Marketing Management and Planning

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STARBUCKS AUSTRALIA
Assessment Report of the Local Market
This study submitted by:
Maria Criselda Bisda
Elmer Raymond Baroja
Eliseo Yanga III
Kenneth Gerard Mallari
Noor Sufna Mohamed Nalim
In partial fulfilment of the requirements in
GSBS-6005: Marketing Management and Planning

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Executive Summary
Aussies take their coffee very seriously. It is surprising then that US-based global coffee giant Starbucks
missed obvious cues and treated the Australia like any generic western market. The result is a humbling
defeat: from a hyper-optimistic market entry of 140 stores all over the country in 2000, it is down to 29
branches today.
In this report, the company’s Australian operations is analysed particularly its existing marketing mix
used for Australian customers. The goal is to identify possible strengths and weaknesses within the
organisation’s marketing strategy. It was determined that Starbuck’s premium pricing coupled by poor
social media promotion management and generic product line was not enough to sustain its strategically
placed branches, thereby leading to closures. Brand equity suffered, being seen as a more expensive
alternative to independent cafes with better ambience, customisable drinks and friendlier baristas.
The reason for this marketing failure is made clearer following a comprehensive overview of the coffee
and café industry which was easily accessible to new comers given low barriers of entry and plenty of
local expertise, extensive and pervasive “coffee culture” that favours locally sourced products over
“international giants” and the emphasis of technology so that baristas can have more time to interact with
their customers. The competitor scan reveals that similar international conglomerates such as Mc
Donald’s and Gloria Jean’s made conscious attempts to adjust to these local trends which resulted in
relative success. However, the local independent café remains to be the biggest competitor, representing
95% of the total market.
All of these are consolidated into a SWOT which profiled Starbucks as a strong global brand with
international expertise and network, strong CSR and employee culture that failed in the Australian market
given its generic approach to marketing. It also failed to exploit already existing trends from a society that
is built around coffee and caffeinated drink consumption.
To address this, market segmentation is conducted using the STP model to determine the general
segments of the market based on geographic, demographic, psychographic and behavioural factors. This
analysis yielded a general segment based on location, age, values and tendencies. These were then
analysed using the findings from the SWOT to formulate potential target markets using the Market
Segmentation Bases. In particular, profiles pertaining to demography, socio-cultural and behavioural
indicators are identified and linked to the Starbucks marketing mix. The goal is to provide a

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comprehensive list of potential target markets that can be used for the succeeding market positioning
strategy.

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I. INTERNAL ANALYSIS
1. Company Overview
Starbucks originally began as “Starbucks Coffee and Tea” in 1971, with its first branch located
in Seattle, Washington (Moore, 2015; Starbucks, n.d -a). In 1982, Howard Schultz, currently the
chairman and CEO, joined Starbucks. It was also in this same year that Starbucks started
providing coffee to restaurants and espresso bars (Starbucks, n.d. –b; Marketline, 2016). By
1992, the coffee shop had completed its initial public offering, and reached 200 shops across
the U.S. (Starbucks, n.d. -b). As the company grew, Starbucks branches were being established
around the country at an average of one store per day, and peaked at an average of seven
stores per day (Palmer, 2008).
Starbucks began to branch out to Australia by the year 2000. Upon entry, branches were
heavily concentrated around the NSW, Queensland, and Victoria regions. By 2007, Starbucks
coffee houses in Australia capped at 84, and began its decline the next year through a rapid
reduction in branches to 23. Branch closures included 23 from NSW, 17 from Victoria, 18 from
Queensland and 8 from the remaining regions (Patterson, Scott, & Uncles, 2010)). Starbucks
opted to retain 23 stores in key locations in Sydney, Melbourne and Brisbane as a means to
attract tourists familiar with the brand (Brook, 2016). At the turn of 2017, Starbucks has
managed to open six more branches in the same key areas totalling 29 stores in June
(Starbucks Australia, n.d. -a).
2. Internal Analysis
Since its inception, Starbucks has inculcated in their coffee shops the culture of more than just
serving coffee, but also serving a “full and rewarding coffee house experience”. Their mission
statement “to inspire and nurture human spirit – one person, one cup and one neighbourhood at
a time” summarizes this lived experience as Starbucks’ main selling point (Starbucks, n.d. -c).
