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Starbucks Case Discussion Question

Starbucks failed in Australia for several reasons: 1. It did not adapt its products or marketing to Australian tastes and coffee culture, instead treating Australia like the US market. Australians prefer locally-sourced coffee and were not interested in Starbucks' sweet drinks. 2. Starbucks expanded too quickly in Australia, opening 87 stores without first building brand loyalty. This made it seem like a "mass brand" rather than exclusive. 3. The timing of its expansion coincided with the Great Recession, further hurting sales as Australian consumers cut back on discretionary spending.

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76 views3 pages

Starbucks Case Discussion Question

Starbucks failed in Australia for several reasons: 1. It did not adapt its products or marketing to Australian tastes and coffee culture, instead treating Australia like the US market. Australians prefer locally-sourced coffee and were not interested in Starbucks' sweet drinks. 2. Starbucks expanded too quickly in Australia, opening 87 stores without first building brand loyalty. This made it seem like a "mass brand" rather than exclusive. 3. The timing of its expansion coincided with the Great Recession, further hurting sales as Australian consumers cut back on discretionary spending.

Uploaded by

Nirvana Shrestha
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Discussion Question

1. Watch the video clip - Why Starbucks Failed in Australia. Do you think Starbucks should try a
new strategy? If so, why? If not, why not?
Right from day one, Starbucks did not see itself as a ‘coffee’ business, but a ‘service’ and
involvement business. The primary store to open outside of the USA was Tokyo in 1996. The
company has been exceptionally fruitful in Japan and it proceeds to be a high performing
advertise. In China, its greatest development market as of now, the baked goods and drinks are
smaller to suit nearby tastes and a green tea Frappuccino has been introduced. So also, the item
things have been balanced to cater to local tastes in Saudi Arabia and Japan. There's growth in
the huge cities of Beijing, Shanghai and Guangzhou where middle-income experts are
burgeoning.
Starbucks in Australia
The coffee industry in Australia is worth $3 billion a year, with $1 billion of that comprising of
takeaway cups. The retail market is extreme with strongly competition and returns of fair 4% p.a.
net profit. In 2008, Starbucks reported it was closing 61 out of its 87 Australian stores (73%)
remaining with less than 2 percent market share of the forte coffee market – an unwinnable
formula for an economy of scale and out of step with the ‘clustering’ immersion strategy utilized
in the rest of the world. Starbucks declared the reason for the closures was consumers’ tightening
of belts due to the global financial crisis and fears of a recession.
So where did Starbucks go wrong?
Its advertising to Australians was the same as the US offerings. Not at all like McDonalds and
Krispy Kreme, who both opened one or two stores in a slowly, slowly approach to invigorate
request and create a sense of scarcity, Starbucks immersed the Australian market with 87 stores
and was soon seen as a ‘mass brand’ not the elite brand position it was after. The Starbucks team
moreover fizzled to get it the psychological and socio-cultural perspectives of the country it was
entering. Australia isn't one homogenous market; it comprises of over 235 different ethnicities
and contains a glad tradition of backing the underdog — in this occasion, the small shop around
the corner. Numerous consumers were found to effectively dislike the ‘super-size’ tall
sugar/high-fat mindset of America which Starbucks was found to epitomize. Even more
regrettable, Starbucks coffee was generally considered ‘watered down’ and second rate to what
was already accessible at a much lower cost. Ethically produced coffee and personal
relationships were also important for the Australian market.
Not adapting: When Starbucks opened its first Australian shop in Sydney, from there, it extended
quick into other parts of the nation. By 2008 Starbucks had 87 stores over the Australian
continent. One of the problems with Starbucks is that they thought that their business show might
just roll out to a different environment and that there was no require for them to adjust.
Too big too fast: They attempted to develop the domain as well quick by quickly opening up
multiple areas rather than slowly integrating them into the Australian market. This didn’t grant
the Australian consumer an opportunity to truly create a craving for the Starbucks brand. So for
the Australian consumer, Starbucks got to be something that's too effectively accessible for them
and hence there wasn’t this point of contrast, or a feeling of need.

Products Were Not Customized for the Local Audience


Starbucks’ to begin with mistake was to accept that all Australian coffee lovers were planning to
like them. And the second mistake was to expect that Australians would just like the same sugary
drinks that their American customers were used to. Once more, it reverse backfire was that the
menu was too sweet for Aussies, not to mention costly. So they held on to their normal cafes and
baristas. As well numerous other alternatives for Australians When Starbucks take off the
Australian market, or at least a expansive number of shops were closed down, the Australian
consumers didn’t care. It’s incompletely because Australians are spoiled for choice when it
comes to coffee. Australia’s coffee market is one of the biggest within the world. The industry
hit more than $6 billion in add up to income in 2018. They’ve been immersed in nuances of café
culture since the mid-1900s when Italian and Greek workers started traveling to the nation.
Hence, when Starbucks came in with their American style coffee culture, where coffee is
basically a product or a commodity. Starbucks had a basic menu and advertised more sugary
drinks which most Australians didn’t like. Also, Starbucks charged more than the local cafes. So,
Australians instead opted to pay less for coffee they preferred from a local barista they trusted.
The Great Recession
Starbucks closed down two-thirds of its stores in Australia in 2008. In case you review, this was
moreover the time when the world was encountering the Great Recession. Even in spite of the
fact that Australia is thousands of miles away from the United States, both nations were affected
by this recession. And even though Starbucks had sufficient financial assets to maintain itself,
the acquiring power of the customers was possibly affected and the final thing they needed to
spend cash on was a new brand of coffee.
Further, Starbucks failure in Australia illustrates why you would like to get it to understand your
market before entering. What works in one place may not work in the other place. Whereas a few
overall strategies or services will stay the same, a global strategy must always take a backseat to
nearby needs and be balanced accordingly. Solid investigate, especially, observational and
ethnographic (such as that performed by IKEA and Tesco before they open stores in modern
foreign markets) is amazingly imperative. A few months of examining and investing time with
coffee-drinking Australians may have saved years and millions of dollars to Starbucks within the
long-run.
What could have been done better?
The new strategy they could use as following, Starbucks should have started with a total of 20
outlets, and as it were in major cities, such as Sydney, Melbourne, Brisbane, and Perth — at
slightest for the few years. The primary step ought to have been to build a loyal fan base. The
company ought to have created a framework, such as loyalty cards, to entirely monitor repeat
purchases and ought to have rewarded normal customers for bringing in a companion. Starbucks
ought to have organized a few focus bunch interviews in Australia prior to its launch. This would
have given the company an opportunity to get it what Australians truly need when they visit a
cafe. It’s simple that the company should have adjusted its products to the Australian market.
Also, In New Zealand and even Kiwis (as they call New Zealanders) aren’t a huge fan of
Starbucks — at least the ones that I have met. Prices should have been balanced, keeping the
recession in mind. I know the profit margins would have been compromised due to this, but
that’s what happens amid a recession. Rather than rapidly entering a foreign region on its own,
Starbucks should have approached experienced Australian investors to establishment a number
of outlets to test things out. In Conclusion, when it comes to marketing, you can’t basically
depend on your gut instinctual. It’s reasonable to expect that Starbucks must have done a few
investigate before aggressively extending into Australia with its sugary menu, but the company
fizzled to get it the foremost vital aspect of a business and the customers.

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