Why Starbucks failed and Why Culture Matters

Starbuck’s is the popular US coffee chain that entered Australia.
Bunnings is an Australian chain of hardware stores that entered the UK.
All three countries — the US, UK and Australia — share variations of the same language and share a common Anglo heritage. Yet both ventures failed massively.

The reasons deal with culture and faulty market-entry assumptions.

Starbucks assumed that its successful US business model would transfer easily to Australia, a country with a similar English heritage and an informal society. But Australia’s coffee culture started after WW II with Italian and Greek immigrants bringing their warmth and uniqueness. Aussies saw Starbucks as an impersonal chain of sameness and predictability.

Similarly, Bunnings with its English heritage and “sausage sizzle” weekend barbeques assumed that its successful Australian business model would transfer easily to the UK. Australia is similar to US Suburbia with one- or two-story houses requiring 200 colors of paint and lawnmowers. But Britain, especially in its cities, mostly has small houses with tiny gardens (if any) requiring few colors and a year-round rainy climate limiting outdoor activities.

Both of these examples are discussed more extensively in Episode 46 of our Global Guru podcast series by global business strategist, Cynthia Dearin.

As any international executive should know, even if a country speaks a variation of a common language, cultural trends dominate. Methods that work here may not work there.

In the same way, translation is not a simple matter of just rendering words from one language to another. AI and translation software alone fail miserably unless a qualified human professional translator intervenes. And proofreading for spelling and sentence structure – as low-cost AI programs do — takes no account of cultural adaptation for the target market. For example: