MMGT6008Marketing Management in the Global EnvironmentInternational Marketing Plan

Nespresso Lounge Dubai

Ishan Sane (307174980)Siddharth Singhvi (311083560)Ahmad Saadan Kazi (310075890)Man Ho Calvin Chong (311129234)

Executive summaryThe objective of the report is to provide a potential marketing plan for Nespresso to expand their global operations and set up a high end luxury lounge in Dubai. The lounge will offer a unique coffee experience to its clients with Nespressos utmost quality in a relaxing and opulent ambience. The global expansion implementation plan could be analyzed by scrutinizing various elements of the marketing environment closely. Over the past decade, Dubai has developed into a commercial, financialand entertainment hub of the Middle East. It boasts one of thehighest GDP and per capita income in the Middle East as it is also ranked one of the top tourist destinations in the world. Although the cultural ethics and values are traditionally Islamic with Arabic influences,but with the constant influx of foreigners into Dubai, there is a trend moving towards internationalization and convergence of various cultures. Politically, Dubai is independent, depicting a monarchy structure. Their trade policies are open and encouraging for global multinational conglomerates. This has led to the presence of several luxury brands, outstanding hotels and the huge purchasing power has fuelled the competitive environment. Nespresso Lounge would have to leverage their core competencies like quality, brand value and global appeal to increase its customer base in the ever competitive coffee market. The following report discusses the various aspects of a successful implementation strategy while understanding the market characteristics, environment, demographic trends and the core customer base. It will also analyze the profitability of the venture through exploration of the four primary concepts of marketing.

Table of Contents1Introduction41.1Why Dubai41.2Product description41.3Target market42Situation Analysis52.1Political Environment52.2Economic Environment52.3Cultural Environment62.4Industry and environment73Market segmentation and customer analysis74Marketing Strategy114.1Place Strategy114.2Product Strategy114.3Price Strategy124.4Promotion Strategy124.5Competitor Analysis134.6Characteristics145Conclusion15

Introduction

Nespresso, a subsidiary unit of Nestle, is a premium espresso machine manufacturer and retailer. It was established in Switzerland and has expanded into various locations worldwide,implementing dynamic strategic practices to leverageinto other countries. Their global expansion strategy was based on a high cost premium model with a narrow target market. This has also resulted in the diversification of their product line into subsidiary cafes and boutique bars.

Why DubaiIn recent years, Dubai, has established itself as a center for various consumer products and flagship stores.The individual purchasing power and willingness to splurge on luxury items has intensified rapidly.It is also one of the fastest growing markets in terms of coffee consumption. By 2014, coffee consumption in the United Arab Emirates is expected to grow by 80%. This is a clear indication of the increasing popularity of coffee and its social integration into the Arabic culture. Numerous cafes such as Starbucks, Costa Coffee, and Emporio Armani Caf among many local have sprung up in the Dubai market and this is becoming a major market trend. Furthermore, Nespresso does not have a flagship lounge outside the Americas. This first flagship caf will be very important in establishing and developing the brand image in the Middle East.Product descriptionOur plan is to set up a Nespresso lounge in Dubai. The lounge will be promoted as a high-end caf providing quality coffee and a lavish ambience while simultaneously developing the brand image amongst Middle Eastern Asia. The exclusive form of premium espresso coffee only made through Nespressos own coffee machine with several elegant choices of flavours will steer innovation in the coffee caf segment in Dubai, UAE. This will be the first Nespresso flagship caf outside the Americas after the ones already existing in New York, Miami, Montreal and Sao Paulo.Target market The Nespresso coffee lounge targets medium to higher income groups, consisting of individuals with a high purchasing power. Dubai has an increasing foreign population including expatriates and businessmen. These people have relatively high income as compared to the general population and are willing to spend their money on consumer goods and outdoor eatery. They are urbanized and hail from affluent families as we will talk about them further while discussing the demographic dynamics.Situation Analysis