To permeate this kind of thinking, Starbucks focused their efforts in firmly aligning their internal
and marketing strategies to a more “relationship-driven,” and “employees-first” approach, in
which the company considers the staff as partners in the business (Ferguson, 2017) even to a
point wherein employees receive stock options as a symbol of being one family with a say in the
company (Leinwand & Davidson, 2016). These strategies are then cascaded down to the
employees who treat their customers as family, as neighbors, and as friends, which allows their
branches to be marketed as a “gathering place” (Michelli, 2007; Leinwand & Davidson, 2016;

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Starbucks, n.d. -c). To provide this kind of premier service, their staff are given training about
the company culture, service skills and self-development skills (Lemus, Feigenblatt, Orta &
Rivero, 2015).
Unfortunately for Starbucks, things did not go as planned upon arriving in Australia. In an
interview with IBISworld analysts, Starbucks purportedly failed to understand the uniqueness of
Australian coffee culture and its coffee market (Robb, 2014). Their rapid decline resulted
primarily from a lack of product optimization and lack of international market research (Patterson
et al, 2010). Starbucks took their coffee recipes from the U.S. and brought the same “weak
coffee” topped with milk, syrups, and other flavors in a country that takes its coffee seriously
(Mescall, 2010; Hurst, 2014). Even subtle nuances like the temperature and texture of a
Starbucks coffee cup do not match with the taste of Australian coffee enthusiasts (Robb, 2014).
Apart from the coffee, Starbucks also failed to optimize their other primary product:
the
experience.
Starbucks expanded too rapidly and forced the coffee shop’s U.S. practices and
standards to an unaccepting Australian market. The company failed to advertise and convince
Australians to patronize their product over all other cafes (Patterson et al, 2010). Moreover, the
interactive and intimate service of Starbucks baristas was sacrificed in lieu of sale quotas and
speedy fulfillment of orders at the till (Robb, 2014). In a piece by local Australian media, SBSTWO (2014), Starbucks ostensibly set “…a low level where perhaps the baristas are not so
professional and are not as dedicated to their craft” in a coffee-loving market with high
standards. Adding to the backlash is the Australian’s strong negative stance against supporting
American products over local ones (Brook, 2016).
Internationally, the financial position of Starbucks remains very strong, as evidenced by the
rapid and continuous growth of the company (Marketline, 2016). Starbucks have recorded an
average of 3% sales growth in their sales and 8% of operational income growth, from $864.2
million to $935.4 million while Asia pacific region resulted an operational growth rate of 13%
(Starbucks, 2015). Opposed to its international counterpart, Starbucks trails behind at less than
1% of the Australian market share (Euromonitor, 2008a). Its decline was a result of around $143
million in accumulated losses and loans of up to $72 million from Starbucks headquarters in the
U.S. (Edwards & Sainsbury, 2008; Shoebridge, 2008).

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3. Marketing Mix
Starbucks marketing mix contains a range of products, price promotion and distribution
strategies to maintain and develop the business (Michelli, 2007). Also included in the mix is
Starbucks’ promotion of their stores as a homey, neighborly experience. Starbucks is touted as
a dominant force in the U.S. coffee market. However, the opposite can be said for the coffee
company in Australia (Patterson et al, 2010).
4. Product Strategies
There is a high product diversification (see Fig. 1) in Starbucks, with coffee as their main selling
point. Their product mix includes coffee, tea, juice, snacks, custom-brewed Frappuccinos,
sandwiches and wraps, and pastries (Starbucks Australia, n.d. -b). In addition, the coffee shop
markets a product line of gifts and souvenirs, such as mugs, tumblers, canteens, pre-packaged
coffee and tea packages (Starbucks Australia, n.d. -c). Other brands can be seen being sold in
Starbucks coffee houses, some, if not most, of which are under the umbrella of the Starbucks
corporate brand. Teavana, their tea beverage line, is one example of such brand acquired by
the company (Weisman, 2015).
Fig. 1: Product overview of Starbucks Australia
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Starbucks has also diversified its coffee into three categories: Blonde Roast, Medium roast and
Dark roast; differentiated by its flavor and roasting process (Starbucks Australia, n.d. -d).
However, the said product line has been lifted from its U.S. counterpart, lacking in its
differentiation to specifically target the Australian market (Patterson et al, 2010).
