Passing Down Acquired Traits

An acquired trait is defined as a characteristic or trait that produces a phenotype that is a result of environmental influence. Acquired traits are not coded in the DNA of an individual and therefore most scientists believe they cannot be passed down to offspring during reproduction. In order for a characteristic or trait to be passed down to the next generation, it must be part of the individuals genotype. That is, its in their DNA. Darwin, Lamarck and Acquired Traits Jean-Baptiste Lamarck incorrectly hypothesized that acquired traits could indeed be passed down from parent to offspring and therefore make the offspring more suited to their environment or stronger in some way. ​ Charles Darwin originally adopted this idea in his first publication of his Theory of Evolution through Natural Selection, but later took this out once there was more evidence to show acquired traits were not passed down from generation to generation. Examples of Acquired Traits An example of an acquired trait would be an offspring born to a bodybuilder that had extremely large muscles. Lamarck thought that the offspring would automatically be born with larger muscles like the parent. However, since the larger muscles were an acquired trait through years of training and environmental influences, the large muscles were not passed down to the offspring. Genetic Traits Genetics, the study of genes, explains how traits like eye color and some genetic conditions can be passed on from one generation to the next. Parents pass traits to their young through gene transmission.  Genes, which are located on  chromosomes  and consist of  DNA, contain specific instructions for  protein  synthesis. Some conditions, like hemophilia, are contained in a chromosome and are passed on to offspring. But thats not to say all illnesses will be passed down; for instance, if you develop cavities in your teeth, thats not a condition youd pass down to your kids. New Research on Traits and Evolution Some recent scientific research, however, suggests that Lamarck may not have been entirely wrong. Scientists at the Columbia University Medical Center found that roundworms that developed resistance to a particular virus passed on that immunity to their offspring, and for several generations. Other research has found that mothers may pass on acquired traits as well. During World War II, the Dutch suffered a devastating famine. Women who gave birth during this period had babies who were more susceptible to metabolic disorders such as obesity. Those childrens children were likely to suffer from these conditions as well, research showed. So while the bulk of the evidence suggests that acquired traits like muscles and obesity arent genetic, and cant be passed on to offspring, there are some cases where this principle has been disproven.

The Key Concepts in Economics - 851 Words

Assignment 1: The Key Concepts in Economics Markisha Dill William Creamer Principle Of Economics May 31, 2015 Before sitting down to complete this assignment, I thought thoroughly about economics as a whole. My interest was whether economics was considered an exact since, i.e. Mathematics. Economics has been described as a science, numerous times. So in my search to find out whether economics was a science, I looked at an online dictionary to see how these words were defined. First I looked at economics. The definition stated, â€Å"Economics is a social science concerned chiefly with description and analysis of the production, distribution and consumption of services and goods. Then I looked for the word â€Å"science†. Science was†¦show more content†¦It calls for adjustment to meet demand. k. Supply shocks: External events that shift the aggregate supply curve l. Stagflation: a decrease in real output with increasing prices. 3. Dross Domestic Product (GDP): The sum of the market value of all goods and services produced in a particular country. 4. Growth Rate: an estim ate of the growth of the GDP based on a persons projected yearly increase in income. When thinking of the information that was highlighted under supply and demand there was one concept that caught my attention. Consumption function immediately made me think of Jordan products. The income base of the majority of his customers is low. However, the demand for consistent and exclusive product is high in the low socio-economic groups. This is a concept Jordan understands, however despite his understanding, he continues to market with that consumer in mind. There should be a certain responsibility to the consumer. I now have a clear understanding of this section of the lesson. In addition, I do agree with the article. However, I do not believe economics is a subject that you can agree or disagree with. As I stated prior, it is not an exact science. Although there are definitions for many functions of economics, ultimately it will continue to have variances. References DeArdilla, Juala. The 10 Things In Economics That Everybody Should Know.Show MoreRelatedThe Key Concepts Of Economics1364 Words   |  6 Pages The Key Concepts in Economics Kristen E. Singleton Dr. Bernadette West Principles of Economics 2/25/2016 The Key Concepts in Economics 1 The U.S economy has shown many signs of positive growth and development since last five years. As we know that U.S was suffering from recession in 2007-08, thereafter the economy went almost into a slump. 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Lee, and Tawni Ferrarini, gives a simple insight for reader into the inner workings economics in a common sense terms. The main point of the book is that to have economic success comes from low interference from the government, the motivation of individuals, and competitive markets. In the beginning of the book, the authors of the book started to breakdown this message of economics by explainingRead MoreThe Growth Of Retail And Hospitality Industries Essay926 Words   |  4 PagesWithin the social sciences of production and consumption the concepts of macroeconomics and microeconomics help to analyse the broadness of our vast economic system. This research essay will critically review an article published in The Australian â€Å"Retail spending rose 0.3pc in January, less than expected†. The author of the article, Dow Jones compares the forecasted growth of retail and hospitality industries. Aspects of consumer sovereignty and market demand explain trends in the post-holiday periodRead MoreThe Keynesian School Of Economic Thought1151 Words   |  5 Pages1) List three key concepts from the Keynesian School of economic thought: (25 points) At least one concept must describe the management of aggregate demand. a. The primary concept of the Keynesian School of economic thought revolved around the management of aggregate demand. The author of this idea, John Maynard Keynes, believed the economy was fundamentally unable to sustain itself at full employment. One of his proposed solutions to this was for the government to intervene to increase aggregateRead MoreNotes On Common Sense Economics1441 Words   |  6 PagesSense Economics, is designed for those who are taking beginning steps to understand the basics of economics. It also provides actual concrete changes that could be made in the economy. This novel gives insight to the bigger picture that involves political rules and policies that go along with that. The context of the book aims to explain why nations prosper depending on people’s understanding of necessary economic arrangements. There are ten elements of economics, seven sources of economic progressRead MorePersonal Statement On Business And Public Relations853 Words   |à ‚  4 Pagesrelated field in business, which means I am required to take 12 credit hours in business courses. I have already taken four business courses and I am currently in my fifth. My first two business courses were Introduction to Business and Principles of Economics. These courses introduced me to business and showed me how to work in a business setting. The next couple classes I took were Principles of Accounting and Principles of Accounting II. 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Accordingly, the socialization of human beings is within not only their family settings but also publicly regarding organizational contexts, market areas, and economic output. Towards further enhancing the general nature of human interaction, a variety of institutions are critical towards understanding why, and how human beings can effectively engage in continuous socialization. The paper will discuss the ways

Queer Theology Free Essays

Queer theology Definition Queer is by definition whatever is at odds with the normal, the legitimate, the dominant. There is nothing in particular to which it necessarily refers. It is an identity without an essence. We will write a custom essay sample on Queer Theology or any similar topic only for you Order Now ‘Queer’ then, demarcates not a positivity but a positionality vis-a-vis the normative A â€Å"pro-feminist gay theology† was proposed by J. M. Clark and G. McNeil in 1992, and a â€Å"queer theology† by  Robert Goss  in  Jesus acted up: A gay and lesbian manifesto  ( Explain two of the main contributors to feminist theology Elizabeth Stuart (born 1963) Professor Stuart was consecrated as a Bishop in the Open Episcopal Church (a small, independent grouping within the United Kingdom). In 2006 she became Archbishop of the Province of Great Britain and Ireland of the Liberal Catholic Church International. Her published works include: * Gay and Lesbian Theologies: Repetitions and Critical Difference * Just Good Friends: Towards a Lesbian and Gay Theology of Relationships * Daring to Speak Love’s Name * Religion is a Queer Thing * Lesbian and Gay Theologies: Repetitions with Critical Difference Prof Gerard Loughlin Gerard Loughlin  BA MA (Wales) PhD (Cambridge) is Professor of Theology and Religion at the  University of Durham,  England. He is the  author  of  Telling God’s Story: Bible Church and Narrative Theology  (Cambridge University Press 1996) and  Alien Sex: The Body and Desire in Cinema and Theology  (Blackwell 