Course Code: MGN Course Title: Management and Organizational Behaviour Dynamics

Course Instructor: Section:

Academic Task No.: 3 Task Title: FAILURE OF STARBUCKS IN AUSTRALIA

Date of Allotment: 21-08-2019 Date of submission: 07-09-2019

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Learning Outcomes:
By analysing this news, we came to know about that Cultural adoption is an integral part for any organisation to sustain
its business in different countries. Starbucks failed to expand its business in Australia because they failed to adopt the
coffee culture of Australian consumers.

Declaration:
I declare that this Assignment is my individual work. I have not copied it from any other students work or from any
other source except where due acknowledgement is made explicitly in the text, nor has any part been written for me
by any other person.
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TABLE OF CONTENTS

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SL. NO. TITLE PAGE NO.

1.0 STARBUCKS CORPORATION BACKGROUND 4

2.0 STARBUCKS IN AUSTRALIA 4

3.0 REASONS FOR STARBUCKS FAILURE IN AUSTRALIA 5

4.0 LINK WITH THE SUBJECT 6

5.0 SUGGESTIONS 7

6.0 CONCLUSION 8

7.0 REFERENCES 8

PEER RATING

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1.0 STARBUCKS CORPORATION BACKGROUND:

 Starbucks Corporation is an American coffee company which was founded by Gordon Bowker, Jerry
Baldwin, and Zev Siegl in Seattle, Washington in 1971.
 In the early 1970’s and 80’s, Starbucks Corporation experienced a success in the U.S. market. By 1987,
Howard Schultz purchased Starbucks after serving for five years in operations department at Starbucks
Corporation. 48 years ago, Starbucks was just a single store in Seattle’s historic Pike Place market.
 From a narrow storefront, Starbucks offered some of the world’s finest fresh-roasted whole beans
coffees. The name, was inspired by Moby Dick, evoked the romance of the high seas and the seafaring
tradition of the early coffee traders.
 Starbucks became profitable in Seattle in the early 1980’s, the first Starbucks location outside America
opened in Tokyo in 1996. The company now operates over 30000 locations worldwide.
 Starbucks mission: To inspire and nurture the human spirit – one person, one cup, and one
neighbourhood at a time.

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2.0 STARBUCKS IN AUSTRALIA:

 Starbucks opened the doors to its first store in Australian in July 2000 in Sydney’s CBD. Australia’s
taste for coffee is a by-product of waves of immigrants arriving on the country shores following World
War II.
 European migrants, which are predominantly Greeks and Italians, were they first establish the coffee
culture which was later embraced more widely in the 1980s. For decades Australians enjoyed a variation
of the “lifestyle coffee experience” that Starbucks created from a scratch in the U.S.
 It is fair to describe Australia’s coffee culture as more of a mature and sophisticated, so when Starbucks
entered Australia in 2000, a thriving urban culture café culture was already in place.
 This established culture saw Australians typically patronised towards the smaller boutique style coffee
shops, with people willing to travel out of their way for a favoured coffee, especially in Melbourne
where coffee has been developed an almost cult like following and for Australians coffee is as much
about relationships as it is about the product.
 The Starbucks product suggesting that an impersonal its global chain experience would have trouble
replicating the intimacy, personalisation and familiarity of a suburban boutique café. Furthermore,
through years of coffee drinking, many Australians, unlike American or Asian consumers like China,
they have developed a sophisticated palate, enjoying their coffee straighter and stronger, and without the
need to disguise the taste with flavoured and syrupy shots.

3.0 REASONS FOR STARBUCKS FAILURE IN AUSTRALIA:

 Unsuccessful to understand the Australian consumers:

 Australia’s coffee culture has been strongly influenced over a century. In 1900s, first Italian and
Greek immigrants had introduced the espresso in Australia, which is the key ingredient to
Australian’s favourite coffee beverage.

 Like Italians, Australian consumers did not like the sugary coffee offering on the Starbucks
menu. Australians preferred black and unsweetened coffee.
 Starbucks adopted US business model in Australia but failed to understand the Australian
consumer preference and served sugary coffee with higher price than local cafes.
 Projecting an arrogant Brand Image:

 When Starbucks first entered the Australian market, Starbucks claimed “to be the most
successful coffee chain in Australia”- which was considered as an “arrogant” statement by the

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 Australian consumers. Americans assumed that Australian would fall love in with an American
brand but that did not happen. Australians have only problem with arrogant American brands.

 Failed to understand Brand loyalty:

 In UK and China Starbucks were extremely successful because they introduced coffee culture in
the market where preferred cup of hot beverage was tea.

 In Australia, Starbucks failed to research about the Australian consumers that they were brand
loyal to their local coffee shops and they were not switch to global brand. people liked to drink
coffee in small cafes, with a small and personal community feel and sharing stories with their
local barista.

