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Starbucks' Failure in Australia

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on 8 October 2013

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Transcript of Starbucks' Failure in Australia

Question Four
With the benefits of hindsight, what strategies should Starbucks have adopted when entering the Australian market??
Starbucks' Failure in Australia
How Starbucks became such a Success??
Americanised the European coffee tradition.
Decline in coffee consumption after WWII in the US
Alfred Peet credited with the coffee revival
Peet's opened a small business in 1996
Peet's trained Starbucks founders
Question One
To what extent did Starbucks' previous experience with international markets prepare it for entering the Australian market?
Question Two
Starbucks’ marketing was based around an ‘experience related’ concept as opposed to one featuring material benefits. How do cultural differences influence the way a concept is interpreted differently in different countries.
Question Three
In what respect was Starbucks’ research into the Australian market inadequate?
Largest coffee chain in the world
Operating across 62 countries with more than 18,000 stores
First Starbucks opened in 1971
In Seattle's Pike Place Market
Original selling only coffee beans and coffee makers
Howard Schultz
1981 Schultz first walked in to Starbucks joining the company a year later
Late 1985, he left the company to start his own called II Giornal that would sell coffee drinks
1987 Schultz bought Starbucks and all its assets
Renaming the combined companies 'Starbucks Corporation'
Schultz then quickly began to expend the buiness
• Bhasin, K. (2012) This One Statistic Shows Just How Much McDonald's Tries To Entrench Itself In Everybody's Minds
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• Marshall, C. (2007) Alfred H. Peet, 87, Dies; Leader of a Coffee Revolution, The New York Times
• The McGraw-Hill Companies. Student Resources (2010) Starbucks Corporation
• RUZICH, C. M. (2008). For the Love of Joe: The Language of Starbucks. Journal Of Popular Culture, 41(3), 428-442.

Rachel Woods
Kanghyuk Suhr (Ryan)
Zeyun Xie (Ben)
Shuai Liu (Darin)
Talisa Vaughan
Australian Coffee Culture
A by-product of immigrants after World War 2
Australian prefer smaller boutique-style coffee store
Australian like coffee straighter & stronger

Australian Coffee Culture
Australians are among the highest consumers of instant coffee in the world
Increases of purchasing coffee in store
Coffee is no longer a luxury or expensive product in Australia
Starbucks’ Failure in Australia
Failed to offer unique experience
Failed to offer Australian taste coffee
Failed to match Australian value: so expensive

Starbucks’ Failure in Australia
Focusing on global domination rather than the needs of the local consumers
Failed to hire the right staffs & staff training
American ways: ‘super-size’ culture of extra large cups & movie stars stratergy

Australian Competitors
Gloria Jean’s, McCafe offer better taste coffee in Australian style store with reasonable price
7-11 start to offer coffee which match the needs of Australian consumers
Hundreds of individual small coffee retailers offer better coffee and experience: ‘staff knew their customer by name’

Main Issues
Culture difference is the most important element which need to be concerned by company before doing business overseas
Starbuck entered into Australian market without any knowledge of Australian culture
In this case, ‘experience’ is different in US and Australia depends on different culture

Australian’s coffee culture
Australia is a tough retail market and coffee retailing is particularly tough

National average is 11kg of coffee a week

Hiring baristas costing,

Competitors in Australia

• Shenkar, Oded (2004) One more time: international business in a global economy. Journal of International Business Studies Vol.35(2)
• Starbucks website (2013) Starbucks Company Timeline
• Starbucks website (2013) Our Heritage
• http://www.smh.com.au/business/starbucks-closes-61-shops-cuts-700-jobs-20080729-3mt1.html
• http://www.abc.net.au/unleashed/32188.html
• http://news.bbc.co.uk/2/hi/7540480.stm
• http://www.loveofcoffee.net/perth-coffee-the-pantry-door-%E2%80%93-north-perth-2010-06-29
• http://www.savoycentre.ie/index.php/gloria-jeans/
• http://www.labbrand.com/brand-source/mcdonalds-new-restaurant-image-shift-branding-strategy
• http://www.i-movo.com/study_tags/loyalty-rewards/
• http://www.norwestprivatehospital.com.au/index.php/visitors/coffee-shop/
• http://www.funnewzealandtravel.com/food/breakfast-new-zealand/attachment/the-coffee-club
Q & A
1. Starbucks was co-founded by three academics. One writer and two teachers. What subject do you think the teachers taught;

a) Marketing
b) Drama
c) History
d) Chemistry
e) English

Q & A
Why they chose Starbucks to be the name ???
Q & A
Why they chose Starbucks to be the name???

The business was acutely named in honour of Starbuck, the coffee-loving first mate in Hermen Melville's Moby Dick
How Starbucks became such a Success??
Starbucks does not just sell coffee; it sells an experience
created a 'third place' in people's lives
Location and conveniences
Word of mouth
Starbucks in Japan
First international store opened in 1996 in Tokyo
Consistency over adaption
Hired local business consultant
Increased density of seating
Invented new drinks
Green tea frappuccino
Starbucks Japanese store twice as profitable than the US store
Starbucks in China
First Chinese store opened 1998
50 stores in China in 2002
165 Stores in 2006
Now has more than 800
Global brand does not mean global product
Localised menu to suit Chinese consumer
Larger seating areas
Q & A
How do you think these previous experiences should have prepared Starbucks to enter the Australian market???
Starbucks Should Have Know
Recognises the need to research
Understand the beliefs, values and customs of a society
Degree to which they need to change
Where did Starbucks go wrong?
Customer service
Store Culture/Ambiance
What strategies do you think that Starbucks could have adopted?
Differentiation Strategy
Starbucks could have concentrated on creating a distinctive and highly differentiated product and marketing program to appeal to the Australian market when they first entered.

Because they have a broad competitive scope and because of the type of business they are in it is their product that offers an opportunity to gain competitive advantage through differentiation.
Segmentation, Targeting and Positioning
A successful American entrant to the Australian market is McDonalds who successfully segment, target and position their business in the markets they operate in
Starbucks relied on market saturation and word of mouth rather than developing a marketing program
Marketing Mix

International Marketing research
Which coffee company is the competitor in Australia against Starbuck’ ?
A. Mcbook
B. Gloria pant’s
C. Hudson’ son
D. The coffee club

Q & A
Flat white
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