5. Price Strategies
The price strategies of Starbucks are mainly concerned about their target market, and
maintaining standards of quality with regard to their coffee. Its target market is composed of
customers who pay premium for quality coffee, and those who want to enjoy coffee associated
with a premium and established name (Michelli, 2007). It is therefore difficult to categorize
Starbucks as a brand targeted to basic needs of their customers. The price ranges differ
between the size, specification, and/or ingredients of their product line (see Figs. 2 and 3). In
one pricing research, the average price of a brewed coffee in the global market costs US$1.28
(Statistics Brain, 2016), while customers pay higher premiums priced between US$2.65 to
US$4.15 per serving (Seaford, Culp, & Brooks, 2012). Locally, the pricing also follows the same
trend. Brook (2016) uses Starbucks’ tall latte as an example, priced at $4.40 in its Sydney
branches, as compared to a large flat white from a local café priced at a cheaper $3.50.
Fig 2. Starbucks Australia coffee prices (Zomato, n.d.) Fig. 3. Other beverages from Starbucks Australia (Zomato, n.d.)
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6. Promotion Strategies
Starbucks advertises in both traditional and online media for specific promotions such as reward
cards, discounts and freebies. Both media allow Starbucks to expand their brand, re-establish
their market position, identify new promotional channels, and find strategies to attract new
customers and retain loyal ones (Lemus et al, 2015). In addition, Starbucks has a strong
corporate social responsibility (CSR) initiative, whose projects find new paths to protect their
brand image, promote a diverse working environment, and help coffee farmers around the globe
(Starbucks, n.d. -d).
Starbucks also launched “My Starbucks Idea” to gather customer views about new ideas about
products, and potential locations to expand the franchise (Starbucks, n.d. -e). Moreover,
Starbucks also promotes the amenities of their coffee houses, such as free wi-fi, ambient music,
and comfortable environment (Sam & Cai, 2015). Oftentimes, Starbucks spread these
marketing information via word of mouth, relying on the strength of their brand identity as a
factor in attracting customers (Patterson et al, 2010). Finally, part of the Starbucks experience is
having the baristas call and remember the names of their regular customers (Seaford et al,
2012; Michelli, 2007).
7. Placement Strategies
Starbucks primarily distributes coffee and their other branded products via their coffee houses,
online stores, franchises, or other retailers. Starbucks branches are generally located in urban
high traffic areas (Seaford et al, 2012) and are currently located in three key regions: Brisbane,
Sydney, Melbourne, and Gold Coast (see Fig. 4). These coffee houses are usually in areas with
high tourist foot traffic, such as airports and places like Sydney Harbour (Robb, 2014). They
also used licencing and joint venture strategies when expanding their network over the countries
(Seaford et al, 2012).
Fig. 4: Starbucks Australia (n.d. -a) store locations
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II. EXTERNAL ANALYSIS
1. Market Situation

Total Market
In a study by Patterson, et al (2010), the Australian coffee and café industry is depicted as
remarkably complex because of its deep integration in the lives of most of its citizens. The study
also posits that coffee consumption is not just about drinking the actual product but instead
considered a lifestyle by its consumers. As such the demand for coffee and the need to spend
time at cafes is immense. However, competition is even steeper. Regardless, the demand for
coffee has been projected to steadily rise.
Figure 5 describes the product segmentation in the Australian market, with coffee taking up the
majority of the distribution at 51%. The demand for coffee is dependent mainly on consumer
income and lifestyle, to which the market addresses with different products that constantly
encapsulate Australian tastes (Magner, 2017).
Size and Growth Trends
From 2000 to 2005, coffee sales have increased to about 18%, and trade volume sales grew by
5% due to the 14,000-strong cafés and restaurants serving different types of coffee. This
generated an income of $9.7 billion from 2006 to 2007 alone (Patterson et al, 2010). In
addition, Euromonitor (2008b) reported that around 31% of coffee sold from food service are
takeaway and is projected to continually hike in the future years. Magner (2017) supported this
idea in his report that the revenue growth in the last five years was supported by the industry
players as a result of the 12.3% hike in 2013-2014 from an increase in consumer spending.
Fig. 5: Product Distribution (Magner, 2017)
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Supporting evidence from the Australian Bureau of Statistics in 2014 also confirms that café
beverage consumption in Australia was increasing at 46%, and tea at 38% (Inside Small
Business, 2015). Furthermore, in an article by Heffernan (2015), IBISWorld reported in
November that the Australian café and coffee shop industry is worth an estimated $4.3 billion.
Business Monitor International (BMI) (2017) forecasted that the sales of coffee, tea and other
hot drinks will grow annually at an average of 5.1% in terms of Australian dollar, while the
industry profit is projected to grow by 7% annually over the next five years (See Figure 7;
Magner, 2017).
