Free Essay Answering Why Starbucks Failed in Australia

Starbucks is an American chain of coffeehouse and a coffee company. Starbucks was started way back in 1971 and it was started in Seattle that is in Washington. The company grew from the humble beginnings to become a leading coffeehouse in the world with branches all over the world today. It is sometimes considered the main representative of "second wave coffee". Starbucks distinguishes itself by the quality of coffee that it serves. Starbucks was started by three people who met while they were in campus that is in the University of San Francisco. Starbucks expanded and grew and they started opening branches all over the world. They are famous for their premium coffee brands that they serve their customer. Today the chain operates 28,218 locations worldwide. From their humble beginnings, Starbucks moved out of America and started opening locations in Europe and Asia. This expansion has seen it become the leading player in the coffee industry. They have premium products and services that they offer their customers. Their target is the high end customers and they customize the products to suit the different customers from students to the working class.

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Recently, the Starbucks in Australia faced closure after it failed to command the Australian market. The coffeehouse set up locations in Australia with the objective of making it big in the country. But before we can examine the entry of Starbucks in Australia we need to look at the Australian coffee market. Their taste for coffee is a by-product of the immigrants who arrived in the country following World War 2. When the immigrants went to Australia they established a coffee culture which became a success. This was done by mostly the Greeks and Italians. To them coffee has always been their lifestyle and part of their tradition. In 2000 the coffeehouse, Starbucks decided to venture into the Australian market. What they never knew was that the challenge unlike in other areas was that Australians were already in coffee for a long time. The coffee culture in Australia can be described as mature and sophisticated. Unlike the Americans, the Australians like their small coffee shops and it is more of a relationship as they care more about the product hence it was evident that a global chain experience would not work in Australia. Something else that was different was that the Australians liked their coffee just straight and stronger with no need to have flavors to disguise its taste.

With all this information now we need to ask ourselves the question, why did a brand like Starbucks which is worldwide fail to stamp into this market. Does it mean that Starbucks did not take their time to understand the existing coffee culture? Was it a mere underestimating the relational aspect of coffee purchasing in the country? Maybe it was a case of overestimating the value of customers. One thing for sure is that a lot of these global brands see expansion into new markets as strategies well placed for domination and maybe Starbucks so that in Australia and decided to take the chance at once without studying the factors and risks they were going to.

One of the major reason as to why they failed was that they failed to entice the Australians into the new coffee cultures. As Martin noted 'I just think they failed in their whole system by the way they serve,, this did not appeal to the culture the Australians have' (2008). When Starbucks was introduced down south that is in Australia there was the hype by the consumers as this was a new brand of coffee coming. But after trying it they just realized that it failed in offering a unique experience that their coffee chains were not offering. Most people believed that the product was not worth the premium price that it was being sold.

Something else was that the rapid expansion and its omnipresence and its somewhat standardized store design as well as recent developments in terms of setting targets for its staff all worked together in dropping the in-store experience at Starbucks. The introduction of set targets to its frontline staff meant that there was minimal time for them to interact with their customers. This was unlike Starbucks which has always been at the forefront in making sure there is interaction with the customers. Starbucks points of differentiation were been drained gradually and now their ideology that coffee was not a commodity but a lifestyle was now being changed and selling coffee as a commodity. This was a critical reason for their failure as they now operated just like a commodity selling point where the customers passed by to buy the commodity and leave.

The other reason was that its customer service started dropping very fast. Like for instance the quality of their baristas started to decline and they hired young people who had no experience in coffee brewing. This was a mistake as they started being undermined by other outlets that offered more at a less price. This dwindling in the quality of the customer service made many Australians opt for their traditional coffeehouse that were there before Starbucks. The decrease in customer service was very fatal as many customers now felt that they offered just normal coffee very poorly but at a very high price.

The final reason was that Starbucks had lost in its promise to offer superior coffee in very comfortable surroundings and that is why their prices were high. Starbucks switched to the vacuum-packaged coffee thus denying the consumers the store-filling aroma of the coffee beans. They also automated the machines hence no hand making of the coffee something that customers liked and characterized coffee making as a theater. Starbucks moved from quality and entered in more about hitting targets per hour whereas they maintained their high prices.

The solutions to all this would have been that as much as they are still operating in Australia in the major cities, they need to take their time and adopt the cultures of coffee in Australia. This will make them edge their competitors. They should stick to the Australian quality coffee that attracts the Australians who have had their tradition in coffee making. Another solution would be to stick to their core of the business and that is improve in customer service. They are not supposed to stop concentrating on profit whereas they are losing customers. What made them thrive were their services something that overtime they have been poor at. They need to go back to when they held their customers with high esteem and loyalty. They need to have qualified baristas. All this they do because they are focusing on their profit and not quality. They need to start offering quality that we came to know Starbucks of. Their core mandate should be quality and ambience not targets and profit.

Venturing in new markets can look easy but unless it is carried in a way that it is supposed to be then there is a real danger that many international brands will lose their core businesses especially when they are focusing on profit and not quality at all times.

References

AustralAsian Specialty Coffee Association (2006), Australian Coffee Market: Key Facts for 2006.

Australian Bureau of Statistics (2008), Cafes, Restaurants and Catering Services, Australia, Report 8655.0 for 2006-07.

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Bitner, M. J., & Wang, H. S. (2014). 11. Service encounters in service marketing research. Handbook of service marketing research, 221.

Lusch, R. F., & Vargo, S. L. (2014). The service-dominant logic of marketing: Dialog, debate, and directions. Routledge.

Rust, R. T., & Huang, M. H. (Eds.). (2014). Handbook of service marketing research. Edward Elgar Publishing.

T. Bawden (2008), 'Starbucks reports first loss in 16 years', Times Online, 31 July, available at <http://business.timesonline.co.uk/tol/business/

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