Feasibility Study for Red Bull In Korea Essay

1.0 Introduction
Red Bull is an Austrian Company that was started by a German entrepreneur known as Mateschitz. He got his inspiration from an Asian based drink that had the ability to revitalize one’s body and mind when exhausted. This was the same quality that Mateschitz was considering when he established the drink during the late eighties. At first, the company began selling Red Bull locally but shortly after, they ventured into other countries such as the United States, The United Kingdom, and Hungary among others.  The company’s shares have risen drastically over the past few years since it is one of the most well known energy drinks in the world. (Speadace, 2007)

                       Red Bull, as a product is an energy booster that can restore one’s strength and is distributed in over one hundred and thirty countries. During the year 2006, close to three billion cans of red bull were sold to various markets found throughout the world. This means that the company has established quite a name for themselves in that industry.  The product itself is known for its rich energy content ensured by measured quantities of glucose, sucrose and fructose. It also has other nutrients such as vitamins, taurine and caffeine. Many people use red bull as a mixer for alcoholic drinks. However, the most notable use is boosting physical strength. The product has the ability to raise one’s metabolism temporarily. Red Bull energy drink is manufactured by Red Bull GmbH and comes in various forms. For instance, there is a sugar free version, a cola beverage and many other varieties. The purpose of this marketing plan is to conduct a Feasibility study for introducing Red Bull from Melbourne to the Korean market. (Speadace, 2007)

2.0 Macro-environment research
The macro environment will be studied through a PEST analysis, where PEST refers to the Political, Social, Economic and Technological factors likely to affect the company when it enters into the Korean market.

2.1 Political factors
The country under analysis is a politically stable one. This was not always the case because Korea has emerged from what used to be a politically turbulent nation. In the past, Korea had dictators as presidents. Although some of them may not have depicted these dictatorship traits openly, it was a known fact that they controlled their electorate. These instabilities sometimes led to war. However, such is not the case today, Koreans boast of some of the most stable political environments in the region; this is especially given the fact their Asian counterparts have been performing poorly in this area.

                        Korea belongs to a number of regional and international trading bodies; one such body is the OECD. The Company has a number of Free Trade Agreements; however, they have not yet entered into a trading agreement with Australia. This means that the Melbourne based Red Bull company ought to be prepared for additional costs as a foreign investor. Besides the latter, Korea operates in an international manner and would therefore welcome foreign investment. (Austrade, 2007)

2.2 Economic factors
The Korean economic climate has grown by leaps and bounds over the past few years. However, it should be noted that it may not be easy to predict or forecast future performances. Owing to the fluctuations in their economic climate, it would be necessary for Red Bull Melbourne to prepare for both good and bad times because Korea has recorded one of the most historic economies changes of our time. (Coyner & Song Hyon, 2008)

                        It is good new to find that the country is an active participant of the global economy. Many multinationals can be found in Korea and the same may be said of Korean owned companies in other parts of the world. Consequently, issues such as VAT would be favorable for Melbourne. In line with this is the fact that the country’s infrastructural facilities have grown rapidly over the years. This is definitely a plus on for any foreign investor because movement of factors of production will be easily facilitated there.  Privatization is also another issue that has been taken seriously by the South Korean government because in 2008, the country’s parliament just finished privatizing its banks.

It has also been predicted that between the years 2009 and 2011, Koreans will keep embracing foreign capital as part of their economy. (QuichMBA.com., 2007)

                        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. Besides the latter, it has also 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 Korean social scene has changed in response to their economic situation. Gone are the days when this country borrowed from donors; instead, the country has now become a donor. In line with this status, many Koreans are now widely informed and most of them demand for quality goods. They have become very choosy and are very particular about what they purchase. This is a word of caution to the Red Bull Company as it intends on penetrating this market. They must strive to convince the average Korean that their products are indeed worthwhile. (Coyner & Song Hyon, 2008)

                            Many foreign entrepreneurs may make the mistake of imagining that Korean consumers are not aware of their rights. However, this is a big misconception because much has changed over the past few years. Consumers now know what is due to them and product liability has become an important concept in this country.

                           Trade Unions within Korea were largely associated with a military-like approach. However, such characteristics are slowly diminishing owing 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 labor. Red Bull should also note that many Korean workers these days are embracing the five-day week long approach to work.