The Australian Café and Coffee Industry is considered
Growing because of the following
reasons: faster growth of revenue than the economy; more new companies entering the
competition; rapid change of process & technology; growing customer acceptance of the
product; and rapid introduction of related products & brands (Magner, 2017).
2. Macro-Environment Situation
Political
Magner (2017) characterised the government’s regulation and policy of the coffee shop industry
as
medium, pertaining to moderate requirements in compliance of the Australian Food
Standards Code, Food Safety Plans and state-regulated regulations on building safety and
hygiene. These were further classified as
steady, which meant no drastic change in legislation
are forecasted in the near future. Further, the Australian Tax Office readily provides business
benchmarking and annual financial metrics for the industry which can be useful for potential
investors (ATO, 2015). Locally, every state provides clear guidelines for setting up and
Fig. 7: Industry revenue (Magner, 2017)
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complying with regulations for a coffee shop business (for example: see ServiceNSW, n.d.). All
of these factors contribute to a political environment that makes setting up a coffee business
readily accessible for newcomers.
Economic
Over the past five years, the profitability of the industry weakened as competition restricted
margins (Magner, 2017). Despite this, coffee consumption is forecasted to rise in the coming
years (BMI, 2017). Further, the coffee shop business is considered ‘
low’ in terms of capital
intensity with low start-up costs compared to other businesses (Magner, 2017). Operating costs
is also generally low due to the adoption of a ‘cost-minimisation strategy’ for operators,
particularly in the employees’ wages (Peetz & Preston, 2009). Thus, in its current state, the
industry is fairly stable with little foreseeable investment risks.
Social
The Australian “Coffee Culture” is a prevalent factor in creating demand for coffee (Mordor
Intelligence, 2017; Patterson et al, 2010). This pertains to the integration of coffee consumption
in an Australian’s daily routine, including: going to coffee shops to socialise with friends, and
buying coffee during office breaks, among others (Wells, 2015; Valent, 2015). This also extends
to the attitudes of the consumers. As stated previously, Australians tend to value locally sourced
products and have a general disdain for foreign and/or global brands (Patterson et al, 2010).
There is also a growing awareness and concern towards the sustainable sourcing of the coffee
products (BMI, 2017; Magner, 2017). Lastly, Australian clients prefer a ‘personal touch’ to the
service, such as barista’s being familiar with their client’s preferred drinks (Morris, 2017;
Patterson et al., 2010). These factors are integral in predicting customer behaviour and thus can
be used for determining market segmentation and competitive advantage.
Technology
In its current state, the coffee shop industry relies primarily on its labour force rather than
equipment (Magner, 2017). This is because majority of customers return to coffee shops not for
the convenience but rather for the ‘relationship and hospitality’ of the staff (Wilson, 2010).
Despite this, technological innovations are directed at making processes more efficient and
making preparation more standardised (Magner, 2017; Valent, 2015). A competitive advantage
can therefore be derived from utilising technology to enhance customer experience as well as
making processes more efficient to allow staff to focus on customer interaction.

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3. Competitor Situation
In identifying the major competitors, several industry reports (Magner, 2017; Mordor
Intelligence, 2017) were compared to determine the major players in the market. Currently, the
Australian coffee and drinks market is dominated by independent coffee shops (BMI, 2017).
Despite this, several companies have also occupied the coffee and café market with Starbucks.
All these companies have different approaches in reaching their desired target market.
However, a common trend among these is the conscious effort to adapt the strategy to the
Australian Market one way or another.
Competitor 1: Retail Food Group Limited
Considered the only major corporate player in the Australian café industry, the RFG group holds
5.1% of the market primarily through Gloria Jean’s Coffee (Magner, 2017). The company’s aims
to expand their franchise and focuses on making franchise acquisition as easy as possible
(RFG, 2017). The company currently has about 350 coffee shops throughout Australia. Their
products are less varied compared to Starbucks and price points are generally a bit cheaper
(e.g.: in Gloria Jean’s Coffees, n.d. -b). Their strategy involves associating itself with the local
culture through branding, CSR and sponsorship of local events (e.g.: Gloria Jean’s Coffees, n.d.
-a).
