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Question: The Nespresso Product The Nespresso product was

a system that allowed the consumer to produce a c...

The Nespresso Product The Nespresso product was a system that allowed the consumer to produce a cup
of espresso coffee at home. Though simple in appearance and use it took Nestlé more than ten years to
develop it. The system consisted of two parts: a coffee capsule and a machine. The coffee capsule was
hermetically sealed in aluminum and contained 5g of roast and ground coffee. The machine consists of
four parts –a handle, a water container, a pump, and an electric heating system. These four parts were cast
into the body and formed the machine. The new product was introduced in 1986. The original strategy
adopted by Nestle was to set up a joint venture with a Swiss-based distributor called Sobal to sell the new
product. This joint venture (named Sobal-Nespresso) was supposed to purchase the machines from
another Swiss company (called Turmix), the coffee capsules from Nestlé, and then distribute and sell
everything as a system one product, one price. Offices and restaurants were targeted as the customers
and a separate unit called Nespresso SA was set up within Nestlé to support the joint venture and to
service and maintain the machines. By 1988, it was clear that the new product was not living up to its
promise. Sales were well below budget and quality problems were driving costs through the roof. Nestlé
headquarters was considering freezing the operation when Jean-Paul Gaillard took over. He had to decide
whether and how strategically to reposition the subsidiary. 1) After reading the case study above answer
the following questions 1. Suppose that Nestle was the rst mover to producing Nespresso product; what
are the main pros and cons of being in this situation? 2. Suppose that Nestle was the late mover to
producing Nespresso product. Does it mean that the company will gain the least pro t comparing with
other competitors? clarify your answer.

. Suggest TWO alternative strategies for Mr. Jean-Paul Gillard to overcome the difficulties of managing and
operating the Nespresso product?.

Name THREE lessons that can be learned from the strategic management course that you have learned
this semester? (2 marks)

3) Find three different companies that adopted different international corporate-level strategies: (multi-
domestic, Transnational, and global Business strategy). Describe each company and clarify how its strategy
in detail.

Expert Answer
 Anonymous
answered this

Answers:

Q 1)

Pros and Cons for Nestle, in case, if it was the rst mover for producing Nespresso product:

If Nestle had opted for producing Nespresso product, it would have had the following Pros and Cons:

Pros

1) Ownership of this initiative would have been with Nestle and the credit for this invention would have
been named after Nestle.

2) Reputation of Nestle would have been increased for the successfully producing a new innovative
product, Nespresso.

3) All the pro ts would have been enjoyed by them and will hold the patent rights of the product.

Cons:

1) As the reports con rmed that the product started to fail with low quality and technical issues, the entire
losses should be borne by Nestle.

2) The Product's failure would have hit the sales, further, showing negative impact on its other offerings.

Q 2) Suppose that Nestle was the late mover to producing Nespresso product. Does it mean that the
company will gain the least pro t comparing with other competitors?

1) In Case, If Nestle had made a late move for producing Nespresso product, The Company would have
been more at risk, as the product's success or failure can not be predicted exactly when it is launched.

2) Unfortunately, the results proved negatively resulting in failure of the product. Hence, Nestle would have
ended up facing huge losses and not pro ts.

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The Nespresso Product The Nespresso product was a system that allowed the consumer to produce a
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