BACKGROUND OF THE COMPANY
Red Bull is a drink created in Austria by Dietrich Mateschitz, who modified a functional tonic that he discovered on his Asia tours to fulfill Western tastes. Dietrich undertook the initiative because he was inclined to make a drink, which quenched thirst and also possessed an operational advantage. Consequently, Dietrich managed not only to establish the corporation but also to create an entire new industry with significant worth in billions. In understanding the UAE Red Bull Company and the scale and scope of the energy drinks industry, it is essential to comprehend the essence of an energy drink. An energy drink represents a carbonated beverage that mainly comprises of caffeine and other ingredients to enhance the drinkers’ energy levels. Energy drinks trade has developed throughout years, and the producers are the vital players in the business today. The energy beverages industry has flourished in the recent times. King states that energy beverage intake has risen on average 10% since early 2007 bringing the consumption to over 4.5 billion liters in a span of four years. The energy drinks industry is a trade, which is in a state of augmented growth.
Red Bull represents a titan of the energy drink trade, one that has successfully established, dominated, and developed into a prosperous mineral beverages name. It is under the watch of FMCG business giants like Coca Cola and Pepsi Co. The corporations have significantly targeted the energy drinks company as their industries have started to fall . The drink’s ingredients are created in pharmaceutical corporations to guarantee great value and safety. Due to the chemical elements the drink is believed to enhance performance, focus, response time, mental status, and stimulate metabolism. In the UAE, Redbull drink is widely marketed and sold by the Abela Supermarkets, Abu Dhabi Co-operative Society, and Al Maya Supermarkets among others.
In the UAE, Red Bull faces competitions from Monster Energy, which alongside Red Bull represents the greatest share of the energy drinks trade. Monster Energy possesses a much broader product line than Red Bull with different choices of flavors. Also, the corporation provides a significantly larger can for the same price as Red Bull to create a better consumer value. Another competitor is Rockstar Company. The majority of consumers use Red Bull as an energy stimulant in place of energy bars or other foods. Redbull with its liquid vitamin B supplement competes in the niche market for vitamins and faces rivalry with larger pharmaceutical corporations.
STRATEGY OF THE FIRM
A business can assume various strategies for efficient development. There exist three main strategies that a company can pursue namely the low-cost strategy, the differentiation strategy, and the response strategy.
In the low-cost approach, the company efforts are concentrated on being the supreme low-cost provider of a service or product that appeals to an extensive range of consumers. In the method, a corporation provides reduced price for a commodity, attempting to stimulate and enhance demand and acquire market share. The actual winner is the firm with the lowest price in the industry. Additionally, the approach is associated with increased profits, through which the company can undertake numerous initiatives to enhance its market share.
In the differentiation strategy, the corporation is perceived in the market as having a significantly higher worth to the client or consumer than the offerings of its rivals. Customer value is offered through distinct characteristics and features of products. In the approach, the business must completely understand its clients’ needs and preferences. A company must be driven to innovate to constantly address the requirements while creating a brand to uphold its position and visibility.
The response approach entails reducing order response time and achieving increased accuracy in marketing the right products. A firm strives to offer a highly diverse assortment of goods and services to a client in exact quantity, quality, and variety as dictated by consumer demand.
Red Bull Company uses the differentiation strategy. The approach is due to the company’s limited scope in the energy drink trade. The cost of the drink is about 5Dhs in the UAE, which reveals the distinct differentiation of the product, particularly in a market where everyone is competing for the equivalent client segment. Red Bull possesses an excellent brand image in the soft drinks industry. The beverage upholds the image through focus-differentiating the product by targeting their clients based on the demography (age, lifestyle, culture) and the layout. The trade has many antagonistic rivals with a strong brand image like Coca-Cola and Pepsi.
