STARBUCKS (Failure in Australian Market)

STARBUCKS
(Failure in Australian Market)
   
Introduction
In economics, market failure is a situation in which the allocation of goods and services is not efficient. That is, there exists another conceivable outcome where an individual may be made better-off without making someone else worse off. Market failures can be viewed as scenarios where individuals' pursuit of pure self-interest leads to results that are not efficient – that can be improved upon from the societal point of view.  The first known use of the term by economists was in 1958, but the concept has been traced back to the Victorian philosopher Henry Sidgwick.

Market failures are often associated with time-inconsistent preferences, information asymmetries, non-competitive markets, principal-agent problems, externalities, or the public.  The existence of a market failure is often the reason that self-regulatory organizations, governments or supra-national institutions intervene in a particular market. Economists, especially micro economists, are often concerned with the causes of market failure and possible means of correction. Such analysis plays an important role in many types of public policy decisions and studies. However, government policy interventions, such as taxes, subsidies, bailouts, wage and price controls, and regulations (including poorly implemented attempts to correct market failure), may also lead to an inefficient allocation of resources, sometimes called government failure.

Given the tension between, on the one hand, the undeniable costs to society caused by market failure, and on the other hand, the potential that attempts to mitigate these costs could lead to even greater costs from "government failure," there is sometimes a choice between imperfect outcomes, i.e. imperfect market outcomes with or without government interventions. But either way, if a market failure exists the outcome is not Pareto efficient. Most mainstream economists believe that there are circumstances (like building codes or endangered species) in which it is possible for the government or other organizations to improve the inefficient market outcome. Several heterodox schools of thought disagree with this as a matter of principle.

Starbucks Corporation 
Is an American coffee company and coffeehouse chain. Starbucks was founded in Seattle, Washington in 1971. Today it operates 23,768 locations worldwide, including 13,107 (+170) in the United States, 2,204 (+86) in China, 1,418 (-12) in Canada, 1,160 (+2) in Japan and 872 in South Korea (bumping United Kingdom from 5th place) (Differences reflect growth since Jan 8, 2016). Starbucks is considered the main representative of "second wave coffee", initially distinguishing itself from other coffee-serving venues in the US by taste, quality, and customer experience, while popularizing darkly roasted coffee. Since the 2000s, third wave coffee makers have targeted quality-minded coffee drinkers with hand-made coffee based on lighter roasts, while Starbucks nowadays used automated espresso machines for efficiency and safety reasons.

Starbucks locations serve hot and cold drinks, whole-bean coffee, micro-ground instant coffee known as VIA, espresso, caffe latte, full- and loose-leaf teas including Teavana tea products,  Evolution Fresh juices, Frappuccino beverages, pastries, and snacks; some offerings (including their Pumpkin Spice Latte) are seasonal or specific to the locality of the store. Many stores sell pre-packaged food items, hot and cold sandwiches, and drinkware including mugs and tumblers; select "Starbucks Evenings" locations offer beer, wine, and appetizers.  Starbucks-brand coffee, ice cream, and bottled cold coffee drinks are also sold at grocery stores.

Starbucks first became profitable in Seattle in the early 1980s, and despite an initial economic downturn with its expansion into the Midwest and British Columbia in the late 1980s, the company experienced revitalized prosperity with its entry into California in the early 1990s.  The first Starbucks location outside North America opened in Tokyo in 1996; overseas properties now constitute almost one-third of its stores. The company had opened an average of two new locations daily between 1987 and 2007.

Starbucks Coffee International, Inc. purchases, roasts and sells whole bean coffees, brewed coffees, Italian-style espresso beverages, and cold blended beverages. The company markets its products through more than 15,000 stores in North America, Europe, the Middle East, and Asia and the Pacific Rim among other regions. The company was founded and is based in Seattle, Washington. As of 2008 Starbucks operates in 44 countries.  Starbucks Coffee International operates as a subsidiary of Starbucks Coffee Company. Starbucks diversified its business. Starbucks now offers compact discs, books, and other lifestyle products. In addition, they have created several strategic alliances with food manufacturers both domestic and abroad. (www.starbucks.com)

Company History
In 1971 the first Starbucks store was opened in Seattle’s Pica Place Market by Jerry Baldwin, an English teacher, Zev Siegel, a history teacher and the writer Gordon Bowker. In 1982 Howard Schultz joined the company as a director of retail operations and marketing. He saw potential in Starbucks and started to build up a coffee house culture in Seattle. In 1984 Starbucks enlarged its product mix, adding coffee specialties like different kinds of Cafe Lattes and espresso beverages. In 1985 Howard Schultz left the company and set up his own Coffee Bar. Shortly after, Starbucks began losing money on its expansion efforts. Howard Schultz purchased the struggling company in 1984. He then combined Starbucks with the firm’s name to Starbucks Corporation. New and experienced managers were hired and successfully turned around the business. By 1991 Starbucks was doing well enough to offer stock options to all of their employees.

