The global market leader in energy drinks is considering further

market expansion

Programme: B.Sc. International Business

Subject: Principles of International Marketing

Exam type: 72-hour individual home assignment

Date: 19th March – d. 22nd March 2019

Characters (Incl. spaces): 22457

Number of pages: 10

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

Table of content

Appendix 1

Introduction

The energy drink Red Bull has a history dating all the way back to 1962. A lot has happened since then as Red

Bull has turned into a global brand represented in more than 100 countries. With a unique marketing

approach and an intense focus on their brand equity, Red Bull has successfully achieved in creating a

premium energy drink. This assignment will first highlight Red Bull’s global activities and market position.

Furthermore, the paper will focus on Red Bull’s expansion options. I will throughout the assignment use the

information stated in the case as the fundamental basis. When retrieving information online I will use data

which is up-to-date, as I interpreted the assignment using the present as a starting point.

1. Marketing strategy and Internationalization mode

Red Bull (RB) started to expand beyond home borders in 1993 only five years after the product was initially

introduced in Austria, and the company has thenceforth become a global brand with a standardized product.

This denotes a geocentric management orientation since they strive to develop integrated global strategies,

which is further seen in their marketing mix. By way of example, their promotion is characterized by global

sponsorships and events coupled with standardized marketing material from the headquarter. Nonetheless,

some parts of their marketing mix have been adapted. Local subsidiaries determine the distribution decisions

and they also handle the local marketing.

When examining RB’s internationalization process, it is seen how they are predominantly entering markets

as the Uppsala model proposes. First and foremost, RB started expanding to countries with geographical and

psychic proximity by the gradual waterfall strategy. First neighboring Hungary and then other EU countries a

few years after. Expanding further they went into USA, which was far geographically, but still fairly psychic

close. Lastly, RB has committed themselves slowly, as their current mode of operation is exporting with

foreign sales subsidiaries. RB is first now considering to fully commit themselves through foreign production

and entering psychic distant markets.

On the contrary, one might argue that RB has tendencies of being Born Global, as they have globalized

rapidly. They started export selling to USA after they received unsolicited orders even before the beverage

was readily available, and after only 26 years the brand is in 161 countries.

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

2. SWOT-analysis

The SWOT-analysis will be used to

evaluate RB’s competitive position based

on two overall variables: Internal and

external factors. Due to the scope of the

assignment, I will not touch upon all listed

bullet points.

Internal

RB is generally a rather atypical company

which is reflected in both their strengths

and weaknesses. Overall, the company is

market leader in the global energy drink

market with a 25% share, which in terms of value is even higher due to their premium pricing. The RB product

portfolio mainly consists of two products: Original and Sugarfree. This entails high risk for the company as

they according to the PLC-curve do not have a balanced product portfolio, meaning that if one product enters

the declining phase, RB must rely on the other product to deliver profit flows. Whilst standardization cuts

cost, the undifferentiated portfolio further limits RB’s flexibility in adapting to local needs and preferences.

However, the company is accomplished in especially their marketing, promotion, and distribution. First of

all, the peculiar marketing strategy applied by RB is highly acclaimed, thus one of their core competencies.

Through their intense focus, they have obtained a favorable position and high brand equity, since RB

consistently has communicated how it is not only a beverage but a ‘way of life’. Furthermore, RB has

overcome the barrier of high buyer power in many markets, by first targeting small independent venues,

which made the larger stores ‘beg’ to sell the product.

External

For RB to sustain their market leadership, they must also direct their focus to external factors. The overall

market for energy drinks is rather small, and the energy drink market is characterized by many diverse

competitors such as small innovative players, substitute products, growing energy drink companies as a result

of strategic alliances etc., thus characterized as a red ocean market. However, the energy drink segment is

experiencing growth which combined with arising trends, such as growing health-consciousness, can emerge

as big opportunities for RB.

