A Detailed Report on the Problems Faced by Starbucks in Australia

This report analyzes the significant problems Starbucks faced in the Australian market, particularly regarding its international expansion. The core issues include stock-related problems due to wage inflation, intense competition from established players like Dunkin' Donuts, and a failure to adapt to Australia's sophisticated coffee culture, where espresso-based drinks are preferred over the filter-style coffee popular in the United States. Starbucks' aggressive growth strategy, without properly understanding local customer needs, contributed to its challenges. Product taste and pricing also played a significant role, as the company failed to offer products tailored to Australian preferences and cost-effectively. Furthermore, the lack of effective advertising and a customer-oriented menu, mirroring the US structure rather than catering to local tastes, hindered Starbucks' success. The report concludes by mentioning the intention to adopt a System Thinking approach, using tools like Rich Picture and CATWOE, to find solutions for these problems.

Running Head: DETAILED ANALYSIS OF PROBLEMS FACED BY STARBUCKS
DETAILED ANALYSIS OF PROBLEMS FACED BY STARBUCKS
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Author Note

1DETAILED ANALYSIS OF PROBLEMS FACED BY STARBUCKS
Executive Summary
The aim of this report is to analyse the significant problems that Starbucks is facing related to
international market especially in Australia. The problems are related to stocks, pricing issues
and taste of the Australian customers. The report also discusses about the competitions that
Starbucks is facing from other organizations in the international markets.

2DETAILED ANALYSIS OF PROBLEMS FACED BY STARBUCKS
Table of Contents
Introduction................................................................................................................................3
Discussions.................................................................................................................................4
Significant Issues faced by Starbucks....................................................................................4
Stock Related Issue-...........................................................................................................4
Growth of Competitors in Australia-.................................................................................4
Australia’s Sophisticated Coffee Culture-.........................................................................4
Aggressive Growth Strategy-.............................................................................................4
Product Taste and Pricing-.................................................................................................5
Advertisement-...................................................................................................................5
No Customer-Oriented Menu-...........................................................................................5
Conclusion..................................................................................................................................6
References..................................................................................................................................7

3DETAILED ANALYSIS OF PROBLEMS FACED BY STARBUCKS
Introduction
Starbucks Corporation was founded in America in the city of Seattle,Washington in
the year 1971.Within few years this company developed its territories worldwide in about
28,000 locations and in 76 markets. Starbucks has been developing rapidly all over the world
but one continent where this global company has faced problems to break through is
Australia. In this report discussion related to issues Starbucks faced in Australian coffee
market is explained in details in the following sections of the report.

4DETAILED ANALYSIS OF PROBLEMS FACED BY STARBUCKS
Discussions
Significant Issues faced by Starbucks
Stock Related Issue-
Starbucks have faced a lot of problems due to wage inflation, as the company has to
spend higher wages to keep employees and higher wages elsewhere in retail and food service.
These issues does not mean that Starbuck’s growth is coming to a quick end or that Starbucks
stock is a good short candidate but still over the years the sales rate is decelerating and other
companies in and around Starbucks space are quickly raising wages themselves (Bernard,
Cade & Hodge,2018) .
Growth of Competitors in Australia-
The biggest competition that Starbucks faced in Australia was from Dunkin’
Doughnuts, the coffee giants in Australia (Steenkamp,2019).
Australia’s Sophisticated Coffee Culture-
At the time when 85 outlets was set up by Starbucks in Australia one important
aspect that Starbucks missed was that compared to United States where filter style or brewed
coffee were preferred, Australian consumers had a reputation of having a unique taste in
espresso-based coffees. So, this turned out to be a significant issue for a American brand
company to enter into the Australian market.
Aggressive Growth Strategy-
Starbucks rapidly grew its market in Australian continent without understanding the
needs of the Australian customers. Australia had a rich coffee culture and Starbucks struggled
to meet the requirement of the customers (Sholihah et al.,2016).

5DETAILED ANALYSIS OF PROBLEMS FACED BY STARBUCKS
Product Taste and Pricing-
The most important aspect that determine the success of any organization is
related to product pricing and taste. The tastes of Australian did not match the taste of
Americans as Australians preferred different tastes for coffee (Honack,2017). The major
drawback of Starbucks was that Starbucks failed to make their product suitable for market
and cost effective.
Advertisement-
Australian Starbucks entered an extremely competitive coffee market. Starbucks
made no advertise in the mass media platform instead they relied on their reputation as a
result many customers were not aware about their product and due to lack of proper
advertisement Starbucks failed to communicate its brand (Voigt, Buliga & Michl ,2019).
No Customer-Oriented Menu-
Like Italians culture Australian consumers had their own taste. Starbucks ignored this
matter completely, and the menu that was offered in Australia market completely copied the
US coffee structure.

6DETAILED ANALYSIS OF PROBLEMS FACED BY STARBUCKS
Conclusion
In this report the discussion was related to the significant issues that Starbucks faced
in the foreign markets especially in Australia regarding pricing and product quality. In the
second part of the report, System Thinking approach will be adopted to find a solution of the
above mentioned problems using tools such as Rich Picture and CATWOE.

7DETAILED ANALYSIS OF PROBLEMS FACED BY STARBUCKS
References
Bernard, D., Cade, N. L., & Hodge, F. (2018). Investor Behavior and the Benefits of Direct
Stock Ownership. Journal of Accounting Research, 56(2), 431-466.
Honack, R., & Waikar, S. (2017). Growing big while staying small: Starbucks harvests
international growth. Kellogg School of Management Cases, 1-22.
Sholihah, P. I., Ali, M., Ahmed, K., & Prabandari, S. P. (2016). The Strategy of Starbucks
and it's Effectiveness on its Operations in China, a SWOT Analysis. Asian Journal of
Business and Management (ISSN: 2321–2802) Volume.
Steenkamp, J. B. (2019). Reflections on defining global brands, fragmentation and
segmentation, and the emergence of richer brandscapes. International Marketing
Review.
Voigt, K. I., Buliga, O., & Michl, K. (2017). Globalizing Coffee Culture: The Case of
Starbucks. In Business Model Pioneers(pp. 41-53). Springer, Cham.