Extended Essays 2021

Introduction

Starbucks Corporation (Starbucks) is an American multinational coffee and food chain that holds 40% of the

US market share 1 ; being the world’s largest coffeehouse chain. Starbucks was founded in March 1971 and has

since opened an astronomical 14,871 locations in the US 2 . This rapid growth occasioned its international

expansion. However, Starbucks experienced devastating loses when originally expanding into South Africa,

Australia, and Israel. This investigation will be focusing on Australia, specifically the extent to which

Sta rbucks’ marking strategies contributed to its failure and how this can be improved in Starbucks ’ future

ventures. What exactly caused Starbucks ’ failure and how this can be improved for future expansion will

subsequently be investigated.

Marketing is the process of satisfying consumer needs in way that generates profit 3 . When expanding into

Australia in the year 2000, Starbucks failed to adapt to Australia’s unique coffee culture. Australia ’s coffee

market is proven to be one of the toughest markets in the world to break into. This is due to Australia’s rich

culture in coffee that originated in the 1930s from Italian and Greek immigrants when they introduced

Australia to the espresso 4 . Since then, Australia ’s coffee has grown and refined to the deeply embedded culture

it is today. Starbucks failed to see these differences between the Australian and US market when adapting its

marketing strategies in its expansion into Australia. However, there are other factors that influenced

Starbucks’ failure when expanding into Australia, such as the Global Financial Crisis (GFC) of 2008 and the

growth strategies Starbucks implemented. Starbucks’ failure in Australia ultimately led to an accumulated

$105 million loss in the first 7 years and the closure of more than 66% of Australian Starbucks’ stores 5 . Thus,

Starbucks ’ failed expansion into Australia can to a large extent be attributed to poor marketing strategies.

1 Statista. (2019). U.S. coffee chains market share 2019 | Statista . [online] Available at: https://www.statista.com/statistics/250166/market-share-of-major-us- coffee-shops/ [Accessed 17 Jul. 2021]. 2 ScrapeHero (2021). Number of Starbucks locations in United States. [online] ScrapeHero. Available at: https://www.scrapehero.com/location-reports/Starbucks- USA/ [Accessed 18 Jul. 2021]. 3 Kotler, P. and Armstrong, G. (2018). Principles of Marketing . 5th ed. Harlow: Pearson Education Limited, 4 CBD, S. (2017). Australian coffee culture, a brief history . [online] Tcptraining.com. Available at: https://www.tcptraining.com/training-news/australian-coffee- culture-a-brief-history [Accessed 17 Jul. 2021]. 5 Turner, A. (2018). Why there are almost no Starbucks in Australia . [online] CNBC. Available at: https://www.cnbc.com/2018/07/20/starbucks-australia-coffee- failure.html [Accessed 17 Jul. 2021].

3