To summarize, RB has many favorable internal factors, and they have built up strong core competencies

which have become a competitive advantage. The market possesses several expansion opportunities. If RB

1. SWOT

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

does not adapt their marketing mix or utilize these trends, they may convert to threats compromising RB’s

market position.

3. International market selection

3.1. MACS-analysis

RB is considering expanding by focusing on emerging markets, as these possess a huge potential. After

applying ‘knock-out’ criteria, the country selection has been narrowed to India, Russia, China, and Japan. To

determine which country is most attractive for RB, the MACS approach will be applied which consists of two

dimensions: Market Attractiveness (MA) and Competitive Strength (CS). MA is measured using macro-

oriented screening to highlight the attractiveness of a specific country, and CS is measured using fine-grained

screening to determine the market in which RB has the strongest competitive strength. By using the MACS

approach a nonbiased evaluation will be ensured in which cultural myopia is avoided as the analysis

overcomes the self-reference criterion. In the two tables below, the highest score is considered the best

score and vice-versa. The screening criteria are selected according to relevance in regard to RB and the energy

drink market. GDP per capita, GDP growth and psychic distance are not weighed heavily, as these only give

an overall impression of the market. ‘Consumption of energy drink’ and ‘growth in the market’ are weighed

heavier, as these characterize the current market and market prospects for RB. ‘Products fits market demand’

and ‘prices fit to market’ are further weighed heavily as the product must be compatible in the market, and

with RB’ premium pricing the consumers must also be able to afford the product.

As it appears Japan scores highest in both MA and CS. The heatmap below illustrates CS and MA on axes and

divide the countries into A, B and C countries by the color fields. According to the heatmap Japan is

characterized as an A country, meaning that Japan is the market with the best prospects for long-term

strategic development. Due to the scope of the assignment, I will only elaborate on Japan.

As the case states, RB is already present in Japan, and they must therefore increase focus even further in this

market. Japan scores high in numerous criteria, but they also fall below on others compared to the alternative

countries. First and foremost, the population of RB’s primary target group (16-29-year-olds) is small in Japan

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

2.3 Heatmap

compared to the other countries. However, it appears how

Japan has the highest purchasing power, which makes RB’s

price point fit well to the market. Additionally, the market for

energy drinks is biggest in Japan and moreover growing. So even

if the number of young individuals is rather small, they

constitute an advantageous market. Secondly, Japan has

cultural proximity. This implies that the prospects for the

product to fit market demands are good. In addition, Japan is

positioned favorably in the AGP/ALP map, as they have positive

attitudes towards global products (AGP). They even score

second highest in their AGP compared to other selected

countries (Appendix 3). Thirdly, the competitive landscape in Japan is characterized mainly by three local

competitors who hold the majority market shares together while RB is placed fourth holding 12,5% (Appendix

4). This can both be positive and negative for RB as local competitors have deep market knowledge, on the

contrary, RB can create a country-of-origin-effect as Japan has a high AGP. Lastly, the business dynamism in

Japan is rather good as they rank 14th out of 140 countries in this category in the World Competitiveness

Report 2018. Thus, the Japanese business environment is considered rather agile and dynamic

(Weforum.org).

Given these points, Japan represents a lucrative market for RB to expand further in, as the energy drink

market is relatively large with a population having a high PPP. The cultural proximity and business

environment are further beneficial. They currently have only a minor foothold in the market, as it is

dominated by domestic companies, which is a barrier RB must focus on.

