energy stimulant such as ginseng, vitamin pills, energy bars, and coffee with energy drinks.
The third target audiences will be the consumers who are health conscious. Latest unproven cases about health concerns have threatened Red Bull’s positioning. Thus, it should carefully target this market segment by implementing an effective strategy to increase consumers’ confidence with the product.
5. MARKET ENTRY STRATEGIES
5.1 Direct investment
There are various ways that Red Bull could consider to enter the Korean market. The most ideal one would be direct investment which is to have either joint ventures or wholly owned subsidiaries.
As for joint ventures, it would be ideal if Red Bull could cooperate with a local major beverage company. The choice of Beverage Company is better if it does not have an existing energy drink. With this, the company will not have separate attention for the product entry to the new Korean market. Joint venture will enable the company to have a lower risk of nationalization and benefit from the local firm’s knowledge on the local market (Gionea, 2005). No matter politically, culturally, language, and business system, the local partner will definitely be more familiar with the environment and make the market entry easier for Red Bull. However, there is a risk for Red Bull to lose control of its technology in manufacturing when cooperating with a local firm. To minimize this risk, Red Bull should hold majority of ownership for its product.
If Red Bull were to go for wholly owned subsidiaries, they will then own total share of the firm and they will have all risk and cost to themselves. This method could be more costly as compared to join venture as Red Bull will have to spend more on establishing a wholly owned company in a brand new foreign market. This is because issues such as trade barriers will cost the company more in expenses. On the other hand, wholly owned subsidiary will allow the firm to have complete management control over its operation (Gionea, 2005). With this, Red Bull could have engaged in global strategic coordination whereby they could apply the same market entry strategy for countries with similar situation.
5.2 Exporting
The alternative market entry strategy that Red Bull can utilize is “Exporting” into South Korea. According to Gionea (2005) the Advantages of exporting includes:
- Exporting is cheaper and safer than other market-entry modes especially direct entry investment.
- Exporting usually has a method of payment like the letter of credit and this type of payment reduces the risks that the importers do not pay for the exporter and it guarantees the contracted delivery for the importer.
- The size of export-oriented companies will get bigger, which encourage task performance and mass production and therefore economies of scale.
- Exporting is open or suitable for any kind or size of firms, which is different from other market entry modes such as FDI or Franchising that seem to require bigger amount of capital and resources.
- Exporting can help firms achieve several potential objectives such as: competitor’s strength, knowledge of customer needs, brand recognition and improvement of distributors and customers relationships.
Accepting all the benefits of Exporting, we still need to discuss about some unavoidable disadvantages of exporting that includes:
- The imported products may be cheaper than the local products and this is a disadvantage for the local products.
- Exporting will increase the total logistic cost because of high transport costs.
- Exporting may be uneconomical because of trade barriers.
- The firms’ agents’ loyalty in foreign markets can be divided when the agents carry other competitors’ products.
Despite all the disadvantages of exporting, Red Bull can still use exporting as a market entry mode because of the fact that the first disadvantage of exporting does not affect Red Bull at all. The second one is unavoidable but it can be a trade-off with other expenses, for example, if Red Bull uses franchising or licensing market entry modes, Red Bull still have to pay the set up costs. The third and fourth are unmanageable, however, other market entry modes can have more disadvantages for Red Bull than Exporting. The advantages of Exporting far outnumber the drawbacks. Therefore, Red Bull can consider exporting as one alternative to launch its products into South Korea market.
6. MARKETING MIX
The Australia based company needs to look at ways in which they can create the perfect approach to doing business within the Korean market. They can do this by improving their 4PS which are; product, promotion, place (distribution) and price.
6.1 Product
The most important thing that red Bull needs to realize is that entry into the Korean energy drink market will require strong brand positioning. Through good positioning, the company will have a strategic direction. In other words, the company will have summarized all the aspects of their marketing plan into one statement. In this case, Red Bull should position itself as a sleek and sophisticated energy drink. This is more or less the same image that the company uses in other countries and has worked wonders for them. Additionally, using such a brand image will go a long way in differentiating Red Bull from other energy drinks in the Korean market. Most Korean products rarely place a lot of emphasis on this trait. It would therefore make the company unique thus giving them a competitive advantage (Vuotto, 2003).
A secondary research stated that Red Bull contains excessive amount of chemicals, some publications even compare it to highly addictive drugs as well as blaming the product for some health issues and may bring deaths (, n.p.) Recently, Red Bull has become the first energy drink company who received certification under the NSF Athletic Banned Substances Program (, n.p.) Therefore, to be successful in South Korea’s market, Red Bull should consider repositioning their brand as a healthy drink to increase awareness and to gain confidence in the product.