Political Environment UAE is a federation made up of seven self-governing emirates in which Dubai is one of largest and most commercial among them. December 2006 marked Dubais stepping stone towards a gradual government reform where the first elections were held for the Federal National Council that had a fraction of form of legal and judiciary authority in Dubai. Abu Dhabi is seen as the politically dominant emirate due to its history and economical characteristics. The legal system in UAE is based on principal Islamic lawin which there is no official system of bail. Due to its disliked pro-western stance, it does attract external threat from neighboring Muslim countries notably Iran. The primary threat facing Dubai is that of insurgency and terrorism rather than military invasion. However its strong law and order institutions have effectively maintained peace and harmony despite being misperceived as being situated in a relatively hostile region of the world.(Library of Congress, 2007)Economic EnvironmentDubai is the economic and financial capital of UAE and the gulf. Direct Foreign Trade in Dubai totaled 488.5 Billion AED in 2009, (Library of Congress, Country Profile, United Arab Emirates July 2007). Dubai in the last decade or so, has also been investing in its educational institutions, building up universities and adding research institutes. Knowledge village established in 2003, serves as a dedicated education zone and in 2007 it partnered with 16 international universities. Inflation in Dubai is typically higher than most oil exporting gulf countries and was approximately 6% in 2005, (Library of Congress, Country Profile, United Arab Emirates July 2007). The major contributors to inflation are the surge in domestic demand, increasing wages and property prices. Nevertheless, the inflation data only represents costs incurred by Dubai citizens and not the whole population. Of late, there are numerous labour issues that have plagued Dubai mainly prevalent in areas like social welfare, remuneration and health care. Apart from that, Dubai has an excellent network of roads and highways. There is also a national causeway worth 1.8 billion USD planned to link Dubai and Qatar. The recently opened Dubai Metro, full automated rail system, was a major project linking all the regional parts of Dubai as well. Dubai has a major port at Mina Rashid that has great facilities, being one of the largest in the gulf, to handle various types of commercial oil tankers and cruise liners. UAE has 37 airports in the country of which six are international and Dubais International Airport being the largest, (Library of Congress, Country Profile, United Arab Emirates July 2007).

Cultural EnvironmentDubai has had a strong Arabic and Islamic influence. However, in recent years, Dubai has become more open to foreign cultures due to governments openness and incentives to attract foreign investments and foreigners into Dubai. Therefore, we can observe a movement of Dubais cultural values from being a Middle Eastern conservative society to now being westernized and liberal. The following comparison chart is a general classification of the cultural dimensions of Dubai (Nardon and Steer, 2009), although it does not provide intricate details about the culture, it does provides an insightful study on what the culture is like in general.

Table 1: Table of cultural dimensionsCultural Dimensions Classification Description

Power distributionHierarchical Respect Seniors Gender hierarchical

Social organizationCollectivist Family- based value Strong in-group & out-group concept View oneself to be a part of a group

Ruled orientationRelationship-based Society governed by relationship

Time orientationPolychronic Future oriented Non- specific on being on time

Relationship with environmentHarmony Do not seek to control surrounding Live in harmony with environment and people

Having examined the cultural dimension, we will take a further look at each cultural element in detail.Table 2: Cultural characteristics and their respective description Cultural CharacteristicDescription

Language Official Language: Arabic English, Hindi and Urdu are commonly spoken

Religion Islam is the major religion

Values and Attitudes Society is more relationship based Increased adoption of western values

Education Level High Literacy rate: 93% Large presence of private schools

Customs Fridays and Saturdays are holidays in the week During the holy month of Ramadan, most shops are closed as food is generally not consumed in the day.

Aesthetics Pork is not sold in majority of food outlets Liquor is not publicly sold and is only available to licensed holders.

Industry and environmentThe United Arab Emirates (UAE) imported 90% of its food and beverages in 2007. There was an approximate 4 billion USD spent on total consumption of food and related products with 50% of this value coming from food consumption in the luxury sector. The food and beverage industry has experienced a growth in demand for imported food. Majority of the 11,000 food establishments have reported to make above average margin returns, (New Zealand trade& enterprise, 2009). Businesses offering casual dining and cafes enjoyed double-digit growth. These growth rates have been sparked by a growth in expatriates, tourists and an increasing trend of eating out. With the tourism sector booming, it has created a healthy environment for businesses to enter and make a decent margin. There is a strong price and quality relationship that exists in Dubai and a product that is differentiated in quality can command a much higher price. The Middle Eastern food and beverage industry is predominantly a relationship-based market in which commitment is portrayed through personal visits to suppliers and customers, (New Zealand trade& enterprise, 2009). Market segmentation and customer analysis

The decision to establish our product/service in UAE was not a random choice rather a natural selection of a country. UAE and in particular Dubai is one of the richest and vibrant state in the gulf regionas discussed earlier, ideally catering to our high end niche product.With a total population of approximately 5.15 million (CIA, 2011) UAE is also one of the worlds most popular tourist destinations with many 7 star hotels around the city. The country also has one of the highest ratios of expats from around the world as Dubai in particular has made a name in being the hub of business activities in the region. Of its citizens, 19% are local Emiratis, 23% are other Arabs and Iranians, 50% are from South Asia where as 8% are westerners and East Asians (Asia Rooms). The demographics of UAE most favored our choice of country to introduce our product in.

