Innovation and Renovation, the Nespresso Story

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The main point of this case is how firms can develop and maintain new strategies in order to have innovation and renovation, this two are fundamentals for all the companies who want to be competitive and evolving in the changing market. Nespresso, as a line product of NESTLE, not just developed a different way to sell coffee, also created a new business model difficult to copy for the competition and a good approach to the market of R&D coffee.

Nespresso System is an innovative concept because offers to the consumer an individual portions of coffee (high quality coffee). Many of these consumers are in Europe, principally in the Scandinavian nations. The Nesspreso System is directed to households headed by well-educated, affluent 35 to 45 years old men and women. The coffee market is divided in two categories, the first is Coffee R&G (roast and ground) this coffee has more quality, the second is instant coffee. Each category is divided into two more “Away-from-home” and “in-home”. Nespresso is focused in coffee R&G in home. The coffee market is controlled by 5 major brands: the first is nestle with 23% in the market, the second is kraft Jacobs SUCHARD (Philip Morris) with14%, the third is Douwe Egberts for Sara lee with 7%, the fourth is Folgers coffee for P&G with 6% of the market, and in the last place is Lavazza with 2% of the market. The other 48% of the market is belong to the others, less important, companies. WHY NESPRESSO?

Facing the context and the challenges of the company in the future, Nespresso was represented a big opportunity not just to try the unexplored market of R&B, also to exploit the success of new and innovating brands in the market like Nesquick and pure life. Besides Nestle didn’t have experience in other types of business and Nespresso show up like a window which aloud to see other type of business model. Nespresso is a type of coffee packed in hermetical capsules that, it’s clean and easy to use and comes in eight available coffee varieties. At first this product was designed for “lifers”, those managers who stay most of the time in the office, but research prove that the house hold market was the right to go. ISSUES AND SOLUTIONS

Nespresso had to face a series of challenges through his way to success, different types of problems show up while the company was solving another. From problems in Marketing, distribution, production, managerial and growth had to be solved if they wanted to reach the goal of SFr 1 billion. The most representative issues presented through the case were: * The Unexplored market of R&B, which could lead to uncertain outcomes. * Solution: This situation doesn’t have an obvious solution, the conclusion that the company approach was that if the company wants to win, it must risk a little too, otherwise it will always had the same, and will not advance. * A Market domain by retailers whit price competition

* Solution: Get add value through the gourmet strategy, and selling the Nespresso cups in the Nespresso club. * The challenge of creating a innovating product difficult to copy by the competition * Solution: Combining technology with Nestle experience in coffee, creating the Nespresso system and Nespresso Capsules, a brand new idea, difficult to copy whiteout infringing copy rights. * Which would be the best target population to approach?

* Solution: Testing in different segments at first, but taking in consider the value of the coffee and the gourmet strategy redirecting to the house-hold market. * What would be the best distribution channels?

* Solution: Through his own channels, subcontracting manufacture firms to make the machines, and selling the Nespresso capsules by direct sale in the Nespresso clubs and by phone line. * How to overcome the skepticism in the company?

* Solution: Separating the Nespresso...
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