 Passive market coverage:

 The problem with Starbucks was that suffered as the number of stores grew at a fast pace and
began employing younger, less experienced staff. If the employees be trained and stood up the
standard they maintain in other expansion. They could have done better.

 Advertisement:
 As Starbucks entered into extremely competitive and mature café market in Australia. Starbucks
did not advertise in the mass media, so it failed to communicate its brand as to make the customer
understand about the product.

4.0 LINK WITH THE SUBJECT:

 Starbucks And the Cultural Differences:

 Organizational culture is outlined because the cluster norms, values, beliefs and assumptions
practiced in a corporation. It brings stability and control within the firm.
 The organization is additional stable and its objective is understood additional clearly.
Organizational culture helps the cluster members to resolve their variations, overcome the
barriers and conjointly helps them in effort risks.
 Changing organizational culture is not an easy undertaking. Employees typically resist
amendment and might rally against a brand-new culture. Thus, it is the duty of leaders to
convince their employees of the benefits of change and show through collective experience
with new behaviors that the new culture is the best way to operate to yield success.
 Starbucks ought to conjointly recognize that cultural variations will have an effect on business
communication through:

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  Customs:
 When doing business with an affiliate from another country, think about the cultural variations
that will be bestowed. This includes basic customs, mannerisms, and gestures.
 Example we can take, if a salesman approaches a gathering with data of a customer’s cultural
background, then his words, body language, and actions can all be adapted to better suit those
of the customers. This, in turn, could cause being higher liked by the client, ultimately
increasing the salesperson's chance to shut the deal.

 Language Barriers:
 In some countries, just like the U.S. and European nation, it's common for folks to talk loudly
and be additional assertive or aggressive once sharing ideas or giving direction. In countries
like Japan, folks usually speak softly and they are additional passive regarding sharing ideas or
creating suggestions.
 When interacting with folks from totally different cultures, speaking during a neutral tone and
creating an acutely aware effort to be unselfish of others' input, even if it is given in a manner to
that you're not accustomed, will facilitate foster effective business communication.

5.0 SUGGESTIONS:

 Starbucks should avoid relying only on reputation:

 A very valuable component for business launching a new product or in a new market is to lose the
ego. Just because you say you are after global domination doesn’t mean customers will allow it.
 Starbucks should have more passionate workforce:
 Starbucks has most important aspect for success is to create passionate workforce. If you go to a
shop and see the teenager behind the desk and lack knowledge of what they are making and what
they are using make you feel the difference when you go to shop where the passionate employee
serves you everything with experience.

 Starbucks should need to clarify what is driven globally and what is managed locally:

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  The global marketing approach of Starbucks does not mean the absence of local, market specific
plans and initiatives. Some aspects of marketing that push themselves to branding, strategic
marketing, planning and marketing campaigns, social media strategy and guidelines, research
strategy, and global PR.
 A tiered market will help you identify territories that might drive the highest potentials returns.
Starbucks allows high level markets to access higher budgets, giving them autonomy; for Example,
research into local users’ behaviours to inform product development.

 Starbucks should research local market needs and implement a collaborative approach:
 Starbucks globally operating characteristic is an excuse to avoid spending time understanding local
cultures, customer needs, and behaviours. It is obvious that a US based customer is likely to be very
different from a customer located in Australia. Their cultures and needs are different, so it makes
sense they will interact very differently with your products or services.
 To implement global model to work, global teams need to develop an understanding of local
markets and establish a close relationship with local marketing teams. Privacy laws may be very
different from country to country.

 Starbucks should research the markets and take time to get to know the international teams
they are working with:
 Trust them to be the experts on local customers and users. And leverage their knowledge to make
your global plans and campaign a success.

6.0 CONCLUSION:

In summary, it appears on all the evidence that Starbucks not only misjudged the Australian coffee culture
but also misjudged the extent of the competition and failed to adapt its offering to the local market.
Furthermore, with the advent of high-quality barista training, the availability of premium coffee beans and
the technology to produce a high-quality cup of coffee. Starbucks may have been responsible for growing
the premium coffee category, but the emergence of Gloria Jean’s and the coffee club turned out to be
serious competitors.

7.0 REFERENCES:

https://www.cnbc.com/2018/07/20/starbucks-australia-coffee-failure.html

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https://www.youtube.com/watch?v=_FGUkxn5kZQ

http://www.starbucks.in/

https://en.wikipedia.org/wiki/Starbucks

https://www.forbes.com/sites/panosmourdoukoutas/2018/09/08/starbucks-greek-problem-in-australia-mikel-
coffee-community/

https://www.abc.net.au/news/2008-08-07/32188

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