Case study on the failure of Starbucks in Australia
History of Starbucks
Starbucks is the largest coffee chain operator in the world. Founded in North America in 1971, Starbucks took a great leap in its growth in 1992 by having 140 stores with a growing store count of an extra of 40-60 percent a year. It has grown further to command the largest share in the international coffee market having penetrated in 44 countries with more than 1500 stores. In the year 200, Starbucks would open a new store somewhere in the world every single day. It has its largest market share is in North America serving about 50 million people a week, followed by markets in the ...view middle of the document...
Such was in Australia. Starbucks entered its market in the year 2000 and managed to open 84 stores. However, in mid-2008, Starbucks announced that they would swiftly close nearly three-quarters of their Australian stores far from the fact that the company’s earnings declined due to global economic constraints characterized by rising fuel costs and escalating interest rates which afflicted their consumers who had cut back spending on luxurious gourmet coffee. All this tragically happened within the spun of a month. Australia proved to be their biggest loser in terms revenue.
First as a reason for their failure is that they focused on product optimization as they used the same old tactics to brand their product in Australia as in America which failed quite miserably. With a coffee culture already pre-existent, Australia needed an organic experience that far surpassed their usual taste. Starbucks found itself lagging behind other coffee companies in terms of popularity and sales. Gloria Jean’s, McCafe and Hudson’s among others took the lead in the market and remained favorites to the Australians. (Miller, Claire 2009).
Second, Starbucks failed to do in Rome what the Romans do which is to create a social connection for the Aussies who ordinarily go out of their way to enjoy a wonderful cup of coffee with their fellow mates. Selling low quality coffee at premium prices set them up for market failure.
Third, Starbucks failed to root a solid foundation in the market and faced cut-throat competition. Being a foreign global brand, they had trouble competing with the local and familiar boutique cafés who were careful to provide just what the Australians needed. Their tactics simply couldn’t match up to their opponents.
They also compromised on quality. The American, Seattle-based coffee chain serve mediocre coffee augmented with large amounts of milk and flavored syrups contrary to what Australian coffee lovers demand: real espresso, high quality and authentic coffee. The country is the largest consumer of instant coffee in the world with more than one billion cups of coffee consumed in a year. The US giant simply overestimated the returns they would have received from this statistics and failed to initiate strategies that they would use to guarantee grand sales in the already saturated market. Their prime goal would have been to provide unique and unmatched high quality coffee to the Aussie people.
The failure of Starbucks in Australia gave a model lesson to the business world....