2.4 Technological factors
One of the most notable issues with regard to the Korean technological scene is that integration of technologies into people’s daily lives has affected them tremendously. Now broadband networks have become synonymous with Korean businesses and any company (including Red Bull) doing business there must ascertain that they have incorporated these aspects into their operations.

3.0 Competitive analysis
Before Red Bull can establish themselves in the Korean market, they should examine the key internal and external factors that can affect the company. This will be performed through a SWOT analysis, industry analysis and also through other marketing theories.

                     The Australian based Red Bull company should consider the nature of the Korean energy drink industry. An overall industry analysis will be crucial in determining how best to approach business there. An industry can be an oligopoly, monopoly, free market, etc. For this case, there is pure competition within the Korean Energy drink industry. There are so many energy drinks that offer the same benefits. Consequently, the most appropriate method of doing business in such an industry is by creating psychological differentiation. This means that when companies portray their products in a certain image, then they have high chances of doing well- Red Bull should follow this approach

3.1 Strengths
Red Bull is an internationally owned company, therefore, the company stands to benefit from its brand name. It has successfully marketed itself in Australia and would therefore enter the Korean market easily. In other words, the company’ brand name is quite strong in the rest of the world thus implying that Koreans have heard about it in the process. In line with this is the fact that the company has been sponsoring a lot of sports activities. Consequently, they have established a ‘hip’ image and this can also apply to the Korean market once they establish themselves there.

3.2 Weaknesses
Red Bull as a product has been battling many litigations with regard to the content of their commodity. Some individuals have asserted that when Red Bull is consumed regularly, it can cause heart attacks or other heart related complications. As if that is not enough, others have asserted that Red Bull’s ingredients do not synchronize with alcohol as they can bring health problems. As it has been mentioned earlier, many Koreans are looking for quality in their products. These litigations could also arise in Korea if Red Bull establishes themselves there. (Coyner  & Song Hyon, 2008)

3.3 Opportunities
Red Bull has certain exceptional qualities that cannot be found in local Korean products or in other energy products. These include the fact that Red Bull can reduce the levels of negative substances in the body such as cortisol. This aspect is quite useful to the company and can be used as a counter for some of the assertions made by local Korean manufacturers about the positive benefits of Korean made energy drinks. Also, because Red Bull is not an entirely natural product, then the amounts of useful substances in them can be known. For instance, a can of red bull has specific milligrams of glucose, sucrose and others. Consequently, consumers can be informed about how much of a certain product they are consuming and thus take measures to control it. This aspect should also be highlighted by the Australian based manufacturers once they enter the market. Other issues include high quality production with strict adherence to international health and hygienic concerns.

                      Also, the product’s packaging is quite convenient. While other energy drinks are found in bottles, this particular drink is conveniently packed in cans and can thus be carried around everywhere. Also, the company could boast of the fact that their commodity comes in a sugar free version for those consumers who may be sensitive about their calorific intake. Consequently, the company can boost its sales by marketing their product as one that can accommodate almost all types of consumers. (Speadace, 2007)

3.4 Threats
The biggest threat to introducing Red Bull energy drink from Melbourne to this country is the fact that the idea of energy drinks originated from this continent. Consequently, there are a variety of competitors in the market place already. For instance, the CHEERS Company is an energy drink manufacturers. Not only is the company Korean based, but it also sells its products internationally. On top of the latter, the company’s strength lies in its product type. The energy drink they offer is completely natural unlike Red Bull. This is an aspect that Red Bull will have a hard time with. As if the latter is not enough, the CHEERS Company also markets its products as hangover cures. They explain that the product has the ability to boost liver functions through detoxification. However, Red Bull can take advantage of this by marketing the overall benefits of their products too.

               Besides the latter, there area also other companies that may threaten Red bull’s performance within the Korean market. Some of them include

·                    Youngi Drink Company

·                    Vita 500 Drink

·                    Red Ginseng Liquid

                These and many more companies in operation within the Korean market and this therefore means that Red Bull should be ready for a lot of competition in the energy drink sector.