2004). These works show Stuart moving from a liberationist approach to an approach grounded in queer theory. She now argues that gender and sexuality are not matters of ultimate theological concerns and that the Christian duty is to refuse to work theologically with such categories. His work included: the relationship between God and Israel: Husband to wife. Jesus to the Church, Husband to wife. The Church includes BOTH genders. Therefore man to man in matrimony. He believes that the Church is looking at this in a symbolic way rather than facing up to the fact that it is what God/ Jesus wants. He talks of the love between Jesus and his disciples ‘John of Zebedee left his wife/wife to be to follow Jesus whom he loved! ’ There is a question over WHO got married at the Wedding in Cana- was it his disciples? Two men? John and Jesus are said to be ‘symbolically married’. He believes that this is significant when discussing gender roles and biology. A ‘natural kind’ of marriage –woman and man- is a ‘fantasy’ and not realistic. The use of ‘queer’ used to be an insult. It should now offer a sense of pride to Gay people. Is queer theology rooted in the bible It is rooted in the bible as it believes the fundamental concepts of Christian theology – e. g. trinity, Jesus and his resurrection etc It is not rooted in the bible as Scripture begins and ends with the picture of marriage as an institution ordained by God – designed for the union of a man and a woman in a life-long, faithful, covenantal relationship. This view is affirmed by Moses, Christ and Paul, and has been upheld through thousands of years of Judeo Christian history and tradition. Pro-gay revisionists usually do not even attempt to address God’s created intent for human sexuality, but instead twist Scripture and argue against those texts which condemn same-sex behaviour. Link five teachings from the bible that support queer theology * The argument that if God’s presence and gifts of love are manifest in a gay-affirming church and in homosexual relationships, it is evidence that God accepts and blesses homosexual behaviour. The argument that â€Å"I’m a born-again believer and I’m gay, therefore homosexuality must be okay† is * The argument that Jesus said nothing about homosexuality in the gospels * Bible translators mistranslated five references to sexual ethics in two different testaments of Scripture. And there is also a possibility that they only mistranslated Scriptures regarding homos exual behaviour. * References to God condemning homosexual behaviour is directed to homosexual prostitutes not to homosexuals as a whole * Love between Jesus and his disciples ‘John of Zebedee left his wife/wife to be to follow Jesus whom he loved! John and Jesus are said to be ‘symbolically married * There is a question over WHO got married at the Wedding in Cana- was it his disciples? Two men? How does queer theology link with liberation theology? Queer Theology is grounded in Liberation Theology that respects the experiences of those who have been systematically alienated and abused by the traditional religious establishment. It is imperative that lesbian and gay Christians embrace the hermeneutics of suspicion and interpret scriptures accordingly. The queer Christian community must live within church structures in light of being a part of the underside of society. A large part of the mission of Queer Spirituality is to challenge doctrinal and theological imperialism that has infiltrated many churches. Queer Theology has no choice but to help build the Reign of God by seeking to destroy unjust and oppressive ecclesial structures and teachings. Queer Spirituality has no choice but to fight the battle for God’s justice with righteous anger and speak the truth in the mist of adversity and strife. Queer Theology must work for freedom and liberation by waging a spiritual battle against domination, control, power, and abuse of church authority by confronting distorted beliefs about lesbian and gay Christians. Queer Spirituality is a call to reject churches that hijack human dignity and freedom in the name of religion. Queer Theology can only embrace a spirituality that cultivates honesty, healing, affection, compassion, and justice. Queer Spirituality can only be authentic when seeking to cast out the demons of poverty, injustice, racism, violence, prejudice, exploitation, or homophobia in any form — whether they are within us, our government, or our churches. While formulating a Queer Spirituality, lesbian and gay Christians need to dig deep into, appreciate, and learn from a noble and splendid Hebrew-Christian heritage. Queer Christians must draw from this heritage the strength to believe that the God of compassion and mercy always conquers and triumphs over the evil of homophobia, hatred, and bigotry. Queer theology basics conclusion – * Queer theologians wanted to construct a theology which came directly from their own context * ‘queering’ involves a re- interpretation and definition of our language and practices from the perspective of homosexual people * Queer theology is closely related to philosophical and socio political movement of queer studies How to cite Queer Theology, Papers

Capital Gain Tax and Fringe Benefit Tax

Questions: Part One: Fringe Benefit Tax Alan is an employee at ABC Pty Ltd (ABC). He has negotiated the following remuneration package with ABC: salary of $300,000; Payment of Alan's mobile phone bill ($220 per month, including GST). Alan is under a two-year contract whereby he is required to pay a fixed sum each month for unlimited usage of his phone. Alan uses the phone for work-related purposes only; Payment of Alan's children's school fees ($20,000 per year). The school fees are GST free.ABC also provided Alan with the latest mobile phone handset, which cost $2,000 (including GST).At the end of the year ABC hosted a dinner at a local Thai restaurant for all 20 employees and their partners. The total cost of the dinner was $6,600 including GST.(a) Advise ABC of its FBT consequences arising out of the above information, including calculation of any FBT liability, for the year ending 31 March 2014. Assume that ABC would be entitled to input tax credits in relation to any GST-inclusive acquisit ions.(b) How would your answer to (a) differ if ABC only had 5 employees?(c) How would your answer to (a) differ if clients of ABC also attended the end-of-year dinner?Part Two: Capital Gain Tax Dave Solomon is 59 years of age and is planning for his retirement. Following a visit to his à ¯Ã‚ ¬Ã‚ nancial adviser in March of the current tax year, Dave wants to contribute funds to his personal superannuation fund before 30 June of the current tax year. He has decided to sell the majority of his assets to raise the$1,000,000. He then intends to rent a city apartment and withdraw tax-free amounts from his personal superannuation account once he turns 60 in August of the next year. Dave has provided you with the following details of the assets he has sold:(a) A two-storey residence at St Lucia in which he has lived for the last 30 years. He paid $70,000 to purchase the property and received $850,000 on 27 June of the current tax year, after the real estate agent deducted commissions of $15,000. The residence was originally sold at auction and the buyer placed an $85,000 deposit on the property. Unfortunately, two weeks later the buyer indicated that he did not have sufà ¯Ã‚ ¬Ã‚ cient funds to proceed with the purchase, thereby forfeiting his deposit to Dave on 1 May of the current tax year. The real estate agents then negotiated the sale of the residence to another interested party.(b) A painting by Pro Hart that he purchased on 20 September 1985 for $15,000. The painting was sold at auction on 31 May of the current tax year for $125,000.(c) A luxury motor cruiser that he has moored at the Manly Yacht club. He purchased the boat in late 2004 for $110,000. He sold it on 1 June of the current tax year to a local boat broker for$60,000.(d) On 5 June of the current tax year he sold for $80,000 a parcel of shares in a newly listed mining company. He purchased these shares on 10 January of the current tax year for $75,000. He borrowed $70,000 to fund the purchase of these shares and incurred $5,000 in interest on the loan. He also paid $750 in brokerage on the sale of the shares and $250 in stamp duty on the purchase of these shares. Dave has contacted the ATO and they have advised him that the interest on the loan will not be an allowable deduction because the shares are not generating any assessable income.Dave has also indicated that his taxation return for the year ended 30 June of the previous year shows a net capital loss of $10,000 from the sale of shares. These shares were the only assets he sold in that year.(a) Based on the information above, determine Dave Solomons net capital gain or net capital loss for the year ended 30 June of the current tax year.(b) If Dave has a net capital gain, what does he do with this amount?