Analysis of the Nespresso Strategy

Topics: Strategic management, Coffee, Nespresso Pages: 11 (3717 words) Published: April 24, 2013

Analysis of the Nespresso strategy

Content| Page|
Introduction| 3|
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Defining the industry| 3|
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Analyzing the industry| 3|
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Core competences of Nespresso| 4|
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The implementation of the Nespresso business model| 5|
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Protecting the Competitive Advantage| 5|
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The target group of Nespresso| 5|
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Value creation through the Nespresso marketing approach| 6| | |
Practicing the corporate social responsibility in the Nespresso strategy| 7| | |
The importance of the strong relationship with the suppliers| 7| | |
Results from the strategy| 8|
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Future threats and conclusions| 8|
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References| 10|

List of Tables| Page|
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Attractiveness of the industry (figure 1)| 6|
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Boutiques (figure 2)| 10|

Analyses of the Nespresso strategy

Nespresso is one of the fastest developing brands that operate under the name of Nestle. In 1986 Nespresso introduced an innovative idea on the Swiss market and after a lot of changes in their business strategy; they achieved a leadership position on the coffee market - an industry which is proven to be really unattractive. The company relies their strategy on a lot of innovative approaches – not only with their business model, but also with their target group, marketing strategy, relationship with the customers and suppliers. In the next paragraphs it will be shown which is the core competence of the Nespresso strategy and what they are doing in order to protect it and make it successful. The report will search for evidences of a successful strategy, innovative approaches and core competence protection by analyzing and critically evaluating the published information from the official website of Nespresso and critics.

Defining the industry
The industry in which Nespresso operates is focused on producing and selling technical equipment for coffee production, which is used for individual tasteful and stylish consumption and that, is where Nespressos` income comes from. A direct competitor of Nespresso in coffee equipment production is Lavazza, which is also a producer of coffee machines with capsules. On the other side, looking at the consumption side of the coffee market, shop chains like Starbucks and Costa can be accepted as their indirect competitors, as they also offer good coffee but not in the field of homemade products.

Analyzing the industry
By analyzing the industry through Porter`s five forces (1985) - Barriers to Entry, The Bargaining power of suppliers, Current Competitors, Power of Customers and Substitute Products, the fact that it is difficult to succeed in this kind of industry can be noticed. There are very high barriers to entry in this kind of business unless under a well-positioned existing brand. What is more, the great amount of competitors and substitutes such as luxury products or tea, depending on the local market, can additionally hinder a new start-up company. Another force that has to be beaten in this industry is the great amount of customers. A new brand has to be able to win a great number of satisfied customers, so it can rely on their power such as word of mouth. (January 2009). Having in mind all of these factors it can be concluded that the attractiveness of this industry is not high, because the potential profitability is not on a satisfactory level.

Analyzing the industry (continued)
Because of the high competition and the high entry barriers, the profitability for a potential new company on the market can not be enough to survive. Still there are companies which succeed and the attention will be focused on what strategy can be used to achieve their success. Nespresso is company that achieved a good profitability on this not very attractive market. The reasons for that are that the company is under the strong brand of Nestle and that it...
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