The Aim of this report is to discuss the business issues related with one of the most important international organization namely, Starbucks which is famous for its offering of high quality coffee and other snacks, has been facing slowdown of business and planning to close the outlets or stores in the highly dense area of mainly the market of Australia (Stories.starbucks.com, 2019). However, this company has been suffering from sales slowdown associated with which this research will be analysis effective factors (Cnbc.com., 2019).
Starbucks Corporation is USA based coffee company as well as coffeehouse chain. It was founded in Seattle, Washington in 1971. Recently the company has more than 28 thousand outlets in all over the world. This company is considered to be the main representative of the second wave coffee that initially distinguished itself from the other coffee serving venues in America by their quality, test and the customer experience mainly focusing on continuously growing popularization of directly roasted coffee. The first outlet of Starbucks was opened in Seattle, Washington by the three partners named Jerry Baldwin, Zev Siegl and Gordon Bowker. These three friends were inspired for selling high quality coffee beans along with the equipment by the coffee roasting entrepreneurs namely Alfred Peet who taught them the style of roasting beans. The first store of this company was located in Seattle but later moved to Pike Place. During the first year of operation the three founders only purchased green coffee beans from teeth and then started to buy directly from the growers. The company had 24.72 billion USD as revenue in 2018 which is constantly changing positively. The company had expanded to the Australian market in the year 2000 and had demonstrated a huge amount of growth in the country in the initial years. However, the growth was stunted after the year 2008 (Stories.strabucks.com, 2019).
Despite the fact that the coffee market in Australia has marked effective growth and is getting support of the vibrant coffee culture of Australia, competitive pressure has been increased. According to the data published by Ibisworld.com.au (2019), the coffee and café industry is expecting growth of 2.2% over the five years of 2013 to 2019 which is worth of $9.8 billion. However, in spite of this progress, no company has able to stand properly in this market. The main problem of Starbucks Limited is the slowdown of its business in every market it has captured till date. The circumstances that has led for this research is the news that the company has been facing fall in stocks and shares for last one year. In the first seven years in Australia, Starbucks had accumulated $105 million in losses. This has forced the company to close 61 locations in the year 2008 (Cnbc.com. 2019).
The issue of slow down sales growth and worsening performance in the home country has affected the sales of the company in the international level. The symptoms of this issue has been seen firstly in the reduced visit of the customers in the locations. Rather they are spending time at their home brewing their own coffee (Stories.starbucks.com., 2019). Secondly, the company is being yielded by huge competition in Australia (Stories.starbucks.com., 2019). Thirdly, the symptoms of this issue slowing down sales is inability of the company to properly utilize the effect technology. The proper use of the technology woukld help in the maintenance of the proper sales of the company thereby implementing the profitability of the company. Finally, the company was never so subdued with the retail traffic before that it is doing now (Stories.starbucks.com., 2019).
The company has been facing sales slowdown and lowering shares in the last one year. In Australia, Starbucks have reportedly accumulated losses of at least $143 million since they opened here 14 years ago (Stories.starbucks.com., 2019). Generally, the market saturation might be the cause of the problem. As the stores do not have minimum range of distance, it is enhancing the competition among the stores growing the threat of market saturation. Another business problems is that the company is failing to attract new customers (Monica, 2018). Holiday beverages, gift cards and other merchandises are not resonating the customers as planned. Finally the higher cost of the beverages that targets the mid and higher incoming range of customers are not being proved to be appealing to the customers in the developing countries like the market of Australia. These business problems need to be solved by the company as early as possible otherwise in spite of having a profitable situation in the global business, Starbucks limited with fall in the hands of Dunkin group and McDonald’s, two most pressing competitors of the company.
The business problem that is being faced by Starbucks in the Australian territories refer to the problem of incurring losses due to the lack of the proper coordination within the organization as well as the saturation of the Australian market. The research aims to discuss the issues that the company has been facing and the factors that have contributed to the present performance of the company in the Australian territories.
The objectives of this research are:
The internal factors of the business can effectively create issues may lead to have sales slow down. According to Kozak (2018), the concept of business survivability depends upon micro environment. The micro, small or medium enterprises at the driving force of economic development and their survivability gets influenced by the condition of the internal situation. In this study, the author has investigated the situation of the business in the Australian region and found that the company’s ability to stay in the market highly dependent upon the skills and efficiency of the staff, public relations with the customers, business Strategies and inability to match the culture of the location where the company is being operating.