According to a new survey by the UAE Ministry of Economy, UAE boasts an average monthly household income of AED 18,248.60 approximately 5000 US dollars. In contrast the average household expenditure is AED 11,241.20 which is approximately 3050 in US dollars. 14.2 percent of income is spent on food and drink by the residents (Bundhun, 2009). This figure is a testament in itself of the fact how the citizens of UAE especially Dubai love to go out and have meals and drinks. The United Arab Emirates is also one of the most urbanized nations in the world with about 84% of its population being in the urban centers (CIA, 2011). In particular, the two big urban concentrations are the capital city of Abu Dhabi and the commercial city of Dubai. Collectively, Abu Dhabi and Dubai control 83.2 percent of the UAE's GDP (Enclyclopedia.com, 2011). It also has a fairly young population. The table below shows the population age distribution of the city of Dubai. The majority of its population lies in the range of twenty five to forty of age group. This reflects on Dubais lively and vibrant lifestyle.

Figure 1: The Percentage Distribution Population by Age groups - Dubai, General census of population housing and establishments Emirates of Dubai, 2005.Similarly the table below represents the distribution of age being gender specific, which shows that the majority of Dubais population is male dominated. Being a male dominated society, the majorities of these individuals are working citizens and formulizes to be the major factor of Dubais outdoor lifestyle.

Figure 2: The Population Pyramid by Age Group - Dubai, General census of population housing and establishments Emirates of Dubai, 2005.Apart from that, with a population of approximately 1.8 million of Dubai itself, there are 10,000 more residents coming into the city every month. (Dubai Statistical Centre, 2010). The growing demand of quality products from the people of Dubai to maintain their lifestyle can also be interpreted from this. This can be backed further from the figure below whichshows an accelerating growth in the demand and supply of imported food items into UAE to maintain its high consumerism.

Figure 3: UAE Import and Export of Food Items from World 1970-2009, Agriculture and Agri-food Canada, 2010.

The figure below compares UAEs outdoor eatery trend with the global average. It quite evidently reflects on the emiratis fondness to eat out in cafs and restaunrants. On average more citizens of UAE like to dine out in each measured frequency.

Figure 4: Eating Out More Important in the UAE than the Global Average, Agriculture and Agri-food Canada, 2010.The residents of UAE have also developed particular fondness of coffee. Being an Islamic country where public consumption of alcohol is prohibited, coffee has comfortably replaced the alcoholic drinks as a social drink. Numerous cafs have sprung up in and around Dubai where friends, business associates and even families can go and enjoy a good time with a cup of coffee.UAE is one of the fastest growing markets by volume for coffee in the world. Total coffee volume sales are predicted to grow by 80% by 2014.In this dynamic and optimistic environment,the launch of the product is synchronized with the current economic, political and social landscape of Dubai. In view of the fact that we are offering an exclusive coffee consumption experience, our target market is the upper middle to high income groups. The strategically chosen location is The Dubai Mall that is at the heart of the business district of Dubai which we will further elaborate later.

Marketing Strategy

It has been observed that a successful marketing plan requires a sound global marketing strategy. It is essential to develop multiple strategies with a view of gaining competitive advantage and integrating the activities of the company on a global level. We would like to explore the potential strategy that should be adopted by Nespresso to establish a high end luxury lounge and caf in Dubai. The four primary aspects of marketing are described below with an emphasis on potential adaptable strategies.

Place Strategy The most integral aspect is location. The geographical significance and cultural environment are closely integrated. However, we will concentrate on the potential physical location for Nespresso Lounge in Dubai. Over the recent decade, Dubais landscape has transformed drastically. Today, it has become a playground for the rich and famous, high end luxury brands, and magnificent structures. The Dubai Mall, located at the heart of Dubais business district, has become a tourist attraction due to its sheer size, high end luxury consumer brands and cafes. The statistics indicate that Dubai mall registers massive footfalls over the weekend comprising of the local populace, expatriates and tourists. There are various competitive high end stores established to cater to these individuals. The cluster effect seems to have worked well as competing high end stores and cafs have registered success over the years. However, due to the high purchasing power and customer density, the cafes seem to have co-existed profitably. This gives us concrete proof that the market for high end luxury cafs with a focuseddifferentiated product and global image would be successful. Moreover, Nespresso has established a flagship retail store on the ground floor of the Dubai Mall. The lounge would serve as an extension to further accentuate the brand image and provide a vibrant environment along with quality coffee.Product Strategy The product characteristics should be clearly illustrated to attract customers. We would use a standardization approach to ensure that the quality standards of Nespresso are maintained. The western appeal should be leveraged and the cafe design should be elegant and display hints of Arabic infused elements. The menu should retain all of the sixteen coffee flavours known as the Grand Cruz range. However, food items could have a few local dishes apart from the regular savory items like sandwiches and pastries.

The technical aspects of product imports should be in synch with Dubai trade regulations, tariff barriers and testing standards levied upon various companies by the Dubai government.

