MGT205-Cross Cultural Management

Task

Starbucks is attempting to slowly expand in a market where it was once shunned.

It’s easy to find a Starbucks cafe almost anywhere in the world, but in Australia, there aren’t that many. That’s because in 2008, the company closed more than 70 percent of its underperforming locations, leaving only 23 Starbucks stores throughout the entire continent.

Despite Australia’s deep love for coffee, the Seattle-based chain didn’t meet success Down Under as it did in other countries. Starbucks opened in Australia in 2000 and grew to nearly 90 locations by 2008. Starbucks moved too quickly, and grew faster than its popularity.

“When they launched, they launched too rapidly and they didn’t give the Australian consumer the opportunity to really develop an appetite for the Starbucks brand,” said Thomas O’Connor, a principal research analyst specializing in consumer industries at Gartner.

Australia’s already-thriving coffee culture also proved to be a challenge for the American brand. The Australian cafe industry is expected to hit more than $6 billion in revenue in 2018. The country has been immersed in the cafe scene since the mid-1900s when Italian and Greek immigrants moved to the continent. It was then that Australians were introduced to espresso, the key ingredient to an Aussie favorite – the flat white.

Australians also compete in barista competitions and can enroll in coffee-making classes, so they take their coffee seriously.

Starbucks didn’t fit Australians’ tastes. The company served sweeter coffee options than Australians preferred, all while charging more than the local cafes.

In its first seven years in Australia, Starbucks accumulated $105 million in losses, forcing the company to close 61 locations.

But Starbucks hasn’t given up in Australia just yet. Since the 2008 closures, the company has started to slowly open more locations in the country.

Today, there are 39 locations in the Brisbane, Melbourne, Gold Coast and Sydney areas, catering to tourists who visit those parts of the country. By slowing its growth and trying to cater more to tourists, Starbucks may have found a recipe for success in Australia. 

Write an essay by referring to the points below on the reason why Starbucks is failing in Australia

1.Hofstede’s cultural dimension 

2.Cultural difference between the two countries

3.Reasons why Starbucks is failing

4.Lessons for Starbucks for future