We analyzed the Nespresso Business Model through the framework provided by Teece - Business Model, Business Strategy and Innovation (2010) and through the Business Model Canvas tool by A. Osterwalder and Y. Pigneur. Moreover, we provided a future generation of the business model to led the company maintain the competitive advantage in a growing competitive market.

1. Prof. Francesca Vicentini
A.Y: 2015/2016

2. Introduction of
the Nespresso
Club concept
1986 – 1994 PIONEERINGYEARS: TRIALAND ERROR
1995 – 1999 START-UPPHASE: LAYINGTHE FOUNDATION
1989 1991 1995 1998
First aviation
Nespresso
machine
First e-
commerce
platform
Introduction of
recycling in
Switzerland
Creation of
Nespresso
5 employees
First machine & 4
Grand Crus
The Beginning
1999

3. Evolving
Sustainability
2000 2003 2004 2010 2012
Boutique
RecyclingGeorge Clooney
Boutique
AAA Sustainable
Quality Program
Nespresso opens its
200th boutique in
Shanghai
Achieves their 75%
recycling capsule
capacity objective
one year before
time.
George Clooney
becomes the brand
ambassador of
Nespresso.
First Nespresso
Boutique opens in
Paris

4. 01 02 03 04 05 06 07 08 09
Strategic Analysis Filter – Teece (2009)
Segmenting the market – WHO?
- Nespresso: differentiation strategy
- Companies + private households

5. 01 02 03 04 05 06 07 08 09
Strategic Analysis Filter – Teece (2009)
Creating a value proposition for each
segment – VALUE?
- Broad variety of choices
- Convenience of being able to prepare it in less than a minute
- Unique Nespresso coffee experience

6. 01 02 03 04 05 06 07 08 09
Strategic Analysis Filter – Teece (2009)
Designing and implementing a mechanism
to capture value – HOW TO CAPTURE?
- The razor-blade model
- Two types of capsules: for offices & private households
- Continuous capsules sale: lock-in effect

7. 01 02 03 04 05 06 07 08 09
Strategic Analysis Filter – Teece (2009)
Figuring out and implementing isolating
mechanisms – HOW TO PROTECT?
- Intellectual Property System
- Holding patents to protect their competitive advantage

8. 01 02 03 04 05 06 07 08 09
Profiting from Innovation Framework
Teece (2009)
2 Modes:
1. Integrated Business Model
2. Outsourced Business Model
Nespresso has a hybrid model..

9. 01 02 03 04 05 06 07 08 09
Profiting from Innovation Framework
Teece (2009)
Coffee
machines:
• Licensees for
producing coffee
machines
• Selling through
direct and indirect
channels
Coffee
capsules:
• Production of the
coffee beans: raw
materials

10. 01 02 03 04 05 06 07 08 09

11. 01 02 03 04 05 06 07 08 09
Cost
Structure
Creating
sustainable
business
success
Creating long-
lasting
consumer
relationships
Creating highest
quality grand
cru coffee
• 1-2% off the entire
world production of
coffee
• Close contact with
farmers
• AAASustainable
Quality Program
• The Poistive cup
• The Nespresso club
• Brand ambassador
Strategy

12. 01 02 03 04 05 06 07 08 09
Cost
Structure
• Patents
• Brand image
• Sustainability
• Systems,
processes and
assets that is hard
to replicate
• Level of Opacity
• Cannibalizing
existing sales and
profits
Protective Measures

13. “A business model describes the
rationale of how an organization
creates, delivers and captures
value.”
A. Osterwalder & Y. Pigneur

14. 01
02
05
04
03
06
07
08
09
The
Business
Model
Canvas

15. 01 02 03 04 05 06 07 08 09
Customers
Segment
B2C – BUSINESS TO CONSUMERB2B – BUSINESS TO BUSINESS
• Companies and firms looking for
qualitative coffee
• Hotels
• Restaurants
• First class airlines
• 18-65 years
old
• Niche market
• Medium-high
income
• Average of 7 coffee
per week
• Looking for quality
• Looking for a status

16. 01 02 03 04 05 06 07 08 09
Value
Proposition
CAPSULES EXPERIENCE
Create the perfect cup of coffee, with exquisite cream, a
tempting aroma and full-bodied taste…
…at home in a convenient and consistent way
SMART
MACHINES:
• Affordable
• Clever in size
• Technology
• Design
• Best Quality
• Variety of
choice
• Luxury
image
• In-shop
experience
• Lifestyle

17. 01 02 03 04 05 06 07 08 09
Channels
OWN CHANNELS PARTNER CHANNELS
Retailers:
Only machines are sold
even in electronic stores
Nespresso wants to bring
the machines into your
house
Boutique:
Popular chic departmentstores and major
cities
Rightbalance between coffee experience and
retail
Online:
E-commerce
Reserved to Nespresso Club Members
48 hours delivery when ordering <200
capsules
Telephone:
Advise on the selection of Grand Crus and
machines
Delivery service suited to individual needs
Reserved to Nespresso Club Members

