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Taste of defeat for the mugs from Starbucks
Posted on 2008-Aug-6 at 12:45 - Post Comment
Mugs A year ago I asked students in a strategy class to think about whether Starbucks was going to be as successful in Australia as it had been in the United States. In the wake of Tuesday's sudden announcement that it is to close 61 of its 84 Australian stores and axe almost 700 jobs, I have been reflecting on what those students might have taken away from that class.Starbucks has been a great teaching case. It is an obvious example of a successful company, and unlike in the cases of a steel mill or a car plant, most students have a good understanding of these types of businesses, either as customers or as casual employees. I tend to use Starbucks as an example of a business that has been successful by adjusting its products to local market conditions.Starting as a small coffee shop in Seattle, Starbucks became a US-wide phenomenon by successfully "Americanising" the European coffee tradition. Starbucks prided itself on having created a "third" place in people's lives. Somewhere between home and work they could relax, and with its mega-mucho lattes and sweet syrups, they made "real" coffee palatable to people who had grown up on filter coffee and soft drinks.When they look at Starbucks, students tend to marvel at how rapidly the business expanded. Good students also quickly notice the limitations to the business model. Starbucks has always had a limited product line and has few opportunities to achieve extra revenue for existing customers. Once you have sold someone some coffee beans, a CD and a two-litre coffee, there isn't much more you can do for them and it is hard to shoo them away without ruining the image of the "third place".
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