(c) If Dave has a net capital loss, what does he do with this amount? Answers: Part A. Fringe Benefit Tax FBT is a tax imposed on employer who provides non cash benefits to employees. Tax is levied on employer as per definite rates on the taxable values calculated as per laid down rules of the act. The benefits which are provided to employees apart from salary are liable to Fringe Benefit Tax. The benefit should be in respect of employment which means benefit should be provided only in respect of employment. If benefit is for business purpose then its allowed to have exemption (47A of Subdivision A of Division 12). Employee may be current, past or future and benefits may be provided either by the organisation or associate of the organisation. FBT year is from 1st April to 31st March. FBT rates are as follows:- 31st March 2014-46.5% Gross up rates are as follows:- There are two types of gross up rates. Type 1 gross up rates are for those benefits for which Goods and Service Tax credit is available. Type 2 gross up rates are for those benefits for which GST credit isnt available. Type 1 gross up rates:- 31st March 2014-2.0647 Type 2 gross up rates:- 31st March 2014-1.8692 There are many benefits provided by the employer to the employees. The examples of different benefits which are liable to FBT are listed below: Car parking benefits(Division 10A of part III) Lower rate interest loan to an employee(subdivision A of division 4 of part III) Health insurance benefits Reimbursement of expenses Benefits by way of food, drink and recreation As per division 13 Many benefits are not liable to FBT which are specifically exempted from FBT. And some of the benefits are allowed for concession as well:- Work related items exempt(58X of Division 13) Minor benefits exemption(58P of Division 13) Taxi travel expense exemption(58Z of Division 13) Small benefit car parking exemption(58GA of Division 13) Concessions, including specific concessions for non-profits Part A.a) Particulars Amount(in $s) Taxable Amount(in $s) Mobile Phone Expense(Note 2) Exempt Childrens school fees(Note 3) 20,000 37,384 Mobile phone handset(Note 4) 2,000 4,129.4 Dinner expenses(Note 5) Exempt Total 41,513.4 FBT liability will be $19,303.73(41,513.4*46.5%). Explanation to the above solution:- First, we have to find whether the benefit provided is following under the category of taxable benefit or not. After that, we need to decide under which category the benefit will fall. Whether under type 1 or type 2? Then after one needs to find out the taxable value by multiplying the values of benefits with gross up rates. Lastly, the taxable value will be taxed according to the prescribed rate. Note: 1- Salary expenditure will not be liable to FBT. Note: 2- Alans mobile phone expenses are liable to FBT. But as Alan is using mobile phone for work purposes only thats why FBT will not apply to mobile phone expenses provided to Alan. Note: 3- Alans childrens school fees are liable to FBT as this benefit is provided over above salary payment. Childrens school fees are GST free therefore coefficient will be 1.8692. Because those benefits which are GST free are included in type-2. Note: 4- Mobile phone handset given to Alan is liable to FBT as this benefit isnt included in work related exemptions and as it is including GST it will be included in type 1 and gross up rate will be 2.0647. Note: 5- At the end of the year, dinner facility was provided by the employer to 20 employees and the partners; the number of partners is not defined in the question. The total cost of the dinner is $6,600. Here, it is said that all the 20 employees were there with their partners. That means total 40 persons attended dinner. So, $6,600 will be distributed between 40 persons. Therefore, per person expenditure will be less than $300. Minor expenses are exempt under FBT assessment Act 1986. Therefore, dinner expenses will not be liable to FBT. Part A.b) If total employees of ABC would have been only 5, then the answer would definitely have changed. As the employees are less than 20, the expenditure will be distributed between them and as the per person expenditure would be more than $300, therefore the amount will definitely qualify for FBT. As in the above solution we assumed that there is only one partner. Therefore, total persons will be 6. So, the total expenditure of $6,600 will be distributed between 6 persons. Therefore, per person the expenditure will be $1,100. The solution would change in the below given manner. 37,384+4,129.4+2,271.17=43,784.57 43,784.57*46.5%=20,359.83 The answer would change in the above given manner. Part A.c) The answer would not change in the given case. If the clients would have attended the dinner the total number of persons will be more, so the amount will be less than $300 per person. Therefore, the answer would not change and it will remain same as per answer 1. Part B. Part B.a) Particulars Amount(in $s) Amount(in $s) Sale of two-storey residence at St. Lucia (Note I) Exempt Sale of paintings(Note II) 125,000$ Less: Purchase cost of painting (15,000*123.4/71.3) (25,960.73) 150,960.73 Sale of Luxury motor Cruiser(Note III) 60,000$ Less: Purchase cost of Luxury Motor Cruiser (110,000$) (50,000$) Sale proceeds of Shares(Note IV) 80,000$ Less: Purchase cost of Shares (75,000$) Less: Interest on loan (1,000$) Less: Brokerage on sale of shares (750$) Less: Stamp duty on sale of shares (250$) 3,000$ Total Capital Gain 103960.73 Less: Capital loss of previous year (10,000$) Net Capital Gain 93,960.73 The most common type CGT event is disposal of an asset-selling it or giving it away. Some other types of events in CGT are:- Cancellation of share or surrender or redemption. A person ceased to be a citizen of Australia. Compensation payment. A person entering into a contract not to perform certain tasks. Explanation to the above solution:- I) Permanent residence is exempted from capital gain if sold. Therefore, two storey residence sold wont be liable to capital gain. This transaction is disposal of an asset. A1 (disposal of CGT asset-104-10).II) Sale of painting is liable to capital gain as per the provisions of the act. Therefore, cost of acquisition will be deducted from the sale proceeds and net sale consideration will be liable to capital gain. This transaction is disposal of an asset. A1 (disposal of CGT asset-104-10).III) Sale of motor cruiser is liable to capital gain as motor cruiser is capital asset as per the definition of capital asset. The motor cruiser is sold by Dave. This transaction is disposal of an asset. A1 (disposal of CGT asset-104-10).IV) Shares are always liable to FBT. Therefore, sale consideration received will be liable to capital gain and expenses incurred to complete the transaction will be allowed as deduction from sale consideration. This transaction is disposal of an asset. A1 (disposal of CGT asset-104-10).V) Capital losses carried down from previous years are allowed as deduction from net capital gain of current as well as future years. This transaction is disposal of an asset. A1 (disposal of CGT asset-104-10). Part B.b) If Dave has net capital gain then the amount of net capital gain will be added to the income of the assessee and it will be taxed as per the normal rates applicable to the income of the assessee. This is the treatment to be given when there is net capital gain derived from the sale consideration (division 6E of part III). Part B.c) If Dave has net capital loss then capital loss will be carried forward for indefinite years and if there is any capital gain in current year or next year then the amount of capital loss will be set off against capital gain (division 6E of part III). References: ANON, N.D., Fringe Benefits Tax, Accessed on 31st January 2015, https://www.ato.gov.au/Business/Employers/Preparing-to-engage-workers/Fringe-benefits-tax-(FBT)/ANON, N.D., Fringe Benefits Exemptions and Concessions, Accessed on 31st January 2015, https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/FBT-exemptions-and-concessions/ANON, N.D., Fringe Benefits Tax Rates, Accessed on 31st January 2015, https://www.ato.gov.au/Rates/FBT/ANON, N.D., FBT Return 2014, Accessed on 31st January 2015, https://www.ato.gov.au/Forms/FBT-return-2014/ANON, N.D., Reportable Fringe Benefits, Accessed on 31st January 2015, https://www.ato.gov.au/Rates/FBT/?page=12#Reportable_fringe_benefits ANON, N.D., Fringe Benefits tax Assessment Act,1986, Accessed on 31st January 2015, https://www.austlii.edu.au/au/legis/cth/consol_act/fbtaa1986312/ ANON, N.D., Capital Gains Tax, Accessed on 31st January 2015, https://www.charteredclub.com/capital-gain-tax/ANON, N.D., Capital Gains Tax, Accessed on 31st January 2 015, https://www.ato.gov.au/General/Capital-gains-tax/ANON, N.D., Acquiring and Owning CGT Assets, Accessed on 31st January 2015, https://www.ato.gov.au/General/Capital-gains-tax/Acquiring-and-owning-CGT-assets/ANON, N.D., Selling an Asset and Other CGT Events, Accessed on 31st January 2015, https://www.ato.gov.au/General/Capital-gains-tax/Selling-an-asset-and-other--CGT-events-/ ANON, N.D., Working out your capital gain or loss, Accessed on 31st January 2015, https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-capital-gain-or-loss/ANON, N.D., CGT Exemptions rollovers and concessions, Accessed on 31st January 2015, https://www.ato.gov.au/General/Capital-gains-tax/CGT-exemptions,-rollovers-and-concessions/ ANON, N.D., Shares and Units, Accessed on 31st January 2015, https://www.ato.gov.au/General/Capital-gains-tax/Shares-and-units/ANON, N.D., Income Tax Assessment Act, 1936, Accessed on 31st January 2015, https://www.austlii.edu.au/au/legis/cth/consol_act/itaa1936240/

Services Marketing Essay Example

Services Marketing Essay Australasian Marketing Journal 18 (2010) 41–47 Contents lists available at ScienceDirect Australasian Marketing Journal journal homepage: www. elsevier. com/locate/amj How the local competition defeated a global brand: The case of Starbucks Paul G. Patterson *, Jane Scott, Mark D. Uncles School of Marketing, Australian School of Business, University of NSW, Sydney, NSW 2052, Australia r t i c l e i n f o a b s t r a c t Americanised the coffee tradition. Keywords: Service brands Service quality Global branding International business Starbucks Coffee The astounding growth and expansion of Starbucks is outlined, both on a global scale and within Australia. The focus then shifts to the abrupt closure of three-quarters of the Australian stores in mid 2008. Several reasons for these closures are described and examined, including that: Starbucks overestimated their points of differentiation and the perceived value of their supplementary services; their service standards declined; they ignored some golden rules of international marketing; they expanded too quickly and forced themselves upon an unwilling public; they entered late into a highly competitive market; they failed to communicate the brand; and their business model was unsustainable. Key lessons that may go beyond the speci? cs of the Starbucks case are the importance of: undertaking market research and taking note of it; thinking globally but acting locally; establishing a differential advantage and then striving to sustain it; not losing sight of what makes a brand successful in the ? rst place; and the necessity of having a sustainable business model. O 2009 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved. 1. Introduction ‘‘Shunned Starbucks in Aussie exit† (BBC News, 4 August 2008) 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. We will write a custom essay sample on Services Marketing specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Services Marketing specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Services Marketing specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Background ‘‘Weak coffee and large debt stir Starbucks’ troubles in Australia† (The Australian, 19 August 2008) ‘‘Memo Starbucks: next time try selling ice to Eskimos† (The Age, 3 August 2008) ‘‘Taste of defeat for the mugs from Starbucks† (Sydney Morning Herald, 31 July 2008) ‘‘Coffee culture grinds Starbucks’ Australian operation† (Yahoo News, 3 August 2008) 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 * Corresponding author. Tel. : +61 2 9385 1105. E-mail addresses: p. [emailprotected] edu. au (P. G. Patterson), [emailprotected] com. au (J. Scott), m. [emailprotected] edu. au (M. D. Uncles). Founded in 1971, Starbucks’ ? rst 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 offee 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). This epitomised the emphasis on customer service such as making eye contact and greeting each customer within 5 seconds, 1441-3582/$ see front matter O 2009 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved. doi:10. 