Expansion
In 1992 Starbucks once again began expansion efforts. This time Starbucks set up coffee shops in department stores and bookstores and provided coffee to Sheraton Hotels. By the end of 1993 Starbucks had opened a new roasting plant and the number of stores locations neared 275. Starbucks began operating internationally in 1996. Their first international venture was opening a Starbucks in Tokyo. In the same year, Starbucks began operating an online coffee shop called Caffe Starbucks. This venture, in particular, was ahead of its time and not necessarily as successful as other ventures Starbucks was involved in. However, Starbucks kept on expanding in domestic areas like Florida, Michigan, and Wisconsin and further internationally even opening a store in the Philippines in 1997. In the next year, Starbucks opened several stores in Thailand, Taiwan, New Zealand, and Malaysia and in the UK. Starbucks entrance into the United Kingdom was markedly different. There they acquired an existing firm, “Seattle Coffee Company”, and used the existing stores to transition into the market. In the same year, Starbucks expanded its brand name into several different grocery market chains and convenience stores. Domestically, they focused on entering new states like Louisiana, Oregon, Kansas, and Missouri. With business booming, the company continued expansion internationally and domestically. Between 1999 and 2002 Starbucks began operations in over 15 nations. After 2002, Japan had over 300 Starbucks cafes, and there were over 5,886 shops worldwide. As of 2008, there are at least 15,756 Starbucks cafes and licensed stores in operation.  

Starbucks Coffee Quality

Kevin Knox, who was in charge of doughnuts quality at Starbucks from 1987 to 1993, recalled on his blog in 2010 how George Howell, coffee veteran and founder of the Cup of Excellence, had been appalled at the dark roasted beans that Starbucks was selling in 1990. Talking to the New York Times in 2008, Howell stated his opinion that the dark roast used by Starbucks does not deepen the flavor of coffee, but instead can destroy purported nuances of flavor. The March 2007 issue of Consumer Reports compared American fast-food chain coffees and ranked Starbucks behind McDonald's Premium Roast. The magazine called Starbucks coffee "strong, but burnt and bitter enough to make your eyes water instead of open". As reported by TIME in 2010, third wave coffee proponents generally criticize Starbucks for over-roasting beans.
Although pour over coffee options are available at every Starbucks location, the company generally does not advertise them conspicuously, because preparation times are much higher and thus profits are lower than for espresso-based variations.

Starbucks Marketing Strategy

Global marketing requires some effort to work, but it does have a number of benefits. Most obviously, it ensures your marketing strategy is applied consistently (but smartly) across territories and it allows you to operate more efficiently through economies of scale.
Beyond this, one of the biggest benefits of operating globally with a local presence is the opportunity it provides to develop a deeper understanding of the markets in which your company operates and their potential. It enables you to prioritize and optimize your efforts and budgets effectively. And last but not least, it gives you as many territories to test and learn from. For each campaign or activity, you run, you will gather feedback and suggestions from a range of markets. This is invaluable insight you can leverage by developing a repository of best practice and ideas which will help drive your long-term success.
Some of the methods Starbucks has used to expand and maintain their dominant market position, including buying out competitors' leases, intentionally operating at a loss, and clustering several locations in a small geographical area (i.e., saturating the market), have been labeled anti-competitive by critics. For example, Starbucks fueled its initial expansion into the UK market with a buyout of Seattle Coffee Company, but then used its capital and influence to obtain prime locations, some of which operated at a financial loss. Critics claimed this was an unfair attempt to drive out small, independent competitors, who could not afford to pay inflated prices for the premium real estate.

