Extended Essays 2021

Comparison to a Competitor

Gloria Jean ’ s Coffees was founded in Chicago and was extremely successful when expanding into Australia.

A key contributor to this success was Starbucks’ ability to adapt its marketing plan by tailoring its menu to

the Australian tastes. The fact that an American brand had already successfully established its brand in

Australia possibly added to Starbucks’ difficulty when expanding into Australia. This is due to brands like

Gloria Jean ’ s dominating the high-end side of the coffee retailing market and McDonalds already occupying

the convenience end. Both of these brands were already satisfying consumer needs with quality coffee, whilst

offering an American twist with more sugary and sweetened options, leaving Starbucks with little point of

differentiation, especially when Starbucks offered lower quality coffee at a higher price. When Paul Irvine,

co- founder of Gloria Jean’s , expanded into Australia, he noted that “ Australia is a tough retail market and

coffee retailing is particularly tough ” 25 . Irvine understood that for a café to be successful, it must offer slightly

better coffee than local competitors, and to do so consistently. Australian coffee consumers prioritise quality

coffee over convenience, whereas Americans are more likely to be swayed by the most convenient option.

This is because for Australians purchasing coffee is an experience to be enjoyed, something that Irvine

understood when he implemented a reward system for loyal customers. Whereas Starbucks lost its unique

value proposition when employees were forced to prioritise sales targets over customer relationships 26 .

While the GFC might seem an easy scapegoat for Starbucks’ failed expansion into Australia, the continued

growth of competitors suggests otherwise. Gloria Jean’s sales rose 18% to an estimated $240 million for

2007/2008. Furthermore, during the time Starbucks opened in Australia, McCafé grew from 60 stores to 488

in the span of 6 years 27 . Therefore, competing companies such as Gloria Jeans and McCafé demonstrate that

despite the economic difficulties, the use of appropriate marketing strategies can also enable them to flourish

when expanding into new markets.

25 Patterson, P.G., Scott, J. and Uncles, M.D. (2010). How the local competition defeated a global brand: The case of Starbucks. Australasian Marketing Journal (AMJ) , 18(1), pp.41 – 47. 26 Patterson, P.G., Scott, J. and Uncles, M.D. (2010). How the local competition defeated a global brand: The case of Starbucks. Australasian Marketing Journal (AMJ) , 18(1), pp.41 – 47. 27 Patterson, P.G., Scott, J. and Uncles, M.D. (2010). How the local competition defeated a global brand: The case of Starbucks. Australasian Marketing Journal (AMJ) , 18(1), pp.41 – 47.

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