1016/j. ausmj. 2009. 10. 001 42 P. G. Patterson et al. / Australasian Marketing Journal 18 (2010) 41–47 leaning tables promptly and remembering the names of regular customers. From inception, Starbucks’ purpose was to reinvent a commodity with a sense of romance, atmosphere, sophistication and sense of community (Schultz and Yang, 1997). Next, Starbucks created a ‘third place’ in people’s lives – somewhere between home and work where they could sit and relax. This was a novelty in the US where in many small towns cafe culture consisted of ? lter coffee on a hot plate. In this way, Starbucks positioned itself to not only sell coffee, but also offer an experience. It was conceived as a lifestyle cafe. The establishment of the cafe as a social hub, with comfortable chairs and music has been just as important a part of the Starbucks brand as its coffee. All this came with a premium price. While people were aware that the beverages at Starbucks were more expensive than at many cafes, they still frequented the outlets as it was a place ‘to see and be seen’. In this way, the brand was widely accepted and became, to an extent, a symbol of status, and everyone’s must-have accessory on their way to work. So, not only did Starbucks revolutionise how Americans drank coffee, it also revolutionised how much people were prepared to pay. Consistency of product across stores, and even national boundaries, has been a hallmark of Starbucks. Like McDonald’s, Starbucks claims that a customer should be able to visit a store anywhere in the world and buy a coffee exactly to speci? cation. This sentiment is echoed by Mark Ring, CEO of Starbucks Australia who stated ‘‘consistency is really important to our customers . . . a consistency in the product . . . the overall experience when you walk into a cafe . . the music . . . the lighting . . . the furniture . . . the person who is working the bar†. So, whilst there might be slight differences between Starbucks in different countries, they all generally look the same and offer the same product assortment. One way this is ensured is by insisting that all managers and partners (employees) undergo 13 weeks of training – not just to learn how to make a coffee, but to understand the nuances of the Starbucks brand (Karolefski, 2002) and how to deliver on its promise of a service experience. The Starbucks formula also depends on location and convenience. Starbucks have worked under the assumption that people are not going to visit unless it’s convenient, and it is this assumption that underlies their highly concentrated store coverage in many cities. Typically, clusters of outlets are opened, which has the effect of saturating a neighbourhood with the Starbucks brand. Interestingly, until recently, they have not engaged in traditional advertising, believing their large store presence and word-ofmouth to be all the advertising and promotion they need. Starbucks’ management believed that a distinctive and memorable brand, a product that made people ‘feel good’ and an enjoyable delivery channel would create repeat business and customer loyalty. Faced with near-saturation conditions in the US – by 2007 it commanded 62% of the specialist coffee shop market in North America (Table 1) – the company has increasingly looked overseas for growth opportunities. As part of this strategy, Starbucks opened its ? rst Australian store in Sydney in 2000, before expanding elsewhere within New South Wales and then nationwide (albeit with 0% of stores concentrated in just three states: NSW, Victoria and Queensland). By the end of 2007 Starbucks had 87 stores, enabling it to control 7% of the specialist coffee shop market in Australasia (Table 1). By 2008, consumer awareness of Starbucks in Australia was 90% (Shoebridge, 2008), with each outlet selling, on average, double the number of coffees (270 a day) than the res t of Australia’s coffee shops (Lindhe, 2008). 3. Expansion into Asia Starbucks currently operates in 44 markets and even has a small presence in Paris – birthplace and stronghold of European cafe culture. Beyond North America, it has a very signi? ant share of the specialist coffee shop market in Western Europe, Asia Paci? c and Latin America (Table 1) and these regions make strong revenue contributions (Table 2). It is in Asia that they see the most potential for growth as they face increasing competitive pressure in their more traditional markets. Half the international stores Starbucks plans to operate in the next decade will be in Asia (Euromonitor, 2006; Browning, 2008). Indeed, Starbucks has done well in international markets where there has not traditionally been a coffee drinking culture, namely Japan, Thailand, Indonesia and China. In effect it has been responsible for growing the category in these markets. The ? rst Starbucks outside the US opened in Tokyo in 1996, and since then, Starbucks’ Japanese stores have become twice as profitable as the US stores. Unsurprisingly then, Japan is Starbucks’ best performing overseas market outside North America. More than 100 new stores open each year in Japan, and coffee is now more popular than tea in terms of both volume and value (Lee, 2003; see also Uncles, 2008). As opposed to their entry into the Australian market, Starbucks made small changes to its formula for the Japanese market; for example, the invention of a green tea frappucino, and the provision of smaller drinks and pastries to conform to local tastes. Starbucks arrived in China in 1998 and by 2002 had 50 outlets, and 165 outlets by 2006 (BBC News, 2006), quickly becoming the nation’s leading coffee chain. Starbucks now sees China as its key growth market due to the size and preferences of the emerging middle class. In the Asia–Paci? region, Starbucks command of the specialist coffee shop market grew from 15% in 2002 to 19% in 2007 (refer to Table 2). The total market for cafes in China grew by over 135% between 1999 and 2004 to reach US$2. 6 billion. It is projected to grow another 144% by 2008 to reach US$6. 4 billion in sales. More specialty coffee shops are opening across China as a middle class with strong purchasing power emerges, although this rise in coffee con sumption is highly concentrated in large cities such as Beijing, Shanghai and Guangzhou. Starbucks has said that it xpects China to become its biggest market after the US and the plan is to open 100 stores a year (Euromonitor, 2006). Signi? cantly, certain Western brands are valued by Chinese consumers and Starbucks appears to be one of them. A growing number of China’s 500 million urbanites favour Starbucks for its ambience, which is seen as an important signal of service quality, Table 2 Starbucks’ regional sales performance by outlets and value 2006. Region North America Asia Paci? c Western Europe Australasia World % of company sales (outlets) 79. 0 13. 6. 7 1. 1 100. 0 % of company sales (revenue in $US) 80. 5 10. 8 7. 7 1. 0 100. 0 Table 1 Starbucks’ share of the specialist coffee shop market in each major region. Region North America Western Europe Asia Paci? c Australasia Latin America Source: Euromonitor (2008b). 2002 (%) 44 17 15 6 0 2007 (%) 62 21 19 7 18 Source: Percentage of company sales in each region is calculated from retail sales within this market in 2006, with sales data drawn from Euromonitor (2007). P. G. Patterson et al. / Australasian Marketing Journal 18 (2010) 41–47 43 nd Starbucks’ design concept rests easily with China’s consumers, who tend to lounge with friends while sipping coffee. Its outlets in China frequently maintain larger seating areas than average outlets in other countries, and plush chairs and davenports are provided to accommodate crowds that linger. However, success for Starbucks in China is not a given, and they will face several challenges in the coming years. China’s accession to the WTO has led to the gradual relaxation of the policy governing foreign-owned retail outlets, and this will lead to more foreign investment and thereby competition (Lee, 2004). Several multinationals are engaged in selling coffee (including KFC, McDonald’s, Yoshinoya, and Manabe), and a number of local brands have recently emerged, some even imitating Starbucks’ distinctive green and white logo and its in-store ambience (notably Xingbake in Shanghai). Furthermore, the reduction of import tariffs on coffee will also encourage foreign investment in coffee. 