Management decision making: The Nestle Nespresso case

Acepublisher .

Order the writing of a tailor-made Management Case study

Free quote online

Case study Format .doc

Management decision making: The Nestle Nespresso case

Download

Read an extract

Reader
Abstract
Contents
Extract

Abstract

Nestle Nespresso is one of the fastest growing subsidiaries of the Nestlé group. The group includes many different brands producing coffee. Among them, there are two very profitable entities: Nespresso and Nescafé. Although they are not the same company, they are owned by the same group, and perform different activities. Nestlé Nescafé is a company that specializes in medium-range coffee. This brand owns many different ranges of products from soluble coffee to small portioned coffee sets. The products are sold in supermarkets, and this is one of its big differences with Nespresso. It is true that one of the particular features that we could identify about Nespresso is the fact that the company sells its products within a fully owned network of outlets. Nespresso is a company that specializes in high-end coffee and coffee machines for rich people. In fact, it was created with this concept in mind at the very inception. The company was created in Switzerland in 1982 to provide high quality coffee to homes, and commercial entities. Thus, this branch of Nestlé created a very powerful coffee machine that was very expensive from the very beginning, and provided two or three different capsules. It catered to what we call in marketing, a niche market. Nespresso looks for the best coffees from all around the world, and is very particular about quality: all the coffees that do not match with the company's exigencies are given to Nestle Nescafe.

Defining the problem
Framing the issue properly
Identifying alternatives
1. Try to enter the medium-range coffee capsule market
2. Merge with Nescafé to get a good place in the medium range coffee capsule market
3. Merge with Nescafé and keep the existing position
4. Create new patents that could get the same effects than the first ones
5. Do nothing and continue just like the patents would still operate
Selecting an approach
Choosing the process, planning and implementation

Get this table of contents for free after login.

Extract

[...] It is also true that it would give Nespresso another 20 years to think about the future strategy. To merge with Nescafé would not be a good idea and would be difficult due to the fact that they were two entities for two different purposes. Nestlé has invested in a 15-year research and development program with high financial investments. It made a similar investment in marketing campaigns in those last years. It is sure that Nespresso has a place of its own in the market, just like Nescafe, which could continue to provide other forms of coffee like powder, soluble coffee etc. [...]

[...] Another big factor that would make the issue very significant is the fact that 2011 is very near and Nespresso has not engaged any program to settle the patent issue. It is also possible that measures have been taken, but kept under wraps due to the spying from competition and business surveillance. However, if it has not already done so, the company might fall short of time to adopt an effective counter operation. Identifying alternatives There are four alternatives available to the company. [...]

[...] This is also a way that will help see the progress of the implementation. During the implementation, Nespresso will have to pay attention on data recording, in order to keep an eye on the progress (updates). Some progresses in the change could be noticed by press or competitors, so that at any moment, the implementation could be reviewed and the plan modified. This is also a way to test the steps of the change process, and to see whether or not they work, and if it is [...]

[...] It is true that this is necessary because though the decision taken may be bad, it would be better than to do nothing. The change process is necessary because the environment is changing too. To say that the environment is changing, implies that the actors in it are changing their behaviors and/or strategies. It is necessary to react to that because the survival on the company depends on it. Regarding resources, change is possible at any level. There are still few years available before the end of the patent, so this is the time to implement the program. [...]

[...] Nespresso protected the 19-bar pressure pomp to get a true espresso with foam in the glass and also patented the use of aluminum capsules in the Nespresso machine system. No competitor is able to create capsules in this metal to protect coffee from light, air and humidity and thus give high quality coffee to customers. The pressures in the pumps were also lower and so could not be true espressos. The differences are truly visible. There is no way to for Nespresso or any other company to replicate these patents now. [...]

doc