Price Strategy The food and beverage industry is highly price sensitive and competitive. The price of a product should be reflective of its target market and consumer demand bearing the cost as well. The Nespresso capsules, usually the source of Nespressos distinct coffee are upward priced at 0.13 Euros per capsule in France (base price). This is a clear indication of high manufacturing costs and premium raw materials. The caf would have to maintain premium price ceilings of the products to maintain breakeven point. The brand positioning of Nespresso would attract high end customers like corporate executives, sheikhs (wealthy locals) and affluent tourists. The premium price and luxurious caf environment should be coupled to attract customers and justify their investment to purchase quality products. One cup of espresso would be priced at 7 AUD, which converts to approximately 27 AED (UAE Dirham). This is a premium price to pay for coffee compared to Starbucks that charges 18 AED in Dubai, approximately 5 AUD. However, the innovative appeal of Nespresso and caf environment should justify the high price model.

Promotion Strategy The promotion strategy is interdependent on the marketing mix. The marketing mix should combine the three important elements of advertising, frontline selling and publicity. Sponsorships are one of the most important aspects of promoting a particular product. Nespresso should sponsor corporate conferences, events and seminars. They should participate in trade shows, notably the Middle East Coffee and Tea Convention, to build brand awareness and advertise through brochures and fliers. The chief objective is to lure customers into embracing the Nespresso experience. They should promote the inauguration of the caf through billboard advertisements and distribute brochures in corporate hotels. The advertising concept should maintain its western appeal. George Clooney is the brand ambassador for the Nespresso brand globally. The glamour factor should be magnified by using George Clooney to inaugurate the Nespresso lounge in Dubai Mall. This would create huge media hype and public awareness. Lastly, The caption Nespressowhat else, symbolizes the embodiment of luxury and quality. It promotes the feeling of exclusivity to those who are associated with the brand.

Competitor Analysis

Figure 5: Competitor Scope analysisAs indicated in the competitor analysis matrix for Dubai, the scope can be explored by analyzing the market segmentation, cost focus and product characteristics. Under the broad market segment, products need to indicate either a low cost strategy or differentiated advantage over competitors. Starbucks and Costa coffee adopted a low cost model to attract potential customers, thereby, widening their target market. In contrast, Emporio Armani Caf has used its luxurious brand image to leverage into the high end purchasing power space. It has successfully adopted a high cost model and created huge market potential. In contrast, Gloria Jeans Coffees concentrated on securing a nice market, while, adopting a low cost approach. They constructed their cafes to represent a relaxed and a vibrant ambience, synonymous with lounges. The focal point of our analysis is the segmentation of our product, Nespresso Lounge in Dubai. We have incorporated a focused differentiated product approach with a high pricing cost model. The emphasis lies in preparing and serving quality coffee, along with regular savory items. The leverage and brand value lies in the combination of quality products matched with a vibrant, luxurious environment to satisfy consumers. The competitive edge over Armani Caf is the innovative approach to coffee preparation and wide variety of exotic coffee flavours on offer to consumers. Armani Caf has diversified into various food items and subsidiaries; the coffee is not the focal point of their enterprise. Nespresso, on the other hand, will diversify into others areas only to accentuate their brand image. Thereby, consolidating the association of coffee with quality.

Competitive Characteristics

Resource and CapabilitiesValuable?Rare?Hard to imitateApplied successfully?Competitive advantage

Coffee qualityYesYesYesYesSCA

Coffee rangeYesYesYesYesSCA

Location (close to target market)YesNo*NoYesNCA

Luxurious InteriorYesYes*No*YesTCA

High-end brandingYesYesYesYesSCA

Note: SCA= Sustainable competitive advantage, TCA= Temporary competitive advantage, NCA= No competitive advantage, *= depends on various factors

As clearly illustrated in the VRIO framework, Nespresso lounge hassustainable competitive advantage in terms of coffee quality, variety and branding. Thus when transitioning into a new market, these are the qualities that have to be retained in our product (the Nespresso coffee lounge) to establish a niche market. The core success factors also lie in providing a meeting place for corporate executives, capabilities such as lavish ambience and the location for meetings are only temporary advantages. If we succeed, our competitors will easily follow.

ConclusionThe marketing plan has been developed on the analysis of various factors. It is the culmination of strategy, environment, market characteristics and other cultural dimensions that have been leveraged to illustrate our agenda. We have conclusively established the critical success factors for Nespresso Lounge as it forays into the Dubai landscape. On comparison with competitors, the focused differentiated product approach and innovative global appeal of Nespresso are the most essential factors. Throughout the course of our marketing research, we have, tried to highlight the synchronous relationship of our product with the landscape of Dubai. We would like to take this opportunity to thank our lecturer, Mrs. Sutton-Brady, for giving us the opportunity to engage in this comprehensive and exciting assignment. It has helped us develop a greater understanding of marketing management principles and strategic implementation of the four pillars of marketing.

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