Nespresso and the U.S. Market SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Nespresso and the U.S. Market
At the beginning of 2012, Nespresso, a manufacturer and distributor of home-brewed, single-serve coffee machines and capsules, is considering how best to increase its share of the U.S. market. It had always relied on organic growth through its own retail stores and a few premium department store chains. However, between 2005 and 2011, the demand for capsule coffee boomed, and this attracted a number of new competitors, including Starbucks, while existing competitors increased their marketing expenditures. At the same time, Nespresso's patents were expiring, and some supermarkets started selling generic capsules for Nespresso machines. How should Nespresso change its strategy to ensure future growth? Should it relinquish its tightly controlled distribution system in order to offer increased convenience to consumers? Should it alter its product to better match the U.S. taste for milk-based coffee? Or might an increase in advertising spur demand?
Authors :: Edward Boon, Colin Campbell, Leyland Pitt
Swot Analysis of "Nespresso and the U.S. Market" written by Edward Boon, Colin Campbell, Leyland Pitt includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Nespresso Capsules facing as an external strategic factors. Some of the topics covered in Nespresso and the U.S. Market case study are - Strategic Management Strategies, Strategic planning and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Nespresso and the U.S. Market casestudy better are - – increasing energy prices, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, increasing household debt because of falling income levels, supply chains are disrupted by pandemic ,
challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Nespresso and the U.S. Market
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nespresso and the U.S. Market case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nespresso Capsules, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nespresso Capsules operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Nespresso and the U.S. Market can be done for the following purposes –
1. Strategic planning using facts provided in Nespresso and the U.S. Market case study
2. Improving business portfolio management of Nespresso Capsules
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nespresso Capsules
Strengths Nespresso and the U.S. Market | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nespresso Capsules in Nespresso and the U.S. Market Harvard Business Review case study are -
High brand equity
– Nespresso Capsules has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nespresso Capsules to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Nespresso Capsules is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Edward Boon, Colin Campbell, Leyland Pitt can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Strategy & Execution field
– Nespresso Capsules is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Nespresso Capsules in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Nespresso Capsules is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Nespresso Capsules is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Nespresso and the U.S. Market Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Nespresso Capsules are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Sustainable margins compare to other players in Strategy & Execution industry
– Nespresso and the U.S. Market firm has clearly differentiated products in the market place. This has enabled Nespresso Capsules to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Nespresso Capsules to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Nespresso Capsules has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Nespresso and the U.S. Market - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Nespresso Capsules is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Nespresso and the U.S. Market Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Superior customer experience
– The customer experience strategy of Nespresso Capsules in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Nespresso Capsules has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Organizational Resilience of Nespresso Capsules
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Nespresso Capsules does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Nespresso and the U.S. Market | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nespresso and the U.S. Market are -
High operating costs
– Compare to the competitors, firm in the HBR case study Nespresso and the U.S. Market has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nespresso Capsules 's lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Nespresso and the U.S. Market, in the dynamic environment Nespresso Capsules has struggled to respond to the nimble upstart competition. Nespresso Capsules has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Nespresso Capsules is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Nespresso Capsules needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nespresso Capsules to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Nespresso and the U.S. Market HBR case study mentions - Nespresso Capsules takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Nespresso and the U.S. Market, is just above the industry average. Nespresso Capsules needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Nespresso and the U.S. Market HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Nespresso Capsules has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Nespresso and the U.S. Market, it seems that the employees of Nespresso Capsules don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Skills based hiring
– The stress on hiring functional specialists at Nespresso Capsules has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Need for greater diversity
– Nespresso Capsules has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Workers concerns about automation
– As automation is fast increasing in the segment, Nespresso Capsules needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
No frontier risks strategy
– After analyzing the HBR case study Nespresso and the U.S. Market, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Opportunities Nespresso and the U.S. Market | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Nespresso and the U.S. Market are -
Developing new processes and practices
– Nespresso Capsules can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Loyalty marketing
– Nespresso Capsules has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Nespresso Capsules can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Nespresso Capsules to increase its market reach. Nespresso Capsules will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Nespresso Capsules to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nespresso Capsules can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Nespresso Capsules to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Buying journey improvements
– Nespresso Capsules can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Nespresso and the U.S. Market suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nespresso Capsules can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Nespresso and the U.S. Market, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nespresso Capsules is facing challenges because of the dominance of functional experts in the organization. Nespresso and the U.S. Market case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nespresso Capsules to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Nespresso Capsules to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nespresso Capsules in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Nespresso Capsules has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Nespresso and the U.S. Market - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nespresso Capsules to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Nespresso and the U.S. Market External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Nespresso and the U.S. Market are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Nespresso Capsules business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Nespresso Capsules has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Nespresso Capsules needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Nespresso Capsules.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nespresso Capsules in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing wage structure of Nespresso Capsules
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Nespresso Capsules.
Consumer confidence and its impact on Nespresso Capsules demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Nespresso Capsules is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Nespresso Capsules in the Strategy & Execution sector and impact the bottomline of the organization.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Nespresso Capsules needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nespresso Capsules can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Nespresso and the U.S. Market .
High dependence on third party suppliers
– Nespresso Capsules high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Nespresso and the U.S. Market, Nespresso Capsules may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Weighted SWOT Analysis of Nespresso and the U.S. Market Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Nespresso and the U.S. Market needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Nespresso and the U.S. Market is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Nespresso and the U.S. Market is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Nespresso and the U.S. Market is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Nespresso Capsules needs to make to build a sustainable competitive advantage.