Red Bull SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by Red Bull managers to do a situational analysis of the organization . It is an important technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Red Bull is facing in its current business environment.

The Red Bull is one of the leading companies in its industry. Red Bull maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis.  SWOT analysis a highly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Red Bull to develop four types of strategies:

• SO (strengths-opportunities) Strategies
• WO (weaknesses-opportunities) Strategies
• ST (strengths-threats) Strategies
•  WT (weaknesses-threats) Strategies

SWOT Matrix Strategies Objective

The primary purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Red Bull strengths, and eradicate its weaknesses.

Step by Step Guide to Red Bull SWOT Analysis

Strengths of Red Bull – Internal Strategic Factors

As one of the leading companies in its industry, Red Bull has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Red Bull are –

• Strong Free Cash Flow – Red Bull has strong free cash flows that provide resources in the hand of the company to expand into new projects.
• Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
• Successful track record of developing new products – product innovation.
• Highly successful at Go To Market strategies for its products.
• High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
• Highly skilled workforce through successful training and learning programs. Red Bull is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
• Good Returns on Capital Expenditure – Red Bull is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
• Superb Performance in New Markets – Red Bull has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.

Weakness of Red Bull – Internal Strategic Factors

Weakness are the areas where Red Bull can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

• High attrition rate in work force – compare to other organizations in the industry Red Bull has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
• Not highly successful at integrating firms with different work culture. As mentioned earlier even though Red Bull is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
• Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
• Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Red Bull needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
• Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
• The profitability ratio and Net Contribution % of Red Bull are below the industry average.
• Investment in Research and Development is below the fastest growing players in the industry. Even though Red Bull is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.

Opportunities for Red Bull – External Strategic Factors

• Government green drive also opens an opportunity for procurement of Red Bull products by the state as well as federal government contractors.
• The market development will lead to dilution of competitor’s advantage and enable Red Bull to increase its competitiveness compare to the other competitors.
• New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Red Bull to drive home its advantage in new technology and gain market share in the new product category.
• Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Red Bull’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
• New trends in the consumer behavior can open up new market for the Red Bull . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
• Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Red Bull to capture new customers and increase its market share.
• Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Red Bull an opportunity to enter a new emerging market.
• The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Red Bull to increase its profitability.

Threats Red Bull Facing - External Strategic Factors

• As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
• Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
• The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
• The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
• New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
• Imitation of the counterfeit and low quality product is also a threat to Red Bull’s product especially in the emerging markets and low income markets.
• No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
• Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.

Limitations of SWOT Analysis for Red Bull

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

• Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
• SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
• The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Red Bull
• SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
• SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of Red Bull

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Red Bull managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Red Bull

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

References / Citations & Bibliography

• M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
• A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
• O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
• L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
• R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)