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EPM938 Operations Management Group Coursework 1 [19.11.

17]
Executive Summary
The aim of this report is to contrast by way of comparison the operational activities of two
organisations: Nespresso and Starbucks Coffee.

Both companies are prominent players in the coffee and beverage industry albeit with a different
client focus.

Nespressos business model is based on supplying household consumers with premium quality
coffee in the form of capsules as well as own-branded electric coffee machines. This is collectively
referred to as the Nespresso system.

Starbucks operations on the other hand involve retailing of premium coffee products through a
network of strategically located and highly visible coffee shops.

Both companies have adopted almost similar sustainable procurement programmes within their
supply chains which are reinforced by a desire to ensure only superior quality and responsibly
sourced coffee beans are delivered to their respective production centres.

Nespresso Sustainability & Corporate


Responsibility Commitment:

We are committed to ensuring sustainability Starbucks Ethical Sourcing Commitment:


throughout our operations, making clear
We know our supply chain inside out, bringing
commitments and seeking to create shared value
you unique sustainably produced coffees from
and positive impact for farmers, consumers and around the world.
society at large, while caring for the We work with over 300,000 farmers across
environment. We believe that each cup of nearly 30 countries to ensure were producing the
Nespresso coffee has the potential not only to best coffee possible, in the most ethical way.
deliver a moment of pleasure for our consumers, When we purchase products for our stores, we
but also restore, replenish and revive evaluate our suppliers for their commitment to
environmental and human resources. social responsibility too.

The report will also consider customers perceived views when faced with choices and decisions
regarding both companies final product in terms of variety, convenience, perceived product value
and cost.
Introduction
Parts of Nespresso operational activities this report will cover:

Household end-users (Direct-to-Consumer)


Coffee Bean Procurement
Production and Marketing Strategies
Coffee Machines
Technology

Parts of Nespresso operational activities this report will NOT cover:

Commercial end-users (Business-to-Business Industrial Client)

Parts of Starbucks operational activities this report will cover:

In-store Coffee products only (Direct-to-Consumer)

Parts of Starbucks operational activities this report will NOT cover:

Other confectionery products sold in Starbucks coffee shops


Commercial end-users (Business-to-Business Industrial Client)
CONTENTS:

Types of Operations analysed in this report:


1. Competitive Strategy
2. Operations Strategy
3. Supply Chain
4. Characteristics of Operations
5. Operations Performance Objectives
6. Nature of Competitive Factors
7. Process types & Process Layout
8. Process Technologies
9. Planning & Control Issues (i.e. Inventory Control and Capacity Management)
10. Approach and Success in Operations Improvement

Overview of Company A [Nespresso S.A]


Nespresso was founded in 1986 and is an autonomous globally managed business unit wholly owned
by the Swiss-based Nestle Group. The company pioneered the concept of selling pre-measured and
portioned espresso coffee pods and capsules using their Nespresso range of coffee making
machines. This innovation is largely centred on the argument that portioned coffee is more superior
compared to standard soluble coffee because it reduces wastage of water and coffee thereby
reducing the carbon footprint. The Nespresso machine also ensures a consistent quality cup of
coffee is dispensed on every occasion by anyone not just by a skilled barista.

The company has operations in 64 countries and employs 12,000 people world-wide and are a visibly
powerful global brand as evidenced by over 340,00 online daily visits and hits on their sales
websites. They also have over 5 million followers on the Facebook social media website. The brand is
also represented by popular actor George Clooney as its brand ambassador.

NESPRESSO OPERATIONS TRANSFORMATION MODEL:

Transformed Resources

Portioned Nespresso
coffee capsule
Input

Transformation Process Customers


Input resources Products & Services Home Coffee Consumer
Nespresso Coffee
System

Transforming Resources

Nespresso Coffee
Machine
Operations Strategy of Company A [Nespresso S.A]
According to Slack et al, Operations strategy concerns the pattern of strategic decisions and actions
which set the role, objectives and activities of the operation.