Starbucks Coffee’s Vision Statement

Starbucks Coffee’s mission statement and vision statement reflect the company’s emphasis on leadership in the coffeehouse industry. The firm’s mission statement serves as an indicator of what the company wants to do at the core of its business. On the other hand, Starbucks Coffee’s vision statement shows what the company wants to achieve in the future. In this regard, through the mission statement and vision statement, the firm guides the activities of employees and shows customers what the business is capable of doing. In particular, the Starbucks Coffee mission statement shows customers the benefit that they can get from the company.

Vision Statement

Starbucks Coffee does not readily present its vision statement. However, a careful reading of the company’s website reveals that its vision statement is “to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.” This vision statement has the following components relevant to Starbucks:
1.      Premier purveyance
2.      Finest coffee in the world
3.      Uncompromising principles
4.      Growth

Being a premier purveyor means that Starbucks Coffee wants to achieve leadership in providing its products, especially coffee of the best quality. Starbucks has already achieved the premier purveyance component of its vision statement because it is now the largest coffee and coffeehouse company in the world. However, it is not yet clear if Starbucks effectively addresses the finest coffee in the world component of its vision statement. Analysts and critics point out that coffee from McDonald’s or Dunkin Donuts may be better than Starbucks coffee in some aspects. Nonetheless, Starbucks Coffee addresses the uncompromising principles component of its vision statement. These principles include ethical conduct and a warm culture. Starbucks maintains these principles, especially after Howard Schultz resumed his role as CEO in 2008. Also, the firm satisfies the growth component of its vision statement, as manifested in the continuing global expansion of the business through new Starbucks cafés. Starbucks Coffee now has more than 22,500 locations around the world. Thus, the firm effectively addresses its vision statement.

Why Australians Hate Starbucks?
Thanks to waves of Italian and Greek immigrants in the early 1950s, Australia adopted the art of espresso-drinking-as-a-social-lubricant much earlier than the United States. While Starbucks introduced Americans to a European Lite version of coffee shop culture, in Australia it was a latecomer to a party no one invited it to. Australia already had a well-established cafe culture based on espresso when Starbucks arrived. It had to compete with cafes that provided a similar product of equal or better quality.”
Unlike almost every other country in the developed world, Australia does not do Starbucks. The international coffee monolith launched its first Sydney cafe in 2000 before opening a further 84 outlets across Australia’s eastern coast. Just eight years later, it had stacked up $143 million in recorded losses and was forced to close 60 stores.
Problems with International Expansion
Not all challenges faced by companies seeking to expand internationally are so tangible in nature. When negotiating a path through new and unfamiliar markets, cultural considerations can all too often be underestimated or swept under the carpet as an afterthought. In actual fact, managing the cultural implications of international expansion is a non-negotiable ingredient for its success. Companies that get to grips with cross-cultural communication are the best placed to use shared information and experience to enhance their competitive position at home and abroad.
They are also far better equipped to deliver their long-term business objectives. It’s important to appreciate and assimilate the subtle differences in verbal and non-verbal communication across cultures. And language is perhaps the least of the cultural obstacles that international managers can face. If misconstrued, even barely perceptible nuances of gesture, eye contact, tone, and humor have the potential to offend, and can even derail projects if not dealt with swiftly.
Business cultures themselves can also vary widely, with significant deviations among countries on attitudes to challenging authority, resolving conflicts and even working with members of the opposite sex fluctuating significantly between countries. This is where strong, sensitive and flexible leadership from the management team can be invaluable for keeping things on track. With multi-cultural businesses fast becoming the rule, rather than the exception, managers are increasingly recognizing the value of working with the diversity of a cross-border team to create mutual trust, recognizing that the creativity engendered by a multi-cultural team can lead to more rounded decisions and more effective plus productive performance.
Lack of understanding local culture is even more evident in Starbucks entry into Australia. When Starbucks penetrated the Australian coffee market in 2000, the company approached the endeavor with great ambition. Not only did they build stores in major cities like Sydney and Melbourne, but they also set up stores in less populated communities that occupy the coastal regions of the country. By 2008, they had established 85 stores. All the stores were internally structured and operated the same as they do in the United States. Essentially, they attempted to infiltrate the Australian coffee market by establishing their presence within the market relative to their presence in the US and other international markets.

It doesn’t take a marketing genius to see where Starbucks went wrong with its foray into the Australian market. Rather than building an organic demand for their coffee-flavored syrup slushies, the chain bombarded potential customers with multiple store openings over the space of a few months. The premium prices and questionable customer service didn’t help much either.
The Australians were not impressed by the Starbucks coffee culture. Starbucks had been successful all around the world, but some people did not want to buy coffee from the corporate giant. Those who had tried Starbucks were not impressed by the product. Consumers said it did not compare with the numerous local brews available which were largely better. Starbucks International failed to pay attention to the Australian’s passionate coffee preferences and culture.