A core competency represents a harmonized combination of diverse skills and wealth that differentiate a business in the marketplace. Among Red Bull’s core competencies is creating an image of power, promptness, and recklessness, and dominating the energy drink market globally. The firm is using the core competencies in their operations management activities to market the drink as a premium product and to eliminate competitors.
PRODUCTIVITY
Firms Productivity
Red Bull’s productivity is consistent with the corporation’s core competencies and strategies. Thus, production is handled by qualified personnel who ensure that the commodity meets the customer demand. Also, productivity at Red Bull’s is constant throughout the year irrespective of factors affecting production. Manufacturing at the firm is facilitated by compliance with the set regulations.
Different Factors Affecting Productivity
Productivity represents one of the most important concepts within the framework of commercial administration. Many of the management strategies are fashioned attending the respective factors. For instance, one of the important elements influencing productivity and typically assumed as the foundation is the use of new production expertise and more efficient gears. Technology is also a vital aspect. The other factors include internal processes of the corporation..
The external factors are in the outside framework but impact productivity. The internal organization of the business, the business idea, and the labor force are additional contributing elements of production. Foreign factors further impact productivity and they do not directly affect manufacturing processes. The factors that typically influence all societies include technology, finance, and location.
Factors Affecting the Firms Productivity
In the UAE Red Bull Company, the factors affecting productivity include the manufacturing, internal and external factors. Other aspects are location and legal framework.
FORECASTING
Forecasting represents the process of instituting predictions based on the past and current factors through evaluation of trends. Therefore, it is not rare to for a firm’s management to undertake forecasts. At Red Bull, forecasts are mainly aimed at the product, market, and expenses. Sales forecasts are essential at Red Bull, and are done annually. Additionally, the corporation undertakes expenses forecast.
The various approaches enable a company’s projections. All strategies lay into one of two overarching methods namely the qualitative and quantitative approaches. The qualitative models are commonly successful with temporary forecasts, where the scope of prediction is limited. They may be viewed as professional-driven, since they bank on market activities or the behaviors to weigh in with a sound agreement. The methods may be applied in forecasting the short-term achievements of firms, products, and services to meet limitations, owing to its dependence on opinion over measurable data. Qualitative models comprise of the Delphi Method and market research.
Quantitative models, on the other hand, discount the professional factor and attempt to eliminate the human element out of the analysis. The approaches are concentrated mainly on facts to avoid the personal bias in underlying the numbers. They further attempt to forecast variables like sales and gross domestic product in the long-term, calculated in months or years. The quantitative models include the indicator approach, econometric modeling, and time series methods. At Red Bull, the management employs both qualitative and quantitative methods of forecasting. Red Bull forecasts its degree of accuracy through evaluating past sales and by using the opinions of the clients.
CAPACITY
Red Bull Long-term Capacity Planning
Over the long term, capacity planning at Red Bull translates mainly to tactical issues concerning the company’s main production facilities. Technology and transferability of the procedure to other products is similarly entangled with lasting capacity planning at Red Bull. Sustainable capacity planning at Red Bull develops when temporary variations in capacity are inadequate. For instance, if Red Bull accumulation of a third shift to its existing two-shift strategy fails to yield sufficient output, and authorizing arrangements cannot be made, one viable substitute it does is to increase capital tools and adjust the layout of the plant (lasting actions). Red Bull further adds extra installation space or builds a new facility (lasting options) where possible.
Red Bull Short-term Capacity Planning
In the short term, capacity planning at Red Bull regards matters of preparation, labor changes, and harmonizing resource capabilities. The aim of short-term capacity planning is to manage unpredicted shifts in demand in a financial way. At Red Bull, the time frame for temporary planning is often only a few days but can extend to as long as six months. Options for instituting interim modifications in capacity are several and offer the choice not to meet demand at all. The simplest and most frequently used technique to intensify capacity in the short term at Red Bull is working overtime.