Nespressos operations strategy is captured within the following points:

Strategy is underpinned by passion for perfection and track record of continuous innovation
to consistently deliver the highest quality coffee tasting experience to consumers worldwide.
This is achieved through delivering high quality Grand Cru coffee capsules range to be
used by unique home-use Nespresso system coffee making machines.
The business model is constantly refined with a focus on continually enhancing the
consumers coffee experience.
Launching of online sales boutique concept that enable 24/7 direct online ordering.
Creating a global brand by expanding geographically.
Establishment of a consumers Membership Club network.

NESPRESSO OPERATIONS MODEL:


Competitive Strategy of Company A [Nespresso S.A]
Nespressos unique direct-to-consumer business model and route to market provides them with a
unique competitive advantage versus competitors and offers a distinct advantage to Club Members.
Direct relationship with customers through the Nespresso Club allows anticipation of customers
needs and tailor offerings and services based on the insight and feedback that they provide.
Nespresso exclusive boutiques around the globe provide personalised services and a unique gateway
to allow consumers to interact with the Nespresso brand.

The company continues to forge new paths of innovation in the portioned coffee market to maintain
its leading competitive edge. The wide ranges from the coffees and design of new machine models
to the development of innovative retail solutions and services, including the new Nespresso Cube,
the first fully automated Nespresso boutique.

NESPRESSO COFFEE SYSTEM PERCIEVED USE & DIMENSIONS OF COMPETITION:


Supply Chain Company A [Nespresso S.A]
Coffee Beans

Nespresso has a very strict and diligent coffee bean selection process and sourcing is based on
selected terroirs or set of a regions relevant environmental factors. The company estimates that
only two percent of the coffee grown globally meets their specific taste and aroma profiles, and
quality requirements. These rare coffees are responsibly sourced and supplied from the worlds
most well-renowned coffee growing regions. The worldwide sourced coffee beans are then crafted
into exceptional blends and single origin coffees, specially developed to suit every taste preference,
by specialists in state-of-the-art production centres. The companys coffee beans are supplied
directly from the farmers thereby cutting out the middlemen and ensuring sustainability
commitments are entirely considered.

Nespresso Coffee Machines

Stylish Nespresso machines are continually re-invented with innovative design and features to offer
consumers more convenience. Currently there are over 60 models of machines and 8 specialised
outsourced design partners. The most popular machine is the Nespresso Magimix series.

NESPRESSO SUPPLY CHAIN CONSIDERATIONS:


How configured
What is done
and who owns it

Capacity of each
Location
part

Characteristics of Operations [Nespresso S.A]


Nespressos operations can be classified as high-volume low visibility for both the Nespresso system
and coffee pods as illustrated in the graphic below:

Operations Performance Objectives [Nespresso S.A]


Nespressos operations performance objectives and roadmap for sustainable growth can be
classified as follows:

1. SPEED
Nespressos primary objective is to enable customers to instantly prepare good quality
coffee in the shortest time possible through utilising the Nespresso coffee system.

2. QUALITY
Nespressos revolutionary concept is to enable anyone to create the perfect cup of coffee
similar in quality to coffee made by skilled baristas.

3. DEPENDABILITY
The Nespresso system offers reliable and innovative coffee machines that strive to meet
customers values and expectations.

4. FLEXIBILITY
Nespresso offers coffee lovers worldwide the widest range of Grand Cru coffees and
continue to regularly innovate to bring new, exceptional experiences to their Club Members.

5. COST
The initial cost of the Nespresso coffee system may seem higher in the short term, but over
time is becomes significantly lower compared to buying specialist barista made coffee from
coffee shops.
NESPRESSO STRATEGY FORMATION PROCESS
Channel
Where Locations

Customer
segment

Size Product
Features
Variety
Quality
EPM938 Operations Management Group Coursework 1 [19.11.17]
CONCLUSION
Nespresso (Company A) and Starbucks Coffee (Company B).

In conclusion, it is reasonably noted that although the operations strategies employed by both
companies may be significantly divergent, particularly in volume and visibility, ultimately they seem
to follow a similarin terms of long term performance objectives [INPUT TO FOLLOW.]