4. The Australian retail coffee industry Australia’s taste for coffee is a by-product of the waves of immigrants arriving on the country’s shores following World War II. European migrants, predominantly Greeks and Italians, were the ? st to establish the coffee culture, which was later embraced more widely in the 1980s. For decades Australians enjoyed a variation of the ‘lifestyle coffee experience’ that Starbucks created from scratch in the US. Australians did not need to be introduced to the concept of coffee as many other countries did. Savouring a morning cup of coffee was already a ritual for many consumers. It is fair to describe Australia’s coffee culture as mature and sophisticated, so when Starbucks entered Australia in 2000, a thriving urban cafe culture was already in place. This established culture saw Australians typically patronise smaller boutique style coffee shops, with people willing to travel out of their way for a favoured cup of coffee, especially in Melbourne where coffee has developed an almost cult-like following. For Australians, coffee is as much about relationships as it is about the product, suggesting that an impersonal, global chain experience would have trouble replicating the intimacy, personalisation and familiarity of a suburban boutique cafe. Furthermore, through years of coffee drinking, many Australians, unlike American or Asian consumers, have developed a sophisticated palate, enjoying their coffee straighter and stronger, and without the need to disguise the taste with ? avoured, syrupy shots. This love of coffee is easily quanti? ed. The Australian market is worth $3 billion, of which $1. 8 billion relates to the coffee retailing market. For every cup of coffee consumed out of home, two cups are consumed at home (AustralAsian Specialty Coffee Association, 2006). Per capita consumption is now estimated at 2. kg-twice as much as 30 years ago. Whilst Australians are among the highest consumers of instant coffee in the world, they are increasingly buying coffee out of the home (Euromonitor, 2008c). More than 1 billion cups of coffee are consumed in cafes, restaurants and other outlets each year, representing an increase of 65% over the last 10 years. Even between 2000 and 2005, trade sales of coffee have increased about 18%. In 2007, the growth in popularity of the cafe culture resulted in trade volume sales growing at an annual rate of 5%. Some 31% of the coffee sold through foodservice is takeaway, and it is thought that ‘fast coffee’ will be a growth area in future years (Euromonitor, 2008d). There is also a trend towards larger takeaway sizes, with 400 ml cups increasing in popularity (Euromonitor, 2008d). One might argue that Starbucks drove these trends, especially in regards to larger sizes. There are almost 14,000 cafes and restaurants serving a variety of coffee types in Australia, and during 2006/07, they generated $9. 7 billion in income (Australian Bureau of Statistics, 2008). However, despite these statistics, the coffee business does not guarantee success. As Paul Irvine, co-founder of Gloria Jean’s notes, ‘‘Australia is a tough retail market and coffee retailing is particularly tough†. According to of? cial statistics, the cafe business is not always pro? table, with the net pro? tability of cafes falling to about 4%. For a cafe to be successful, it has to offer marginally better coffee than local competitors, and do so consistently. Coffee drinkers in Australia are discerning, and they will go out of their way to purchase a good cup of coffee. They are not as easily persuaded as people from other countries simply to visit their nearest cafe. Secondly, for a cafe to make a pro? t, it needs to turn over 15 kg of coffee a week. The national average is 11 kg, so a cafe has to be above average to begin with to even make a pro? t. Any newcomer needs to understand this before entering the market. The other signi? cant constraint on pro? tability is the cost of hiring baristas, with a good one costing between $1000 and $1500 a week (Charles, 2007). However, it seems that this is a necessary cost in order to deliver a superior product. The question that then begs to be asked is: How well did Starbucks understand this existing coffee culture? Did they under-estimate the relational aspect of coffee purchasing in Australia, as well as the importance of the quality of ingredients and the skills of the person making each cup? Did they overestimate the value consumers attach to the in-store experience and the ‘third place’ concept? Or did they just look at the statistics regarding coffee consumption and think that operating in Australia was a license to print money? Did they simply see Australia as the next logical step to global domination? Starbucks has 87% of the US specialty coffee shop market, and only now is it beginning to feel pressure from non-traditional competitors such as Dunkin Donut, 7 Eleven, McCafe and Krispy Kreme (Burritt, 2007). However, in Australia, the competitive landscape is different. Gloria Jean’s dominates the high-street part of the coffee retailing market and McCafe dominates the convenience end (Shoebridge, 2008). Other signi? cant competitors include The Coffee Club and Wild Bean Cafe (an add-on to BP petrol stations) and Hudson’s Coffee (see Table 3). All offer a similar in-store experience to Starbucks, with McCafe from 2007 onwards refurbishing many McDonald’s stores to imitate the Starbucks’ experience, albeit at the economy end of the market. 5. Growth grinds to a halt . . . store closures In recent times however things have started to go wrong for Starbucks. Internationally, company earnings declined as cashstrapped consumers faced record petrol prices and rising interest rates meaning they have had to pull back on gourmet coffee and other luxuries. Sales fell 50% in the last 2 years, the US share price fell more than 40% over the past year and pro? s dropped 28% (Bawden, 2008; Coleman-Lochner and Stanford, 2008; Mintz, 2008). Consequently, Howard Schultz, the founder and chairman of Starbucks, resumed the position of CEO in 2008 with the aim of revitalising the business. He slowed the pace at which stores were opened (and in fact closed more stores than he will open in the coming year), introduced key performan ce targets (KPTs) and an employee rewards system in the US, and simultaneously shut down every store in America for three and a half hours of staff training (Muthukumar and Jain, 2008). Customer-oriented initiatives have included the addition of more food, the launch of the Starbucks card and Starbucks express, and the provision of highspeed wi-? internet access (Hota, 2008). Notably, Schultz acknowledges that the company’s focus has been more on expansion than on customer service – the very thing that was at the heart of its unique value proposition. 44 P. G. Patterson et al. / Australasian Marketing Journal 18 (2010) 41–47 Table 3 Competition in the Australian specialty coffee chain market (chains arranged in order of the number of stores operating in Australia). Number of stores in Australia Gloria Jean’s 500 Year established in Australia 1996 Business model Price of an espresso coffee (e. g. , ? at white, cappuccino) Regular $3. 25 Small $3. 25 Standard $3. 40 Regular $3. 40 Small $3. 10 Tall $3. 60 Performance highlights and lowlights Franchise Overall Winner, 2005 Franchisor of the Year Sales rose 18% to an estimated $240 m for 07/08 driven by new stores and growth from existing stores The fastest growing cafe brand in Australia and NZ Number of stores up from 60 in 2002 Winner, 2008 Food Franchisor of the Year The number of stores reported here includes NZ Plans to open more sites McCafe Coffee Club Wild Bean Cafe 488 220 105 1993 1989 2004 Some store-owned, some franchise Franchise Part of a franchise with Wild Bean Cafe (BP) Connect Franchise Store-owned Hudson’s Starbucks 45 23 1998 2000 Plans to expand store numbers by 20–30% 08/09 Prior to closures in August 2008 there were 84 stores had a perceived lower quality product Sources: Various company reports as at the end of 2008. However, it seems that these measures were too late for the Australian operation. On 29th July 2008, Starbucks announced that it would be closing 61 of its 84 Australian stores (i. . , 73%) by August 2008, resulting in a loss of 685 jobs. All of these stores had been under-performing (8 were in SA, ACT and Tasmania, 28 in NSW, 17 in Victoria and 8 in Queensland). This decline of Starbucks in Australia was not as sudden as many would have us believe and in fact some reports (Edwards and Sainsbury, 2008; Shoebridge, 2008) indicated that by late 2007 Starbucks already had: accumulated losses of $143 million; a loss of $36 million for that ? nancial year; lost $27. 6 million the previous ? nancial year; loans of $72. million from Starbucks in the US; was only surviving because of its US parent’s support. Whilst the troubled economy might seem an easy scapegoat, with people tightening their belts and eating out less, it is unlikely that this was the core problem as evidenced by the continuing growth of their competitors. Indeed, coffee is no longer considered a luxury item by many Australians, but rather an affordable part of their daily routine. Instead, there is substantial evidence to suggest a number of factors combined to bring about Starbucks’ demise. . 