Spilled the beans


Millions of people around the world drink coffee for whatever reason. Since I am in an operation management class I started to think about what makes Starbucks a wonderful and a successful company. I am a huge fan of coffee and the “café experience,” and I must say that the quality of coffee and the whole process is not particularly exceptional at Starbucks. So what is their secret? How can a small coffee shop, started in the 70’s in Seattle, Washington, become prosperous?

Operating a large chain is unquestionably a very challenging process. Starbucks took the risk of expanding their brand and products not only throughout United States, but also worldwide. I believe that we can definitely say that the company has succeeded in regards to operations in a global environment, and furthermore, redefined the culture of drinking coffee. In order to achieve these goals the organization had to apply KSFs (Key Success Factors). These activities helped the organization to outperform and give them a competitive advantage.

Companies who try to establish their operations outside of United States have to deal with many challenges from the aspect of operational management. They must be able to analyze in detail the environment in which the company would like to establish its operations. They have to identify the culture, their needs, traditions, and customs. Based on all of these important factors they are then able to identify SWOT analysis on themselves. Starbucks had a clear purpose and strategy as stated on their mission statement, “Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”

Starbucks chain stores captured nearly the whole world and their brand is recognized by many people. However, there are a few places in which Starbucks didn’t quite succeed. One of them is Australia. The company was forced to close 61 of its 85 shops across the country. What went wrong? How did they fail at accomplishing their mission?

Mr. Urquhart, a retail consultant, says that, “With more than 235 ethnicities speaking more than 270 languages and dialects, companies wanting to get ahead in Australia should be aware that they are not dealing with one monolithic block”. In my opinion the management was too occupied with expansion, and focusing only on immediate growth instead of studying the local preference and acknowledging that not everyone is this same. Also, product standardization doesn’t always yield great results because some communities prefer customization and unique service. Lastly, Australians have a great expectation in terms of product originality, meaning the taste, texture, and history of coffee has to match their expectations.

Are you a fan of Starbucks? Do you think they overstretched their operations? What additional strategy could have been implemented to succeed down under?



7 thoughts on “Spilled the beans

  1. As a fellow coffee lover, I really enjoyed the article you chose and your response to it. I am definitely a frequent customer at Starbucks, but its definitely the convenience rather than the quality that brings me there time and time again. I agree with you that their product is mediocre and many of the other small cafes have a superior product. However, every time I go to Starbucks I know exactly what I’m going to get and the barista is usually halfway done making my drink before I can pull out my wallet; getting me in and out quickly. I think it is this experience and the seemingly infinite customizable drink options that Starbucks can attribute its extreme success to. I personally don’t think that Starbucks overstretched their operations; I think they would have been crazy not to give Starbucks in Australia a chance considering their past success in expansion. Just like McDonald’s does with their menu items in Asia, Starbucks should have tailored their menu to Australian’s preferences. I will definitely continue to get my morning cup of joe from Starbucks, but I do understand the Australian’s distaste for their product and the expansion flop that it caused.

  2. I myself am a frequent visitor to Starbucks. Similarly to the first comment, I visit out of convenience rather than the experience. If I want that cafe experience I usually visit local shops rather than Starbucks.

    I do think that they overstretched their operations however, I read an article once about Starbucks that basically said they are not worried about one store closing because that same week they will open 4 more. So I do not think they are that affected by this turnout in Australia. I think they may be able to bounce back from this by lessening the franchise quality of Starbucks and making them more individualized. Although, I don’t see that happening any time soon.

  3. Convenience vs quality, I have to agree with the last two comments about how convenient it is to go to Starbucks. Is it the best quality? I don’t know, Have I had better coffee somewhere else? yes. I was in Australia last month, and let me tell you, coffee is what people love there. There are small coffee shops in every corner of Sydney, sometimes blocks with multiple coffee shops and express coffee shops. When talking to locals they would ask us if we had gone to certain coffee shops. They love their little coffee shops and when a big chain like Starbucks comes along, they might not be so welcoming to it since they support local businesses a lot more than they do with big chain companies. It is difficult to open Starbucks stores in countries in where cultures are used to local and refuse to go to chain businesses so it will be hard for them to keep open in places where the locals will simply not buy from them. I don’t think that by closing down Starbucks in Australia will hurt them in any way since they are opening so many more somewhere else. One thing I can say by traveling and trying Starbucks in different countries is that Starbucks outside the United States tastes a lot better but it is a lot more expensive and they do a good job by implementing new drinks to different kinds of cultures.

  4. Expanding overseas is a challenging endeavor for any company. When it comes to cultural things such as food and beverages, this can become an even bigger challenge. I know from personal traveling experience that franchises have had to expand their menu and offerings in order to appease the local populace. Starbucks may have to change their approach so that they can attract customers. However, I also feel that it will be very hard for a company to make their name in a different environment due to cultural differences, and very few are able to pull it off effectively.

  5. Interesting post! I personally am not an avid coffee drinker, but I certainly have those moments when I can use a coffee. As an infrequent coffee drinker I’m not able to distinguish between the quality of Starbucks’ coffee and other higher grades of coffee, but in respect to the expansion I do believe they were aggressive in opening their shops in culture that is very particular about their coffee. The only thing I could think that could’ve saved their shops, was if they offered exceptional tasting coffee, that was far superior to anything around, because the timeliness and convenience of their service was certainly there.

  6. One would think that a company like Starbucks would do the homework before expanding internationally. Closing 61 out of 85 shops is a big loss but I don’t think that has affected Starbucks a lot but it is still a loss. Starbucks could have avoided this loss by doing more research in the Australian market, knowing that is such a diverse country. You can not expect a product that is successful in America to be successful in other parts of the world too. You should take in consideration who your customers are and their tastes. I grew up in Europe and if you take the same product you offer in US without making any changes to it, your chances of being successful are low. For example McDonalds in Europe is more expensive than here in US, but the quality is way better than here and the price is higher too. McDonalds is successful in Europe because they know that people are willing to pay more for a better quality.

  7. It is interesting to me that Starbucks would not have foreseen those issues occurring. Whenever a brand expands oversees massive amounts of economic research as well as sampling is put into effect. I do not think the diversity is as big of a deal commenters on this thread are talking about. Is not America equally as diverse if not more than Australia? Starbucks seems to do just fine here despite the different ethnicities. I think it is the actual culture of Australia, perhaps quality over convenience is valued. Maybe the lifestyle is different and people desire tea and a less rushed atmosphere than Starbucks often times will offer. I love coffee and drink it everyday. I can certainly notice a quality difference in Starbucks and Dunkin Donuts versus Intelligentsia. In my opinion it is the actual atmosphere and operation style of Starbucks which caused it to fail in Australia.

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