Redbull is an energy drink which is produced by Red Bull GmbH which is a private limited company located in Australia. The firm was established in 1984 within the soft drink industry. The energy drink has managed to attain a significant market share of 46. 8% compared to other drinks. This makes the redbull drink to be the market leader (‘It gives you wings’, 2009, p.1).
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The drink industry has witnessed rampant growth over the past few years due to an increase in the consumption rate of various drinks. A large number of investors have been attracted into the industry due to its profit potential. According to Meghan, Ellenbecker, Emily, Leslie and Kelly (2006, p.3), there has been advancement in the size of the industry due to increased consumption of the non alcoholic drink. The beverage drink industry represents 46.8% of the entire non alcoholic market. In 2009, the average level of revenue for the industry averaged $367.1 billion. According to a research by data monitor, it is expected that there will be a decline in the industry’s rate of growth. This will result from increased saturation of the beverage drink market. This will culminate into a decline in the industry’s level of profitability.
In an effort to position themselves more effectively, firms in this industry are incorporating various growth strategies such as formation of mergers and acquisitions. The main objective of integrating these strategies is to enable them attain a high economies of scale in their operation. This trend has caused some players to exit from the market. In addition, increased globalization as a result of technological innovation such as the internet is enabling firms in the industry to increase on their market share.
The success of firms in the industry is also being enhanced by changes in the society. Meghan et al (2006. p.4) asserts that there is a high rate of change in attitudes and lifestyle within the society which are supporting the growth of the industry.
Market analysis using Porter’s five forces
The high level of revenue within the industry is culminating into an increase in the degree of rivalry amongst firms within the industry. Rivalry is also increased by existence of other large players such as PepsiCo Incorporation. This makes competition between firms to be intense in an effort to attain a high market share. Increased rivalry within the market has culminated into price war between firms so as to maintain their profitability level.
The industry is also characterized by a large number of substitutes. This results from emergence of other types of beverages such as coffee and tea beverages and bottled water. According to a study by Meghan et al (2006, p. 4), the coffee and tea account for 11.8% of the total market share while bottled water account for 9.3% of the total market share. However, there is a high probability of growth in this market segment. This will result from the fact that consumers are becoming more conscious with consumption of healthy products.
Meghan et al (2006, p.5) asserts that there are a number of barriers that prohibit potential investors from venturing the industry. For example, the new firms will face intense competition from the already established brands. Venturing the industry requires a huge financial investment and the establishment of efficient distribution networks. In addition, there is difficulty in the ease of exit for firms in the industry. The effect is that there is an increment in the number of firm’s venturing the industry.
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Supplier power within the industry is relatively low. This is due to the fact that there are a larger number of suppliers for equipments necessary for the production of beverage drinks. This makes it possible for firms in this industry to easily switch from one supplier to another. The result is that the suppliers bargaining power is made to be relatively low.
On the other hand, buyer power within the industry is relatively high. For example, institutional consumers purchase beverage drinks products in large volumes. This makes them to be able to purchase the products at a lower price (Meghan et al, 2006, p.6). Buyer power is also enhanced by the facts that there are a large number of substitute products in the industry. This makes the customers switching cost to be relatively low since they have a wide range of beverage products to choose from.
The soft drink industry is very competitive. Some of the firms that pose a threat to the operation of the firm include Coca Cola Company, PepsiCo Incorporation and The Gatorade Company. The following Competitive Profile Matrix illustrates a comparison of Red Bull GmbH with these firms in relation to energy drinks.
|Key success factor||Redbull GmbH||PepsiCo Incorporation||Coca Cola Company||The Gatorade Company|
|Management and human resource||5||4||5||5|
|Geographical scale of operation||4||5||3||4|
From the table above, it is evident that Redbull GmbH energy drink has a relatively high competitive advantage compared to its competitors.
SWOT Analysis of the Redbull
There is a high probability of redbull energy drink succeeding in the market despite the increase in competition. The table below represents an analysis of the soft drink by considering its strengths, weaknesses, opportunities and threats.
|The drink serves as a functional drink since it is rich in nutrients. This makes it to appeal to different consumers.||The drink has not penetrated the entire global market.||Increased demand for non alcoholic products.||Increased competition from other beverages such as coffee and tea.|
|Strong brand identity amongst the energy drink (‘It gives you wings’, 2009, p.2).||The price of redbull is relatively high compared to other substitute energy drinks.||Increased market potential through incorporation of electronic commerce. This will result into an increment in the size of the drink’s market share.||Decline in consumer purchasing power due to financial crisis. More investors|
|The quality of redbull is high. It improves the consumers’ vigilance, rate of metabolism, concentration, emotional status and reaction speed. This makes it to be a favorite drink where there is enormous energy consumption rate.||High probability of success through value addition. This will result into increased customer loyalty.||Change in tastes and preferences amongst the consumers.|
|Growth in the sports industry will boost redbull’s market share.|
|The management of the firm can retain its market share through product-line extension.|
Meghan, D., Emily, K., Leslie, P. & Kelly, Z. 2006. Industry analysis: soft drink. Web.
Red Bull GmbH. 2009. Redbull energy drink: it gives you wings. Web.