Cross-Cultural Management Case Study: Starbucks in Australia

This case study examines Starbucks' struggles in the Australian coffee market, highlighting the company's initial rapid expansion and subsequent closure of numerous stores. The analysis delves into the cultural differences between the US and Australia, identifying how these differences impacted Starbucks' marketing and product positioning strategies. The study utilizes Hofstede's cultural dimension theory to understand the cultural constraints hindering Starbucks' success. The assignment explores management challenges, including rapid expansion, pricing strategies, and product modifications. It suggests improvements in marketing, product taste, service, and store decor to align with Australian coffee culture. The conclusion emphasizes the importance of market research and product adaptation to successfully expand business in Australia, with recommendations for modifying coffee taste, service, and incorporating Australian cultural elements in stores. The study concludes with a reference list of relevant sources.

Running Head: STARBUCKS IN AUSTRALIA
STARBUCKS IN AUSTRALIA
Name of the Student
Name of the University
Author Note

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Executive Summary:
Australian coffee-market has been proved the hardest one to penetrate and
achieve success by the coffee-empire like Starbucks. This reflected in the closing of
nearly 61 underperforming outlets of the company in the year 2008 which, in aggregate
contributed to the loss of amount $105 million, incurred by Starbucks. Experts consider
that, it is the cultural differences between the two country America as well as Australia
which has largely contributed in the adoption of faulty marketing strategy and
deficiency in the effectiveness of the product positioning strategies. Again some experts
consider, with the help of Hofstede’s cultural dimension theory the failure of Starbucks
in Australia can be defined. This is the reason this study has attepted to find out the
cultural constraints with the help of the Hofstede’s cultural dimension theory; which
create impediments in the path of expansion of the business of Starbucks in Australai.
The final section of this section has provided a couple of recommendation for Starbucks
to improvise its marketing as well as positioning strategies and continue.

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Table of Contents
Executive Summary:........................................................................................................................1
Introduction:....................................................................................................................................3
Key Management Challenge:..........................................................................................................4
Analysis:..........................................................................................................................................4
Conclusion and recommendation:...................................................................................................6
References:......................................................................................................................................8

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Introduction:
Starbucks, is one of the large coffee empires of the world. Since its inception in
the year 1971, in Seattle, Starbucks has been able to foster modification and innovation
in the coffee-delicacies offered the company. In this way Starbucks has been able to
expand its business all over the world. The innovative business strategies of the
company has reflected in the steep rise in the amount of revenues accrued by the
company. Reports evidenced that during the interval of 2014-2019, the revenue of the
company has risen from 16.45-26.51 billion US$ (Elliott 2014). In spite a continuously
rising growth path ensuring world-wide success of Starbucks. The company has not
been able to run its business successfully in the continent of Australia. In other words,
Australian coffee-market has been proved the hardest one to penetrate and achieve
success by the coffee-empire like Starbucks. This reflected in the closing of nearly 61
underperforming outlets of the company in the year 2008 which, in aggregate
contributed to the loss of amount $105 million, incurred by Starbucks (Honack and
Waikar 2017). Experts consider that, it is the cultural differences between the two
country America as well as Australia which has largely contributed in the adoption of
faulty marketing strategy and deficiency in the effectiveness of the production
positioning strategies. Again some experts consider, with the help of Hofstede’s cultural
dimension theory the failure of Starbucks in Australia can be defined. This is the reason
this study has attempted to find out the cultural constraints with the help of the
Hofstede’s cultural dimension theory; which create impediments in the path of
expansion of the business of Starbucks in Australia. Further this study incorporates a

4STARBUCKS IN AUSTRALIA
couple of suggestion for Starbucks to improvise its strategies to expand its business in
Australia.
Key Management Challenge:
In order to throw lights on the key challenges of the management of Starbucks in the
country of Australia, first the faults of the management needs to be discussed. This is because of
the fact that, the challenges of Starbucks in the path of expanding its business in the country of
Australia is interrelated with the faults of the management. An in depth research about the
defective management by Starbucks will reveals that. Starbucks was unnecessarily agile to
expand its business in the continent of Australia. This reflected in its introduction of about 90
outlets at a stretch within the year 2008., Experts also considered that the abrupt introduction of
the 90 outlets was the result of the lack of any thorough research by Starbucks, regarding the
coffee culture of Australia, which is much more sophisticated as compared to the assumption
made by the managers of the company. Further the high pricing strategy, lack of product
modification, bearing no trace of Australia culture in the decoration garnishing as well as service
are the other challenges in the path of the expansion of the business of Starbucks in Australia
(Taecharungroj 2017).
Analysis:
An analysis of the faults as well as the challenges of management has been conducted
with reference to the Hofstede’s cultural dimension theory. The recommendations evident from
the analysis are many. Firstly, the company needs to improvise its marketing strategy keeping in
mind that the coffee-culture in the continent of Australia has been introduced with the advent of
Italian as well as Greek immigrants in Australia during 1950s and this largely reflected in the

