Starbucks’ Trouble Establishing and Sustaining

Its Presence in Australia

Australia’s love for coffee began with the influx of immigrants from European countries after
World War II. The migrants, who were mostly Greeks and Italians, established the culture,
with the rest later embracing it during the 1980s (Tucker, 2017). All along, Australians were
used to a variety of coffee experiences, even when Starbucks it in the US, and savoring
morning coffee seemed to be a ritual for them (Garthwaite et al., 2017). It would be fair to
describe the Australian coffee culture as striving and sophisticated by the time Starbucks
joined the market. With such an established culture, Australians did not find the need to move
out of their way in favor of Starbucks, considering that they had already developed a cult-like
following of local brands. Given the nature of the Australian coffee consumers, it would not
be easy for a global chain to replicate the intimacy and personalization of the local boutique
café (Honack and Waikar, 2017). Besides, unlike American consumers, Australians enjoyed
their coffee straighter and without disguised flavors and syrupy shots throughout the years of
coffee drinking.

Starbucks was successful in such markets as the UK and China. They happened to have
introduced the coffee culture in these countries, given that the preferred beverage was tea. On
the contrary, Australia had a well-established independent coffee culture (Tucker, 2017).
Besides, Starbucks did not use above-the-line promotional activities and instead relied on the
brand name and stores as the core of the business (Sholihah et al., 2016). This initiative was
introduced by Howard Shultz using the slogan “Build Starbucks one cup at a time.” The
motto meant that the company relied on customer experience for generating loyalty and word-
of-mouth advertising, hence the growth of the business (Honack and Waikar, 2017).
However, the strategy could not apply to a market as competitive as Australia, where
consumer loyalty was with particular baristas. Considering the lack of advertising, Australians
were unable to shift to Starbucks. On the other hand, such competitors as McDonald’s
effectively communicated their messages.

Starbucks failed to customize its business model to fit the Australian market based on the
assumption that what worked in the US would work in any other English-speaking nation.
Contrastingly, the company’s success in the first place in Asian markets was a result of its
ability (Glowik, 2017) to adjust the original business model. Even though Starbucks made
changes to the Japanese and Saudi Arabian menus, the retailer generally offers similar
products in all its international markets. This explains why it introduced and applied the
“American” offering in Australia without taking the time to understand the locals’
preferences. Australia has at least 235 ethnicities, which means that a company will need to be
aware of the homogeneous nature of the country before settling on an entry strategy (Tucker,
2017). Further, coffee consumers in Australia are used to the idea of buying local, sharing
bonds with sellers, and supporting ethically-minded businesses. The business model used by
Starbucks clashed completely with the interests of the locals to the point of considering the
company non-corporate.
Starbucks started its US business with a single store and proceeded to capture the imagination
of consumers, leading to second, third, and more outlets. It did not take long for the retailer to
become a demand-driven phenomenon (Alwaleed et al., 2019). A similar case happened with
McDonald’s in Australia, starting with one shop in each city and creating a buzz around the
brand experience (Honack and Waikar, 2017). On the contrary, Starbucks immediately
imposed itself in Australia by opening multiple establishments in every city. The company,
therefore, denied Australians an opportunity to “discover” the brand. According to Tucker
(2017), the company identified strategic sites, put up huge signs, and introduced non-
traditional coffee names and sizes. This amounted to showing Australians a new way to drink
coffee, an initiative that quickly resulted in market saturation. On the other hand, Starbucks’
expansion had little impact on competitors, and instead, the company was cannibalizing its
stores. Furthermore, Starbucks ended up violating the principles of novelty and scarcity by
initiating too many outlets.