Economic/Supply & Demand Study Case My question: The question is how MR. Bob can

Question

Economic/Supply & Demand Study Case

My question:

The question is how MR. Bob can convince all shareholders to go into energy drinks business!

Need to highlight the key elements that would let the board of directors agree on the plan of adding energy drinks.

The case as follows:

" Bob Burns looked over the last few numbers provided to him in the consultant's report on the bottled water industry, closed the binder and turned to Nicle. ( Looking back, our decision to get into the soft drink industry was a good one, but we need to get into new products and market segments in order to support our growth strategy. Our growth in bottled water has slowed because competition continues to be tough and because consumers are starting to resist paying for high priced alternatives to tap water)

(I just happened to be reading a report from the people from Food Science and Safety about growing popularity of energy drinks. They say it is a fast growing product in a key market segment: 18- to 34 year old . Why don't' we go into this market)

( I hate to say this, Bob, but it may be a case of too little, too late, Said Nicole. " Established brands such as Red Bull have been around for a long time and dominate this market space. Red Bull is particularly popular in Asia, which as you know is a rapidly growing region for our soft drink products)

( I'm not prepared to give up so easily, Nicole. The fact that energy drinks are popular in growth markets in Asia is all the more reason for us to consider getting into this business. And I really like the fact that this product is so popular among young people. we have good distribution channels bottling know- how, and marketing savvy.

This business is close to our core competency and it is still growing. We have told analysts we expect double digit growth of our top line as well as our bottom line. At our upcoming shareholder meeting, our shareholders and the analysts will be expecting to hear our plans for further business expansion. In the past, we did it with the help of soft drinks and bottled water.

Now, it is time to grow our entire beverages division with the help of energy drinks)

Explanation / Answer

There are following key elements that can be used by Mr. Bob to convince his shareholders to enter into the energy drink market.

1. The first business case to enter into the energy drink industry is the growing demand of these products, more specifically in the Asian region where the emerging economies like India and China provide a huge market potential.

2. There is one and most popular name Red Bull that is unable to provide the supply, hence creating a demand and supply gap. This gap can be rapidly filled up by the company if entered into this industry. It is backed by the strengths into:

i. Distribution channel expertize that can reach out to the customers quickly

ii. Bottling know-hows, making a good design and lowering the cost. It will make the price advantage in the market and competitive advantage as well

iii. A good knowledge of the market, able to identify the opportunities with different segments on the basis of price and quality   

3. Presence of governments in these markets that are liberal oriented ( even China has opened up its market) and it will make a moderate risk and high return business proposition.

4. A sound and favorable market on the basis of PESTLE analysis with people getting neo-rich and able to buy the product.

5. On the basis of Porter’s five force model, there is only one major competitor in the form of Red Bull, making market to be attractive with a bargaining power lying with the manufacturers in energy drink segment.

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