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Australasian Marketing Journal 18 (2010) 41–47

Contents lists available at ScienceDirect

Australasian Marketing Journal
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How the local competition defeated a global brand: The case of Starbucks Paul G. Patterson *, Jane Scott, Mark D. Uncles
School of Marketing, Australian School of Business, University of NSW, Sydney, NSW 2052, Australia

a r t i c l e

i n f o

a b s t r a c t

Americanised the coffee tradition.

Keywords: Service brands Service quality Global branding International business Starbucks Coffee

The astounding growth and expansion of Starbucks is outlined, both on a global scale and within Australia. The focus then shifts to the abrupt closure of three-quarters of the Australian stores in mid 2008. Several reasons for these closures are described and examined, including that: Starbucks overestimated their points of differentiation and the perceived value of their supplementary services; their service standards declined; they ignored some golden rules of international marketing; they expanded too quickly and forced themselves upon an unwilling public; they entered late into a highly competitive market; they failed to communicate the brand; and their business model was unsustainable. Key lessons that may go beyond the specifics of the Starbucks case are the importance of: undertaking market research and taking note of it; thinking globally but acting locally; establishing a differential advantage and then striving to sustain it; not losing sight of what makes a brand successful in the first place; and the necessity of having a sustainable business model. Ó 2009 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved.

1. Introduction ‘‘Shunned Starbucks in Aussie exit” (BBC News, 4 August 2008)

then shifts focus to describe the extent of the store closures in Australia, before offering several reasons for the failure and lessons that others might learn from the case.

2. Background ‘‘Weak coffee and large debt stir Starbucks’ troubles in Australia” (The Australian, 19 August 2008) ‘‘Memo Starbucks: next time try selling ice to Eskimos” (The Age, 3 August 2008) ‘‘Taste of defeat for the mugs from Starbucks” (Sydney Morning Herald, 31 July 2008) ‘‘Coffee culture grinds Starbucks’ Australian operation” (Yahoo News, 3 August 2008) When the announcement was made in mid 2008 that Starbucks would be closing nearly three-quarters of its 84 Australian stores there was mixed reaction. Some people were shocked, others were triumphant. Journalists used every pun in the book to create a sensational headline, and it seemed everyone had a theory as to what went wrong. This case outlines the astounding growth and expansion of the Starbucks brand worldwide, including to Australia. It * Corresponding author. Tel.: +61 2 9385 1105. E-mail addresses: (P.G. Patterson), janescott@primus. (J. Scott), (M.D. Uncles).

Founded in 1971, Starbucks’ first store was in Seattle’s Pike Place Market. By the time it went public in 1992, it had 140 stores and was expanding at a breakneck pace, with a growing store count of an extra 40–60% a year. Whilst former CEO Jim Donald claimed that ‘‘we don’t want to take over the world”, during the 1990s and early 2000s, Starbucks were opening on average at least one store a day (Palmer, 2008). In 2008 it was claimed to be opening seven stores a day worldwide. Not surprisingly, Starbucks is now the largest coffee chain operator in the world, with more than 15,000 stores in 44 countries, and in 2007, accounted for 39% of the world’s total specialist coffee house sales (Euromonitor, 2008a). In North America alone, it serves 50 million people a week, and is now an indelible part of the urban landscape. But just how did Starbucks become such a phenomenon? Firstly, it successfully Americanised the European coffee tradition – something no other...
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