Competitor 2: Minor DKL Food Group Pty Ltd
Being the second largest competitor, the Thailand-based Minor DKL Food Group holds 2.1% of
the market and is represented by its coffee shop chain: The Coffee Club (Magner, 2017). The
company’s goal is to become a leading food and drink retailer in Australia, and focuses on
customer service and experience as the main value proposition (Minor DKL, n.d.). It currently
COMPETITORS SIZE MARKET
SHARE STRATEGIES
Gloria Jean’s
Coffees
358
stores
5.1%
Wide variety of coffee variants suited for different
Australian tastes, but lesser variety than Starbucks
Associates with local culture through CSR and
sponsorship
The Coffee
Club
300
stores
2.1%
Focus on customer service and experience
Offers simple, yet authentic coffee experience
Rapidly growing coffee franchise
Independent
cafes
6365
stores
94.2%
Simple menu with limited options
Well-trained baristas
Table 1: Comparison of competitors (Magner, 2017)
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has around 300 outlets throughout Australia and has been the fastest growing coffee franchises
to date (Magner, 2017). The products have the least variety among the three competitors and
involves only coffee in its different varieties (The Coffee Club, n.d. -a). The company’s strategy
involves simplicity in emulating an authentic coffee experience with no frills and unnecessary
distractions to the ambience with hints of locally targeted CSR (The Coffee Club, n.d. -b).
Competitor 3: Independent Cafés
Despite not being a single company, Australian independent cafés are the true majority in the
coffee and café industry, with a massive 94.2% market share (Magner, 2017; Mordor
Intelligence, 2017). Patterson et al (2010) profiled these shops to have several common
elements that characterise them as distinct competitors: particularly the incapacity to do
massive advertising on TV or sponsor prestigious sporting events; and a simple and common
menu composed of a few coffee variants and pastries. But their greatest advantage is they
perfectly know how their baristas prepare a special coffee for their Australian customers.

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III. SWOT ANALYSIS
As a result of the discussion above, this report can now discuss the SWOT of Starbucks
Australia.
1. Strengths
Starbucks has multiple strengths it can utilizein its re-establishment of businesses in Australia.
Starbucks is a globally-recognized brand, with more than 25,000 branches in 74
countries, and is also well-known in Australia as a local key player (BBC News, 2016).
The company has a huge network of suppliers for all their needs, particularly: 5 regional
distribution centers (RDC) and 5 company-owned roasting plants in the U.S., 2 RDCs in
Europe and Asia; and 24 co-manufacturers in Asia, Europe, Latin America, and Canada
(Cooke, 2010).
The company applies a “coffee culture experience,” by treating its employees as
business partners through extensive training, provision of company shares, and selfmanaging teams (Goldsmith, 2010; Lemus et al, 2015). This is cascaded to customers
STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
Strong international
branding
Generalised
perception of market
Extensive research on
Australian coffee
culture and behavior
Imitation
Globally extensive
chain of supply Price
Lower the price, or level
with the prevailing rate
in the market
Low prices of coffee
Treat its employees as
business partners, and
treat its customers as
family members
Poor social media
engagement
Hire social media
engagement experts to
revamp the online
image and customer
relations
Existing and budding
independent cafes
Diversified products Brand and product
duplication
Increase efforts in
protecting company’s
trademarks and
intellectual properties.
Innovate product
quality to be unique in
the industry.
Australia’s strong
patronage to local
products and
communities
Strong CSR Initiatives
Table 2: SWOT Analysis
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being treated as family members, which stimulates the target market by establishing an
emotional and relatable connection (Michelli, 2007; Leemon, Zorfas, & Magids, 2015).
Starbucks has a diverse product line, ranging from different coffee blends, teas, snacks
and pastries (Starbucks Australia, n.d. -b). This will allow the coffee house to reach
multiple markets and use organizational resources more efficiently (Clarke, 1985;
Oyedijo, 2015).
Australian branches are situated in areas with high tourist foot traffic, like airports and
cities with international residents (Seaford et al, 2012; Robb, 2014), which allows the
coffee house to rely on a massive demographic and store visibility (Knego, Petljak, &
Vouk, 2014).
Starbucks has a robust international CSR that taps into different sectors, such as ethical
and labor-fair coffee farms, in-house learning institutions, and re-developed branches
with greener, more environment-friendly footprint (Starbucks, 2016).
2. Weaknesses
Unfortunately, Starbucks had a few pitfalls in its intent to establish a name for itself in Australia.
