Starbucks case is analyzed in the current report in respect to its failure in the Australia market. There were number of reasons behind failure of the firm like high price, poor quality, not changing product line according to taste of the people, inexperience staff. Difference in culture of US and AU was another main reason behind failure of the firm in the AU market.
Case study of Starbucks is taken into account which failed into the Australia. The firm failed to make available product according to a value system, culture and taste of the people and due to this reason face heavy loss in Australia. Starbucks is a US based company and it failed in overseas market and due to this reason case study considered for MASB module. Main issues identified in the case study are that firm believes that it is US based brand and due to this reason will easily get acceptance in AU. The firm failed to do accurate market research follow the same business model in AU which it follows in the US. Starbucks does not take into consideration that there is already well developed café culture in AU and the industry is at saturation stage. Firm underestimates loyalty of people towards local brand. This research study will assist in understanding role that any nation, culture play in making a product successful or failed in the overseas market.
Starbucks is the one of the largest coffee chain across the world. It is basically a US based company. Currently, the firm is operating in a number of the nations of the world and it achieves huge success in the overseas market. However, the firm failed in Australia (Honack and Waikar, 2017). Case study of Starbucks is chosen for the research because Starbucks is one of the most well known brand names known for making available quality of specialty and varieties of coffee to the people. Even though firm provides customers value for money service, then also it failed in overseas market Australia. This is the reason due to which case of “Failure of Starbucks in Australia” is taken for MASB (Managing across international borders). There are a number of reasons due to which firm failed in the Australia market.
Lovelock and Patterson, (2015) state that one of the main reasons behind company failure is that it does not adapt itself according to market conditions. In July 2000 Starbucks opened its first café in Australia in Sydney. By year 2008 firm had 87 stores in the Australia. Major mistake that Starbucks made is that it assumes that its business model will work in every business environment. Due to this reason firm does not make changes in its business model. Opposite to this, Nan and Li, (2017) state that Mc Donald when enter into the Indian market it come up with a menu tailored according to taste of Indian consumers and achieve huge success in the market. It is well known fact that no matter how much well established brand name is. If product firm offer is not according to the people value system firm will fail in the market.
On the basis of the above discussion, it is concluded that Starbucks makes several mistakes in the Australian market. First of all it does not change its product portfolio and serve items that it usually serves in the US to Aussies at their home country. The product was not according on people taste and due to this reason firm failed in the Australian market. Moreover, the price was high and there was already café culture in AU and people do not feel that need to pay more for Starbucks coffee as they do not feel value for money. For Aussies coffee is not produced, it is medium of sharing time with friends and relatives. Hence, they prefer to get quality coffee at a reasonable price which Starbucks was not able to give to the customers in its premises. Overall, it can be said that product and pricing strategy of Starbucks was against people value system and culture which is identified based on Hofstede framework where the score for power distance is 38 and indulgence is 71 and due to this reason firm failed in AU.
Based on literature review some of recommendations are given below.
• Slow elevation in branches: Starbucks must increase its business at a slow pace in the Australian market and must do in depth market research. This can be considered as cautious approach in the business. Even if the elevation in sales is observed at a faster rate then also for few years’ business must be expanded at a slow pace. This is because brand loyalty of Aussies towards the local brand is high.
• Experienced staff: This is one of the main areas where Aussies criticize too much at Starbucks. Mentioned firm must change its workforce and hire experienced employees that have years of experience in preparing coffee and dealing with customers. Such kind of employees can give valuable suggestions to the firm regarding changes that need to made in the product line. By making changes according to inputs received from the employing firm can improve its performance in the Australian market.
• Innovate product line according to taste: Starbucks needs to correct its mistake and it needs to innovate its product lines according to the taste of people. Currently, Aussies prefer to drink Espresso but Starbucks can still offer other variety of coffee to the people, but need to make sure that the product line is innovated (Leeming, 2015). By doing so it can be ensured that the products of the firm will be acceptable to the people.
• One or two stores in single city: Starbucks must open its one or two stores within the city so as to develop distinct image among the people that its products are not readily available and possess required quality. Same strategy Mc Donald follows in its business in many nations and it also achieves huge success in those countries.
• Changing layout of café: Starbucks must change the layout of its café and it must open café at locations where on roof café can be served to the individuals. Café of Starbucks has heavy lighting and environment is developed in such a ways that one fell to behave in a professional way. If there will be open space individuals will feel good in natural environment and will enjoy coffee.
Books and Journals
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