Red Bull similarly upsurges capacity by improving the application of their capitals. Ideal options in the group are employee cross training and overlapping or astounding shifts. A cleverer tactic employed by Red Bull is adjusting the output. Regulating the production or offering complimentary services are instances. In amenities, Red Bull permits clients to do some of the processes work themselves.
Like most corporations, having sufficient capacity at Red Bull is always a challenge. To counter the problem, the management tries to transform demand. Besides, the company further hires employees part-time and incorporates working extra hours.
Steps in Capacity Planning
Stevenson defines the following steps in capacity planning:
1. Estimating future capacity requirements. Red Bull achieves it through forecasting.
2. Evaluating existing capacity and facilities. Red Bull achieves it by identifying gaps in production factors.
3. Identifying alternatives for meeting requirements. Red Bull has labor substitutes like employing personnel part-time.
4. Conducting financial analysis. Red Bull employs sales and expense forecasting.
5. Assessing critical qualitative issues. For Red Bull, the factors include competition and internal factors, which are regularly evaluated.
6. Selecting the best alternative for the long-term. Red Bull has various options ready in case of need. They include increasing the plant’s layout and finding alternatives through financial analysis and simulation.
7. Implementing alternative selected. Red Bull employs different choices owing to its qualitative and quantitative approach.
8. Monitoring outcomes are done through regular assessments and evaluations at the company.
The Difference between a Leading and the Following Capacity Planning Strategy
A leading strategy is more aggressive than the following strategy, since a firm increases its production capacity in advance of projected increases in demand. The following strategy is a more conservative approach than the leading approach. Unlike the former, the following strategy reacts to actual upsurges in demand by boosting capacity after the operation is running optimally instead of increasing capacity in anticipation of demand. Red Bull employs the leading strategy as a means of luring clients away from rivals, since the firm is susceptible to inventory shortages when demand increases.
PROCESS SELECTION AND FACILITY LAYOUT
Process Types
The process includes the following activities. The job shop that provides high flexibility to produce a range of products in limited quantities, The batch process represents a higher volume job shop where similar products are produced repetitively. Line process contains high volumes, homogenous merchandises, and devoted resources. Last one is the continuous process that possesses great capacity and reduced flexibility. The process works with non-discrete objects that are not separated into their ultimate parcels until the very culmination of production.
Facility Layouts
Reid and Sanders state that layout planning represents deciding the appropriate physical arrangement of entire resources within a facility. A layout can significantly impact productivity. The four key layout types include process designs that groups identical resources together, product layouts intended to manufacture a clear product efficiently, hybrid layouts that fuse features of both product and process layouts, and fixed-position layouts where the product is too huge to relocate like a structure.
Figure 1. Comparison of Processes
Selection Process and Facility Layout Followed by Red Bull Company
The method selection at Red Bull is batch process. Production is highly flexible and manufactures small sizes. The method is characterized by the manufacture of a distinct brand separate from the others. The advantage accrued is that the company can concentrate on producing a high-quality brand that meets the clients’ demands. The process also helps in saving capital.
PRODUCT AND SERVICE DESIGN
Various Product/Service Designs used at Red Bull.
The products designs at Red Bull aim to reduce environmental impact and energy usage. The packaging cans are intended to promote the theme of recycling. The products are also fit into sports perception and culture. Another product design goal at Red Bull is the reduction of caffeine and increasing active ingredients of Noo Tropics, chemicals that stimulate mental awareness.
Legal, Ethical and Sustainability Issues
Administrative agencies control various establishments and define guidelines for averting detrimental matters from being employed in product design. Injury instigated by the product is the duty of the producers. Manufacturers are accountable for any harm or damages caused by their product owing to its design or craft, similarly recognized as product liability. It is also likely that they might face litigations if their products cause injury to customers. Administrators must probe if there is demand for their product or service. If the business advances its goods or services agreeing to the clients’ requirements, their product will be prosperous.
