Innovation and Renovation: The Nespresso Story - Research Paper Example

The starting point of yesterday is the goal of tomorrow. Carlyle Introduction to the Nespresso System: In the stagnating market for coffee, Nestlé came up with a new niche and created a new growth segment, Nespresso, and began the arduous climb to success. As a leading food company employing more than 200,000 people worldwide and raking in SFr70 billion in France alone, along with the factories in over 80 countries can prove to be pretty daunting for an average company to take control of. Thus, in 1988, an outsider was taken in to head a company within the company fold to bring it to new heights. At the start, it seems to be a miniscule Nestlé company but over the decade, Nespresso emerged with a character all its own. Commitment to high quality products all the time A real visionary by tapping into a new market of gourmet coffee and selling it successfully as a premium system attached to a lifestyle Creative methods are employed to ensure that clients are satisfied through no-frills marketing strategy in place of exclusivity and brand image Problem Definition: Currently, the leadership of Nestle’ makers of Nespresso Coffee, enjoys a significant growth of consumer demand for high quality, gourmet coffee, but although Nespresso commands 90% (Miller, 2000)of the market worldwide, only the upper-crust of the few Continental European, North American and developing countries have acquired the taste for the “coffee- brewed specialty” lifestyle. As such, the need for Nespresso to move toward a more dramatic growth and the need for it to adjust in order for it to develop further in the future is of utmost importance. The sprouting up of competition and the various perks and services they too can offer must be considered. A comprehensive market projection basing on the needs and opportunities should be the goal for the future. This could be easily addressed if the (1) problem of holding back on aggressive advertising is met head-on instead of confining the marketing strategies of Nespresso products through word-of mouth manner as it has always been pursued before because of the fear of some senior management of not reaching its target market: the crème de la crème, is overwhelming the decisions they need to implement instead of seeing the benefits they could glean from it. Nespresso had been employing word-of-mouth only and no adverts as it projects the product to be for exclusive clients only and that enjoying Nespresso is afforded only to the select few. Thus, the target has been , from the start, not the average household but those who have been exposed to refined taste and would pay the extra for a quality drink made in the comforts of their own home. Coming to terms with the need for aggressive advertisement for Nespresso, points us then, to the second problem, albeit, a minor one which is the need for a change in the mindset of Nespresso senior management beyond that which is already enforced, to convince them that this is a necessary undertaking to maintain a firm hold in the future of Nespresso and to halt the competitors claim on the niche enjoyed by Nespresso in the present. Justification of Problem Definition: As Nespresso remain to be the leading brand of gourmet coffee in a small but fast-growing category in the world market (Miller, 2000), one cannot deny the new growth of other coffee gourmet products seeking to imitate its success. As a distinctive brand of luxury image departing from most of Nestle’ lines of business which are reputed to be of large-scale and mass-marketing efforts, the bulk of the market was thus aimed to those who are familiar with the taste of gourmet coffee and can discern quality and fine taste rather than practicality. As a result, a separate company was created in June of 1986 to introduce a concept and in 1988 an outsider is recruited to head the venture. The structure of thinking of Nestle’ executives were that someone with flair and creativity backed by a solid commercial and marketing record from outside the ranks of Nestle’ should head the newly formed company and must possess a “special mentality”. They believe it is needed and was convinced that familiarity with the company’s history would deter the drive for excellence which was the case in this situation. This brings us to the realization that Nespresso needed the change in the organization’s mentality as inferred through the handout and the fact that all it could take is someone new to bring a great new idea or product to greater heights or even to fruition. SWOT Analysis of the Nespresso Brand Image: Strengths Weaknesses Leading coffee gourmet brand in the world High cost of product is backed by high quality of the coffee Significant turnaround in management leadership, market management, productivity and profitability Major focus on satisfying the exclusive clientele Distinctive luxury brand and products is offered as well as services to maintain customers and attract more into the exclusive Club Nespresso staff are very motivated and work as a well-oiled machine to maintain the lifestyle brand they are selling New niche in the coffee industry started without the data of supporting market Low awareness of the Nespresso product in the mass-market segment where most of Nestle’ products are The sprouting of high-end competition offering the same services Activities are low and not consistent confined only to one activity which is the Club OPPORTUNITY THREATS Nespresso promoted itself through word-of mouth method It offered its clients to be part of a high-end exclusive lifestyle A strong financial background Communication with various coffee suppliers are maintained Performance, functionality and accountability is recognized in management European and other major coffee players attempt to emulate Nespresso’s success Competition in product costing Competition in service perks Innate corporate culture of Nestle’ As with other jobs, security and uncertainty remain the fear In the workplace Financial losses if competition is makes a better judgment Alternative Courses of Actions: Converting from a solely word-of-mouth to a more comprehensive and strategic advertising measures aimed and focused at sophisticated key market segments and various consumer types should be actively considered and studied immediately. Knowing this, a lot of good strategic decisions can be done because first, some households may or may not have access to advertising in TV, and second, if they ever have access, the message may be eventually lost if not properly explained by a person of reputable background. Analysis of contradictory information and the need for openness to different opinions can lead to either effective or ineffective decisions of the customers. Advertising through TV then can run both ways. Another alternative is influencing the mindset of senior management through education and change in corporate attitude. The responsibility of recognizing the potential and supporting it does not only cover the beginning of the process but also covers the wider scope of flexibility and communication openness. The previous experience that worked for the company does not always apply to the organization throughout its lifetime. Change is needed because as one cannot change the past, we should also accept that it should not be forgotten. One has to admit that education is needed if one expects to remain competitive in the future. Finally, improving