1. Starbucks overestimated their points of differentiation and customer perceived value of their supplementary services ‘‘I just think the whole system, the way they serve, just didn’t appeal to the culture we have here† Andrew Mackay, VP of the Australian Coffee Traders Association, in Martin (2008) Whilst there was initial curiosity and hype about Starbucks, after trying it, many Australians quickly found that it failed to offer a particularly unique experience that was not offered by other chains or cafes. Given the strong established coffee culture and discerning palates of Australians, the core product – coffee – was not seen as particularly different from, say, a latte or short black from a good suburban barista, Gloria Jean’s or Coffee Club. Its point of difference in Australia, where a coffee culture already existed, had to be in its supplementary or value-adding services – i. e. , its unique servicescape, engaging customer service, brand image and so on (Lovelock et al. , 2007). But was this worth a premium price, especially as the competition began replicating Starbucks in-store experience? Starbucks has since been harshly criticised by Australian consumers and the media. Their coffee has been variously described as ‘a watered down product’, ‘gimmicky’, and consisting of ‘buckets of milk’. These are not the labels you would choose to describe a coffee that aspires to be seen as a ‘gourmet’ product. It has also been criticised for its uncompetitive pricing, even being described as ‘‘one of the most over-priced products the world has ever seen† (Martin, 2008). Even the idea of the third place has come under criticism – ‘‘why would you want to sit around a pretend lounge room drinking a weak and expensive coffee when you can go around the corner and have the real thing? † (Wailes, 2008). It seems that Starbucks’ rapid expansion, its omnipresence, somewhat standardised store design and recent insistence on staff achieving various sales KPTs (key performance targets) such as serving ‘x’ customers per hour, all combined to diminish the instore experience. The introduction of sales targets for front-line These closures saw 23 stores kept open in prime locations in Sydney, Melbourne and Brisbane. But this begs the question: can a 23-store chain be viable for the brand in the long-term? Based on the approximate numbers in Table 3, Starbucks had a 6% share of stores in Australia before the closures; this has now fallen to a share below 2%. Even before the closures, Australasia represented only 1% of company sales (Table 2) and now the ? gure is expected to be much lower. This may not make much commercial sense as it will be dif? cult to achieve economies of scale in terms of marketing and purchasing, and such small numbers are totally out of step with the clustering strategy adopted in its strongest markets – the US, Japan and China. However, it could also be argued that with Starbucks’ strategy of global domination, it is unlikely that it will ever close its Australian business entirely. Whilst Starbucks’ management have been keen to suggest that ‘‘this decision represents business challenges unique to the Australian market and in no way re? ects the state of the Starbucks business in countries outside of the United States†, the US market has also suffered. By September 2008, 600 stores had closed (or were due for closure), with about 12,000 workers, or 7% of Starbucks’ global workforce affected (Mintz, 2008). It should be noted that the situation in the US has only worsened as a result of the global ? nancial crisis. 6. So what went wrong? Opinions abound as to why Starbucks failed in Australia. Our research suggests there is some truth to many of these opinions. P. G. Patterson et al. / Australasian Marketing Journal 18 (2010) 41–47 45 employees, for example, meant staff and baristas had less time to engage with customers. It began to stray too far from its roots and the very values upon which the brand was built. Some of these actions were forced upon Starbucks by emerging competitors seeking to imitate the brand, and thus gain a slice of the ever growing lifestyle coffee market. Starbucks’ points of differentiation were systematically being eroded and, in a sense, the brand that taught the world that coffee is not a commodity was itself becoming one. 6. 2. Declining service quality The brand has also come under ? re for declining customer service as it continued to expand. For example, the quality of baristas is said to have declined as Starbucks widened its pool of applicants in order to meet demand at new stores. Can a 17 year old high school student really compete with a boutique trained barista with a passion for coffee? By not offering a better experience and product than emerging direct competitors, Starbucks found itself undermined by countless high street cafes and other chains that were selling stronger brews at lower prices and often offering better or equal hospitality. Whilst they may have pioneered the idea of a ‘third place’, it was an easy idea to copy, and even easier to better by offering superior coffee, ambience and service. Now, with so many coffee chains around, Starbucks have little point of differentiation, even wi-? internet access has become commonplace across all types of cafe. Furthermore, while customers were offered promotional rewards for returning to Starbucks, the card-based scheme is no more sophisticated than equivalent me-too cards at Gloria Jean’s, Coffee Club, Hudson’s and many independent cafes. And as noted earlier, one of the things that set Starbucks apart from the competition – i. e. , acknowledging customers (often by name for regulars) within a few seconds of entering the store and eriously engaging with them, began to unravel when Starbucks imposed both customer service and sales targets for its cafes. The imposition of these targets plus an ever widening range and complexity of coffees to remember and make to perfection, meant staff morale and inevitably customer service levels declined. In fact in the USA some staff were so disillusioned with the impositio n of sales targets (because it meant they simply didn’t have time to engage with customers) they posted blogs openly stating that Starbucks had lost its way. Finally, it appears that Starbucks were not even delivering on their core promise of serving superior coffee in comfortable surroundings, thus justifying its premium price. By switching to vacuum packaged coffee, consumers are denied the store-? lling aroma of the coffee beans. The switching of traditional coffee machines to automated espresso machines (which can make coffees 40% faster and move customers through the lines more quickly), has also resulted in a loss of ‘theatre’ (Grove et al. , 2000) for people wanting to see their coffee made that way and has also had implications for taste. In-store, it has been noted that there are fewer soft chairs and less carpeting, and Starbucks recently lost ground in the ‘service and surroundings’ category of the Brand Keys 2007 Customer Loyalty Engagement Index (Cebrzynski, 2008). It seems that Starbucks is now less about the quality of the coffee, and is more about the convenience of faster service and being on every corner – whilst still charging a premium. 6. 3. Starbucks ignored some golden rules of international marketing Ironically, it seems that the very thing that made Starbucks successful in the ? st place, its ability to adjust the original (European) business model and coffee tradition to local (US) conditions, is the thing that let it down. Whilst Starbucks has made minor changes to its menu in countries such as Japan and Saudi Arabia, it generally offers the same products all around the world. When the company came to Australia, it brought its ‘American’ offering, simply bringing wha t worked in the US and applying it here, without really understanding the local market. But with more than 235 ethnicities speaking more than 270 languages and dialects, companies wanting to get ahead in Australia need to be aware that they are not dealing with one homogeneous market. Unfortunately what worked in the US was ‘‘bitter, weak coffee augmented by huge quantities of milk and sweet ? avoured syrups. Not so much coffee, as hot coffee-based smoothies†. For the Australian consumer raised on a diet of real espresso, this was always going to be a tough sell (Mescall, 2008) As McDonald’s Australia chief executive Peter Bush noted, US retailers that have had trouble making it work in Australia (e. . , Starbucks, Denny’s, Arby’s, Taco Bell) are those that have ‘‘introduced formulae developed for US palates and for the US way of doing business . . . These formulae have, at best, modest relevance in Australia†. Peter Irvine, co-founder of Gloria Jean’s, also noted that ‘‘US retailers often arriv e in Australia thinking the size of their overseas chains and the strength of their brands in other markets will make it easy for them to crack the local market. Their focus is on global domination rather than the needs of the local consumers†. Further, there is a strong sense in Australia of buying local, supporting the community, having relationships with the people you buy from, and supporting ethically-minded businesses. Starbucks clashed completely with that, whereas local stores can differentiate themselves as being local and non-corporate. Furthermore, some would argue that Starbucks has become a caricature of the American way of life and many Australians reject that iconography. Many are simply not interested in the ‘super-size’ culture of the extra-large cups, nor want to be associated with a product that is constantly in the hands of movie stars. . 4. Expanding too quickly and forcing themselves upon an unwilling public In the US, Starbucks started in Seattle as a single store. In a nation bereft of a genuine cafe culture, that single store captured people’s imagination, and soon became a second store, quickly followed by a third. Before long, Starbucks had become a demand-driven phenomenon, wi th everyone wanting a Starbucks in their local area. McDonald’s grew exactly the same way in Australia, opening just one or two stores in each city – nowhere near enough to meet demand – thus creating an almost arti? ial scarcity, which created huge buzz around the brand experience. Krispy Kreme did the same. But when Starbucks opened in Australia, they immediately tried to impose themselves with multiple store openings in every city – adopting the US-model of expansion through store clusters. Australians were not given a chance to ‘discover’ it. As Mescall (2008) points out ‘‘they took key sites, hung huge signs, made us order coffee in sizes and gave the coffees weird names. Starbucks said to us – ‘that’s not how you drink coffee. This s how you drink coffee’†. They took the Coca-Cola strategy of being available wherever people looked, but this quickly led to market saturation. Their expansion di d not hurt their competitors so much as themselves, and they found themselves cannibalising their own stores. Furthermore, by becoming too common, the company violated the economic principles of cultural scarcity and the novelty wore off. By having too many outlets, becoming too commercial and too widely used, it began to lose its initial appeal of status and exclusivity. It began to have a mass brand feel, certainly not the warm feeling of a neighbourhood cafe. Furthermore, they became more reliant 46 P. G. Patterson et al. / Australasian Marketing Journal 18 (2010) 41–47 on less af? uent consumers who now, with a worsening economy, are spending less, making Starbucks more vulnerable to economic ? uctuations. 