According to Bianchi, Cosenz and Marinkovi? (2015), the strategic planning system can improve the competitiveness of the company in the region. The authors have used marketing tools like interview and interrogation and economic analysis of the company performances in the Russian region. This study has found out that strategic planning process when not get proper elaboration can affects the policies and process of production in the organization. These all have affected the strategic planning of Starbucks which has only focused the higher class of customers rather being accepted by mass. This would help by discussing the issues that are prevalent in the Australian market and have been influencing the stunted growth of Starbucks.
As pointed out by Noe et al. (2017) the internal factors like employee motivation or inability to work in cross cultural situation can affect the growth therefore, when the issue of inability to match the culture of the locations and attracting new customers on the basis of localization of the products and services get mitigated, the company can definitely work better. In addition to this DeCenzo, Robbins and Verhulst (2016), have suggested to focus on the human resource of the companies to create a positive organizational culture. As mentioned in the Forbes.com (2018), there are incidents of racial discrimination in the Starbucks stores which has affected the fame of the company. Hence it has successfully implemented training process for the employees.
The external factors like high competition in the market and the absence of technological support affect the business by slowing down its sales. It is highly dependent upon the country of origin and turbulent market conditions.
The study by Schwens et al. (2018) has focused on the information cost model which is a valuable factor for surviving in a competitive market of Australia. The connection between internationalization and performance has been controversial. There are prominent theoretical arguments that focus on the effectiveness of the business with the multinational structure can be affected by the degree of the host market diversity organizational adaptation process and rising cost for technological adaptation can involve strong organizational complexity.
Similarly the author like Hajkowicz et al. (2016) have stated hat the economic conditions within the political territories of the country has a major effect on the development of the issues that are faced by the company in the matters that are related to the business growth and decline. The majority of the issues that are faced by the company reveal the influence of the economic conditions of the organization in terms of the issues that are highlighted in the overall economic performance of the organization in the given markets. The pricing strategy that is implemented within the organization is based on the economic regulations that are followed within the country.
According to Ollivaud, Guillemette and Turner (2016), there is a close conection between sales slowdown and investment in the organization. This paper has detailed how the continued demand weakness can turn to deterioration of the potential investment that affect the overall business of the companies. Similarly, the authors like Decker et al. (2017), have focused on the effect of sales slowdown to the pace of labor productivity growth. As the sales of the company is the first and foremost factor based on which the growth of the company is measured, when it slows down, the company cannot focus on the growth of the employee productivity and innovation of new products. In the case of Starbucks, the outlets are being closed one by one as the sales have been reduced (Stories.starbucks.com., 2019). As pointed out in the news articles in Forbes (2018), Starbuck is losing its cool image and its identity. The company’s concept of providing ‘third place’ that used to attract the millennial and others than its competitors has become cliché. All of these have been imitated by the compactors like McDonald’s and Dunkin.
Innovation in terms of both products as well as services can help the companies to grow popularity and sales according to Anzoategui et al. (2016), more focus on the R&D and technology adaptation can guide the organizations to find ways for growth. The methods of innovation that was once applied in the company when the third wave of coffee makers from 2000s targeted the quality minded drinkers with the handmade coffee associated with lighter roasts, Starbucks uses some automatic espresso machines for safety reasons and efficiency. This gave the company addition advantage over the competitors. Similarly, Christensen et al. (2016), support the view that the company can enhance customer service through applying technology in retail and production that may attract new customers.
The sustainability should be maintained within the organization in order to deal with the various issues that are faced by the coffee shops in the Australian market. The implementation of the CSR activities helps in the development of the suppliers of the company as well as the clientele of the organization. Womack and Jones (2015), sustainable growth include proper use of the resources both tangible as well as intangible. This can lead the companies to create value and wealth both. On the other hand, Ortiz?de?Mandojana and Bansal (2016) have focused on the organizational resilience through sustainable business practices. In this regard the company can focus on the proper use of raw materials and apply localization of the products. More focus on the CSR activities and encourage the local communities by incorporating those in the business production can attract the local customer and supply chain. Thus the sales of the will get a fresh impetus and definitely grow.
Therefore, it can be concluded that Starbucks have followed innovative production and effective service policies to the customers but in the closely competitive market, their policies somehow are not working. Therefore, sales is facing slowdown affecting the shares. The research problems and questions have effectively tried to find out the ideas and perceptions of the authors in different facets so that the company get opportunity to regain its position.
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