Wednesday, April 27, 2016

Prevent your strategy from hitting a BRIC wall

"To fight and conquer in all your battles is not supreme excellence.  Supreme excellence consists in breaking the enemy’s resistance without fighting."
                                                                                     — Sun Tzu, The Art of War
In times like today, every company thinks beyond covering their costs and creating marginal value. They desire dominance, monopolistic control, and power. The easiest strategy during times like this is an expansion, mostly to emerging markets, like BRICS due to high demand and low capital requirement. BRICS is the acronym for an association of the five major emerging national economies: Brazil, Russia, India, China and South Africa.
While expanding to a new market, companies face a lot of resistance from the ‘enemy’. They need to assess the ‘enemy’, instead of just fighting the differences. But how? How do you identify the institutional voids in a country? What are the important aspects to analyze before delving into a market? Thinking about this reminded me of an article I read about Red Bull and their globalization strategy.
When you think of Red Bull, which country do you associate it with? I think of America, and so do most Americans. Red Bull is an Austrian brand and a major part of its globalization strategy is to reflect the culture of the country they are expanding to. When Red Bull was introduced in India, the Indian energy and sports drink market was still at a nascent stage. They analyzed the market to narrow down the avenues where they should adapt their business model.

-       Political and Social System: The Indian judiciary is highly bureaucratic and corruption is rampant. Power is held in the hands of the private sector rather than public organizations.
-       Openness: Since India is a relatively closed economy, Red Bull partnered with Rahul Narang Group (RNG) to form a joint venture to get a pulse of the Indian market and familiarize themselves with the consumers. They worked together for over a decade before parting ways.
-       Product Markets: With this decision Red Bull, the 4.2-billion Austrian energy drinks multinational, went solo in India and set up its own independent operations. “This important decision was made in order to step-change the presence and distribution of the world's leading energy drink Red Bull in India and reflects their belief in the phenomenal potential in India.” [1] This will result in better focus and direct communication, boosting the growth. The direct business relationship between Red Bull India and Distribution Partners is expected to enhance and further improve their relationship with the trade.
-       Labor Markets: India is known for a highly capable labor pool, available at a competitive rate. Red Bull made sure that they leverage this talent and thus recruited Indians, people who understand the customers, as executives.
-       Capital Markets: India has a strong, well-developed capital market. Red Bull utilized their profits from its overseas market to create small operations in India, growing at a steady 30% year on year.

After assessing the market, Red Bull modified their business model for India. An average Indian consumer is not used to a high priced, non-alcoholic beverage with the motive of providing an extra burst of energy to power through the day. In the Indian culture, such drinks are perceived to be alcoholic, and consumers tend to stay away from them. So, Red Bull devised a marketing strategy to connect with the consumers and help them connect with the brand. Red Bull designed engaging TV advertisements since television is the most widely used communication medium in India. They broadcasted it on Indian and English shows, to attract a variety of consumers. It helped them tap into the Indian consumer’s curiosity by mimicking a recent event or relatable experiences. They also started sponsoring adventure sports and rock concerts in India, which introduced more people to the drink.

Red Bull is currently estimated to control close to 75% to 80% of the Indian energy drinks market. With the wings, Red Bull certainly flew over the BRIC wall!   


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