3.2. Segmentation

When identifying the target segment in Japan that RB should pursue, two main segmentation approaches

will be used: demographic segmentation and psychographic segmentation. The demographic measures

which are crucial for RB to apply are age, income, and profession. RB must expand their demographic

segment, as they face a challenge of few teenagers and

young adults in the Japanese market. Thus far, RB’s

target segment has included young and trendy

individuals. By expanding the age diversity, they will

further target mature grown-ups with successful

careers. Moreover, by targeting the middle- and upper-

class segment, RB can justify setting a premium price. The psychographic measures in the segmentation

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

include attitudes, values, and lifestyle. RB should keep focusing on the consumers needing an energy boost,

thus the sporty, outgoing and athletic consumers. Furthermore, RB’s target segment in accordance to

psychographic measures can be found in the Euroconsumer’s four lifestyle groups, where RB should focus on

the “Successful idealists” and “Affluent materialists” (Keegan, 2016, p. 240). Targeting the segment

summarized in the box will enable RB to get wider market coverage. They will not be compromising their

brand image, as they will target young and mature adults with an active and outgoing lifestyle and/or a

successful career.

3.3. The main competitor in Japan

Of the three main competitors in the Japanese energy drink market, the company, Asahi Soft Drinks Co Ltd,

has the biggest company share of 29%. Monster has made a strategic alliance with Asahi, in which Asahi

distributes the Monster energy drink (Wilmore, 2013). The Monster brand constitutes the largest brand share

in the Japanese market with 18,2% (Appendix 5). I will therefore focus on Monster as the main competing

brand. Comparing the Monster brand

share, Red Bull Original accounts for 9,1%

and their Sugarfree version 3,4%.

Competitor comparison

Through table 3 it is seen how the two

brands are somewhat distinct. The

Monster product consists of two main

packaging forms: 335ml cans and 150ml

bottles, whereas RB only has their regular

250m l c an. Both product s have

standardized packaging, with only

language adaptation. RB’s product

portfolio in the Japanese market consists

of their two main products. Monster has a

wide product portfolio in terms of energy

drinks, as they have many different flavors and varieties, while also offering with and without sugar

(Amazon.co.jp). As seen in the table, the two brands also differ substantially in pricing, with a difference of

30,8%, meaning that RB uses the price skimming strategy in Japan as well. Looking at the applied distribution

strategies, RB exports through their own local subsidiary, Red Bull Co Ltd., while the American Monster gains

a competitive advantage of local market knowledge through their strategic alliance with Asahi. RB’s

distribution choice is beneficial as they remain in control, thereby being able to leverage their global

strategy. Nonetheless, it involves export barriers, and having to obtain local market knowledge

3. Competitive landscape

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

themselves. The promotion strategies applied by the brands have similar characteristics. RB’s .com-Website has

several videos made in Japan focusing on nightlife, cars, winter sports etc. (Redbull.com). Further RB has held

several sports events like “Red Bull Air Race Japan” and “Crashed Ice Japan”. These events have created

publicity for RB, as many media cover the events. The promotional video for Red Bull Air Race is adapted to the

Japanese culture by portraying Japanese Samurais fighting (Redbull.com). Likewise, Monster focuses on winter

sport, Formula 1, X-Games etc. However, they also focus on E-sports and music, as they for instance are the

main sponsor in a world tour of a Japanese Band (Mosterenergy.com/jp). This implies that Monster has

adapted their marketing for the Japanese market as well.

For RB to gain a competitive advantage in the Japanese energy drink market, they should according to

Porter’s Generic Strategies pursue the differentiation strategy. Differentiation is obtained when a product

has an actual or perceived uniqueness in a broad market. Targeting a broader segment combined with

premium pricing will lead to superior

financial returns. In addition, this

compet it ive strategy can be

extremely effective in obtaining

market share, which is necessary for

RB in the red ocean energy drink

market. Shown on the perceptual

map, RB will gain more perceived

value by applying this competitive

strategy.

3.4. Marketing mix plan

When expanding further in Japan, RB must revise their otherwise standardized dual extension marketing mix,

in order to fulfill the differentiation strategy.

