Red Bull Goes to ChinaThe energy drink Red Bull is produced by the Austrian Company Red Bull GMBH. Founded in 1987, the company that gives you wings sold 6.8 billion cans, up 8%, across 171 countries in 2018. Top growth markets included India (+30%), Brazil (+22%) and Eastern Europe (+22%). According to the owner and CEO of the company, Dietrich Mateschitz, about 10% of sales were profits. The major part of Red Bull´s expenditures are marketing related. The energy drink producer has traditionally pursued a global communication strategy with high marketing activity for advertisement, sponsorship and product placement. Their slogan is "Red Bull gives you wings” and has been used consistently around the world. Red Bull sponsors two Formula-1 drivers, four football teams and hundreds of sport events. The management pursues the strategy to invest the major part of profits into the trade mark Red Bull. As a result, the company’s trade mark is the most highly valued of any Austrian company. In 2019, Forbes estimated the brand value to be $10 billion.

Red Bull's rapid international expansion has earned it the undisputed number one position in the world's energy drinks market, according to Euromonitor International. In the face of growing competition from rival brands such as Hansen Natural Corp's Monster in the US, Red Bull is planning a more aggressive assault on Asia. Red Bull has been sold in China through a licensing deal with “Red Bull China”, a joint venture between a Taiwanese and a Chinese company since the 90ies. Red Bull also entered China directly through exports in 2014. The two versions are similar but not identical:

Due to a drawn out dispute between the joint venture partners of Red Bull China about the rights to the trademark in China, overall sales growth has been disappointing in the last few years.

Red Bull's prime consumers are in their 20s and the large youth population in the region can potentially become energy drinks consumers in the long term. Last year Chinese energy drink sales reached 25 billion yuan, registering an annual growth of 45%, according to the market research group China Investment Research Consultant. Compared with the world's developed countries where the average per capita consumption of functional drinks is about 7 liter per year, the average Chinese consumer only drinks 1.5 liter of functional drinks.

1) Going globala) Red Bull has been truly committed to becoming a global company. The company has

been entering new markets at breathtaking speeds. What are potential advantages and disadvantages of going global?

b) What are important criteria to assess the attractiveness of the Chinese market for Red Bull?

c) What are advantages, disadvantages, and potential problems of the licensing deal?

2) Competitive analysisRed Bull has been very successful and made its owner one of the richest people in Austria. a) What is Red Bull’s main competitive advantage? b) How does Red Bull achieve this competitive advantage? What core competencies are

required to pursue Red Bull’s global competitive strategy?c) What is a brand and how can you calculate its dollar value?

3) Red Bull’s global communication strategya) Briefly describe the nature of a global versus a regional communication strategy.b) What are potential advantages and disadvantages of Red Bull’s global communication

strategy? c) What are potential problems of exporting the “original” Red Bull to China since 2014?

4) Pricinga) A can of Red Bull is sold to wholesalers in the United States for $0.8. Assume the

company wants to charge Chinese distributors the same price adjusted for additional shipping cost. Since the currency exchange rate is 1$ = 6 yuan, the price of a can would be 5 yuan (4.8 yuan +0.2 yuan for additional shipping cost).

b) What are potential problems with this pricing strategy?c) How would you go about setting the price?

5) CultureChina belongs to a high context culture. Using Hofstede’s dimensions, China rates high on Collectivism, low on Uncertainty Avoidance, high on power distance, and high on Masculine. What would you do differently in managing Red Bull’s sales force in China versus Red Bull’s sales force in the U.S.?

6) Financial AnalysisAssume Red Bull is produced in Austria and shipped to Chinese wholesalers. The Chinese wholesalers pay in yuan. a) What happens to Red Bull Austria’s profit from its Chinese business if the value of the

Euro is going up versus the U.S. Dollar?b) Management is concerned about the currency exchange rate risk concerning its

Chinese business. What could management do to greatly reduce this exchange rate risk?