Legal bodies similarly require looking at sustainability when designing and manufacturing the product/service. The four features of sustainability include life cycle assessment, value analysis, remanufacturing, and recycling. Life cycle assessment centers on the environmental effect that the particular product has over its lifetime. Value analysis delves at the parts within a product and pursues to decrease the price. Remanufacturing has become significant over the preceding few years and comprises of substituting worn-out and faulty products. Recycling encompasses recovering old materials for prospect usage. The strategy not only saves cash but gratifies ecological concerns.
Red Bull Company ensures that it operates with the ethical and legal framework of the UAE policies. Additionally, in enhancing ethical considerations, the company engages in social activities for the welfare of the communities like charity. Also, the firm ensures that advertising meets the required legal and ethical standards. In sustainability intiative, the company undertakes an awareness campaign to improve recycling of the cans.
LOCATION
Importance of Location Decisions
Location decisions are essential for a company’s marketing strategy, the cost of operations, growth, and depletion of resources. There also exist strategic significance of site decisions, which includes lasting commitment, impact on revenues, operations, investments, and supply chains. The decisions are imperative for Red Bull’s location, since they help achieve the objects related to profit potential and identifying numerous locations to choose from.
The Steps when Selecting a New Location
1. Selecting a new location entails identifying dominant setting factors. Managers or administrators identify the location elements that are required for the business. The level necessitates managerial knowledge and judgment.
2. Developing location alternatives. Upon distinguishing the dominant factors, the administrators can pinpoint location options that satisfy the chosen elements.
3. Evaluating site options. Managers assess the options of locations and institute final choice. The step is a challenging process, since a location benefits include primary and secondary preferences.
Factors Considered by the Firm
Red Bull considered various factors when making the location decisions. The factors included local aspects, community considerations, multiple plant strategies, and site-allied factors (Red Bull, 2014). The regional factors encompassed the place of raw materials, markets, labor factors, climate, and taxes. Community considerations entailed services, quality of life, consumer attitudes, taxes, environmental guidelines, utilities, and developer assistance. The site-related elements consist of transportation, environmental, legal, and land. Additionally, the firm has to consider multiple plant approaches that include product, market area, and process plant strategies. Nevertheless, the organization has also examined service and retail locations putting into consideration manufacturers. Finally, Red Bull Corporation considered the global factors.
QUALITY MANAGEMENT
Red Bulls Management of Quality
Red Bull manages quality through operations involving the determination of quality policy and implementation through quality planning and assurance (Red Bull, 2014). Therefore, the firm ensures that the products meet clients’ requirements. In managing quality, Red Bull ventures into training of workers on using new processes and also creates incentives associated with quality objectives. Also, the firm has developed a feedback mechanism to facilitate constant growth.
Costs Associated with Quality
One of the costs associated with quality is penetration pricing. In the approach, the company’s laser is sold at reduced average price than that of its peer product categories. The cost of offering Red Bull laser at reduced prices helps in gaining product diffusion and adoption within the marketplace. The second cost is associated strategy with premium pricing, which aids recovery of expenditures related to the initial penetration pricing.
Quality Tools and how Red Bull can use them
There exist several tools that a firm can use effectively to troubleshoot quality. It includes flowcharts, check sheets, and control charts. Flowcharts define a procedure in as many details as possible by diagrammatically showing the steps in appropriate sequence. Red Bull can use flowcharts to identify vital process points for control, pinpoint areas for additional improvement, aid illustrations, and resolve challenges.
Check sheets help organize facts by category. They reveal the interval of a distinct value. Red Bull can use check sheets to reduce administrative operations and pinpoint flaws. A cause and effect tool describes a correlation between variables. Red Bull employs the diagram to identify areas where facts must be gathered and evaluated. Therefore, it is one of the improvement tools.
Red Bull operates a thriving business in the UAE. The firm employs a differentiation strategy and short-term and long-term capacity planning approaches. Unlike its competitors in the region, Red Bull assumes a leading strategy. The brand has strong recognition and loyalty due to providing customer satisfaction through time.