Product

The product extension strategy has worked well for RB as this has enabled production efficiencies. However,

the limited product line makes RB rely on only two products to capture market share. In order for RB to

capture the previously analyzed target segment in Japan, they should introduce a new product through a line

extension. The new product should be made as a healthy drink with more vitamins, caffeine of course, and

stevia sweetener. Moreover, they could include matcha and/or green tea, as these ingredients are popular

in Japan and furthermore healthy (Parker, 2017). Looking at the Japanese culture, it is seen how it is

characterized by high masculinity in regard to Hofstede’s cultural dimensions. This entails a competitive,

4. Perceptual map

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

success- and achievement-oriented society. RB can exploit these cultural values by positioning the new

product as a product for sports competitive people. This product invention will also enable RB to capture the

arising health trend and increase their market share in the Japanese energy drink market, thereby challenging

Monster. The drink should have the same packaging as their standardized European styled packaging as this

will create country-of-origin effects in Japan through the favorable AGP. However, they should change the

blue color on the packaging. The new color should be green as this is associated with health and energy.

Furthermore, the color green represents vitality and youth in Japan (Mathers, 2018), which fits the target

segment. The adaptation of their product portfolio in the Japanese market can further pose as a test market,

and if successful RB can introduce the product to the rest of the world.

Price

When determining a pricing strategy, it will be important to consider the brand’s current position and target

segment. As RB is targeting the middle- and upper-class in Japan, they should extend their price skimming

strategy to the new drink, as this will represent their brand value and desired positioning illustrating “morefor-

more”. The Japanese moreover have a high purchasing power, thus not overly price sensitive. This pricing strategy

is ideal, taking their differentiation focus into account, in which RB will rely on their Emotional selling proposition

(ESP) to emphasize their brand values. In addition, RB will exploit that Japan has a high uncertainty

avoidance entailing high consciousness of brand names. If RB were to set a lower price on the new product,

they could potentially send confusing signals to the consumers, that the product was for instance poor of

quality compared to their original products, thereby resulting in a positioning error.

Place

The current atypical distribution strategy applied by RB has been successful so far. RB prefers to deal with

small independent venues, but as off-trade has become the leading channel for energy drinks RB should

revise their distribution strategy. When introducing the new product to the Japanese market, RB should focus

on a broad channel width with intensive distribution. RB can at the same time broaden the channel width for

their existing products. This would be suitable as both the new and existing products can be categorized as

frequently purchased convenience products. To acquire a broad channel width the sales force in the Japanese

subsidiary should use indirect channels by targeting wholesalers, as these will distribute the products to

numerous retailers. These initiatives will increase time and place utility and ensure higher market coverage,

thereby challenging their main competitor Monster.

Promotion

When introducing the new healthy drink in Japan, RB should mainly adapt their marketing still keeping their

core brand values in mind. The advertising appeal should be emotional and dramatic, as this travels well in

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

Japan. The goal of the campaign is to grow and increase RB’s perceived value in the Japanese market. This

can be reached by the campaign:

“An energy drink offering more than just energy”

RB will through this imply how they sell a lifestyle and not just a product, thus staying true to their current

positioning. The perceived exclusivity in the new drink will satisfy both the status and admiration need in the

Asian version of Maslow’s hierarchy. When carrying out the campaign, RB should use both advertising and

sales promotion. First, RB should host a running event which will be in perfect alignment with the health

aspect and moreover the Japanese competition culture. At the run, the new drink will be displayed

everywhere and furthermore sampled. The sampling will move the consumer forward to the trial part in the

adoption process, which can lead to an adaption of the product. The event could possibly generate publicity,

as news media might cover it. In addition to the event, RB should use influencer marketing to highlight the

health benefits of the product, while also increasing the brand value through modern marketing channels.

The internet penetration rate in Japan is 90,9%, which would make this a suitable channel (Worldbank, 2018).

The Japanese Influencer Eri Sato (@Rola) would be appropriate, as she has a very extravagant but also active

lifestyle. With her 5,3 million followers on Instagram, sponsored content on this platform will result in a wide

reach, while targeting the young hip segment. The sponsored content can possibly create a word-of-mouth

effect generated by her followers.