In addition, Red Bull also needs to decide whether to customize or standardize it products before entering the South Korea’s beverage market. Red Bull can consider customizing their products by considering the local taste, preferences and requirements. For example, generally a can of 8 oz. Red Bull contains 27g of sugar (Red Bull, n.p.). Due to the taste, requirements and local regulations different, Red Bull may decide to launch a sugar free energy drink in South Korea. Red bull is a ‘convenient’ product, one that can be easily bought from any local supermarkets and vending machines. The fact that Red Bull comes in a slim silver-and-blue enforces that ‘hip’ image. Red Bull would need to consider the issues of language and local law compliance in its brand and or advertisements.
Climate changing has lead to an encouragement to Koreans toward green environment. Koreans are more prefer to products which are disposable, reusable and biodegradable. This trend may be an opportunity for Red Bull in packaging their products.
6.2 Price
Pricing can make the difference between a company having steady flows of cash or not. It can also make the difference between the company performing well today or failing in the future. Red Bull is a quality product; its value has also been enhanced by its packaging and other advertisements conducted worldwide. Consequently, the Australian company should not under-rate themselves. Their price should reflect the quality of their product. Besides this, the company should consider offering price segmentation. In this regard, they need to look at their segmentation and offer different prices for those commodities. For example, the sugar-free cans could be sold at a higher price than the normal ones.
In order for Red Bull to decide on its pricing strategy when entering the Korean market, there are many factors that needs to be taken into account before they could make the decision. Pricing are aim to cover its cost of production or if not at least its marginal cost of production and to maximize profit. Red Bull as a foreign product will definitely have to consider its production cost, transport and distribution, insurance, credit etc.
Because Red Bull is a new energy drink product in the country, they should take the step of having low pricing strategy to accumulate brand loyalty and market share in its introductory period. This pricing strategy is known as penetration pricing. By doing this, they will be able to attract interest in the product and also appeal to wider segments. Besides that, Red Bull has to be aware of the price competition that may exist in the Korean market. As there are many other similar products that could provide the same effect as Red Bull in Korea, the company could consider setting a price slightly lower than the market price for energy drink to gain market share for its introductory period. Lowering the price at the beginning might cause the company to break-even revenue or even loss in the introductory period, however this will help in introducing the product to the new market and to keep the sales steady in the long term.
6.3 Promotion
The Australian based Red Bull is quite active in sponsoring events all around the country. Most of these events usually revolve around sports. Consequently, it would be wise to identify similar events within the Korean market so as to add some community values into the company’s image. This will go a long way in establishing the company as a force to reckon with in Korea. Additionally, the company should consider performing charitable activities there. For instance, they could identify children’s home and sponsor it. On the other hand, they could look for other projects especially environmental projects (Vuotto, 2003).
Lots of promotional effort is required to help Red Bull to be penetrated into the South Korean market and to build strong brand equity towards the brand. The promotional tools may include:
TV advertisement aims to increase the brand equity in target customers’ mind. Red Bull has already established lots of successful marketing campaigns and they are promoting their product with its famous tagline; ‘Red bull gives you wings’. The company could come up with similar advertisements that are used internationally, however it needs to customize for the South Korean market to attract the local consumers.
Sampling would be useful tool to promote the products to specific target group; high school students. It can be conducted at the place where the students spend the most such as school, library and private institute. As mentioned above, most of the students who prepare for the university entrance exam sleep for less than 5 hours. So, if the promoters give a can of Red Bull then it could be able to attract the students’ attention.
Red Bull could do promotional events for those who prepare for university entry exam. Send a box of Red Bull and some other health supplements to the students who won the events. This activity would build the strong relationship between the Red Bull and the event candidates and therefore it will be resulted as increased brand loyalty.
Use many numbers of media press, like major newspapers or online news sites. If the press writes an article about the Red Bull or carries a photo of celebrities, who’s holding a Red Bull can, it would not only raise the consumer awareness towards Red Bull also positively influence the readers who likes or wants to be like such ‘cool’ people.
Red Bull can take advantage of the significant number of people that use internet in South Korea, it would be a useful tool to increase brand awareness. The company website will provide all the information about the product, conducted promotions and the company itself. Also, Red Bull can put internet banners on the popular search websites or blogs, such as Naver and Cyworld, that most young people access daily.
The company could take the advantage of local celebrities to promote their product as many young Koreans are highly affected by their favourite celebrities. Consequently, if the celebrities mention that they are fan of Red Bull, the young consumers would purchase the product to copy their favourite celebrities.