6. 5. Entering late into a highly competitive market ‘‘In America, Starbucks is a state of mind. In Australia, it was simply another player. † Barry Urquhart, quoted in Delaney (2008) From Day 1, Starbucks got off on the back foot. They lacked the ? rst-mover advantage they had in the US and Asia, ? nding themselves the late entrant in an already very developed, sophisticated and competitive market. Indeed, the competitive landscape in the Australian retail coffee market is very different to that of other countries. Here, Starbucks found themselves competing with hundreds of independent cafes and speciality coffee chains (see Table 3), where the coffee was generally better and the staff knew their customers by name. Signi? cantly, they were also the last of the major chains to gain a presence in Australia. 6. 6. Failing to communicate the brand Worldwide, Starbucks rarely employs above-the-line promotion, and this was also the case in Australia. Instead, they maintained that their stores are the core of the business and that they do not need to build the brand through advertising or promotion. Howard Shultz often preached, ‘‘Build the (Starbucks’) brand one cup at a time,† that is, rely on the customer experience to generate word-of-mouth, loyalty and new business. But in a market as competitive as Australia, with a consumer whose palate is discerning and whose loyalty often lies with a speci? barista, advertising and promotion was essential to communicate the Starbucks message. The issue is not so much about building awareness – which, at 90%, is high – but to communicate what the brand means and to give consumers reasons for patronising Starbucks. Their lack of advertising made this branding issue even worse, with many people unable to articulate why they should be loyal to Starbucks. At the same time, competitors were communicating their messages very effectively – McDonald’s, for instance, is a heavy spending, award-winning, advertiser in the Australian market. Added to which, more subversive counter-messages were coming from those who saw in Starbucks a ‘brand bully’ riding rough shod over the nuanced tastes and preferences of local cultures (Klein, 2000; Clark, 2008). In other words, a range of strong contrary messages were undermining Starbucks’ own very limited communications. 6. 7. Unsustainable business model Starbucks’ product line is limited primarily to coffee. Sometimes a new product idea will be developed, such as the Frappucino, but these tend to have limited product life cycles and/or are seasonal. For example, the Frappucino has traditionally made up 15% of (summer) sales, but recently sales have been down, suggesting that customers are already bored with it (Kiviat, 2008). Furthermore, in the instance where other products were offered, people failed to purchase them as they only really associate Starbucks with coffee and generally seek food elsewhere. This is a very different model to The Coffee Club which has much more of a cafe feel to it, or McDonald’s which has a full range of breakfast and lunch/dinner items that can be complemented by a McCafe latte. Hence the average transaction value at Starbucks is lower than its competitors, and therefore more customers must pass through its doors to reach the sales and pro? t levels of its competitors. It also creates con? ict with the Starbucks ethos of the third place (and allowing people to sit around for 30 minutes sipping lattes and reading, talking or sur? ng) versus the need to get people in and out quickly and not take up valuable ‘real estate’ (which in itself means that the average Starbucks store needs to be much bigger than the average cafe). Unlike most of the other retail coffee chains, Starbucks does not use a franchise model, preferring to lease and ? t-out its own outlets. This means more cash is being spent upfront, and in Starbucks’ case, more debt accrued. But adopting a franchise model would have numerous other advantages than just minimising this. It would mean that local investors, with a good sense of the local market, put their own money into the business and take an active role in running it and shaping its direction. 7. What are the main lessons from this case study? Several key lessons emerge that should be of interest to both domestic and international marketers. 7. 1. Crossing international borders is risky and clearly Starbucks did not do their homework, or ignored their homework Well conceived market research involving both primary and secondary data, including qualitative and quantitative approaches, would have uncovered the extent of the ‘coffee culture’ that existed in 2000 when Starbucks entered the Australian market. It seems inconceivable that Starbucks management, or at least its Australian representatives, were not suf? iently apprised of the extent to which many consumers were already well acculturated in terms of buying and consuming European styles of coffees such as short black, lattes and cappuccinos, nor the extent to which many customers were in fact loyal to their suburban cafe or competitive brands such as Gloria Jean’s. As a late market entrant, Starbucks clearly failed to do thorough homework on the mar ket before entry – this is a failure in terms of due diligence. Alternatively, they chose to ignore the messages that were coming from any due diligence that they had undertaken. This may or may not have been due to some arrogance on the part of Starbucks, or due to the fact that they considered they had a strong global brand which would meet with universal acceptance. An example of where Starbucks did do its homework, and act on it, was in France when it entered that market in 2006, establishing a cafe in the middle of Paris. Research had clearly shown the American way of consuming and socialising over a coffee was an anathema to many French, so Starbucks held back from entering the French market and when they ? ally entered it was with great trepidation, expanding at a very slow pace and testing the market at every step. 7. 2. ‘‘Think global but act local† This familiar maxim in international marketing should be well understood. While Starbucks had brand awareness as a major global brand, it failed to adapt the product and the customer experience to many mature coffee drinkers in Australia. As noted earlier, all the evidence suggests that it simply tried to transplant the American experience into the Australian market without any adaptation. In particular, it failed to adapt either its core product or its supplementary services to create the intimacy, personalisation and familiarity that is associated with established boutique cafes in Australia. 7. 3. Establish a differential advantage and then strive to sustain it A question of strategy that Starbucks perhaps failed to address was, ‘‘Is our product differentiation sustainable in the long term P. G. Patterson et al. / Australasian Marketing Journal 18 (2010) 41–47 47 and does it continue to justify a price premium? As noted earlier, it can be argued that the core product in this case, that is the coffee itself, is essentially a commodity, and that Starbucks’ coffee, according to many consumers, was no different to the competition, and in some cases inferior. Then Starbucks’ points of difference clearly revolved around its brand image and supplementary services. It was these supplementary services, such as its unique servicescape and exce llent customer service, that they used to justify a premium price. However, as competitors (e. g. , The Coffee Club) quickly imitated the ‘Starbucks experience’ (i. . , their supplementary services, ambiance, etc. ), by providing premium coffee and an intimate casual experience, Starbucks’ value proposition began to fade. In other words, their key points of difference could be easily imitated and were not sustainable. Faced with this scenario, the onus was on management to re-fresh and evolve any lingering differential advantage that Starbucks might have had or, at the very least, give customers reasons to continue patronising Starbucks through its communications. 7. 4. Don’t lose sight of what made you successful in the ? st place As more and more competitors emerged, both individual cafes and chains such as Gloria Jean’s and The Coffee Club, competitive pressures forced Starbucks to impose rigid sales targets on their frontline staff including bar istas to increase store productivity. However, the imposition of these KPTs and the pressure to serve more customers more quickly meant that Starbucks forgot the very thing that made it unique in the early days, namely, to provide a customer experience in an intimate casual setting that set it aside from competitors. As more pressure was placed on staff to have higher throughput, this meant that baristas and other employees had little time to engage with customers. In other words, Starbucks forgot about the very things that made it unique in the ? rst place. This is akin to the Wheel of Retailing hypothesis (Hollander, 1960) where a no-frills retailer gradually moves upmarket in terms of variety of product, price and more services and within several years ? nds itself competing with the more established premium supermarkets that were the very competitors that they tried to distance themselves from in the ? st place. The only difference with Starbucks is that it reversed the direction of the Wheel – by gradually moving downmarket it brought itself into direct competition with cheaper operators and lost sight of what made it successful in the ? rst place. 7. 