Strategic Management Of Monster Beverage Corporation

Running head: STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 1

Strategic Management of Monster Beverage Corporation

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STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 2

Strategic Management of Monster Beverage Corporation

Introduction

Strategic management is one of the most effective and efficient tools that most organizations use

in gaining a competitive advantage over competitors in their line of business (Freeman, 2010).

The approach and process of strategic management entails combining the formulation of

strategy, implementation, as well as evaluating the objectives of an organization. It also involves

the required policies and plans that will enable the business to attain its goals, as well as

allocation of resources (Freeman, 2010). This implies that the operations, actions, filed of

operation, location of competitors, as well as the ways of delivering organizational objectives are

determined by the strategic management of an organization.

The importance of strategic management in an organization is that it defines the

principles that managers have to follow so as to ensure that positive results are obtained (David

& David, 2016). Such policies and principles are derived depending on the contextual roots and

characteristic nature of the business in operation. However, this definition of strategic

management has been altered so that it captures critical principles such as economic, social,

cultural, and cognitive features required in effective and efficient management (David & David,

2016). As such, there has been evolution in the theoretical focus of strategic management from

adaptation and planning to ensure that organizational resources are also embraced.

The theory of strategic management also includes human-based perspectives that focus

on the strategic capacity that a business possesses as well as its ability to effect self-development

(Eisenhardt & Graebner, 2007). This is an indicator that organizations that have low and poor

strategic and competitive position in the market need to reposition their resources such as human

resources so that they can enhance their performance. Such strategic management theories are

STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 3

developed from contingency approach, information technology approach, and systems approach

(Eisenhardt & Graebner, 2007). The main theories in strategic management include the human

resource-based theory, the survival-based theory, the agency theory, and the contingency theory

(Eisenhardt & Graebner, 2007). In this essay, the Monster Beverage Corporation is used in

validating the management theory as highlighted. The company will also be used as a tool for

bridging theory and praxis.

Introduction of the Organization

The Monster Beverage Corporation was incorporated on the 25

of April, 1990 (Monster

Beverage Corporation, 2016). It is a holding business, hence it does not conduct any operating

business; it operates through its subsidiaries that are consolidated. The role of the subsidiaries of

the company include marketing and distributing its energy drinks such as the Monster Energy

energy drinks, Full Throttle energy drinks, Ultra energy drinks, NOS energy drinks, and

Gladiator energy drinks, among others (Monster Beverage Corporation, 2016).

Additionally, the Monster Corporation is one beverage company that deals with the

manufacture of energy drinks, several types of natural drinks, as well as fruit drinks such as Blue

Sky, Monster Energy, Hansen’s Natural Soda, Peace Tea, Hansen’s Energy, Hubert’s Lemonade,

and Hansen’s Junior Juice (Monster Beverage Corporation, 2016). By the year 2012, the

company had already amassed the largest market for drinks in the United States of America,

selling drinks worth $31.9 billion.

Some of the branded products from the Monster Energy Corporation are sold in various

markets such as the United States of America, North America, Africa, as well as Europe

(Monster Beverage Corporation, 2016). These products are found in different markets, where

there are also other competitors such as the Red Bull. As such, the Monster Energy Corporation

STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 4

utilizes the strategic management theory so as to ensure that it is at par with the competitors in

terms of marketing and competitive positioning.

Objectives of Monster

The primary objective of the Monster Beverage Corporation is gain a competitive position above

the other thirty energy drink companies that are found in the market (Monster Beverage

Corporation, 2016). It also aims at ensuring that it becomes the first-choice energy drink that

consumers think of when they want energy drinks. According to the current statistics, Monster

owns around 27% of the market but aims at improving this market share.

There are several ways through which Monster plans to apply the strategic management

theory in order to enhance its competitive position and retain its consumers. One of such ways is

by ensuring that the company starts a back over with its target market (Neuhouser, Lilley, Lund,

& Johnson, 2009). It has also been established that the base market of Monster is comprised of

students and young professionals whose age ranges between 16 and 34 years. This age group

prefers the Monster energy drink because it is a ‘New Age beverage’ that exudes a vibe that is a

hip and edgy, reflecting their lifestyle (Neuhouser, Lilley, Lund, & Johnson, 2009). This

strategic management will enable the corporation to regain the consumers that it has lost, as well

as gaining new ones. It will also enable Monster to implement the modern trends that could

enable it to attract more customers.

The second objective of Monster is to ensure that it creates a greater presence among a

large number of consumers (Emond, Sargent, & Gilbert-Diamond, 2015). The corporation plans

to apply the strategic management theory by sponsoring city events, college and schools events,

and sporting events. This will create a platform for Monster to market its brand to potential

consumers, as well as enhancing its competitive position in the market. As such, Monster could

STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 5

also use the audience in launching and testing new products in the markets. They could create a

new market niche among the students.

