The competitive advantages of Nestle’s Nespresso brand?
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There are several competitive advantages that Nespresso has over other companies. This organization has a well-established brand that is recognizable to people living in different countries. There are other businesses that sell similar products but these companies are not as popular as Nespresso. Additionally, the coffee machines developed by Nespresso are extremely easy to use and this user-friendliness appeals to many people (Levine 2011, p. 1). Finally, it is important to speak about the price of their products. They can offer a 4-g capsule of coffee at the cost of 55 cents (Levine 2011, p. 1). This is why many buyers give preference to Nespresso, rather than its competitors. It is quite possible that this firm will retain its competitive advantages in the future.
Why companies are keen to apply to the “classic razor/razor-blade business model”?
One of the concepts mentioned in the case study is the razor-blade business model (Levine 2011, p. 1). This term means that the company sells a certain product at a very low price, but the cost of complementary goods is very high (Kotler et al 2008). For instance, customers can purchase Nespresso machines at $130, but these machines can accept the coffee capsules only by Nespresso. The main advantage of this business model is that clients become dependent on the company. Moreover, in this way, this organization covers the low price of their coffee machines. This approach has been adopted not only by Nespresso. For example, many manufacturers of printers sell their devices at a low price, but customers have to purchase only their cartridges. A very similar approach has been adopted by the producers of razors. So, one can say that this business model still remains valid. Overall, this approach enables a business to establish long-term relations with its clients.
Kotler, P., Wong, V., Saunders, J., & Arm, G 2008, Principles of Marketing, Pearson Education, New York.
Levine, J 2011, ‘Pod of Gold’, Time Magazine. p. 1.