Starbucks failed to capture the Australian market through its preferred coffee taste,
including texture, milk and cream levels, and temperature. Moreover, it failed to emulate
the coffee house experience of interacting with customers and offering a more
customized coffee preparation because of a sub-par barista service (Robb, 2014; SBS
Two, 2014; Patterson et al, 2010).
Starbucks’ coffee is priced higher than a typical Australian café product, starting from
$4.40 onwards compared to an independent café’s tastier cup priced as low as $3.60
(Laughlin, 2016).
Starbucks Australia lacks the connecting relationship with their customers through social
media channels, and merely posts transactional promotionals on Facebook despite the
many engaging replies from the community (Starbucks Australia, n.d. -e; Sashi, 2012).
Being a well-known brand, the Starbucks name and its menu can easily be copied by
anyone with a starting capital to open a coffee house. Examples include cafés named
“Stars and Bucks,” “Starblack,” “Five Bucks,” and “Sun Bucks,” to name a few. All of
which are situated in countries where Starbucks also dominates (Tripadvisor, n.d.;
Levenstein, n.d.)
3. Opportunities
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The Australian Market presents interesting challenges and factors that Starbucks can capitalise
for them to expand their current market share.
Given the varieties and available suppliers of coffee within the region, there are plenty of
opportunities for product research and development that can be catered to the local
customer’s tastes.
Given the vibrant coffee culture and demand for premium coffee and café experience,
Starbucks has opportunities to adapt its global brand identity by adding elements of local
culture that will associate Starbucks with local interests. Doing so ensures that
Starbucks can maintain its premium pricing.
The interaction-focused customers of Australia translate to plenty of opportunities to
engage with customers in order to reverse the negative brand reputation and create a
loyal customer base. Starbucks can use its expertise in CSR and efficiency to capitalise
on this.
The ever increasing tourist foot traffic in the state capitals is ripe for opportunity and
Starbucks can benefit from this by being associated with local cafe culture that tourists
would prefer to experience rather than catering directly to international tourists that risks
disenfranchising local customers.
4. Threats
Starbucks must also be mindful of the threats coming their way, especially now that the
company aims to rebuild itself from its unfortunate downturn.
Just like Starbucks’s first foray into Australia, the café and coffee market is dominated by
independent shops (Magner, 2017). The market continues to grow, which increases the
number of cafés Starbucks has to compete with.
In connection with this, local, independent cafés, Gloria Jean’s, and even The Coffee
Club offer barista-brewed coffee priced lower than that of Starbucks’s menu.
Finally, there still looms a negative sentiment and stigma towards U.S.-based products.
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IV. MARKET SEGMENTATION
In determining the market segmentation, the STP model in Solomon, Hughes, Chitty, Marshall,
and Stuart (2014) can be used.
The first step in this model is identifying the market segment. This involves determining the
geographic, demographic, psychographic, and behavioural variables of the market in order to
determine the base segments (Armstrong, Adam, Denize, Volkov, & Kotler, 2017; Solomon et
al., 2014). In terms of geographic factors, most consumers of coffee are concentrated in
metropolitan east-coast areas such as Melbourne and Sydney (BMI, 2017; Magner, 2017;
MordorIntelligence, 2017). For demography, most consumers are aged 15-34 years old (36.8%)
followed closely by those aged 35-54 (36.5%), usually with careers (e.g.: office workers,
professionals) and no specific bias towards gender (Magner, 2017). In terms of psychographic
factors, most are “absorbed in the coffee culture” (Morris, 2017) valuing socialising with friends
and relaxing during break time (AG, 2015; Patterson et al., 2010). Finally, their behaviour is
most likely influenced by a routine of consuming coffee at specific times of the day
characterised by frequent consumption (Valent, 2015), brand loyalty towards locally sourced
products (Patterson et al., 2010) with the desired advantage of being customisable to their
specific drink preference (Morris, 2017).
Now that these segments have been identified, the next step involves evaluating these to
determine the best market to target. In the case of Starbucks, most of its remaining branches
aligns with the geographic segment of being located in major cities. However, its current
promotion strategies do not show any evidence of catering to a specific demographic group.
Further, there are no specific strategies indicated to address the local psychographic and
behavioural segments other than its existing strategies applied globally. As such, in its current
state, Starbucks strategy resembles an “Undifferentiated Marketing Approach” as defined by
Solomon et al. (2014) with little to no attempts to adjust to the Australian market.
