Nespresso Business Model and The Six Characteristics it Espouses

The concept of business models has, in the past decade, managed to transform companies and the manner in which they attract potential clients. At the core of these novel strategies is a client-oriented approach that seeks to provide the required services at any given moment. This, essentially, creates value for the company since they replace old and obsolete organizational rationale while still delivering value service to clients. Swiss entrepreneur Alex Osterwalder recognizes this need and thus endeavors to provide present simple and practical solutions. He discusses these solutions in his YouTube presentation dubbed “Competing on Business Models” where he endeavors to shift the business environment by introducing new conventions (Osterwalder, 2018). It is rather curious that Alex’s interests were fueled by his love for political science where models dominate every proposition design. He contends that businesses are quite similar to Political Science since they are both involved in the formation of institutions.  The Stategyzer developed the Nespresso business model that entailed a “portioned” coffee as the primary consumer product. The company soon revolutionized the coffee industry with its idea of allowing individuals to create barista style beverages through their machines and pods. It is, therefore, necessary to explain this business model according to the six characteristics that it espouses.

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Nespresso has clear revenue streams that allow the company to make profits stay afloat in a rapidly changing market.  According to its business model, income always flows through it from discrete payments made by many of its loyal customers. Since the introduction of the single-serve type coffee appliance back in 1986, Nespresso has managed to grow steadily across 62 countries. As a result, its revenue streams widened and enabled the company to reinvest most of its profits back to its global operations. Proof of its financial success has recently come to light through its activities in far-flung countries such as South Sudan. Working closely with TechnoServe, the company has managed to further improve its revenue supply chain by directly investing some of its revenue in oil production and agricultural exports. By so doing, Nespresso is now involved in sustainable business practices that benefit the firm greatly in its attempt increase channels of revenue. Moreover, its participation in such countries also allows it to give back to society in a unique way since the pacification of these regions allows businesses to thrive and local inhabitants to earn a living.

Key resources are also a hallmark of Nespresso’s mode of operation and have aided it in achieving its current market success. One of its most important resources is its coffee. Superior quality has always seen clients return to the company since its inception. Nespresso is also cognizant of the fact that their customers are their greatest effort and actively seek out information regarding their experience. A vibrant customer support service is always glad to receive customer suggestions about the quality of their product and areas that firm needs. The company acknowledges the prestige that usually accompanies its high quality and the reason why it is an expensive beverage. Nespresso is aware that many individuals would prefer to consume its capsules as a status symbol which is why its customers are highly valued. Additionally, the innovative design of its machines has gone on to benefit the company greatly. Nespresso’s brand image is also a key resource that has made it possible for the firm to attract new customers every year. Prestigious marketing featuring famous figures such as George Clooney creates customer loyalty through the presentation of a sustainable image.

            At the center of Nespresso’s procedures are key activities that promote its relationship with customers and in securing distribution channels. Thus, the firm goes out of its way to provide its customers with a particular value proposition with regard to the product that is currently on offer. These values are identified at a very early stage and communicated to customers through an elaborate chain. It does not stop here. The company continues to improve this chain value periodically as a way of ensuring that its high standards are maintained while customers remain satisfied. To this end, the company makes sure that a thorough customer follow up is always available to keep track of their customers and the opinions that they have regarding the product. As a result, customers are always assured of direct contact with the company in fundamental matters that are important to their experience. One such contact resulted in the development of boutique retailers. Recently, the company has taken this a notch higher and incepted a Nespresso Club that brings together all its loyal customers. Hence, Nespresso has succeeded in capitalizing on its good image to construct quite a following on the internet to catapult it further ahead.

            Nespresso has also managed to create channel segments meant to aid it when targeting potential customer.  The company manages to differentiate between goods and services using this technique, isolating specific clients that require such services. Focusing on individual clients generally has a positive effect on the brand since they now acknowledge its involvement in their lives and the lengths that it goes to keep them satisfied. In addition to this, Nespresso is also dedicated in ensuring that clients have a clear choice between retail or premium coffee pods. A compromise allows it to bridge the gap that exists between these two markets, allowing them to function in the most cost-efficient manner while still making profits. Using a bait and hook model, the company approaches the market expertly by offering its consumables and machines as options that customers can choose from. In essence, the customers end up purchasing a patented technology that, inadvertently, forces them to purchase the consumables designed for its use. Nespresso has had much success with this design since it has played a major role in the optimization of its operations across the board. Through a system of keen suppliers and elaborate outsourcing, Nespresso has succeeded in expanding its distribution channels giving it a sustainable edge over its competitors.

Nespresso’s success has widely been attributed to its attention on key business partners.  The primary reason why the brand started first by seeking partnerships was to enable it to form connections that would be fundamental for market coverage. Strategic partnerships have been of great importance to companies in aiding them expand to new territories. As a subsidiary of the food giant Nestle, Nespresso has benefitted greatly from this close relationship that has averted any judgment of error that the latter would have made if it was alone. An understanding of market dynamics made it possible to create systems that have enabled the brand to remain afloat even when its competitors were grappling with harsh market forces. For instance, the development of the machines made it possible to proceed with plans to create a distribution channel its products. Furthermore, partnerships with George Clooney and America’s cup also enabled Nespresso to build brand awareness in locations that would, most likely, be visited by potential customers.  

Nespresso is also keen on the value that it delivers to its customers. Stakeholders back in its parent company Nestlé are aware of the important role played by these customers, hence the need to identify how value is delivered to them. In this particular model, Nespresso focuses on the time required for one to prepare and consume a gratifying cup of coffee. The idea behind its development was to make it possible for regular individuals to develop their cup, just like their local barista does. All the elements that go into developing a drink of such a stature are explored as a way of ensuring that customers get value for their money and an experience to remember. Thus, convenient pods become an integral part of the preparation process that is used, later on, as a sales pitch to appeal to new customers. Any suggestion or concern raised about the preparation and clean-up process is thoroughly assessed as a way of ensuring that all concern are approached with the seriousness that they deserve. Value also entails providing viable products that will satisfy the client’s needs and keep them coming back for more.

In conclusion, business models are an important centerpiece in the development of successful companies that ultimately provide the best products and services to their clients. Nespresso espouses clear revenue streams, key resources, key activities, channel segments, business partners and value as standard characteristics in its model. As a consequence, their application seeks to replace obsolete organizational rationale in an attempt to provide value products and services.

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