Case Study of Starbucks

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 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

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 coffee house had done previously. Before Starbucks, coffee in its current form (latte, frappacino, mocha, etc.) was alien to most US consumers. Secondly, Starbucks did not just sell coffee - it sold an experience. As founding CEO Howard Schultz explained, "We are not in the coffee business serving people, we 're in the people business serving coffee" (Schultz and Yang, 1997).

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