The high exposure of the product through promotions may not only help to raise the consumers’ awareness towards Red Bull, it also generates ‘Word of Mouth’. These processes will assist Red Bull to overcome the local competitors and to become one of the top energy drinks in the South Korean market.
6.4 Place
Place refers to the location that Red Bull can be purchased in South Korea. Red Bull is an energy drink, so it should be available in supermarkets or superstores, 7Eleven, electronic Drink Machines everywhere and restaurants.
Place also refers to distribution channel. As Red Bull is well used in bars and clubs in Australia by being mixed with alcohol, the company could collaborate with bars and restaurants in Korea also. The company should identify all the products within the Korean region. They could first start with major towns and cities and then work their way to the smaller areas. Bars and restaurants are important marketing tools because they reach the client directly and can display all advertisements for the commodity there.
By using export or direct investment market entry modes, we can seek for an agent or a wholesaler to distribute Red Bull to all those stores in South Korea. With an agent or a wholesaler in South Korea, we will be able to answer the 3 questions about Place, according to Pride et al (2006) that is right place, right time and right quantities. The agent or the wholesaler will know exactly where to place Red Bull, when to deliver Red Bull and how many Red Bulls to all of those stores and retailers. Therefore, following this plan, Red Bull will be available at the right place, at the right time and in the right place in South Korea.
6.5 Process
Process is an extended marketing mix. As Red Bull is a foreign product it could consider gauging itself with set goals or integrating service into customer experiences. Pride et al (2006) emphasized that such services could include conducting surveys to assess feedbacks on the product and to consider any changes to the marketing mix. For example whilst handing out Red Bull sample in the promotion process, service can be applied by encouraging feedbacks to assess customers satisfaction. Other method can be opening a phone line for handling complaints and queries about the product. Establishment of goals will enable Red Bull to evaluate its performance for example to achieve 30% of market share.
7. CONCLUSION
The external analysis (PEST) indicates that the Korea business environment is quite conducive for Red Bull and it should therefore proceed with the venture. However, it should be cautious about the country’s labor unions and also about their cultural factors.
The competitive analysis revealed that Korea has a lot of energy drinks and the industry has so many players. In order to do well, the company should consider making the most of their sleek image. They should also advertise as they are an international company adhering to international standards. Besides this, their product has certain useful qualities like having a sugar free alternative and also the product has the ability to reduce toxins in the body. If the company makes these strengths known, then it may succeed in out-competing its players.
8. REFERENCE
Books
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Gionea, J, 2005, International Trade and Investment, An Asia-Pacific Perspective 2E, McGraw-Hill, Australia
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Pride, E, Rundle, W & Paladino, F (2006), Marketing Core Concepts and Application, John Wiley & Sons, Australia
Journals & Articles
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Coyner, T & Song, H J (2008), Mastering Business in Korea; Seoul Selection Publishers
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Vuotto, F. (2003), The Four P’s of Marketing: Product, Price, Place, & Promotion; California, Business & Agribusiness Librarian
Websites
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Austrade (2007), European wide detectives, Australia Trade Commission; viewed 8 September 2008, < >
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A Market Analysis- Red Bull, 2007, viewed 20 September 2008 <>
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Bureau of East Asian and Pacific Affairs, South Korea, March 2008, viewed 20 September 2008, <>
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Free Term Paper for All, Free Term Papers on Energy Drinks Market, 2008, viewed 21 September 2008 <>
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Kennedy Library Home, 2008, ‘Information Competence on Marketing Module 3 Segmentation, Targeting, Positioning (STP),viewed 16 September 2008, <>
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Lee, MJ 2006, High school student’s health care, EduPlus, viewed 28 September 2008, <>
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Medical News Today, Red Bull(TM) Becomes First Company to Receive Certification under the NSF Athletic Banned Substances Program, viewed 25 September 2008, <>
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QuichMBA.com. (2007), Foreign Market Entry Modes, viewed 8 September 2008, < >
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Red Bull (2008), Red Bull Home website, viewed 8 September 2008 < >
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Scribd, Integrated Marketing Communications Plan for Red Bull Energy Drink, viewed 21 September 2008 <>
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Shim, JW 2007, Power of Bacchus, Joins News, viewed 28 September 2008, <>
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Situation Analysis, Marketing Mix (5Ps), viewed 20 September 2008, <>
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Speadace (2007), Red Bull Company History, viewed 8 September 2008 <>
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The Whyville Times, Red Bull: Energy Wonder or Blunder, viewed 26 September 2008 <>
