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International Marketing Case Study: Red Bull in Japan (Feb 2006)

1.1 Basic Facts about Japan 
Japan is an Asian country which lies between North Pacific Ocean and the Sea of Japan, East of the Korean Peninsula which separates Asian countries.  The island of Japan consists of several thousands of islands of which are Hokkaido, Honshu, Shikoku and Kyushu are the main one. Japan's closest neighbors are Korea, Russia and China.
Japan has a population approximately 125 million people. The whole area of Japan is 337.835 sq km, which is slightly smaller then California.
The climate of Japan is strongly influenced by the Pacific Ocean and the Asian Continent causing tropical summers and cold winter. Climate varies from tropical in the south to cool temperate in north.
Japan is an urban society with only about 6% of the labor force occupied in agriculture. About 8 million of urban population is concentrated on the area of Pacific coast of Honshu and in the north Kyushu. Mayor population centre is metropolitan Tokyo with approximately 14 million.
Japan has very rich culture, traditions and customs. Shinto and Buddhism are Japan's two major religions. Most people consider themselves Shinto or Buddhist or bought. Effectively, Japan has passed trough wars and conflicts.
The official language is Japanese, which is spoken just in Japan. The literacy rate in Japan is very close to 100% and 95% of the Japanese population has high school education.
Japan's form of government is parliamentarian democracy under the rule of a constitutional monarchy. The prime minister is the chief government officer. 1.2 Cross-Cultural Analysis
The Japanese lifestyle is a rich blend of Asian-influenced traditional culture and Western-influenced modern culture. In order to show the best portrait of Japanese people we will tackle these following different aspects:  Hofstede's Cultural Dimensions
Japan is dramatically different form the other Asian Countries such as Hong Kong, Korea or China. In Japan masculinity is the highest characteristic which explains us that members of society show a strong belief in gender roles, preference for achievement, hostility and material success.
The lover ranking factor is Individualism which shows us that Japanese people believe in a freedom and look on themselves and on family. Which means that one person one vote these persons hold personal opinions, individualist countries often have a high per capital GNP then collectivistic countries.
Japan is high ranked in Uncertainty Avoidance which means that people and managers in these countries prefer reduction of conflicts, management having precise answers to the questions, precise instructions, detailed job descriptions to deal with job complexity and avoidance of multiple bosses.
The power Distance is normal which means that the degree of inequality among people (population of a country) considers as normal.
Economic Analysis of Japan
In order to explain the reasons of the product like Red Bull would find its place in Japan, we had to research economy of the Japanese market. The Japanese economy is one of the strongest in the world. The currency is Yen (). Japan is industrialized and have free market economy which is the highest largest in the world after the United States in the terms of international purchasing power. The main export goods are cars, electronic devices and computers. Most important trade partners with Japan in USA, which imports more then one quarter of Japanese exports.
Japan has a largest surplus in its export/import balance. The most import goods are raw materials such as oil, foodstuffs and wood. Major suppliers are the USA, China, Indonesia, South Korea and Australia. Manufacturing, construction, distribution, real estate, services and communication are Japan's major industries of today.
Aeroculture makes up only about 2% of the GNP. The most important agricultural product is rice. Recourses of raw materials are very limited and the mining industry rather small. 2.1 Japanese Market of Energy Beverages
Japanese market is over cowered and there are plenty of opportunities for many companies. Energy drinks are more known as medical or tonic drinks and they are present on Japanese market for many years. Japanese market is considered to be extraordinary for all the kinds of products, because of the large young population being the target market segment. Cultural effect is the most influencing one, which created the attitude of trying new products. Research shows that Asian market v energy drinks consumes 3.6 billion litters per year. Japan consumption is 13L per capita. 2.2 Red Bull in Japan 
Energy drink Red Bull was created by an Austrian company in 1987. It was a formula created by Mr. Mateshize which resulted with incredibly popularity worldwide.  The exact formula is secret but the active ingredients are far superior to caffeine alone. Taurine is a naturally occurring conditional, essential amino acid in our bodies. It effects conductively to a sensitive speed and tempo of human body and mind. It also acts as a cleanser of body, giving the consumer benefits outlasting the increase of energy. Red Bull also contains some caffeine. Red Bull product designed to improve physical performance and in Japan it is very well accepted.