To determine the best segment, the SWOT of the organisation is incorporated into the “Criteria
for Analysing Segments” (McDonald, 2012; Solomon et al., 2014) in order to come up with the
selection criteria, specifically:

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Considering the SWOT of Starbucks:
Sustainability: Which segments are large enough?
Measurability: Which segments can be measured and defined?
Accessibility: Which segments are accessible using the available marketing mix?
Responsiveness: Which segment will be responsive to the available marketing mix?
To qualify as a potential target market, the identified segment must fulfil most if not all of the
aforementioned criteria. For ‘sustainability’, the segment must constitute majority (more than
50%) of the possible market with no forecasted change in the next year based on the BMI
(2017). For measurability, the segment must have a well-defined unit of measure based on the
definition provided by an official source (e.g.: ABS, n.d.). For accessibility, Starbucks’ marketing
mix, specifically ‘Positioning’ is considered as the segment must be within the radius of the
remaining branches in Australia. Lastly, for responsiveness, the entire Marketing Mix particularly
‘Promotion’ and ‘Product’ are considered and checked if the segment will likely respond
positively to these initiatives.
Following this, several potential target markets have thus been defined:
Those highlighted in yellow are possible target markets that Starbucks can aim for. In the case
of the geographic segment, there is a significant amount of city-dwellers living in Australia’s
state capitals compared to those living in the countryside. This qualifier is easily defined
following the definition provided by the Australian Bureau of Statistics on city vs. rural dwellers
Segment Sustainability Measurability Accessibility Responsiveness
Urban (Sydneysider/ Melbournian) Yes Yes Yes Yes
Rural (Country Folk) No Yes No No
15-34 (Yuppie) Yes Yes Yes Yes
34-54 (Professional) Yes Yes Yes Yes
55 and over (Retiree) No Yes No No
Caffeine Junkie Yes Not Yet Yes Yes
Socialiser Yes Not Yet Yes Yes
Coffee Connoisseur No Not Yet No No
Advocate Yes Not Yet Yes Yes
Geographic Segment
Demographic Segment
Psychographic Segment
Behavioural Segment
Table 3: Target Markets
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(ABS, n.d.). Also, most of Starbuck’s remaining branches are situated in urban areas as well.
Finally, the responses of this segment can also be influenced and predicted by the company
given their expertise. For the Demographic Segment, the combined Yuppies and Professionals
make up to 73.3% of the total consumers of coffee in Australia (Magner, 2017). All of these can
easily be measured based on census statistics to determine age and profiled using market
research. Most of this segment are also employed particularly in city centres and thus can easily
be monitored and attracted. For both the Psychographic and Behavioural Segments, the precise
measures are harder to define without precise market research. However, certain markets such
as the socialisers, who spend time in coffee shops to hang out and the advocates who prefer
locally sourced products are well documented in research to exist (e.g.: in BMI, 2017; Morris,
2017; Patterson et al., 2010).
The result of this analysis is profiled using the Market Segmentation Bases (Solomon et al.,
2014) using the “a priori method” (Green & Krieger, 1991; McDonald, 2012) wherein the
segment is analysed prior to physical market research to provide a comprehensive overview of
each possible target market. These are profiled in the succeeding pages.

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City dwellers are characterised primarily by living and
spending most of their time in the metropolitan areas of
Australia, particularly the state capitals. Most are middle
to high income given the higher cost of living in these
areas. Most value independence and perseverance
given the hustle and bustle of city life. Their lifestyle is
also very active particularly in their studies or careers,
with countless hours spent on daily tasks. As such they
also tend to establish routines given the fix time of work
or school, having less available time than country folk.
Demographic
Indicators
Socio-Cultural
Indicators
Behavioural
Indicators
Australian East
Coast
Self-Directed Want to relax
and be laidback
State Capital
(Sydney,
Melbourne,
Brisbane)
AchievementDriven
High
dependence of
caffeine to
keep going
Metropolitan
(Geelong,
Newcastle)
Busy Life Style
Young to
Middle-Aged
Limited Leisure
Activities
Uni Graduates
Middle to High
Income
Single to DINK
City Dwellers
21
The young working class of Australia, dubbed ‘Yuppies’
derived from young professionals are mostly millennials and
generation alphas starting out their career or doing part-time
jobs mixed with studies. As a result they have moderate
spending power from their jobs and often have flexible
income given either their single or Dual-income-no-kid
(DINK) status. They tend to value immediate gratification
and are interested in technology and socialising.
