Nespresso, a division of Nestle '5 SA, pioneered the development of the single serving coffee machine in 1986 Nespresso had achieved sales of $2.6 billion with double-digit growth projected over the next several years. The machines which have been imitated by more than twenty competitors, use a capsule or \"pad" to make a single serving of coffee pumping hot water through the pod under high pressure. From the outset, Nespresso's business model was based on the sale of its exclusive coffee pods protected by many patents to generate most of the sales and profits for the company rather than the sale of the machines. The pad to coffee machine relationship is similar to the cartridge and printer, whereby the printer manufacturers rely on the sale of the printer cartridge for the bulk of their revenues and profits. Nespresso recognised the extreme importance of maintaining the exclusivity and premium price of its coffee pods by stringently controlling their distribution channels. Consequently, Nespresso's coffee pads are only said in its own stores, its online site, or by phone directly from Nespresso. Recent competitors Sara Lee Corp, Ethical Coee Co announced plans to introduce their own coffee pads that will work in Nespresso machines. These capsules will be cheaper and more widely distributed than the Nespresso pods. Nespresso says it will take legal action if the competitor products infringe on any of its patents. Discuss this statement In your response, do you think Nespresso's direct distribution strategy based on tight control of the channels for its coffee pods can provide an effective means for dealing with the competition. (2.5 marks) Do you think that the legal action will stop the competition from selling their Nespresso compatible pods? Why or Why not? (2.5 marks) How does Nespresso's pricing strategy support their distribution strategy? (2.5 marks)