MMGT6008

Marketing Management in the Global Environment

International Marketing Plan

Nespresso Lounge
Dubai

Ishan Sane (307174980)

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

Executive summary
The 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 Contents
1

Introduction..................................................................................4
1.1

Why Dubai..............................................................................4

1.2

Product description.................................................................4

1.3

Target market.........................................................................4

Situation Analysis.........................................................................5
2.1

Political Environment..............................................................5

2.2

Economic Environment...........................................................5

2.3

Cultural Environment.............................................................6

2.4

Industry and environment......................................................7

Market segmentation and customer analysis...............................7

Marketing Strategy.....................................................................11
4.1

Place Strategy......................................................................11

4.2

Product Strategy...................................................................11

4.3

Price Strategy.......................................................................12

4.4

Promotion Strategy..............................................................12

4.5

Competitor Analysis.............................................................13

4.6

Characteristics.....................................................................14

Conclusion..................................................................................15

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.

1.1 Why Dubai

In 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.
1.2 Product description

Our 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.
1.3 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

2.1 Political Environment

UAEisafederationmadeupofsevenselfgoverningemiratesinwhichDubaiisone
of largest and most commercial among them. December 2006 marked Dubais
steppingstonetowardsagradualgovernmentreformwherethefirstelectionswere
heldfortheFederalNationalCouncilthathadafractionofformoflegalandjudiciary
authorityinDubai.AbuDhabiisseenasthepoliticallydominantemirateduetoits
historyandeconomicalcharacteristics.ThelegalsysteminUAEisbasedonprincipal
Islamiclawinwhichthereisnoofficialsystemofbail.Duetoitsdislikedprowestern
stance,itdoesattractexternalthreatfromneighboringMuslimcountriesnotablyIran.
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
relativelyhostileregionoftheworld.(LibraryofCongress,2007)

2.2 Economic Environment

DubaiistheeconomicandfinancialcapitalofUAEandthegulf.DirectForeign
TradeinDubaitotaled488.5BillionAEDin2009,(LibraryofCongress,Country
Profile,UnitedArabEmiratesJuly2007). Dubaiinthelastdecadeorso,hasalso
been investing in its educational institutions, building up universities and adding
research institutes. Knowledge village established in 2003, serves as a dedicated
educationzoneandin2007itpartneredwith16internationaluniversities.Inflationin
Dubai is typically higher than most oil exporting gulf countries and was
approximately 6% in 2005, (Library of Congress, Country Profile, United Arab
EmiratesJuly2007).Themajorcontributorstoinflationarethesurgeindomestic
demand,increasingwagesandpropertyprices.Nevertheless,theinflationdataonly
representscostsincurredbyDubaicitizensandnotthewholepopulation.Oflate,
therearenumerouslabourissuesthathaveplaguedDubaimainlyprevalentinareas
like social welfare, remuneration and health care. Apart from that, Dubai has an
excellentnetworkofroadsandhighways.Thereisalsoanationalcausewayworth1.8
billionUSDplannedtolinkDubaiandQatar.TherecentlyopenedDubaiMetro,full
automatedrailsystem,wasamajorprojectlinkingalltheregionalpartsofDubaias
well.DubaihasamajorportatMinaRashidthathasgreatfacilities,beingoneofthe
largestinthegulf,tohandlevarioustypesofcommercialoiltankersandcruiseliners.
UAE has 37 airports in the country of which six are international and Dubais
InternationalAirportbeingthelargest,(LibraryofCongress,CountryProfile,United
ArabEmiratesJuly2007).
2.3 Cultural Environment

Dubai 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 dimensions

Cultural Dimensions

Classification

Power distribution

Hierarchical

Social organization

Collectivist

Description

Ruled orientation

Relationship-based

Time orientation

Polychronic

Relationship with

Harmony

Respect Seniors
Gender hierarchical
Family- based value
Strong in-group & out-group
concept
View oneself to be a part of a
group
Society governed by relationship
Future oriented
Non- specific on being on time
Do not seek to control surrounding

environment

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 Characteristic
Language
Religion
Values and Attitudes
Education Level
Customs

Aesthetics

Description
Official Language: Arabic
English, Hindi and Urdu are commonly spoken
Islam is the major religion
Society is more relationship based
Increased adoption of western values
High Literacy rate: 93%
Large presence of private schools
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.
Pork is not sold in majority of food outlets
Liquor is not publicly sold and is only available to
licensed holders.

2.4 Industry and environment

TheUnitedArabEmirates(UAE)imported90%ofitsfoodandbeveragesin2007.
Therewasanapproximate4billionUSDspentontotalconsumptionoffoodand
relatedproductswith50%ofthisvaluecomingfromfoodconsumptionintheluxury
sector. The food and beverage industry has experienced a growth in demand for
importedfood.Majorityofthe11,000foodestablishmentshavereportedtomake
aboveaveragemarginreturns,(NewZealandtrade&enterprise,2009).Businesses
offering casual dining and cafes enjoyed doubledigit growth. These growth rates
havebeensparkedbyagrowthinexpatriates,tourists andanincreasingtrendof
eatingout.Withthetourismsectorbooming,ithascreatedahealthyenvironmentfor
businessestoenterandmakeadecentmargin.Thereisastrongpriceandquality
relationshipthatexistsinDubaiandaproductthatisdifferentiatedinqualitycan
commandamuchhigherprice.TheMiddleEasternfoodandbeverageindustryis
predominantlyarelationshipbasedmarketinwhichcommitmentisportrayedthrough
personalvisitstosuppliersandcustomers,(NewZealandtrade&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.
20

19.42
19.41

18
16

14.83

14
12

Present %

10.24

10
8
6 4.26
4.13
3.73.31
4
2

9.27
5.5
3.3
1.48
0.580.240.160.17

0
0- 5- 10- 15- 20- 25- 30- 35- 40- 45- 50- 55- 60- 65- 70-75+
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.

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

8%
8%
28%
55%

6%
6%
14%
74%

8%
11%
25%
55%

7%
7%
15%
72%

Never/ Less than once a week

Once a week

Twice a week

More than 3 times a week

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.
4.1 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.
4.2 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.
4.3 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.
4.4 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.
4.5 Competitor Analysis

Figure 5: Competitor Scope analysis

As 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.

4.6 Competitive Characteristics

Resource and
Capabilities

Valuable?

Rare?

Hard
to
imitate

Applied
successfully
?

Competitive
advantage

Coffee quality

Yes

Yes

Yes

Yes

SCA

Coffee range

Yes

Yes

Yes

Yes

SCA

Location (close to
target market)

Yes

No*

No

Yes

NCA

Luxurious Interior

Yes

Yes*

No*

Yes

TCA

High-end branding

Yes

Yes

Yes

Yes

SCA

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.

Conclusion

The 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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