Market Structure and competition

Competition is the presence of substitutes in the market . It brings in an interesting element in the marketing strategies for any product. Competitors can be any one :- be it the product with same features but different brand, enjoying more or less the similar brand loyalty as yours, or a product which is not a close substitute. For example for coke , apart from Pepsi and other cold beverage brands, even drinks like nimboo pani and sugar cane juice from a small outlet are its competition.

Red Bull being the first mover in the energy drinks category had an advantage of creating a strong brand for itself without any competitors around. Like any other new to the world product category, the success of Red Bull made other brands to come up and compete with the brand. To compete with these brands, Red Bull came up with many successful and defensive marketing strategies.

Energy Drinks have become very famous in the last decade. During the last ten years, there were established hundreds of them around the world. The energy drink market continues to grow even in light of the tough economy and increased health scrutiny. Soda sales have been declining steadily over the same period, while energy drink sales have been booming.

Red Bull's COMPETITORS :-

Red Bull continues to dominate “The Top Brands” chart with over 40% of the market share.

Since the main purpose of Red bull is to give energy, any product solving the same problem will be its competitor. In India, products such as Glucose-D, Blue, Rio, Tzinga are its direct competitors where as tea and coffee will be its indirect competitors.

The competitive scenario in a market can be properly analyzed using Porter’s model of 5 forces analysis which is represented as follows:

1. Industry (Segment) Rivalry:

The market in an industry can sometimes be unattractive if the product already has strong substitutes and competitors. This might lead to a large amount of strife between competitors. Such a market experiences a lot of price fluctuations.

Industry Rivalry for red bull is low owing to the following:

1.Red Bull has turned their niche market into a mass market and a regular buy for people around the world.

2.Its brand familiarity has given them a key source of competitive advantage.

3.Differentiation by Tzinga (another popular energy drink that is trying to enter the market) is a strategy being used. They are becoming direct competition adding caffeine into their drink making it a stimulation drink.

4.Red Bull has secured distribution channels that make it hard for competitors to enter the market.

5.Red Bull has a very loyal customer base.

2. Potential Entrants:

A potential entrant refers to local entrants into the business which bring in competition to the product. On one hand, a local brand might find it difficult to establish itself in the market, however being locals; they have a greater understanding of the customer.

The threat of a potential entrant in the market for red bull is medium.A drink like a famous caffeine based soda that is manufactured in the local market and hence has the advantage of cheaper rates and can be competition to red bull.

3. Substitutes:

Substitutes refers to products which might pose a threat to the product because they are almost identical or might even prove to be a better selling product if the company selling it goes for aggressive pricing.

Although Tzinga, a new entrant to the market (priced at almost 1/3^rdred bull), might seem a big competition. Threat from substitutes is very low for red bull because Red Bull’s High prices are linked to their high quality, thus identical substitutes at lower prices don’t really affect the Red Bull market

4. Bargaining Power of Buyers

Being a small market with strong customer loyalty, it’s possible for the company to have all of the pricing power and for the customers to have very low bargaining power. There is a pull in the market or a derived demand giving retailers not much bargaining power

5. Bargaining Power of Suppliers

Red Bull has a short supply chain meaning high profit at each stage of the chain. The production process for Red Bull is uncomplicated, leaving the suppliers with not much power because there are low input costs. Hence the bargaining power of suppliers is also low.