and developing the product is best but consistency is adamant in this finicky market segment. Since customers of Nespresso is accustomed to the refined way of life, the demand for Nespresso to fill that demand with respect to changing manpower is significant. A shift in customer tastes is avoidable if the product they are accustomed to ten years ago is still the same product ten years from now. Aiming to widen the market receptive to new and refined coffee tastes like the gourmet brand that Nespresso is, will open a new and wider opportunities for Nepresso in the world. Right now, the market is concentrated in countries that are familiar with the product but the introduction of such to other countries as well will spell a difference in revenues in the future. Evaluation of the Courses of Action: In order to achieve a higher standard in terms of market perspective, a formula should be developed and followed. The following table can be utilized. Alternative Action Positive outcome Negative Outcome Intensive advertising campaign for Nespresso Culture change through education Introducing Nespresso in other countries Knowledge of the product to a large and captive audience Change in attitude and outlook in the workplace Awareness of the product and the consumer will be having the option to choose Mass marketing might overturn the luxury branding and image Nespresso started with “lifers” or senior management might reject the changing culture in the workplace the demand of worldwide clients may prove to be overwhelming In assessment of the different business practices Nespresso has done so far, the management decisions remain to be the significant and pivotal turning point. It will remain to be so in the course of Nespresso’s existence and should therefore be considered fully. Conclusions/ Recommendations and Decisions The alternative decision most suitable at this time is employing a drastic advertising change from inside. This process, (mass marketing of Nespresso will show that Nestle’ is continuing to adapt to changes) seeks to inform, involve and influence the immediate community as well as a worldwide audience in limited or unlimited ways. As specialists in charge of the department or system, it is also they who must be prepared therefore, in dealing with the integration of the systems and the fast-paced innovations in an increasingly complex and changing environment. Providing an understanding of what effective strategic decisions can make for an organization and is capable of doing is the purpose of this paper. Redefining the management stance about fundamental decisions and actions it will eventually take and the relevance it makes is significant as well as its relevance in the present situation in anticipation for the future environment. Quick and sound decisions are part and parcel of any organization, but strategic decision-making will be and will continually be described as an effective management tool – but it is important to note that it can never stand in or substitute for the best exercise of judgment through leadership. In the end, leaders of any enterprise, (Nestle’ for this discussion) need to step back and look at the bigger picture to ask and answer the ‘most important issues they can respond to and how to respond to it effectively’. Just as the hammer does not make a house built, so does the analysis and decision-making tools of innovators in Nestle’ do not make an organization fly but the support, judgment, reasoning and intuitive skills they need from senior management should be brought into the forefront of the organization. Though described as a discipline, even though a well-thought of plan in an organization will not typically flow smoothly from one step to the next. It is a veritable challenge that needs to be hurdled daily. The decision made yesterday may very well alter a fresh insight arrived today as it is a creative and evolving process. It moves forward and back several times before it can arrive at a final set of decisions. Therefore, it should feel as no surprise if the process feels like a comfortable ride on a train early on then more like a roller coaster as it progresses. However long and winding the road, the important thing is that it stays on track of its vision. Porters 5 Forces Analysis: Since one knows that Nestle’ is a huge business enterprise but just like any other business enterprise, needs good management strategies all the time to make and keep Nestle’ running smoothly; the planning, directing, coordinating and supervising falls heavily on the shoulders of the upper managers for they are the ones in charge of the delivery of the product, Nespresso. Over time, staying abreast of the changes to make the best decisions can at any given point – manage, plan and implement the most strategically best results. Follow-up and Evaluation: Nespresso so far has implemented the correct strategic moves to further its vision of a successful gourmet coffee brand. But in the event the other competitors out there ( Starbucks, Lavazza, Illycafe’ and others) have caught up with Nespresso’s success in the future, it is wiser to turn to market projection based on the needs and opportunities of the times as it should be the goal for the future. Comprehensively, Nespresso will have to turn strategic planning and marketing solutions from the database it now has accumulated over the years, allowing there fore that Nestle’ can focus on the most important opportunities and validate these opportunities at every chance they are encountered. This is a complex change indeed but one that can decide the ‘staying power of Nespresso in the market segment it now dominates. Although Nespresso has backed the decisions it made in the past with ample research and is often used to implement market decisions, the drawbacks associated with it cannot be denied. Understanding the borderline between the data collected and the data that is used can pinpoint the problem before it even starts. The iterative process and grounded theories in particular could mask the real situation instead of using it to the company’s advantage. It should question always the formulation and refine its methods over periods of time. The use of interviews and questionnaire should be enhanced to keep management on its toes all the time. Documentary evidences of how the clients of Nespresso and the market they belong to behave and change can establish facts and draw conclusions that can be beneficial to Nespresso. The belief of some of the senior management that high-end coffee drinking should be confined to a select few allows the competitors to eat up the bulk of the market, losing important clients in the process. Manipulating data to suit management’s expectation of the product’s performances can never spell positive results in the long run. It all boils that the best course for Nespresso to take is an aggressive take on the sets of events that Nespresso is surrounded with. Marketing strategy and sound decisions that can lift the brand they carry beyond races and cultures but still remain true to Nestle’s company’s vision and mission. BIBLIOGRAPHY Britton, A. 1996, ‘Advice about Empirical Research’, Middlesex University Website. [online] Available at http://www.mdx.ac.uk/www/study/research.htm Miller, J. 2000. ‘Innovation and Renovation: The Nespresso Story’, International Institute for Management Development, vol.5, no. 543 Strategic Planning (2008) available at http://www.allianceonline.org/FAQ Read More