1987 when the Red Bull was introduced to Europe the company sold 1million cans, The brand come to the United States and Japan in 1997 and lest year Red Bull sold about 1billion cans worldwide. Overly, the category produced sales of $275 million lest year, more then double 2000 sales.
Unfortunately Red Bulls success did not work everywhere. In France and Canada, Red Bull is banned. It is classified as a medicine and until recently in Japan was only available in pharmacies. The reason Red Bull sales are limited or even banned in some countries is because the drink has been linked to several deaths.
In year 2000 in Japan was made a clear research of Red Bull drink, because it caused a death of two young Japanese. The doctors from National Food Administration in Japan said that under normal circumstances no health problems would be caused by drinking only Red Bull.
The main components of Red Bull are water, vitamin B, amino acid and caffeine. As the caffeine is most concerned by the media, for this reason doctors made explanation that the caffeine content in Red Bull is the same with tinned Coca-Cola, and much lower then the content in a cup of coffee.
Regarding to how to drink Red Bull, the doctors said the result of drinking Red Bull with wine or with any alcoholic drink is bad and there is evidence which provided death of the two young people which was caused by drinking mixture of Red Bull and wine. The combination of Red Bull and any alcohol beverage for instance Vodka is a killing combination because they directly affect human blood pressure, which in some cases could be fatal and cause death. Separately used are not harmful. After that in year 2000 the government of Japan binned selling of Red Bull in any store, restaurant, disco, bar or café.
What concerns the Japanese government is dehydrating effect, in particular those who participate in sports. There was a case of death when a guy after drinking of several cans of energy drink followed by heavy workout at the gym. The Japanese National Food Administration headed the investigation and has publicly warned people not to take Red Bull mixed with alcohol or after heavy exercise. After that in year 2000 the government of Japan binned selling of Red Bull in any store, restaurant, disco, bar or café. We could sell our product just trough pharmacies till the market has been deregulated to allow sales trough all other types of retail outlet
Red Bull company as well does not recommend mixing Red Bull with alcohol because the level of caffeine present in Red Bull with alcohol can go up to dangerous levels. Diet experts say that the effects of caffeine can vary and it's hard to say if it is or not safe level. High levels of caffeine can be dangerous to those with high blood pressure or anxiety disorders. For this reason there is printed warming on ever can that advises consumers not to mix beverage with alcohol. 3.1 Product adaptation – modification
In fact, because Red Bull has so much caffeine it can actually dehydrate the drinker. It means that if you physically exerting yourself and drink just Red Bull, the lack of dehydration could strain in your heart. Here are ingredients of Red Bull any how they affect human body. To be successful in other markets we need to meet certain criteria that is stated by the country's law and not only that but allow creating the product that fits the profile of the people of that country that we want to do business with. Japanese are considered to live healthier lives then people from Europe or United States. From that perspective in order to satisfy the state laws in Japan our management team decided to modify the amount of ingredients that our emery drink contains.
We have decided to reduce the level of taurine by 50 %. By doing this taste would remain the same. However the drink by doing this would be much healthier then it was before, but in another hand the drink will not be as much as powerful as it's used to be.
Another think that we would like to do in order to improve quality of the drink would meet high Japanese standards is to add some other vitamins to it. Instead of calling it energy drink, for this market and maybe other difficult markets it would be called “health drink”. That way it would be also presented at the market campaign to penetrate Japanese market. We were also thinking that for this healthier line of the Red Bull product to provide Sugar Free like we already have for our energy drink.
