Provide a recent practical example of an organization that has faced the

challenges of international competition and expansion.

Starbucks
Background
Starbucks is a brand known around the world. It has expanded to many countries and succeeded
in international markets.
Starbucks then decided to expand into Australia where it opened its first shop in Sydney in 2000.
Till 2008 it had more than 87 shops in different locations in Australia. They thought it will be a
success just like it had been a success in other countries but what happened was not what the
organization think tankers hoped for. During early years, Starbucks reported $105 million in
losses.

Reasons
Following were the reasons for their losses:
 Not enough market research: The biggest mistake that Starbucks made when they
decided to move into Australia was that they thought they didn’t need to adjust their
offerings. Australia has a rich coffee culture, where local cafe menus are dominated by
complex coffee drinks. They did not properly research the market and thought that people
will buy the drinks because of the brand name.
 Different taste preferences: Australians do not like too much sugary drinks and
Starbucks’ drinks were too sugary for their taste.
 Cultural differences: Australians like to go to coffee shops mainly to have
conversations, to meet people and converse about different topics and then get
complimentary drinks while having those conversations. Starbucks did not understand
that Australians prefer coffee shops as a meeting place as opposed to the US where you
buy your drink and then head out.

Target:
Background
The most recent high-profile example of an international expansion failure is Target’s
withdrawal from the Canadian market. Founded in 1902 and headquartered in Minneapolis,
Minnesota, Target is the second-largest discount retailer in the United States and in direct
competition with market leader Walmart. Given its overwhelming success in America, Target
announced in 2011 its first international expansion into Canada. Over $4.4 billion was invested
into the expansion, and expecting a rapid recoup of its investment, the company stated its
Canadian stores would become profitable by 2013. But it was not the case. Hence, on January
15, 2015, Target announced it was abandoning Canada and would close stores in a planned
manner.

Reasons
Following are the reasons for Targets’ challenges in Canada:
 Buying pre-existing shops instead of opening own retail stores:
Target tried to enter the market with buying pre-existing retail stores that did not meet
the brand expectations that people had from Target. The stores were smaller than what
people expected.
 Lack of market research regarding the location:
The location of the retail shops was not ideal and inconvenient for customers. They had
to go out of their way to shop there. They did not research enough to select locations that
would attract more customers.
 Supply chain problems:
Target opened 124 stores and 3 distribution centres within 3 months that led to delivery
problems. People were unable to find too much variety at the shops because of supply
chain problems.
 Technology failure:
The computerized ordering system was not upto the mark and had glitches.
 Did not study customers’ behaviors:
Canadian expected low prices and discounted items just like Walmart which Target failed
to provide.
 Competition:
Walmart entered Canadian market 2 years before Target did and Target did not have any
competitive advantage over Walmart and other players in the market. Lack of
competitive strategy also led to Target’s failure.
 Did not follow internationalization process steps:
Target did not follow the proper steps of internationalization process whereby the risk of
failure can be some what minimized.