The third market objective of Monster is introducing a new advertisement that is

innovative, to the existing ones. Such includes the introduction of a QR Code on the energy drink

can (Emond, Sargent, & Gilbert-Diamond, 2015). These Codes will enable consumers to scan

them so that they are directed to the Corporation website where they can view products and make

online orders. This QR Code will also be implemented on a can that has a logo of Monster and

include coupons in the website where the Code directs the user (Emond, Sargent, & Gilbert-

Diamond, 2015). According to the contingency theory in strategic management, this objective

aims at increasing traffic on the Corporation website so that it can market and sell its energy

drinks.

The final objective of Monster is to combine a mix of adding a growth of around 3% and

price matching as per those of the main competitors (Red Bull and Rockstar). As such, Monster

energy drinks will be cheaper than those of Red Bull and Rockstar (David, 2016). This will

increase the chances of Monster attracting more customers than its competitors, increasing its

competitive position in the market. It will also enable the business to grow due to an increase in

the profitability. The implementation of this objective will require the company to implement the

survival-based theory that aims at enabling businesses become the first-choice in a market. As

such, strategic management will be critical.

Ownership Structure of Monster

The Monster Beverage Corporation is an example of a corporate structure. That is because the

structure of this company is much more complex as compared to other entities within the same

industry. It is also a legal corporation that is independent, separate from the owners and

STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 6

shareholders (Becchetti, Di Giacomo, & Pinnacchio, 2008). As such, the business has to operate

within set rules and regulations that comply with the laws of the land. This involves compliance

with the rules and regulations regarding taxes. Defiance to follow these rules might land the

company in trouble with the judicial system. Sometimes they are either fined or banned from

accessing certain markets (Becchetti, Di Giacomo, & Pinnacchio, 2008). The corporate structure

is more complex and expensive than most other business structures.

External and Internal Governance Mechanisms

Internal Mechanism: It is responsible for the setting of the most fundamental controls

that are in place in the companies (Chesnut, 2010). The control then monitor the progress and

success of the organizational activities and establish the corrective measures that should be taken

on activities that do not meet the organizational standards directed towards the achievement of

organizational goals and objectives.

The internal mechanisms at the Monster Beverage helps in maintaining the larger internal

control of the company by ensuring the internal objectives of the company are followed

(Chesnut, 2010). They also provide a mechanism of serving the internal stakeholders, owners,

employers, and managers in the organization. Some of the objectives that are served by these

internal mechanisms at the Monster include ensuring that there are reporting lines that are

defined in a clear manner, smooth operations, and effective systems of performance

measurement.

Internal mechanisms include internal audits that are independent, management oversight,

structure of the board of directors in place and their levels of responsibility, and the segregation

of policy and control development (Chesnut, 2010). The internal mechanisms at Monster

STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 7

Beverages Company are stable and efficient. That is because of ensuring proper strategic

management in the Corporation.

External Mechanism: It is also evident that both the Monster has external mechanisms.

These mechanisms are normally controlled by external forces and ensure that they meet the

objectives of external entities such as trade unions, governments, regulators, and other financial

institutions that trade with the company (Knutsen & Brower, 2010). The external mechanisms

are critical for particular functions of the company such as the management of debts and

ensuring that the operations of the company are in compliance with the legal requirements of the

land.

In most cases, the external mechanisms in the company have been imposed on it by their

external stakeholders in the form of guidelines for regulation and union contracts (Knutsen &

Brower, 2010). The role of external mechanisms is to specify guidelines that are to be followed if

the company is to register the best practices. This strategic management approach has enhanced

the growth and profitability of Monster. It has established its competitive position as one of the

best known brands in manufacture and sale of energy drinks.

Forms of External Control

There are several types of organizational control that are used in companies. However, there are

three that are primary and used in Monster Beverage Company. These are strategic control,

operational control, and management control.

Strategic control involves an evaluation of the organizational strategy (Agrawal &

Chadha, 2005). The Monster uses it after it has formulated strategies, as well as the strategies

have been implemented. It is efficient in Monster. According to the strategic management theory,

this has enabled Monster to sell its products at the international level.

STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 8

Operational control is also common to Monster. It evaluates the performance of the

individuals and that of various groups in the organization. It establishes areas that need more

concentration and improvement (Agrawal & Chadha, 2005). It has enabled the business to

improve on its weaknesses as it seeks to capitalize on its strengths and opportunities. The

performance of each worker is evaluated against the expectations of the company. This is in

accordance with the human resource-based theory in strategic management.

Management control also plays a critical role in the operation of Monster. It involves the

control of activities and resources in an organization (Agrawal & Chadha, 2005). This control

requires skilled management personnel in leadership. As such, it is efficient in Monster. That is

because Monster has a skilled leadership that has enacted the implementation of the human

resource-based theory in the strategic management of businesses.

Primary Sources of Differentiation and Cost Advantage for Monster

There are two primary sources of cost and differentiation advantage for Monster in the energy

drinks industry. These are the strengths and opportunities of the corporation as identified in the

SWOT Analysis of Monster.

Strengths: The success of the Monster is attributed to various strengths that are

associated with the company. One of such is that it has a can design that is attractive and

innovative (Kavitha & Reddy, 2016). That attracts customers in large scale. It also has loyal

customers, strong identity of the brand, strong financial position, and its pricing is reasonable

since it is half that of competitors like Red Bull. Additionally, the company has a large depth of

the product, enabling it to capture a broad market niche.

