Nespresso Case Summary

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Tiffany Smith

July 27, 2010

The Nespresso case traces the development of the Nespresso System in a 100%-owned affiliate deliberately placed outside Nestlé’s main organizational structure. The case also highlights the team's successes and challenges in creating a new, small, niche segment in the mature coffee market and its prospects for growing the business from 150 million to 1 billion Swiss francs within the next decade. The Nespresso system was a radical departure from most Nestle lines of businesses targeted to the mass market; the Nespresso story offers provocative lessons about innovation in large, highly structured organizations.

This case speaks about the history of Nespresso’s development and the challenges for its future. The beginning of the article describes Nestlé’s strategies for growth through innovation and renovation and describes the management’s practices and views on promoting a climate for innovation. The article then goes on to describe the challenges the company faced as the company tried to grow the Nespresso business towards 1 billion Swiss francs.

The Nespresso case touches on opportunity recognition, the characteristics of the corporate entrepreneur, and the necessary organizational structure needed in order to be innovative in this industry. The case also covers the delicate transformation of an initiative from the entrepreneurial stage to institutionalization for sustained growth.

The Nespresso machines were highly innovative due to its outward simplicity and masked complexity. The extraction process for the Nespresso machines was considered highly innovative because it incorporated years of research and learning that would be hard for a competitor to replicate without patent infringement. The Nespresso concept helped Nestle to outperform all of their competitors in quality and convenience. Because Nestle held the patent for the Nespresso machines competitors could not copy their invention...
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