18. 01 02 03 04 05 06 07 08 09
Customer
Relationships
BOUTIQUES DIGITAL
EXPERIENCE
NESPRESSO
CLUB
• Advices from
coffee experts
• In-shop
experience
• Broad range of services
• Feeling of belonging to an
exclusive network
• Database for all of its
members
• Clear website
• Products
assortment
• Online orders
• Support
CALL CENTER
• Enabling them to
place orders 24/7
• Provide technical
support

19. 01 02 03 04 05 06 07 08 09
Revenues
Stream
LOCK-IN STRATEGY
Strategy that instigates the
repetitive sales of capsules
FIXED MENU PRICING
Strategy of predefined prices
based on static variables
Price range for machines:
from 99 to 699 euros
Price range for capsules:
from 0,37 to 0,45 euros
CAPSULES
92% of the
company’s
turnover is
represented
by the
capsules
MACHINES
4% of the
company’s turnover
is represented by
the machine and
the cross-selling of
coffee accessories

20. 01 02 03 04 05 06 07 08 09
Key
Resources
FINANCIAL:
Nespresso belongs to Nestlè
Group
Access resources and capital of
an international company
PHISICAL:
3 production center in
Switzerland
410 boutiques worldwide
INTELLECTUAL:
1700 patents gave to the
company a competitive
advantage
HUMAN:
1,500 coffee specialist in their
Customer Relationship Centers
10,500 employees worldwide

21. 01 02 03 04 05 06 07 08 09
Key
Activities
PRODUCTION:
• 63000 farmers in 11 countries
• Coffee processed and capsuled
• Manufacturing activities 100% in
Switzerland
• Quality checks
MARKETING & BRANDING:
• Marketing campaign
• Brand ambassador & Celebrities
• Web presence
B2C DISTRIBTION:
• Direct distribution strategy
• Worldwide distribution
• In-house delivering
R&D:
• Focus on creativity, design and
innovation
• Improving sustainability
• Quality and different tastes

22. 01 02 03 04 05 06 07 08 09

23. 01 02 03 04 05 06 07 08 09
Key
Partnerships
MACHINE
MANUFACTURERS
Krups, Delonghi, Siemens,
Magimix, Gaggia
COFFEE BEANS
SUPPLIERS
Farmers provide to
Nespresso the
coffee as raw
(IUCN) International
Union for Conservation
of Nature
“Alucycle Program”:
sustainability through
value chain

24. 01 02 03 04 05 06 07 08 09
Cost
Structure
US $100.00 US $300.00US $200.00
FIRST PACK THIRD PACKSECOND PACK
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
PRODUCTION
COSTS
R&D COSTS B2C
DISTRIBUTION
COSTS
MARKETING
& BRANDING
COSTS• Farmers
• Production
process
• Quality controls
• Production
centers
• Coffee
specialists
R&D TEAM:
Network of experts
focused on
designing more
innovative, high-
performing and
greener machines
• Shipping
products
worldwide
• Provide the
same service
• Provide
machines to
retailers
• Testimonials
• TV advertising
• Social media
presence
• Boutiques in the
best locations
• Newspaper
advertising

25. A successful Business Model
Bringing machines
into your house
LOCK-IN
Repetitive sales
of capsules

26. Competitors are now allowed
to produce compatible
capsules
EASIER TO
FIND
CHEAPER

27. 01 02 03 04 05 06 07 08 09
Cost
Structure
US $100.00 US $300.00US $200.00
FIRST PACK THIRD PACKSECOND PACK
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
FLAVORS SUSTAINABILITY
The company is
increasing the
variety of tastes
of their capsules’
lines
The company is
improving their
commitment in
environmental and
social responsibility
“AluCycle
Program”
Nespresso is already
responding to this
threat:
QUALITY
The company
is trying to
increase the
perception of
coffee quality

28. A new generation of business model is
needed
Nespresso should focus on what really
make their customers loyal to them:
The Customer
Relationship “Nespresso Elite
Club”
Luxury club really
involving customers

29. 01 02 03 04 05 06 07 08 09
Cost
Structure
US $100.00 US $300.00US $200.00
FIRST PACK THIRD PACKSECOND PACK
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
Lorem - Ipsum
GOLD CLUB PLATINUM CLUBSILVER
CLUB
2500 capsules
New machine
for free
Stimulant to be a
loyal customer
Implicit perception
of discount
Silver
member€ 50 per year
Exclusive service:
Luxurious treatment in
any Nespresso
boutique
5000 capsules
Sophisticated coffee
machine
Access to the Gold
Club service
Invite two
friendsTaste coffee before time
to market
“NESPRESSO ELITE
CLUB”

30. 01 02 03 04 05 06 07 08 09
The effect on the business model
Cost structure
• Increase in CRM costs
• Giving free machines
Revenues
• Customers staying loyal
• New customers
Key partnerships
• Newspapers
suppliers
• Mobile devices
suppliers
Key activities
• In-shop
entertainment

31. Thank you for your attention!!!
Thank you for your
attention!!!