Demographic
Indicators
Socio-Cultural
Indicators
Behavioural
Indicators
Metropolitan
Area
Self-Directed Hanging out and
socialising
15-34 Years Old
(Gen Alpha to
Millenial)
AchievementDriven
Wants
immediate
gratification
Uni Graduates Busy Life Style Drinks when
stressed or
relaxing
Middle Income Sports and
other
recreation
Single to DINK Shopping
Travel
Yuppies
22
The professionals are the counterpart to the Yuppies and
consist of Generation X and Ys at the height of their careers
aged 35-54. They are mostly office workers that follow a daily
routine or business men and entrepreneurs with less
predictable but equally busy lifestyle. They tend to value
Demographic
Indicators
Socio-Cultural
Indicators
Behavioural
Indicators
Metropolitan
Area
Conformity Meetings/
Business Deals
35-5 Years Old
(Gen X-Y)
SecurityFocused
Loyal to desired
brand
Uni Graduates/
Post-Grad
Benevolence Drinks when
stressed or
relaxing
Middle to High
Income
Power
Single to
Married with
Kids
Busy Life Style
Leisure Sports
Professionals
23
meaningful interactions and are generally more mature in terms of personality.
The caffeine junkies could be your students or your hectic office guy that needs their ‘fix’ of
caffeine whether in coffee or tea to get the through the day. This segment is characterised by
their dependence and continued association of drink consumption towards their behaviours and
thus typically routinize their frequent consumption or consume it during specific occasions (e.g.:
meetings, exams etc.).
Demographic
Indicators
Socio-Cultural
Indicators
Behavioural
Indicators
Metropolitan
Area
Hedonism Drinks when
stressed or
relaxing
Typically Young
but not age
specific
Stimulation Routine
behaviours
Middle to High
Income
Drinks
frequently and
impulsively
Typically Single
Caffeine Junkie
24
The socialisers are motivated to go to cafes for reasons
that go beyond having a drink or bite to eat. They usually
Demographic
Indicators
Socio-Cultural
Indicators
Behavioural
Indicators
Metropolitan
Area
Stimulation Visits shops to
spend time
with friends
Typically Young
but not age
specific
Security Schedules meetups at regular
basis
Middle to High
Income
Conformity Loyal to
location based
on convenience
Typically Single
Socialiser
25
go for leisure, to hang out and spend time with friends and family, usually on their break or dayoff. They value ambience and comfort and usually prefer to have a place where they could chat.
They usually build rapport with their local barista, who they prefer to customise their drinks for
them.
Like the socialisers, the Advocates patronise cafes for
more abstract reasons. While they could be people of
Demographic
Indicators
Socio-Cultural
Indicators
Behavioural
Indicators
Metropolitan
Area
Tradition Visits shops
that prioritise
local goods and
treats
employees well
Typically
Middle-Aged
but not age
specific
Universalism Checks labels
for sourcing and
sustainability
indicators
Typically has
family or other
relationship
considerations
but not always
Benevolence Loyal to brand
that convinces
them
Advocate
26
any age or background, they usually represent the local Australian culture of advocating for
locally sourced goods and supporting local jobs. They could also have strong opinions on
sustainability of products and the well-being of both clients and employees. The advocates
value fairness and social justice above all and this translates to them favouring cafes that
embody these ideals.
V. CONCLUSION
In this report, the organisational profile of Starbucks together with its respective marketing mix
has been analysed together with the external context involving the coffee drinks market, the
PEST and the main competitors of the brand. From this information, the SWOT has been
derived which in turn has been utilised to identify possible target markets that Starbucks can
target when conceptualising its positioning strategy. In general, while Starbucks is currently not
as financially successful as it projected in the Australian market, the report has demonstrated
that it is not a lost cause.
To mitigate its situation, the organisation has to use the available information particularly from
competitors to determine how to permeate the ‘coffee culture’ among other environmental
factors that make the Australian market distinct. It can then use its existing resources to
precisely target the market segments that can be penetrated using the marketing mix. In
particular, the organisation should focus on influencing beliefs towards a more positive
association of the brand.
Finally, given its identified strengths, particularly its strong global influence, extensive supply
chain, strong CSR campaigns and engaging employee culture, Starbucks can seize a specific
segment from most if not all of the potential target markets. It should capitalise on positioning
that cannot be accessed by local competitors, who lack the resources to compete and
international competitors who lack emphasis on local service culture. As quoted by Patterson et
al. (2010): Starbucks should “think global but act local”.

27
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