Australian expansion proves a move too far for Starbucks

Starbucks is a great example to use with students when it comes to illustrating the growth strategies of multinationals. However, Starbucks has just announced that it is closing the majority of its stores in Australia…

The photo above is one of the Starbucks locations in Melbourne. Soon it will be one of the few places that Aussie Starbucks fans can get a fix from their favourite coffee shop.

Starbucks Corp, the world’s largest coffee-shop chain, has announced that it will close three quarters of its stores in Australia within the next five days, backing away from a market it entered eight years ago. That means that 61 of Starbucks’ 85 stores in Australia will soon be empty.

Bloomberg has some interesting background information on the reasons why Starbucks has failed to make its investment in Australia generate the right returns. Essentially it is a cultural thing. Well before Starbucks arrived, Australia already had an established coffee shop culture, with customers focused on quality rather than price. Whilst Starbucks initially took market share from the established operators, ultimately the Starbucks product range couldnt compete successfully.

An interesting lesson for other global brands that believe their products will be accepted and successful wherever they choose to launch them…