Instant coffee is a household staple, with 73% of UK consumers drinking it daily. Nestle’s Nescaffe dominates the market with 43% market share and the majority of volume sold. In seeking out new ways to expand coffee drinking in the home, Nestle developed Nespresso. Nespresso is every bit as convenient as Nescaffe but uses fresh ground coffee individually packaged in pods to brew consistent single serve espresso. To use the pods, a special Nespresso coffee machine is necessary. Upon purchasing a machine, the consumer becomes part of the Nespresso club. Pods are then sold to club members either through high-end Nespresso boutiques or online. This premiumisation of convenient coffee is a growing market, in fact between 2010 and 2012 it was the fastest growing segment in the UK coffee market with growth of over 50% in both value and volume. Nespresso has always been the market leader for coffee pods in Europe, starting to develop their system as far back as the 1970s and continuing to innovate today. However, with patents on their unique system coming to an end last year, so too will their monopoly in this niche market. Already, the firm is feeling the competition from newcomers such as CafePod who make their own pods compatible with Nespresso machines. The following discussion will explore how trust, an entrepreneurial spirit and constant innovation have shaped Nespresso, and what this means for the future of the firm. As previously mentioned, Nespresso was first developed in the 1970s, but it wasn’t until 1986 that a wholly owned subsidiary of Nestle, Nespresso SA, was actually formed. The idea behind the product is simple – a two-part system, with machine and capsule made for ease and convenience. The aluminium capsule contains 5g... ... middle of paper ... ...s having the authorization beforehand.” His attitude, coupled with a strong commitment to the brand that ensured he was acting in the best interest of the frim, helped Nespresso to innovate. Interesting to note here is that despite the principal (Nestle upper management) having asymmetric information about the agent’s activity (Gaillard), the results were advantageous. Sebastian Raisch discusses Nespresso in his article, “Balanced Structures: Designing Organizations for Profitable Growth”, explaining, “The entrepreneurial culture helped it to move faster and promote innovative ideas such as the ‘club concept,’ which represented Nestle’s first direct marketing experiment and played a key role in Nespresso’s success.” Therefore, it can be argued that the principal’s lack of knowledge helped foster an entrepreneurial work environment were innovation could flourish.
Geoff Herzog is the product manager for coffee development at Kraft Foods Canada. After reviewing successful results of single-serve coffee pod systems, he wondered whether it would be successful in other areas. It was July 6, 2004, and Herzog had just learned that Kraft Foods North America was planning an aggressive launch of coffee pods in the United States. He then had only a month to decide whether or not the company should proceed with a simultaneous launch in Canada, or await the U.S. results.
Keurig and its K-cup concept revolutionized a market that had been around for over five hundred years to allow consumers to brew an excellent cup of coffee in their own home. Before the K-cup concept was introduced by the company, consumers had to measure the desired amount of coffee themselves and were largely constrained to coffee makers that would brew only multiple cups of coffee. Everyone in America has heard of Keurig but not many people know the history of the company behind bringing this product to the market. Green Mountain Coffee was a largely regional coffee company with loyal customers throughout the Northeast United States but not much market penetration elsewhere. It was not until the company purchased the Keurig concept from its creator John Sylvan that it was able to propel itself to the international company it is today. This new product revolutionized the coffee market and can now be found in thirteen percent of American workplaces and account for twenty-five percent of the coffee makers sold in the United States (Sozzi, 2015; McGinn, 2011; Ingram,
CEO of Starbucks, Howard Schultz, originally had the idea that Starbucks would have the community/traditional feel in their stores, and still serve high-quality coffee (“Our Heritage” 1). Adding an Italian vibe to the coffee shops, keeping its traditional logo, which is based on a mythical creature, and advertising some of its products in a more “traditional” style accomplished the first goal. For an example, Starbucks recently created a commercial about their Refreshers, which was about cooling someone down in the summer time, with the scenery of Tuscany in the background. Serving high-quality coffee was obtained by ordering coffee beans from where they naturally grow and giving it a perfect roast to give to a customer. It was a marketing strategy that helped Starbucks grow and transform its commodity chain to support gathering more raw materials for a cheaper and more efficient way.
In 2002, unexpected findings of a market research showed problems regarding customer satisfaction and brand meaning for Starbucks customers. The situation was unacceptable for a company whose overall objective is to build the most recognized and respected brand in the world. Starbucks was supposed to represent a new and different place where any man would relax and enjoy quality time, alone or with others. But the market research showed that in the mind of the consumers, Starbucks brand is viewed as corporative, trying to expand endlessly and looking to make lots of money. This huge gap between customers' perception and Starbucks' values and goals called for immediate action.