4.0 Target market analysis
The company’s product is based on its energy giving properties. (Speadace, 2007) Consequently, it would be devisable for the company to target the youth especially those who engage in sports. However, this should not be over-emphasized as it could alienate consumers who do not like sports. They should focus on consumers between the ages of sixteen and thirty five. These are the people who constantly need to replenish their energies and they are the people who would understand the company’s international image.

5.0 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

5.1 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)

5.2 Promotion
Melbourne’s energy drink company has already established a strong marketing campaign for themselves. They are known for the ‘red bull gives you wings’ slogan. The slogan has come across in variety of advertisements made by the company. One of the most widespread ones is some cartoon characters that attempt to imitate ‘Adam and eve’; the first Christian human beings in the world with regard to red bull’s tempting qualities. The company’s production team could come up with a similar advertisements but one specifically designed for the Korean market. For instance, they could depict a gentleman leaving behind  beautiful lady for a red bull.

                                Since the promotional aspect of any commodity could make the difference between accepting the product or not, the company should lay a lot of emphasis on this factor. For instance, they could conduct a series of promotional exhibitions in supermarket chains. Also, the company could take advantage of local celebrities to endorse their product. Many young Koreans look up to their celebrities and this would add a local feel to the product. Additionally, the company should give discounts for those consumers who purchase in bulk. For instance, they could offer one extra can for every dozen purchased.

                               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)

5.3 Price
In order to appeal to the masses at first glance, it would be favorable for Red Bull to set their prices at a slightly lower level than their local counterparts. This pricing strategy is known as penetration pricing. By doing this, they will attract a lot of interest in the product and they can also appeal to wide segments. However, in order to recover their capital and begin profiting, the company should revise its price to meet prevailing standards. This will be plausible because the company will already have set a client base.

                                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; it 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 instance, the sugar-free cans should be sold at a higher price than the normal ones.

5.4 Place
Many entrepreneurs tend to ignore distributional strategies assuming that each member of the distribution channel will play their part in the chain. However, this may not necessarily be the right approach. In essence, the company ought to be very specific about what they require their channel members to do. For instance, the company could give retailers their posters, they could also be the route used to market the product directly to consumers. Besides this, the company should also take advantage of wholesalers by offering them, trading allowances for those who take up large commodities of times. (Vuotto, 2003)

                        One of the most influential partners that the company needs to collaborate with bars and restaurants. 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.

6.0 Market entry strategy
In order to enter effectively into the market, it would be advisable for Red Bull Australia to first use an intermediary. In other words, they will be using the indirect approach to marketing. Indirect entry is advisable because the Korean energy drink segment is a bit complex. Using a third party would therefore ease the company’s transition into this market because they understand the dynamics of that respective country. However, as they continue trading there and after they have understood the market, then they can consider letting go of their intermediary and establishing themselves as an independent business. Some of the intermediaries that they could use are

·                                                    Freight forwarders

·                                                    International trade consultants

·                                                    EMCs

                 The company should also consider the mode of distribution that would be most favorable to apply in Korea. In this case, it would most appropriate for the company to utilize a series of companies there to sell their commodities. For instance, they could enter into an agreement with one company to sell their products for them online while they handle the physical selling in person. By doing this, the country will have boosted their sales by reaching certain audiences that have embraced broadband networks. (QuichMBA.com., 2007)

7.0 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 the fact 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 the fact that they are 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.

Vuotto, F. (2003): The Four P’s of Marketing: Product, Price, Place, & Promotion; California, Business & Agribusiness Librarian

Austrade (2007):  European wide detectives, Australia Trade Commission; retrieved from http://www.austrade.gov.au/European-wide-directives/default.aspx  accessed on 8th September

QuichMBA.com. (2007): Foreign Market Entry Modes, retrieved from http://www.waynesburg.edu/depts/modules/documents/BUS417supplimentalinfo-foriegnmarketentrymodes-southpointecenter-tedzobb.doc accessed on 8th September

Speadace (2007): Red Bull Company History, retrieved from http://www.speedace.info/red_bull.htm accessed on 8th September

Red Bull (2008): Red Bull Home website; retrieved from http://www.redbull.com/

Coyner, T. & Song Hyon, J (2008): Mastering Business in Korea; Seoul Selection Publishers