Branding and market positioning

By creating strong perceived value in the Japanese market through ESP, RB will exploit the brand aware and

status-oriented culture. The line extension will fit well with RB’s current products and brand value, and it will

further emphasize how RB do not only sell a product but a way of life. Consequently, RB will create global

consumer culture positioning. The applied Product Extension-Communication adaption strategy (Dual

adaption if taking the new invention into account), will help RB gain their desired position showed in the

perceptual map, which will further set them apart from the competing brand Monster.

4. Marketing research study

RB is planning to launch their new healthy energy drink variant in USA. For this, they need to conduct a

research marketing study. It is recommended to use both primary and secondary data combined with

qualitative and quantitative data. Exclusively using primary data will be very expensive while obtaining

secondary data through desk research is a more low-cost approach. Quantitative data combined with

secondary data such as market shares, number of firms etc. can help highlight the competitive landscape in

the US health segment. Qualitative market research is favorably combined with primary data, as RB among

other things can obtain deep consumer understanding. Looking at the type of study, RB should mainly use

focus groups as this can cover many aspects of their marketing research study, like testing product samples,

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

understanding core brand equity of established companies, and last to test a proposed advertisement or

product concept. When collecting the primary data, a nonprobability sample should be used through a quota

sample by earnings per month as this will ensure that the overall mark-up of the US population will be

reflected. This will give RB an overall impression of the health trend, and how it is developing.

5. International production

For RB’s expansion in the world market, I would recommend them following the strategic option B of building

another production facility. This will be the last step in the Uppsala Model through high involvement, which

would moreover eliminate one of their weaknesses seen in the SWOT. RB should initiate a greenfield

investment with 100% ownership, as this will give them full control, since importance lies in RB maintaining

their high quality and brand value.

North America could pose a good candidate for hosting the new production facility, as RB could avoid tariffs

in this market through the NAFTA-trade agreement. Additionally, North America possesses a great business

environment with strong intellectual property rights, a big skilled workforce etc. (Keegan, 2016, p. 99).

Overall, the initiative will create several advantages for RB. First, it will create better flexibility in the

distribution network. If the production in Austria were to run out of aluminum, as has happened before, the

factory in North America could increase production to still be able to fulfill orders. Secondly, it would have a

direct financial impact, as it will diminish the negative impact of exchange rates, avoid tariffs, and decrease

transportation costs to markets nearby. Lastly, North America has the highest volume share of the energy

drink market, thus if they were to reside in this continent, they could be able to serve this large market from

within. This would yield two opportunities 1) RB would obtain greater market knowledge and 2) by close

proximity RB can increase their market share as they can quickly respond to orders.

If RB were to build the factory, they must however be aware how this requires high fixed costs, and that it

would possibly remove economies of scale from their Austrian factory.

Conclusion

In conclusion, RB should make adaptations to their otherwise standardized approach when entering the

promising Japanese energy drink market. By introducing a new healthy product, broadening their channel

width, and adapting their advertisement and promotion, they will gain market shares in the red ocean

market. However, RB should still stay true to their original brand values, such as their price skimming, and

emphasis on selling more than just a product. Else they will position themselves unfavorably. Red Bull will be

targeting middle-aged and young adults with active lifestyles and/or successful careers. The main

competitor in the Japanese energy drink market is Monster Energy, who RB will gain a competitive

advantage over by using the differentiation strategy. In their further expansion, international production

expansion would be recommended, as this will entail financial and distributional benefits.