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adoption of the espresso-drinking habits of Australians prior to the people of United States.
Hence, European Lite version of coffee shop culture was not new in Australia. This as the reason
Australians did not feel that they were offered anything new at an affordable price when
Starbucks introduced European Lite version of coffee shop culture in the continent of Australia.
Moreover the coffee-culture in the continent of Australia support the preference of much bitter
savor of coffee. Again, this was not followed by Starbucks. Rather the coffee offered by
Starbucks in the continent of Australia, was sweeter which was unable to match the definition of
ideal coffee in Australia (Honack and Waikar 2017). Rather Australians found that they were
offered a service which were not ‘up to the mark according to them’, did not satisfy them in
terms of taste and garnishing and not pocket friendly for them too. This made Australian coffee
lovers reluctant to pay more for a coffee which they find less tasty. All these are evident of the
fact that, expansion of business further in the continent of Australia demands a thorough market
research, product modification. The company needs to modify their product. The taste of the
coffee, the service as well as the garnishing and also the decoration of outlets should bear some
essence of Australian culture. For instance for garnishing as well as decoration they can use
Greek and Italian souvenir. They can use table covers designs of the furniture and wall painting
bearing the traces of ancient Greece. They can depict the story of introduction of coffee in
Australia which was further modified by Starbucks through wall painting (Harrington
Ottenbacher and Fauser 2017). Further they can experiment with the taste of the coffee making it
less sweet and adding less milk. Observing the demand for low calorie chocolates in Australia
they can position the chocolate blended coffee as a less calorized beverage, which will look after
the obesity problem of Australians (YANG and TU, 2016). All these should be accompanied by
a low price strategy to boost the demand for the coffee of Starbucks in the continent of Australia.

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Conclusion and recommendation:
In the conclusion, it can be stated that, of the factors responsible behind the
failures of Starbucks to expand its business in the country of Australia, was the cultural
differences between the two country America as well as Australia. Further the
deficiency in the effectiveness of the production positioning strategies induced by lack
of market research was the another reason behind the failure of the establishment of
business by Starbucks in Australia. An analysis of the faults as well as the challenges of
management has been conducted with reference to the Hofstede’s cultural dimension
theory. of the reason revealed through the analysis is that, This as the reason Australians
did not feel that they were offered anything new at an affordable price when Starbucks
introduced European Lite version of coffee shop culture. in the continent of Australia.
Moreover the coffee-culture in the continent of Australia support the preference of much
bitter savor of coffe. Again, this was not followed by Starbucks. Rather the coffee
offered by Starbucks in the continent of Australia, was sweeter which was unable to
match the definition of ideal coffee in Australia. Further the high pricing strategy, lack
of product modification, bearing no trace of Australia culture in the decoration
garnishing as well as service are the other challenges in the path of the expansion of the
business of Starbucks in Australia.
All these are evident of the fact that, expansion of business further in the
continent of Australia demands a thorough market research, product modification. The
company needs to modify their product. The taste of the coffee, the service as well as

7STARBUCKS IN AUSTRALIA
the garnishing and also the decoration of outlets should bear some essence of Australian
culture. For instance for garnishing as well as decoration they can use Greek and Italian
souvenir. They can use table covers designs of the furniture and wall painting bearing
the traces of ancient Greece. They can depict the story of introduction of coffee in
Australia which was further modified by Starbucks through wall painting. Further they
can experiment with the taste of the coffee making it less sweet and adding less milk.
Observing the demand for low calorie chocolates in Australia they can position the
chocolate blended coffee as a less calorized beverage, which will look after the obesity
problem of Australians. All these should be accompanied by a low price strategy to
boost the demand for the coffee of Starbucks in the continent of Australia.

8STARBUCKS IN AUSTRALIA
References:
Elliott, C., 2014. Consuming caffeine: The discourse of Starbucks and coffee. In Brands (pp.
356-367). Routledge.
Harrington, R.J., Ottenbacher, M.C. and Fauser, S., 2017. QSR brand value: Marketing mix
dimensions among McDonald’s, KFC, Burger King, Subway and Starbucks. International
Journal of Contemporary Hospitality Management, 29(1), pp.551-570.
Honack, R. and Waikar, S., 2017. Growing big while staying small: Starbucks harvests
international growth. Kellogg School of Management Cases, pp.1-22.
Taecharungroj, V., 2017. Starbucks’ marketing communications strategy on Twitter. Journal of
Marketing Communications, 23(6), pp.552-571.
Taecharungroj, V., 2017. Starbucks’ marketing communications strategy on Twitter. Journal of
Marketing Communications, 23(6), pp.552-571.
Taylor, G. and Richardson, G., 2014. Incentives for corporate tax planning and reporting:
Empirical evidence from Australia. Journal of Contemporary Accounting & Economics, 10(1),
pp.1-15.
YANG, Q. and TU, X., 2016. Starbucks VS Chinese Tea—Starbucks Brand Management
Strategy Analysis in China. International Business and Management, 12(1), pp.29-32.