There are plenty of options for consumers and allows them to pick whatever they want to drink. With coffee shops all over the world and almost every corner, in addition to growing number of Starbucks stores, it may not be as special to consumers as it once was. Buyers have the power to choice between low cost or high quality, which forces companies to choose a strong and consistent strategy.
In 1971, the first Starbucks store opened in Seattle’s renowned Pike Place Market. In the beginning they made only one guarantee to their customers: Expect More Than Coffee (Starbucks, 2017). It is on that guarantee that they have built a connection with their customers that has solidified their success in a saturated market. Now they have more than 24,000 retail stores in 70 countries (Starbucks, 2017). Their extensive brand portfolio now includes the following: Starbucks Coffee, Seattle’s Best Coffee, Teavana, Tazo, Evolution Fresh, La Boulange, Ethos Water and Torrefazione Italia Coffee. In this report, I have made the choice to delimit this brand audit to only include the Starbucks flagship brand.
Schultz, Howard, and Joanne Gordon. Onward: How Starbucks Fought for Its Life Without Losing Its Soul. New York: Rodale, 2011. N. pag. Print.
Starbucks is currently the industry leader in specialty coffee. They purchased more high quality coffee beans than anyone else in the world and keep in good standings with the producers to ensure they get the best beans. Getting the best beans is only the first part, Starbucks also has a “closed loop system” that protects the beans from oxygen immediately after roasting to the time of packaging. They did this through their invention of a one-way valve which let the natural gasses escape but keeping oxygen out. This gave them the unique ability to ensure freshness and extended the shelf life to 26 weeks. Starbucks isn’t only about the coffee, it’s also about a place where people can escape to enjoy music, reflect, read, or just chat. It is a total coffee experience. The retail outlet has been responsible for much of Starbucks growth and has contributed substantially to their brand equity.
In the United States, coffee is the second largest import (Roosevelt, 2004). Furthermore, the United States, consumes one-fifth of all the worlds¡¦ coffee (Global Exchange, 2004). The present industry is expanding. It is estimated that North America¡¦s sector will reach saturation levels within 5 year (Datamonitor. n.d.). According to National Coffee Association (NCA), 8 out of 10 Americans consume coffee. In addition, it is estimated that half of the American population drinks coffee daily. The international market remains highly competitive. It is estimated that 3,300 cups of coffee are consumed every second of the day worldwide (Ecomall, n.d.). The latest trends included dual drinkers, an increase in senior citizens...
In the article, it describes the benefits of Juan Valdez expanding in the United States. On the other hand, it shows how Starbucks will struggle in Colombia competing against an all Colombia company. Juan Valdez founding and operations are explain in the article. It also details how Starbucks uses new brands to keep customers going to the store. The article is a great example of international commerce in the world.
The purpose of this report is to evaluate Nestle Company industry based on the case study and comprehend how the company develops strategic intent for their business organizations following the strategic factors and approaches. I will analyze the strategic management process as firm used to achieve strategic competitiveness and earn above-average returns. I will critically examine the strategy formulation that includes business-level strategy and corporate-level strategy. It also aims to identify market place opportunities and threats in the external environment and to decide how to use their resources, capabilities and core competencies in the firm’s internal environment to pursue opportunities and overcome threats.
In this report, there will be an overview, strategic direction and organizational structure of Nestlé S.A. This prompted investor groups who are interested to invest in this company and to decide whether they should invest their funds with Nestlé S.A. The purpose of this report is an opportunity to gain knowledge of how this company evolved and how they operate their business. This will not provide any information on the company situation, marketing strategy, financial performance, and company outlook.
Today, Nestlé owns around 8,000 brands, has 468 factories or operations in 86 countries and employs more than 180,000 people worldwide (“Nestlé’s History”). The initial expansion of the company can really be traced to the years following...
Caf? Expresso, as the first mover in the coffeehouse marketplace, which has expanded quickly and become one of the ?big three? players in the global coffee shops chain. However, recently this company is continuously facing a lot of problems in terms of its staff, easy-copied business model and product range, resulting this company lost its leading position to the number three. Therefore, its adjusted visionary goal is ?return Caf? Expresso to the number one position in the marketplace? (Beardwell, 2010). To achieve this goal, Caf? Expresso identifies ?the coffee drinking experience? is significant to achieve competitive advantage and customer value-added, which was delivered through three key elements (graph 1),
3. Nestle’s first mover strategy. The writer makes a comparison to enterprises during the industrial revolution. These companies had to invest in infrasture that are almost negligible in todays commerce activities, to start off production. Nestle had to engage in activities with a potential high risk such as their milk collection process in china.