The next thing would be change of package. We would not do some enormous changes of the package, we would leave the same shape of the can and our logo of Red Bull which is very well known  ( two red bulls) but we will just change the color from well recognized blue will put green color as a symbol of nature and more healthier product. For the sugar free can, it will be light green of the package.
We believe by doing this, which is highly necessary would bring us success as well it would be improvement of quality of our product not only in Japan but also in other countries that we have hard time with. 4.1 Target Market
If we take a look of population that consumes energy drinks on a regular basis we immediately notice that it is increasing on a steadily. The “product support” obviously has a determining role when the use of energy drinks is related to professional athletes and sports people. However, taking into account the target market as a whole, we have to emphasize that we point mainly to young people between 18 and 35 years of age. The product has been conceived for a public that is interested in sports, video games, and night life. This is why on a global scale we already see an incredible amount of events and sponsorship organized by Red Bull. This has to bed done also in the country we want to enter.
Demographic dimension is important when dealing with the formation of a target market due its strong ability to influence. In fact we may point out that people don't consume all drinks the same way. Sometimes customers decide their own “drinking style”. However, it is interesting to notice that most of the times it is up to the producers and marketing managers to decide how a their product should be consumed. For example the globally well known beer “Corona” is always drank directly from the bottle with a piece of lime or lemon on the top, without the use of a glass. Red Bull adopted as advertising campaign this solution in order to convey an image and sense energy and “wildness”. 5.1 Advertising and Promotion
We may with no doubt state that branding is a kind of “marketing communication” between people. The aim of branding is to create an image and perception of a product which is publicly adopted. However this is made much more difficult when dealing on an international level. Concerning the segment of functional foods and drinks, Japan is widely recognized as the most developed and established. The main causes for this are the range and diversity of the products and the role played by the government when relating to promoting them. Everyone knows that Red Bull is nowadays one of the top promoters of extreme sports such as jet skiing, wind surfing, bull riding, BMX, skating, trial etc. It therefore also has a well established image. Surprisingly for many, Red bull also supports arts thanks to the notable “Red Bull Music Academy”. “The Red Bull Music Academy brings together DJs and music producers from diverse musical and cultural backgrounds to exchange their ideas about music and their knowledge of how life in the music industry works”
. This is organized once every year in a different location and anyone related to the world of music and is interested may take part.
Moving on to Japan in specific, first of all we have to remember that our product had to be modified in order to be sold in this market and therefore a new advertising campaign has to be elaborated. The idea is to point on the fact that our product now is much healthier (according to the governmental specifications). As marketing strategy we adopted a more aggressive one: going directly to the customers without getting lost with media channels. We decided to: The actual campaign will of course be carried out by a local marketing agency due to the higher knowledge of the target. The promotion we have in mind for the new “healthier” red bull we have in mind will last around three months. In any case this will also include advertisements on television channels, selected magazines, banners and pop ups on selected internet website etc (we have to be in contact with a relatively young public). Currently we included in the budget also the sponsorship of particular sports events. 6.1 Competitors
Currently there are many companies that have included and energy drink in their range of products. However, these are almost all local and therefore the fact of being foreigners is seen as strength rather than a weakness from our point of view. The competition is very high since the Asian market was the one that actually “started” energy drinks.
The entire competition can be divided into four main groups: 7.1 Distribution of Product
Distribution in Japan has long been considered as the most effective non-tariff barrier to the Japanese market. The distribution system is different enough from its United States or European counterparts that it should be carefully studied. The Japanese system has four distinguishing features: 1) a structure dominated by many small wholesalers dealing with many small retailers; 2) channel control by manufacturers; 3) a business philosophy shaped by a unique culture; 4) laws that protect the foundation of the system- the small retailer.
There is a density of middlemen, retailers and wholesalers in the Japanese market unparalleled in any Western industrialized country.