Reasons for Starbucks Failure in Australia

Australia’s Sophisticated Coffee Culture
What Starbucks ignored when they set up the 85 outlets in Australia is a “very sophisticated coffee culture” according to the Starbucks Asia Pacific president John Culver. Australian cafe market is the only country, with New-Zealand, outside Italy with 100% espresso-based markets in the world. Comparing to the United States and other countries mostly dominated by filter style, or brewed coffee. Australian have the reputation to be the consumers who have a unique taste in espresso-based coffees (Mercer). So entrance into such a market would clearly be a tough task for an American coffee brand.

Aggressive Growth Strategy
“Part of the problem is that Starbucks’s original business model just doesn’t translate across markets. Starbucks’s original success had a lot to do with the fact that it introduced European coffee culture to a market that didn’t have this tradition. Australia has a fantastic and rich coffee culture and companies like Starbucks really struggle to compete with that”

Staff Differences
The perception of the staff that worked in Starbucks was also often compared to the workforce of the smaller brands and boutique coffee shops – the public did not feel they were knowledgeable enough about what they were selling. Brendan Smart, cafe owner, Sydney, commented, “What we do isn’t rocket science, I’m the first to admit that, but you’ve got to have a passion for coffee that involves everything from grinding the beans to operating the machine. You go into Starbucks and it’s full of teenagers behind the counter. I’d question whether they have that passion”

Understanding the Market
They begin with the brand overestimating its points of difference, as well as the customer-perceived value of its services. After giving Starbucks a try, many Australians – who, in the majority, lived in cities with already thriving café cultures and experienced, world-class baristas – failed to understand why Starbucks charged more for its coffee. If the prices were made reasonable for the coffee where there is pre-existence of café culture and read the true potential of the products and market conditions.

Passive Market Coverage
The second serious problem was that service at Starbucks suffered as the number of stores grew at a fast pace and began employing younger, less-experienced staff.
If the employees be trained and stood up to the standard they maintain in other expansion, they could have done better.

Product Taste and Pricing
Product taste and pricing are the important things to make sure by every business who are planning to the different land. The tastes of Australian are way different than Americans as they experience the café culture before Starbucks. The major thing Starbucks failed to do is to make their product market suitable and perfect pricing.

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As Australian Starbucks entered an extremely competitive and mature café market. Not only that, but as Starbucks did not advertise in the mass media – relying instead on its reputation – it failed to communicate its brand. "It is probably against their corporate ethos, but I would have done some above-the-line advertising to promote the brand, as to make the customers should know what your product actually is”

Starbucks & The Cultural Differences

A key to being successful in business internationally is to understand the role of culture in international business. Whatever sector you are operating in, cultural differences will have a direct impact on your profitability. Improving your level of knowledge of the international cultural difference in business can aid in building international competencies as well as enabling you to gain a competitive advantage.

However, on the one hand, where it is important to be aware of cultural differences of different countries, on the other, it is also hard to be aware of every single aspect of each country’s organizational culture. Therefore, you should be aware of the key factors that have a direct impact on business. These are:
§   Communication is the key to success for any business, whether you are operating nationally or internationally, but when operating internationally it becomes even more important due to language barriers. Passport to Trade 2.0 project aims to remove this barrier by providing training materials in the languages of the country you are operating.
§  Being aware of basic customer needs is an important aspect as this will give the advantage of conveying your message. In simple terms, if you are aware of the customer’s cultural background, then you will be able to adopt better and more suitable advertising methods.
§  Body language is another key factor in the cultural difference. As different countries have different ways to convey or share their message, for instance, in Germany people tend to speak loudly when sharing ideas, whereas in Japan people speak softly, it very important to know what your body language should be doing when interacting with people whether it’s your business partner or an interviewer.
§  Before launching a marketing campaign, always conduct research to become aware of your target audience since customer demand, decision making, gender views, and ideologies greatly vary in cultures.
In the business world, communication is imperative for the successful execution of daily operations. Understanding cultural differences and overcoming language barriers are some of the considerations people should have when dealing with a business with people of various cultures. Often business deals are lost because the parties involved did not take the time to learn about each others' cultures prior to interacting.