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

Bibliography

• Amazon.co.jp, https://www.amazon.co.jp/s/ref=nb_sb_noss?__mk_ja_JP=カタカナ &url=search-alias%3Daps&field-keywords=monster&rh=i%3Aaps%2Ck%3Amonster&ajr=0

• Data.Worldbank.org (2018), “Individuals using the Internet (% of population)”,

https://data.worldbank.org/indicator/IT.NET.USER.ZS?locations=JP

• Keegan, W. J., (2016), “Global Marketing – Ninth edition”, Pearson

• Mathers, C. (25/6-2018), “What Is the Meaning of Color in Japanese Culture?”, Classroom,

https://classroom.synonym.com/what-is-the-meaning-of-color-in-japanese-culture-

12081009.html

• Mosterenergy.com/jp, “Front page”, https://www.monsterenergy.com/jp/ja/home

• Parker, S. (“Drinking Matcha in Japan: why the roots of this Instagram favorite runs deeper

than you think”, The Independent, https://www.independent.co.uk/travel/asia/matcha-

japan-tour-uji-kyoto-green-tea-latte-drink-superfood-antioxidents-instagram-

a7875176.html

• Redbull.com, “Strap in for the return of Red Bull Air race in Chiba,” Redbull.com,

https://www.redbull.com/mea-en/videos/red-bull-air-race-japan-2018-event-prview-video

• Redbull.com, “The streets of Japan,” Redbull.com, https://www.redbull.com/int-

en/tv/video/AP-1P353TH551W11/the-streets-of-japan

• Weforum.org, “The Global Competitiveness Report 2018”, World Economic Forum,

http://reports.weforum.org/global-competitiveness-report-2018/

• Wilmore, J. (30/1-2013), “JAPAN: Monster sees success, but faces stiff competition”, just-

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llT2nCt6tGPGAlWrM14Odly3B 3cgkRJqgnREd9jNaH8II

Appendix Appendix 1

Table of content

Table of content .................................................................................................................................................................... 2

Introduction .......................................................................................................................................................... 2

1. Marketing strategy and Internationalization mode ........................................................................... 2

2. SWOT-analysis ........................................................................................................... 3

3. International market selection ............................................................................................. 4

3.1. MACS-analysis ................................................................................................................................................................. 4

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

3.2. Segmentation .................................................................................................................................................................... 5

3.3. The main competitor in Japan ............................................................................................................................................................ 6

3.4. Marketing mix plan ................................................................................................................................................................................ 7

4. Marketing research study ..................................................................................................... 9

5. International production ..................................................................................................... 10

Conclusion .......................................................................................................................................................... 10

Bibliography ....................................................................................................................................................... 12

Appendix............................................................................................................................................................ 12

Appendix 2

Sources used in MACS:

• GDP per capita PPP: Imf.org

• Compounded growth: Desjardins, Jeff (1/1-2019), “Chart: The world’s largest 10 economies in 2030”, Visual Capitalist, https://www.visualcapitalist.com/worlds-largest-10-economies-2030/

• Population in the age of 16-29: Wordbank.org, “Population estimates and projections”, https://databank.worldbank.org/data/reports.aspx?source=health-nutrition-and-population-statistics:-population-estimates-and-projections

• Consumption of energy drink: Euromonitor, “Soft Drinks; Energy Drinks”, http://www.portal.euromonitor.com.esc-web.lib.cbs.dk/portal/StatisticsEvolution/index

• Growth in energy market: Euromonitor, “Soft Drinks; Energy Drinks” http://www.portal.euromonitor.com.esc-web.lib.cbs.dk/portal/StatisticsEvolution/index

• Business dynamism: Weforum.org, “The global competitiveness report 2018”, http://reports.weforum.org/global-competitiveness-report-2018/competitiveness-rankings/#series=GCI4.D.11

• Psychic distance: Hofstede Insights, “Country comparison”, https://www.hofstede-insights.com/country-comparison/

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

Appendix 3

Source: Retrieved from slides.

Appendix 4

Source: Euromonitor.com (March 2019), “Energy drinks in Japan”, http://www.portal.euromonitor.com.esc-web.lib.cbs.dk/portal/analysis/tab

Exam Name: Principles of International Marketing (BINBO1160E + BISHO1004E)

Appendix 5:

Source: Euromonitor.com (March 2019), “Energy drinks in Japan”, http://www.portal.euromonitor.com.esc-web.lib.cbs.dk/portal/analysis/tab

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