Opportunities: The company has several opportunities that enable it to grow and expand

its size and competitive advantage in the market (Kavitha & Reddy, 2016). They include the

STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 9

presence of a buyout target, appropriate promotion, ease of entering new markets, as well as its

position and location in most areas. There is room for growth and expansion.

Organization Position and Major Competitors

According to current research conducted in the United States, Red Bull is the largest seller in

energy drinks. It has a market share of 39% (Chesnut, 2010). It is assumed that the total number

of cans sold by Red Bull annually is 4.6 billion, and it serves a total of 164 countries globally.

The study ranks Monster as the second leading seller with a market share estimated at

28.9% (Chesnut, 2010). The success of Monster has been attributed to its strategic management

in that it produces energy drinks in 34 different varieties. The regular flavor is found in black

cans that have the corporation logo in green and shaped as claws of a monster.

Monster has also implemented the strategic management theory by supporting extreme

sports activities and events just like Red Bull and Rockstar. However, it has been established as

the leading sponsor of Motocross, BMW, and Supercross events (Chesnut, 2010). This strategy

was adopted as a way of marketing the corporation brand and attracting new buyers. This has

been effective as it has promoted Monster to be the second leading energy drinks brand in the

United States market.

The third leading energy drink brand in the US market is the Rockstar, which has a share

of 9.8% (Chesnut, 2010). Its varieties and flavors are estimated at 20. The business also

participates in sponsoring sporting events.

The primary assumption made in this is that the study was conducted in the entire market.

That is because the businesses use different strategic management approaches. As such, they

have different market niches where they have the highest number of consumers.

STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 10

Pie Chart: Strategic Group Diagram

Competitive Advantage Sources for Monster: Value Chain Analysis

One of the greatest challenges that face most businesses is enhancing the effectiveness of the

supply chain management. However, Monster has managed to increase the efficiency of its

supply chain management (Kavitha & Reddy, 2016). For instance, the inventory of the

corporation has increased by a significant percentage of 92%. That is an indicator that the supply

chain strategy that Monster has developed is strength (Kavitha & Reddy, 2016). That has been

achieved through focusing on improving the online business of the company, which has proven a

successful strategy.

It is also worth noting that approximately 37% of the corporation’s sales are generated

from sponsorship of sporting events (Kavitha & Reddy, 2016). However, sales could be further

boosted if the portfolio entrusted with distribution channels is well-diversified. It would

minimize the risk of losing important customers. As such, the supply chain management of the

corporation is one of its sources of competitive advantage.

STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 11

Others sources of competitive advantage for Monster include the growth of existing

brands, development and launching of new products and brands, as well as the expansion of

distribution (Kavitha & Reddy, 2016).

VRIO Analysis

Valuable?

Rare?

Costly to

Imitate?

Organized

Properly?

Competitive

Implications

Economic

Implications

Growth of

Existing

Brands

Yes

Long-term

Advantage

Positive

Enhancement

of Supply

Chain

Management

Yes

Long-term

Advantage

Positive

Development

and Launch

of New

Products

Yes

Short-term

Advantage

Positive

Expansion of

Distribution

Yes

Long-term

Advantage

Positive

STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 12

Recommendations for Increasing Competitiveness at Monster

There are various strategies that could be adopted to promote competitive advantage of Monster.

Some of the most critical include the following.

 Building a board of directors that is strong and qualified, as well as evaluating

performance. Monster should build a board of directors that is independent,

knowledgeable, and qualified. They should also have the necessary skills, integrity, and

ethics so as to enhance the performance of the corporation.

 Roles and responsibilities should be defined. The roles delegated to the CEO,

chairperson, and executive officers should be defined in writing so as to ensure

accountability in their performance. Particular duties should also be delegated to each of

them.

 Emphasizing ethical dealing and integrity. The management should seek to establish a

culture at Monster that is characterized by integrity as well compliance with company

policies. An individual should also be appointed to oversee the code of conduct, policies

on conflicts, and whistleblowing at Monster.

 Evaluation of performance and making compensation decisions that is principled. There

should be measurable performance targets for the executive officers at Monster.

Additionally, these targets should be evaluated on a regular basis to ensure that each

employee is working towards the implementation of organizational strategy.

 Engaging in risk management that is effective. There are various risks that Monster faces

and that hinder its improvement in terms of competitiveness. As such, a process should

be set so that it is applied in identifying and assessing such risks such as environmental,

financial, reputational, operational, and legal that could hinder growth and development,

STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 13

as well as effective strategic management. The process should also establish a way of

curbing these risks.

Conclusion

The Monster Beverage Corporation is one of most renowned energy drink brands in the market

today. Despite the fact that it lags Red Bull, this brand has gained market in various areas. That

is because of the presence of effective strategic management at Monster. As shown in the essay,

Monster applies the strategic management theory in its operations. That has enabled the

competitiveness of the business to grow. However, it can be enhanced by the various

recommendations that have been highlighted.

STRATEGIC MANAGEMENT OF MONSTER BEVERAGE CORPORATION 14

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