A Starbucks cafe can be found very easily almost anywhere in the world, except down under i.e. Australia. It entered the Australian market in 2000 and opened nearly 90 stores by 2008. There are hardly any stores after Starbucks decided to close more than 70% of its underperforming cafes. As of now, Australia has close to 23 Starbucks cafes left. Despite the Australian citizen’s never-ending love for coffee, Starbucks did not prove to be a success as it did in other countries around the globe.
On the other hand, in 1999, Starbucks entered the Chinese market with one store in Beijing. Today, it has around 4,200 stores 177 cities in mainland China with the experience ‘One cup, one person and one neighborhood at a time’. Despite being a tea drinking nation, Starbucks was able to bridge the gap between tea drinking and the coffee drinking culture and succeed well.
So, why did Starbucks fail in Australia and succeed in China?
This study will dig deeper and answer the following question. It will relate to the following chapters: Strategies for International Business and Evaluation of Countries for Operations. Undertaking this study will prove to be useful for any reader who plans to expand globally and enter new markets. It outlines the importance of good market research, a sustainable global strategy, a clear business model, and a focus on thinking globally but acting locally. Before entering a new country, it is important to do a detailed analysis, focus on resource acquisition, and decide which location will be suitable for our product. Without an understanding of the market, a brand like Starbucks can also fail.
A comparative study related to Australia and China clearly shows how Starbucks’ succeeded in a country like China where it was so difficult to enter as Chinese traditionally drank tea by efficient evaluation of country and right business strategies and how it managed to understand the preferences and tastes of the Chinese population.
Currently, we know some factors that led to the same as listed below:
Australia
No adaptability and lack of market research
They grew so rapidly and expanded to different cities in Australia without any change in their business model, menu, or services. They were confident that their business model would work in a different country without any major change.
Rapid expansion
Starbucks opened its first store in 2000 in Australia and expanded to nearly 90 locations by 2008. It grew faster than its popularity among Aussies. (Patterson, P. G., Scott, J., & Uncles, M. D., 2010)
Substitutes
Australians take their coffee very seriously. They love a good cup of coffee since the mid-1900s when Italian and Greek immigrants moved and introduced ‘the flat white’. The thriving coffee culture and the presence of local cafes proved to be a great challenge for Starbucks. (Adams, J., 2012)
China
Localization
Starbucks used the think globally and act locally approach in China- a tea-drinking nation. It bridged the gap between tea drinking culture and the coffee drinking culture by introducing a special menu containing beverages based on local tea ingredients. Moreover, the menu included items that were specially modified to suit the taste buds of Chinese.
Partnering with local players
To capture the complex and homogenous market of china, Starbucks partnered with regional players. In north China, it partnered with Beijing Mei Da, a regional coffee company to gain a huge market share. These players provided Starbucks with relevant information regarding consumer tastes and preferences.
Positioning and demand creation
Starbucks has created a demand curve for coffee in china which is known to be a tea-drinking nation. It positioned its coffee in the minds of the consumers and created a ‘Starbucks experience’ that appeals to Chinese consumers. It chose to project its brand image in high visibility and high traffic areas.
Contribution and Insights
To strengthen the study further, we will work on the consumer behavior in both the countries separately and understand what Starbucks could have done better by using statistics, journal articles, news articles, YouTube videos and discussions by experts.
After studying the existing Starbucks strategies, we will consult the chapter Strategies for International Business to recommend the right strategies which can be implemented whereas with the help of the chapter Evaluation of Countries for Operations, it will be easier to suggest ways to properly scan the environment before entering a new country.
Our major contribution will be to further explore how Starbucks has still not given up on the Australian market and trying its level best to re-enter the market with new strategies by targeting the tourists who already love Starbucks as not much has been said about the same. With the help of SWOT analysis, we will find out ways by which Starbucks can work on its weaknesses and exploit its strengths further to re- enter the Australian market.
In a nutshell, a complete business perspective is important to understand the success/ failure of any business.
2020-5-6-1588784478