The high density of small stores with small inventories is supported by an equal density of wholesalers. It is not unusual for consumer's goods to go through three or four intermediaries before it reaching the consumers- producer to primary, secondary, regional and finally to retailer to consumer, the high degree of fragmentation and specialization makes it difficult to go direct and thus forces a manufacturer to rely on middlemen with an elaborate set of trade customs.
The most efficient and low risk channel to distribute for our product is method of licensing. That is contractual long-term, non-equity agreement. Agreement would be made with Japanese distributor in Tokyo, who would take care of further sales to wholesalers and retailers. We thought that it would be very hard to distribute our product by founding own warehouses in Japan. That is because wholesalers and all other middlemen downstream are tied to manufacturers by a set of practices and incentives designed to ensure strong marketing support for their products and to exclude rival competitors from the channel. Regarding to this, many foreign companies faced blocked distribution or low sales, just because Japanese tend to buy from a middlemen. The business in Japan is based on tradition: trust, loyalty and friendship so all of this makes to them aversion to foreigners. Distribution is often used to gain advantage from their strong government and ability to cut red tape.
Disadvantage of this kind of distribution is that we don't have impact and control on the sales when it reaches to the Japanese market. This gap could be covered by participating in sales promotions, loyalty to suppliers, contribution to overall success, advertising layouts, management education program etc. 8.1 Methods of payment
The methods of payment would be cash in advance or letter of credit. Cash in advance lacks competitiveness; the buyer may refuse to pay until the merchandise is received. Payment would be made in U.S. dollar, not Japanese yen.
PRCE PER ONE CAN 9.1 Method of transportation
Shipping cost is important factor in the products price in export marketing and transportation mode must be selected in terms of total impact on cost. For overseas transportations, over sea shipping is probably the best and the most economical way. We would take care about all possible risks during the transportation- CIF contract. From the port of San Francisco, where is our regional office located, to the port in Tokyo, goods will arrive in 3 weeks.
Japan has a fully developed infrastructure of roads, highways, railroads, airports, harbors, warehouses for distribution of all types of goods and services.
Another way of exporting the Red Bull product is through air carriers. Because of the long distance from either San Francisco or Austria, which is Red Bull's headquarter. This is the best way and the fastest. The advantage of the transport through air carrier is the fastest way to bring product in Japan.
The disadvantage of this transfer would be the higher cost of transportation, but we need to take into consideration that the Japan is an island and is a long distance from Japan to San Francisco or Austria the original country of red Bull product. 10.1 Marketing Mix  Product:  Price:  Place: Promotion: 11.1 Budget
The expected costs of distribution of Red Bull are the following:
Costs of transportation (Ocean shipping from San Francisco to Japan)
ٍStorage in warehouse
The next order will be made after two months because that time is considered as necessary to enable advertising campaign to make customers more familiar with a drink. Afterwards bigger orders are expected.
The big part of total cost is advertising campaign which amounts 100 000$ in total. Advertising campaign will be done by some marketing agency whose job will be to organize three months promotion of Red Bull.
Advertising campaign would include ads on major TV stations, in magazines and billboards, radio stations, internet etc. The budget for promotion activities will include sponsorships of sports events, where costs per sport match (football, basketball) would be 30 000$. We expect that not more than one sport event will be sponsored within the first three months.
Therefore the optimum budget of 158 000$ is the minimum needed for the first three months of Red Bull distribution. We anticipate that advertising campaign will bring the most costs at the very beginning, until the moment Red Bull establishes itself on Japanese market. 12. 1 Bibliography
International marketing 11th edition by Philip R. Cateora, John I. Graham
Hofstede, Geert "Culture's Consequences, Comparing Values, Behaviors, Institutions and Organizations Across Nations", Newbury Park, CA; Sage Publications; Second Edition; February 2003.
Hofstede, Geert, "Cultures and Organizations; Software of the Mind; Intercultural Cooperation and its Importance for Survival", New York, McGraw-Hill, 1996. ID=142

Published: Wed, Nov 21 2012 @ 7:02:32
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