The paper “ Red Bull and Energy Drink Industry - Threat of Substitutes, Bargaining Power of Suppliers and Buyers, Industry Rivalry, Threat of New Market Entrants” is an outstanding variant of case study on marketing. In 2001, Red Bull's energy drink dominated the ‘ energy drink’ market as indicated by Griffiths. Red Bull still holds on to its market dominance despite the entry of competitors in the market (Brad 2012; Michelle, Bichler & Annika 2012). Using Porter’ s five forces, Red Bull’ s external market is defined as follows: The threat of substitutes: Low Red Bull’ s target market (people aged 16-29 years) is not pricing sensitive.
Additionally, Red Bull is purchased for its convenience to a particular situation based on its brand power and loyal consumer base (Chaundy 2001). As such, there is less likelihood of substituting the product with other beverages. As a premium product, Red Bull’ s high prices are perceived as a reflection of its high quality (Griffiths 2001; Wipperfurth 2003). Substitutes that compete on a price platform, therefore, stand the risk of being perceived as being of lesser quality. Although Jones (2001) indicates that imitators of Red Bull are not able to stay in the market for long, the energy drinks market has some players whose longevity has passed the test of time.
Such include Lucozade Energy, Irn-Bru 32, Carlsberg’ s Shark, Battery (in Finland), Pepsi’ s Amp, and Coca-Cola’ s Burn among others (Dahlen, Lange & Smith 2010). According to Dahlen et al. (2010), most of these new products mimicked the Red Bull mystique, which includes youth culture, anti-establishment and sexual virility. Fortunately for Red Bull, its manufacturer has successfully reaffirmed its image through multimedia exposure throughout the years, thus downplaying the threat posed by substitute products. The differentiation tactic has also helped Red Bull’ s brand image by creating perceptions in consumers’ minds that the energy drink is unique, and it delivers superior benefits that no other energy drink can give (Lidsz 2003).
In some markets, Red Bull has cultivated street credible images that have earned it nicknames such as ‘ liquid Viagra’ , ‘ speed-in-a-can’ , and ‘ liquid cocaine’ (Dahlen et al. 2010, p. 316). Substitutes such as energy smoothies and coffee among others do not have the caloric content, the stimulation duration and the convenience of Red Bull.
As such, the product has successfully established a niche market owing to its combination of characteristics. Bargaining power of suppliers: Low The production of Red Bull is uncomplicated and requires little input from external suppliers (Hanrahan 2010). As such, the bargaining power of suppliers is low. The short supply chain assures suppliers of significant profits. However, their only way of accessing such profits is through the Red Bull brand owner. Such a relationship tilts the balance of power in favor of the brand owner. The possibility of a huge number of suppliers who would be willing to work with Red Bull also tilts the balance of power in favor of the brand owner, hence meaning that suppliers do not have as much bargaining power as would happen if suppliers were limited. Bargaining power of buyers: Low Derived demand in the market does not afford retailers much bargaining power hence making it unlikely for consumers/buyers to have similar powers (Kumar, Linguri & Tavassoli 2004; Sursuk 2008). The strong consumer loyalty gives most pricing powers to the product manufacturer.