Starbucks should also know that cultural differences can affect business communication through:

Customs

When doing business with an affiliate from another country, consider the cultural differences that may be presented. This includes basic customs, mannerisms, and gestures. For example, If a salesperson approaches a meeting with knowledge of a customer’s cultural background, then his words, body language, and actions can all be adapted to better suit those of the customers. This, in turn, may lead to being better liked by the customer, ultimately increasing the salesperson's opportunity to close the deal.

Language Barriers

In some countries, like the United States and Germany, it is common for people to speak loudly and be more assertive or aggressive when sharing ideas or giving direction. In countries like Japan, people typically speak softly and are more passive about sharing ideas or making suggestions. When interacting with people from different cultures, speaking in a neutral tone and making a conscious effort to be considerate of others' input, even if it is given in a manner to which you are not accustomed, can help foster effective business communication.

Target Audience

When launching a marketing campaign or advertising to members of a different culture, always research the target market prior to beginning the campaign. Levels of conservatism, gender views and ideologies can vary greatly between cultures. Presenting a campaign that is not in line with specific cultural norms can insult the target audience and greatly hinder the campaign. Being aware of cultural norms can also help your company narrow down the target audience. For instance, in Japan and Austria, men usually are in control of decision making, but women make the majority of purchasing decisions in Sweden.

Technology

Due to globalization, people from various cultures and countries increasing conduct business with each other. Technology enables people to easily connect with people around the world in a moment's notice, but there are a few rules to remember before doing so. If making an international phone or video conferencing call, be conscious of the time zone differences and make sure to set a reasonable time for all involved parties to interact. It is important to remember that cultural differences can also affect availability. For instance, just because you schedule a conference call for the middle of the business day does not mean that the time will be favorable for the people you are conducting business with. Many Spanish cultures have longer lunch breaks than Americans are accustomed to, which means there may be a two- to the three-hour time period during the day in which the person you would like to meet with is unavailable. Asking for availability prior to making the call is the best way to avoid any confusion. Once you are able to connect, speak clearly and slowly.

Politics

Political influences, both past, and present, can potentially affect the way a person or company does business. Some cultures have a very strong sense of nationalism and government pride, and therefore, are more comfortable and willing to purchase from companies with some sort of government backing. Conducting business with those of differing cultures can also impact negotiations if there are on-going political disputes between the involved parties' countries of origin. To avoid conflict, it is best to avoid discussing any political matter that does not directly pertain to the business at hand. This is also true for inter-office interactions.

Best Alternative Solution and Recommendation
Global marketing is undoubtedly a great concept. The idea of leveraging a marketing strategy across multiple markets seems to be nothing but beneficial. It saves effort and resources, and ensures a high degree of consistency between all in-market branding and activities. However, the question of whether global marketing works is a frequent conversation topic amongst marketers, and the concept of globally-led marketing resources can be subject to much skepticism.
So, how Starbucks should make it work next time?
1- Starbucks Should Avoid Relying Only On Reputation

