International Management: Starbucks' Australian Market Entry Analysis

This case study examines Starbucks' unsuccessful venture in the Australian market. The analysis identifies key factors contributing to the failure, including rapid expansion, a lack of market adaptation, and pricing strategies. The case study highlights the importance of understanding local consumer...Read More

Running head: INTERNATIONAL BUSINESS
International Business
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1International Business
What should Starbucks focus on avoiding in Australia?
There are a number of practices that the coffee giant must avoid in Australia to improve
their business. Firstly, the company must do away with its policy of rapid expansion through
franchising. Opening 87 stores, without properly estimating the market demand, was a major
mistake that led to significant loss. The company tried to impose its brand value on the national
market by opening several outlets, but this backfired and the easy availability reduced the
excitement of the people for the brand.
The lack of adaption of the Australian market is another reason for the brand’s
unsuccessful venture in the country. Brews like French Roast and Caffe Verona were not
accepted by the consumers as it did not meet their taste (Walters and Broom 2013). Starbucks
should focus on analyzing the market tastes and the incumbent coffee culture of the population
instead of trying to force their own products into the new market, which may have been
successful in other parts of the world.
Furthermore, the general higher cost of coffee compared to other brands and cafes is a
bad strategy to attract a customer base, especially since Australia already has an established
coffee market with many loyal customers (Patterson, Scott and Uncles 2010). In order to
penetrate this market they need to drop their existing pricing strategy and develop more
competitive pricing for its products and services. Rapid franchising has also caused the problem
of drop in quality of service as the increasing number of stores requires more personnel.
Starbucks should avoid recruiting untrained professionals and focus on quality training.

2International Business
How can Starbucks improve their marketing in Australia?
Marketing is a necessary requisite for all brands and organizations to establish and
maintain their presence in the market. Starbucks entered Australia without a proper marketing
strategy and focused on expansion rather than band promotion, expecting their existing global
brand presence to have enough impact on the country’s consumers (Talpau and Boscor 2011).
Marketing and advertising is extremely important, especially for surviving in a competitive
environment which already has a saturated market. In order to mark their presence, Starbucks
should focus on products and services that adhere to market tastes, yet are distinctly unique in
their own ways. In a market where customers already owe their loyalty towards certain brands,
the uniqueness of a new one must be perceived by consumers (Baroto, Abdullah and Wan 2012).
Strategic advantage should be created in terms of pricing and low cost positioning. Advertising is
a vital part of marketing and should be encouraged as much as possible for maximum public
awareness.
Conclusion:
In conclusion, it can be stated that Starbucks’ business venture in the Australian market
failed because of a number of reasons. In order for the coffee giant to succeed in the country,
they need to amend a number of their policies and practices. The practice of rapid franchising
needs to be controlled and Starbucks needs to focus on quality instead of quantity. Greater focus
should be laid on consumer preferences in order to attract customers. Marketing is key for the
promotion of a new brand entering an already established market and Starbucks should put in
greater effort into its advertising and marketing in Australia.

3International Business
References:
Baroto, M.B., Abdullah, M.M.B. and Wan, H.L., 2012. Hybrid strategy: A new strategy for
competitive advantage. International Journal of Business and Management, 7(20), p.120.
Patterson, P.G., Scott, J. and Uncles, M.D., 2010. How the local competition defeated a global
brand: The case of Starbucks. Australasian Marketing Journal (AMJ), 18(1), pp.41-47.
Talpau, A. and Boscor, D., 2011. Customer-oriented marketing-A strategy that guarantees
success: Starbucks and McDonald's. Bulletin of the Transilvania University of Brasov.
Economic Sciences. Series V, 4(1), p.51.
Walters, P. and Broom, A., 2013. The city, the café, and the public realm in Australia. In Café
society (pp. 185-205). Palgrave Macmillan, New York.