nespresso business strategy
Post on 16-Apr-2017
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GENERAL OVERVIEW
• Founded in 1986
• Autonomous globally managed business of the Nestlé ® Group
• Reference in the portioned coffee sector and one of the fastest growing global food and beverage brands
• NESPRESSO® is present in 60 countries
• 8300 employees and 300 boutiques worldwide
• Enable anyone to create the perfect cup of espresso coffee
• Delivering highest quality coffees
• Ultimate coffee experiences to our consumers
NESPRESSO® PRODUCTS
• Coffee machines• 30 models designed and manufactured in
collaboration with 6 machine partners. (KRUPS & DeLonghi)
• In house R&D
• Capsules • Wide range of flavours
• Accessories– Mugs, coffee cup, pots
VALUE CHAIN ANALYSIS: PRIMARY ACTIVITIES
Inbound Logistics:• Suppliers from many different countries
deliver coffee to production centers• Data warehouse• Reverse logistics for recycling Operations:
• The production is based in Orbe and Avenches:ü coffee roasting up to capsule
packaging stage • 300,000 to 1,400,000 capsules per day
Outbound Logistics:• Trucks leave from the production
centers to Boutiques and customers home
• Logistics Partner: DPD, BRT…
PRIMARY ACTIVITIES
Marketing & Sales:
• Very strong marketing campaign• Provide all the info through their
website• More than 300 boutiques in the
best locations allover the world• Online retail
Services:
• Nespresso club• Nespresso app• Technical assistance
SUPPORT ACTIVITIES
Firm Infrastructure:
• Headquarter in Lausanne• Production centers in Switzerland• 300 boutiques in unique location
HR Management:
• High qualification required• 70% of employees in direct contact
with customer
Technology Development:
• R&D department in Lausanne• Balance between the right water
temperature, quantity and speed, along with 19 bars of pressure
Procurement:
• Long lasting relationships with suppliers
ECOLABORATION
• Coffee: source 80% of our coffee from the Nespresso AAA Sustainable Quality™ Coffee Program, including Rainforest Alliance certification by 2013.
• Capsules: put collection systems in place to triple our capacity to recycle used capsules to 75% by 2013.
• Carbon: between 2009 and 2013, reduce the carbon footprint of each cup of coffee by 20%.
RESOURCES CHARACTERISTICS
Nespresso’s resources embed these 3 characteristics: • Appropriability: High appropriability due to the
large amount of patents and the strenght of the brand;
• Imitability: Capsules can be imitated but not the
brand value and the experience nespresso provided;
• Durability: Capsule durability due to stability of
coffee demand and strong customer relationships.
NESPRESSO CAPABILITIES
Corporate functions:
• Strategic innovation: Capsules• International management
R&D:
• Innovative new product development• Ability to exploit and research new gran
cru tastes• Led to the invention of unique technology
that delivers a balance between right water temperature, quantity and speed for the best result
NESPRESSO CAPABILITIES
Operations:
• Efficiency in capsules manufactures
Product design:
• Ability to balance good design and practicality
Marketing:
• Luxury brand management• Building reputation for high quality
coffee
Ecolaboration:
• skills to conduct a profitable business in an environmentally friendly manner
COMPETITIVE ADVANTAGES
Drivers of Cost advantage:
• Economies of scale: up to 1.4 mln capsules produced per day
• Economies of learning: more than 15 years from the first capsules production
• Standard Product design: many flavors, one capsule design
COMPETITIVE ADVANTAGES
Drivers of Differentiation Advantage:
• Highest quality coffee within the market
• Nespresso’s patents
• Outstanding customer service
• Exclusive Boutique Location
• Unique brand image
• Creative marketing approach
COFFEE INDUSTRY
• After crude oil, COFFEE is the most sought commodity in the world
• Brazil is the largest coffee exporting nation
• Over 2.25 billion cups of coffee are consumed in the world every day
• There are 3 main types of in home coffee:• Filtered Coffee• Espresso Coffee• Instant Coffee
• NESPRESSO® is about in-home espresso coffee
Evolution of Industry Structure over the Life Cycle
! GROWTH:!IN+HOME!ESPRESSO! MATURE:!FILTERED! DECLINE:!INSTANT!
DEMAND!Increasing, sector is growing up by 24%
a year
Stable, mass market, price
sensitive customer, +4% year
Decreasing, Obsolescence
TECHNOLOGY!
Standardization of capsules to be
compatible on every coffee machine
Diffused know how Lack of innovation
PRODUCTS!Design & quality
improve; emerging of capsule design
Trend to commoditization Low differentiation
COMPETITION!
First movers: Nespresso and
Lavazza stable on top of the market
Market leader is Lavazza, high
competition tough
High competition between, Nescafé (leader), Folgers, Maxwell House
KEY!SUCCESS!FACTOR!
Fast High quality Practicality
It’s a commodity producing on a large
scale taking advantage on EOS
Speed of preparation Low shipping weight
Long shelf life !
KEY SUCCESS FACTOR
• High quality coffee
• Strong marketing campaign
• Technology development
• Economies of scale
• Economies of learning
• Distribution channels
FIVE FORCES MODEL: IN HOME ESPRESSO COFFEE
- Wide network of suppliers - Low bargaining power- Mostly price takers
- Outside home coffee- Instant & filter coffee
- High price for high quality - Excellent reputation - Club services - Luxury Marketing
- Difficult entrance (due to EOL & EOS)- High capital requirements
• Nespresso market leader (45%)
• High Concentration (Illy,Lavazza)
POTENTIAL ENTRANTS SUBSTITUTES
BUYERS
SUPPLIERS
COMPETITORS
NESPRESSO GROWTH FACTS
• Revenue: $ 3.1 bln, +20% (2012)
• Net income: $ 800 mln
• Substitutes average growth in 2012: - 6%
• Market Share: 45%
STRATEGIC SUGGESTION
Offering home-like comfort in non residential locations:
• Goal: Increase our Demand Reach introducing a new Nespresso machine in which you can either pay or use your own capsules
• Where: exclusive frequented places (VIP lounges, country clubs, private universities)
• Catch: Nespresso Electronic Card
STRATEGIC SUGGESTION
Why:
• Outside home coffee market takes the 50% of the total coffee market
• Increase our market share• Increase sales expectations• Reach outside home coffe
channels
But…
Keeping niche target and luxury brand prestige
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