Why Starbucks failed in Australia? Blame lack of market intelligence

Starbucks coffee is a global brand with presence in 77 countries serving in stores numbered 30,000 and still counting. The breakthrough strategy worked in every nook corner of the world but could not get off the ground in Australia.

Espresso brand and Starbucks go hand in glove and the first store in Australia was opened in Sydney in 2000 and rapid expansion saw by 2008 it had 87 stores spread mainly in places of high tourist traffic, where the brand recognition was excellent. Elsewhere instead of recognizing brand the consumers were put-off by ubiquitous nature in which the stores were located.

Then came the crash! Lack of business forced Starbucks to close 61 stores in July 2008 thereby making a crucial error. The retrenched employees were all trained well and most of them started their own baristas. As Starbucks sold its franchise and remaining stores to Rich Lister Withers family in 2014 business strategists pondered why the giant succeeded elsewhere and failed in Australia. The prime suspect was none other than market intelligence.

The next most competitors to Starbucks is Gloria Jean’s coffee who have started way back in 1979 and grew in controlled phase increasing stores gradually in almost 40 countries with nearly half of them located in Australia. They blended brand, texture, milk and crème to give unique expression in taste to the consumers that too with friendly and charming service.

But close upon 75% of the retail coffee houses are not big companies but small independent outlets most of them had Ex-Starbucks personnel. Business strategy of these small outlets underpinned customers to relax, sit-back and enjoy every sip of the coffee sitting around table inside and outside baristas with friends and colleagues. They also proudly broadcast the place of origin where the coffee beans were picked up. While for Starbucks, Espresso was a mere commodity, for the independent guys serving coffee in whatever form is a pleasure.

A proper market intelligence study would have alerted Starbucks to understand the local culture and the manner in which coffee chains act in providing value proposition to customers and capturing attention of customers and their loyalty too. Because most of these customers are repeaters and acted as referees of the coffee stalls to their kith and kin. In this manner reputation by word of mouth spreads so much so customer loyalty gets built-up around the coffee shops.

The hard lesson learned can be summed –up as follows: Business strategy muse be adapted to the findings of market intelligence!

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

Why business strategist must wade through both conceptual and contextual thinking?

Business strategist for that matter any type of strategist must have excellent ability to think in terms of concept and in terms of the context where he is in.

It was Lord Buddha who originally introduced the first conceptual framework in human history wherein he presented the philosophy of Buddhism. He was able to do so after rigorous training of the mind focussing and variable analysis. He came out with cause and effect, a theorem all of us know and most of us practise.

Conceptual thinking is not necessarily a gift. Anyone can develop it by applying concentration & focus over a subject/issue/problem, developing alternative solutions, evaluating pros and cons of each of the alternatives, making trade-off if necessary and finally optimizing the use of means one has and achieving the ends one seeks. This optimization gives out the line of best fit or the right way which is chosen as strategy.

But no business strategist can stay in the high pedestal and dictate the chosen business strategy as the best and ram it on the throats of the operational managers. Before finalizing a strategy he must listen to those who are going to execute and must be able to foresee typical conditions that could prevail at the time of implementation.

Understanding the context in which line managers will be placed is the key factor that determines suitability of adopting a particular strategy. Everyone working in a firm understands that making profit is key for survival and at the same time a firm need to understand that it must give customers value proposition which they cannot simply reject.  

In a competitive and ever changing market place, a product however much innovative it is cannot command big following unless line managers fine-tune customer relationship, target customers and distribution channels.  Contextual thinking will highlight how all three aspects can be motivated to buy more and sell more. Paraphernalia of contextual thinking includes among other things, communication, demand management, persuading, trouble shooting, negotiation and decision making.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

Seven convincing reasons how business mission is coupled with tactics

While implementing business strategy you get into the murky area of operations where you have to grapple with business mission on one side and business tactics on the other. By using appropriate business tactics you have to complete the mission. Otherwise mission gets aborted.  Let me show seven convincing reasons how business mission is coupled with business tactics:

1.        In business mission a firm sounds its attitudes and behaviour. Hence, concrete steps are laid within a mission statement indicating the methodology in which you segment your work along functional lines so as to achieve the stated mission. Each of these functional lines requires suitable business tactics. For example, operational tactics, customer relation tactics, pricing tactics and so on

2.        Business mission displays the situation that could arise and the mileposts to be passed while executing business strategy. Hence, mission deals with the consequences that arise in execution of strategy in the form of tactical manoeuvre

3.        A business mission statement answers the questions “How to get there”. It seeks to reach objectives set by suggesting suitable tactics. At the same time, the line managers are given authority to amend or tweak business tactics depending on the circumstances prevailing at a given time.

4.        By the same token, line managers even tough given specific objectives have the freedom to report back to the top management if and when they see the need for amending or recasting objectives taking into considerations of prevailing conditions within business or out in the market

5.        Business mission is neither broad nor narrow. Never the less business mission must under-line comprehensiveness in terms of objectives to be achieved. It must be fleshy as well as lean. Facts and figures must accompany a mission statement because it is borne out of contextual thinking. This type of thinking trains you to understand the context in which you are placed while carrying out your mission

6.        Business mission relates to business objectives of a firm all the time so as to keep the focus on the current matter on hand. This enables you in placing mission just in front of your table so that you can glance over it as you progress

7.        Senior management is entrusted with the formulation of mission and accompanying objectives and procedures.  Being mundane in nature and narrow in outlook and perhaps too close to view you and your senior management can quickly spot whether you are succeeding or failing in your mission.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

 

Seven definitive proofs that vision fathers business strategy

In board rooms, strategy is the most articulated words. It is excusable, because ultimate responsibility of drawing business strategy rests with the board of directors. But what is startling is the fact nobody remembers that strategy did not arise on its own but chosen as a translating mechanism of business vision into reality. Here are seven definitive proofs that confirm strategy is borne out of vision:

1.        In vision a business speaks of business policy and its beliefs and values. You write a vision statement indicating the philosophy in which you work, the concepts that guide and the value judgement you make in progression towards your ideals

2.        Vision portrays the standard that is set for achieving over a period of time. In other words, business makes a choice that has long haul. Hence, the overtone of vision is aspiration as well as inspiration.

3.        A business vision statement answers the questions “What to become or Where to go”. It seeks an end-state that business wishes to achieve at the end of its business cycle. In order to do that, a vision statement provides direction and guidance in brief manner but with broad intent

4.        “Brevity is better part of valour” goes the adage. Vision does just that. Savour the vision of Department of Commerce of USA:  “By assisting the private sector, our vision is that the United States continues to play a lead role in the world economy”. Do I need to say any more?

5.        Business vision is chiselled as policies of a business that govern conduct of transactions in every circumstance. Such policies are of general nature and do not give facts and figures but ideas and concepts. In fact, vision is borne out of conceptual thinking. This type of thinking trains you to spot the missing link or information that is needed to solve a puzzle. In a vision statement you are looking for an over-awning concept or all-prevailing idea in global manner

6.        Vision relates to goals of a business. The goals are set as end-state of business strategy. That is to keep the big picture intact and behind your table so that you often turn back and watch your business vision and then watch your steps in executing business strategy

7.        Board of directors is entrusted with the formulation of vision and accompanying business policy, business strategy and corporate goals. Being lofty in nature and broad in outlook and perhaps too distant to view armchair analysts often miss the tree as forest when they react to short term lull in the progress of a company and dub it as vision failure.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist