Energy drinks are one of the emerging commodities in the world that are having a very high rate of growth in their market. People in the world are shifting from the consumption of carbonated drinks to taking more healthy drinks. This has enabled the energy drinks market of energy drinks to be increased at a very high rate. The products have translated from being a niche commodity to a fast growing in the drinks markets. These changes are evident because the people are more focused on being fit and healthy. People are trying as much as they can to avoid complications that are brought by carbonated drinks.
Red bull is an Australian product that is a product. It is the most selling energy drink worldwide and has more than 5.8 billion cans sold in 2016. It is a modification of a Thailand drink called Krating, which was designed to meet the taste of the western consumers (Henges, et al 2018). The drink is designed in 19 different types based on different flavors. The company has also been involved in sporting activities in a very extensive way. The brand has become continually popular and is extending to different markets n the world. It sponsors extreme sporting activities such as crushed ice and others. The following is a five porter's analysis for of the brand.
Very many companies in the world manufacture energy drinks. The different companies include the monster, full throttle, and rockstar. All these companies are part of the competitive rivals for red bull. However, the red bull has been able to secure a very great market share in the drinks market than all the other competitors while combined. There is a continuous growth in the energy drink industry and this is an opportunity for both red bull and the competitors. Red Bull has been a leading example and the competitors are trying to follow the footsteps by making their business diverse and getting involved in sporting activities (Morley, Howard, and Henges, 2018). Having a great share of the energy drinks market the company means that red bull is having many competitors and therefore is facing a very high competition.
The threat of new entrants
For a business to enter into the energy drink industry there has to be many innovations that will enable the business to pick and stand. It is very difficult for a new business to enter into the energy drinks industry and this discourages new entrants into the industry. The barriers that prevent new entrants in the industry are very high. Those businesses in the industry made many investments so as be who they are now (Thow, et al 2018). Therefore, new entrants will have to spend a lot of money and other resources to be able to catch up with the existing players. In addition, developing and economies of scale is a great barrier because it will take a lot of time to establish. The entrants are also faced with many challenges in the effort to develop a national distribution or even global distribution. The toughest task comes when trying to acquire a market share in the available market for the new entrant. Red bull is therefore not facing a threat from the new entrants into the market.
Bargaining power of the consumer
Red bull has left suppliers with a very low bargaining power due to the strategies that they use in the production. It has also reduced the cost involved in switching suppliers. A simple production process that only requires a few raw materials has done this. The company requires the raw materials in large amounts thus giving an opportunity for any company to supply the raw materials (Sánchez, 2018). The company, therefore, is able to shift from one supplier to another because of the many suppliers available. In fact, most suppliers are known because they have been given an opportunity to be part of red bull suppliers. This shows that the suppliers are having a very low bargaining power (Nienhuis, Van Hoof, and Van der Lely, 2018).
Bargaining power of buyers
Energy drink market is a small market that has been identified for brand loyalty. However, there is a lot of competition in the market despite the fact that it has a small market. Red Bull has held a certain bargaining power over their customers because it has a very high market share in the market. Therefore, the company can increase the prices of their commodity moderately without having to lose any buyer (Garrett, et al 2018). On the other hand, those who are high earners and therefore are not sensitive to increase in prices mostly consume energy drinks. The drink contains caffeine, which is addictive to the buyers and therefore reduces the bargain powers. Therefore, the bargaining power of the buyer is at a medium level.
Threats of substitutes
The things that can substitute for energy drinks are coffee and other homemade drinks (Billich, et al 2018). In the case of fruit, smoothies are natural and are the only things that can bring a treat to red bull. Many controversies are associated with the consumption of red bull. Some say that the drink is not healthy and therefore there is a need to substitute it with a natural drink. However, the red bull has been able to deal with these controversies by ensuring that the raw materials that they use are of the best quality (Vester, et al 2018). Therefore, even after the controversies the primary consumers of the energy drinks continues to consume the products. This has lowered the threat of substitution very low.
Energy drinks are an emerging commodity and have substituted most of the carbonated drinks. Red Bull has the greatest market share in the energy drink market. The brand has been able to acquire a lot of competitive advantage due to their strategies of production and marketing. The brand, therefore, is able to make the greatest sales as compared to its rivals combined. It has also been able to reduce the bargaining power of both the buyers and the suppliers.
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