Why did Starbucks fail in Australia?
Starbucks is a large coffee chain born in Seattle during the 1900s. With more than 32,000 stores across 80 countries, Starbucks has become a leading company in the coffee and beverage market and is constantly reported as one of the most profitable brands in the world! In a race for expansion, the company persists to rapidly start new international branches. This expansion has persisted to the level that it is estimated that a new branch in China opens almost every 15 hours! However, more importantly, are all these stores successful?
At the beginning of July 2000, when Starbucks launched its first store in an Australian neighborhood, it did not achieve the enormous success it was expected to. Though the company later started even more stores around the continent, most failed that Starbucks ended up closing two-thirds of its stores later in 2008. After a thorough analysis by expert economists, it was realized that the culprit of the problem was Starbucks’s failure to modify its menu and marketing methods to suit the Australian market.
Australia is widely known for its top-quality coffee and extensive history with roasting and grinding coffee beans. Therefore, Australian consumers are accustomed to a much wider variety of coffee selections and special drinks than what Starbucks had offered at the time. Moreover, the coffee industry holds rich cultural values there, as the Australians view consuming coffee as a chance to go out and spend time with their family and friends in a cozy area, as opposed to the rapid, take-out nature of Starbucks.
The previously mentioned causes of failure in Australia had taught the American brand a moral when the first Starbucks branch opened in Milan, Italy in 2018. The Starbucks menu in Italy offers an extensive choice of more than 115 drinks to better suit the rich Italian café culture. Starbucks is still not admitting its defeat altogether in Australia, however. The company revealed it will make a huge return to the country with modified strategies this time, not only with its selection of beverages but also with its target audience. They are aiming to focus on international students and tourists given their tremendous numbers in the country.
Global business strategies are simply the strategies brands use to expand their reach on an international level successfully. There are four principal classifications of strategies common in almost all businesses, regardless of their field. Firstly, the “international business strategy” is when a company’s goods are all produced in their home country and then exported overseas. Although they may be saving up on the expensive fees of expanding and starting headquarters in foreign countries, these brands may eventually face difficulties managing their logistics and sales abroad and compiling with foreign trade regulations. Secondly, the “multi-domestic business strategy” is when companies tailor their products, services, and sales and marketing techniques with great attention to match the customs, traditions, and lifestyle of the local area. Companies that follow this approach often have headquarters overseas to facilitate management in foreign branches; a great example of such a company is Nestlé.
On the contrary, the third strategy, called the “global business strategy”, makes little to no changes to its goods worldwide and keeps them more ‘homogenized’ instead, such as pharmaceutical companies. The final strategy, named “transnational business strategy”, is commonly known to be a mix between the previous two strategies: the multi-domestic and global. Although the products are usually the same or remarkably similar across different regions, the company often uses highly varying marketing and advertising strategies to better suit the tastes of the population, which may lead to products that vary in their appearance and cost. The American company Coca-Cola is an excellent example that illustrates this approach, where you will notice that the beverage almost tastes identical everywhere, but the can looks different with proper translations and varying prices.
Next time you travel (probably after the pandemic!), keep an eye on the differences in international brands from a country to another. You will be amazed by the efforts these companies put into their products, where you will perhaps learn something about the local taste. And do not forget to try the products not available on your local menu!