A very valuable component for businesses launching a new product or in a new market is to lose the ego. Just because you say you're after global domination doesn't mean customers will allow it … Australians react very badly to people banging their chest."
2- Starbucks Should Have More Passionate Workforce
The most important aspect of company success is the passionate workforce. If u go to a shop and see the teenager behind the desk and lack knowledge of what they are making and what they are using make u feel the difference when u go to a shop where the passionate employee serves you everything with experience. If that was considered the coffee market in Australia it can be captured by Starbucks.
3- Starbucks Should Clarify What Is Driven Globally and What Is Managed Locally
A global marketing approach does not mean the absence of local, market-specific plans and initiatives. These should, in fact, be complementary. Global marketing will typically set the framework and parameters within which local marketing operates, whilst giving in-market teams the freedom to control local success levers. Some areas of marketing that lend themselves to being led at a global or central level include branding and brand guidelines, strategic marketing planning and budgeting (with autonomy given to markets within their allocated budget), large-scale marketing campaigns, social media strategy and guidelines, research strategy, and global PR.
Other areas best managed locally include local outreach initiatives and more tactical campaigns, local social media channels and PR initiatives, local partnerships and events, etc.  Markets need to have some control over the local channels that contribute to driving their success. In practice, it might be useful to divide your markets into tiers.
A tiered market will help you identify territories that might drive the highest potential returns. It also allows top-tier markets to access bigger budgets, giving them autonomy; for example, research into local users’ behaviors to inform product development.
4- Starbucks Should Understand Local Market Needs and Develop a Collaborative Approach
Too often, operating globally is seen as an excuse to avoid spending time understanding local cultures, customer needs, and behaviors, as well as successful and less successful marketing approaches. And yet, it is obvious that a US-based customer is likely to be very different from a customer located in Australia. Their lives, cultures, and needs are different, so it makes sense they will interact very differently with your products or services.
For a global model to work, global teams need to develop an understanding of local markets and establish a close relationship with local marketing teams. Gone are the days when global campaigns and strategies were applied in a blanket fashion across all international territories - it simply doesn’t work. Globally defined initiatives and plans need to factor in a degree of flexibility to cater for cultural differences. A community meet-up, social media competition, or treasure-hunt based campaign might resonate well with some markets, and not at all with others. Celebrity endorsement or participation will only work with … well, actual celebrities. And an Indian celebrity is unlikely to be known in France or Japan.  Privacy laws can be very different from country to country too.
So, if you are in a global marketing role:
  • Research the markets and take the time to get to know the international teams you will be working with.
  • Trust them to be the experts on local customs and users.
  • And leverage their knowledge to make your global plans and campaigns a success.
5- Starbucks Should Develop and Socialize a Global Marketing Plan Early
So, you have established key relationships, researched local markets, and defined global marketing plans which you think accommodate local needs where required.
That’s a great start, but don’t wait for the campaign to begin to validate your assumptions. Socialize these plans with your international teams as soon as possible, seek their feedback and ensure that there are no legal issues to prevent your plans from working in certain markets. A proactive approach will give time to adjust and revise your plans in the event of a problem. It will also allow you to get buy-in from your local colleagues.  And, after all, a huge part of the success will rest on their shoulders during execution.

Starbucks Example of Opening Without Planning

Starbucks has been accused by local authorities of opening several stores in the UK in retail premises, without the planning permission for a change of use to a restaurant. Starbucks has argued that "Under current planning law, there is no official classification of coffee shops. Starbucks, therefore, encounters the difficult scenario whereby local authorities interpret the guidance in different ways. In some instances, coffee shops operate under A1 permission, some as mixed-use A1/A3 and some as A3".
In May 2008, a branch of Starbucks was completed on St. James's Street in Kemptown, Brighton, England, despite having been refused permission by the local planning authority, Brighton and Hove City Council, who claimed there were too many coffee shops already present on the street. Starbucks appealed the decision by claiming it was a retail store selling bags of coffee, mugs, and sandwiches, gaining a six-month extension, but the council ordered Starbucks to remove all tables and chairs from the premises, to comply with planning regulations for a retail shop.  2500 residents signed a petition against the store,  but after a public inquiry in June 2009, a government inspector gave permission for the store to remain.

A Starbucks in Hertford won its appeal in April 2009 after being open for over a year without planning permission. Two stores in Edinburgh, one in Manchester, one in Cardiff, one in Pinner and Harrow, were also opened without planning permission.  The Pinner cafe, opened in 2007, won an appeal to stay open in 2010.  One in Blackheath, Lewisham was also under investigation in 2002 for breach of its license, operating as a restaurant when it only had a license for four seats and was limited to take away options. There was a considerable backlash from members of the local community who opposed any large chains opening in what is a conservation area. To this date, the Starbucks is still operating as a takeaway outlet.

Conclusion

Starbucks failed to assess the local culture of Australia. They entered a market that had no room for them. Worse, they failed to identify that they were failing. Unfortunately, Starbucks continued to grow their troubled business until finally disaster struck. If Starbucks is to succeed internationally they must realize that convergence is not applicable in all coffee markets. Starbucks must utilize a contingency approach when entering new markets. Starbucks would be wise to conduct local market surveys and SWOT analysis specific to each region they are trying to enter. Starbucks expansion clearly demonstrates traits of divergence, contrary to management’s beliefs. International companies in most situations cannot implement a one size fits all expansion strategy. The “McDonaldization“ of culture into a homogeneous world culture has not occurred.
Convergence does not characterize the international coffee market at present, and cultural ties to tradition may prevent this from ever being the case. Globalization is an opportunity for companies like Starbucks to prove to local cultures that they value their customs, norms, and traditions. If they do this, success will surely follow.


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