5. Consider the viability of the business model It has to be questioned whether the Starbucks’ business model is viable in the l ong term, or even the medium term. A business model that uses a premium price to justify the excessive ? or space and elaborate servicescape, and allows customers to sit in this environment for an hour sipping one latte, has to be questioned. Given that Starbucks do not have the array of products that, say, a McDonald’s might have and, as documented earlier in this case, therefore do not generate the same sales volumes and revenues, it is hard to see how the Starbucks’ model is ? nancially viable. 8. Conclusion In summary, it appears on all the evidence that Starbucks not only misjudged the Australian coffee culture but also misjudged the extent of the competition, and failed to adapt its offering to the local market. Furthermore, with the advent of high quality barista training, the availability of premium coffee beans and the technology to produce a high quality cup of coffee (at a modest cost), sole operators who knew their customers by name, were able to set up business as viable competitors. Starbucks may have been responsible for growing the premium coffee category, but the emergence of Gloria Jean’s and the Coffee Club (and McCafe, a premium coffee shop embedded in McDonald’s restaurants) turned out to be serious competitors. Finally, questions have to be raised about Starbucks fundamental business model in a market where many small niche players can easily replicate the ‘Starbucks Experience’. References AustralAsian Specialty Coffee Association, 2006. Australian Coffee Market: Key Facts for 2006. Australian Bureau of Statistics, 2008. Cafes, Restaurants and Catering Services, Australia, Report 8655. 0 for 2006–07. Bawden, T. , 2008. Starbucks reports ? rst loss in 16 years. Times Online, 31 July. (accessed 15. 08. 08. ). BBC News, 2006. China central to Starbucks growth. BBC News, 14 February. (accessed 29. 08. 08. ). Browning, E. 2008. Starbucks hopes growth abroad will save its bottom line. ABC News, 31 July. (accessed 29. 08. 08. ). Burritt, C. , 2007. McDonald’s challenges Starbucks with cheaper lattes. Bloomberg, 11 September. (accessed 29. 08. 08. ). Cebrzynski, G. , 2008. Starbucks-dominated category wakes up and smells McD’s espresso rollout. Nation’s Res taurant News 42 (3), 1–6. Charles, E. , 2007. In the trenches: Coffee. In the Black, May, 28–31. Clark, N. , 2008. Starbucks: The brand we love to hate. Marketing, 2 April. Coleman-Lochner, L. , Stanford, D. D. , 2008. Starbucks reports ? rst loss since 1992, predicts slower growth. Bloomberg, 30 July. (accessed 29. 08. 08. ). Delaney, B. , 2008. Starbucks to go. Guardian, 30 July. (accessed 29. 08. 08. ). Edwards, V. , Sainsbury, M. , 2008. Weak coffee and large debt stir Starbucks’ troubles in Australia. The Australian, 31 July. Euromonitor, 2006. Starbucks Ups Expansion Plans. Euromonitor International. Euromonitor, 2007. Starbucks Corp – Consumer Foodservice – World. Euromonitor International. Euromonitor, 2008a. On-trade Watch: Identifying Key Growth Markets to 2012. Euromonitor International. Euromonitor, 2008b. Company Watch: Starbucks Wakes Up and Smells the Coffee. Euromonitor International. Euromonitor, 2008c. Coffee – Australia. Euromonitor International. Euromonitor, 2008d. Impulse Food and Drink Channels – Coffee – Australia. Euromonitor International. Grove, S. , Fisk, R. , John, J. , 2000. Services as theater. In: Swartz, T. , Iacobucci, D. (Eds. ), Handbook of Services Marketing and Management. Sage Publications, CA, pp. 21–35. Hollander, S. , 1960. The wheel of retailing. Journal of Marketing 25 (1), 37–42. Hota, M. , 2008. Starbucks: brewing more than just coffee. European Case Clearing House (ECCC), 508-025-1. Karolefski, J. , 2002. Conquering new grounds. BrandChannel, 11 February. (accessed 29. 08. 08. ). Kiviat, B. , 2008. Wake up and sell the coffee. Time South Paci? c (Australia/New Zealand edition) 7 (13), 52–56. Klein, N. , 2000. No Logo. Flamingo, London. Lee, H. , 2003. Japan: a nation of coffee lovers. Euromonitor International. Lee, H. , 2004. Coffee brews a future in China? Euromonitor International. Lindhe, J. , 2008. One skinny cap to go. Business Review Weekly, 7 August. (accessed 15. 08. 08. ). Lovelock, C. , Patterson, P. G. , Walker, R. , 2007. Services Marketing: An Asia Paci? c and Australian Perspective. Pearson Education, Singapore. Martin, S. , 2008. Starbucks: a study in liberal failure, Part II. Conservatism Today, 29 July. (accessed 29. 08. 08. ). Mescall, J. , 2008. Starbucks in Australia: where did it go wrong? Unleashed, 7 August. (accessed 29. 08. 08. ). Mintz, J. , 2008. Starbucks closing 600 stores in the US. International Business Times, 1 July. (accessed 14. 09. 08. ). Muthukumar, R. , Jain, S. , 2008. Starbucks suffers: Schultz returns. European Case Clearing House (ECCC), 308-152-1. Palmer, D. , 2008. Starbucks: what went wrong? AFN Thought for Food, 31 July. (accessed 29. 08. 08. ). Schultz, H. , Yang, D. J. , 1997. Pour Your Heart into It: How Starbucks Build a Company One Cup at a Time. Hyperia Publishing, New York. Shoebridge, N. , 2008. Local palate bucks another US retailer. The Australian Financial Review, 4 August. (accessed 15. 08. 08. ). Uncles, M. D. , 2008. Aroma Australia Pty Ltd goes to Japan. In: Schiffman, L. , Bednall, D. , O’Cass, A. , Paladino, A. , Ward, S. , Kanuk, L. (Eds. ), Consumer Behaviour, fourth ed. Pearson Education Australia, Australia, pp. 584–588. Wailes, N. , 2008. Taste of defeat for the mugs from Starbucks. Sydney Morning Herald 31 (July).

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Blade Runner And Fifth Element Cityscapes Film Studies Essay Blade runner greets the viewer with a fascinating opening scene where the camera hovers over a vast industrial mega polis called Hades. The year is 2020 and overpopulated Hades is trying to reinforce itself. The place is filled with corroded skyscrapers which shoot flame and gases into the environment creating a sense of hazy and polluted atmosphere. Also, in this shot and in subsequent shots flying cars, called spinners, are seen moving around the cityscape. The entire Hades cityscape was a forced perspective miniature set with larger miniature elements in the foreground which get smaller and smaller as we approach the horizon. Special photographic effects supervisor Douglas Trumbull and his crew constructed the whole set on a plywood table which was about 20 feet wide at the back and 5 feet wide in the front. The actual horizon on the screen is just 15 feet away from the camera. 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They were positioned carefully so that the camera could fly right in between creating depth. Another hurdle was creating the atmospherics in the cityscape. Director Ridley Scott wanted smoke and haze in the distant background to add to the drama of the whole scene. Douglas Trumbull created this effect using studio fans and smoke detectors. He first contained the set using black cloth all around it and set up the smoke detectors to trigger the fans. So when they fed smoke into the contained set, fans powered up and pushed the smoke around creating a natural progression of smoke in the environment. Describing his perception of the Hades cityscape, Mark Stetson states: I just had this scheme, I just wanted to do it as a series of silhouette and smoke. I wanted the smoke to really be the light and the light to light it up. Everything about that miniature had to be lights. The way light was used in this shot to create volumetric effects and reflections played a major role making it look real and credible. About 20,000 fiber optic cables (about 7 miles long) were used to light the Hades cityscape. The light cables were threaded up from beneath the plexi glass, on which the brass etched cutouts were mounted. They also mixed and experimented with a lot of interactive lights like axial, blinking, etc which created variety and helped improve the overall aesthetics of the shot. The flying cars (spinners) were a central impression throughout Blade Runner. Model maker Gene Winfield made four scale versions of the spinners, ranging from an inch to a gigantic forty-four inch long model, for different shots. Each model had its own light rig which could be tweaked to match the lighting of the shot. In order to integrate the cars into the shot, they had to shoot them as separate elements in four different passes and later on put them in using optical methods. Flying car model moves were created by Baker and McHugh using a Universal Hartland motion control unit. It is a hybrid method where they program simple motions like track and tilt and later on manually chart other controls such as pan, pitch, roll, etc. This enabled them to have a greater control over the placement and path of the move. For every spinner movement a corresponding matte was created to help composite it onto the environment. They created the mattes using front lit technique where the spinners were photographed as white shapes on a black background instead of vice versa. They shifted to the alternate in order to avoid the streaks caused by the motion control rig while shooting the mattes. discusses about the insertion of the spinners against the Hades cityscape: One of the most challenging aspects of the optical involvement was the insertion of spinners and other miniature elements into appropriately smoke-laden background plates-without having them come out looking like cutouts After great deal of testing and experimentation special photographic effects supervisor David Dryer got around this issue by generating a balance between the holdout and cover mattes. They are then lined up separately using the EEG system and fit onto the spinners onto the backplanes. In an establishing shot of New York cityscape in Fifth Element, female lead Milla Jovovich who was reconstructed from an alien DNA escapes from the lab and exits onto a narrow window ledge hundreds of floors above the ground. In consecutive shot, New York City in the year 2259 is portrayed as a towering urbanscape with huge buildings and heavy flying traffic. The lanes are parallel as if they were on a grid with old mid-fifties architecture all along and they extended until the horizon. states that Director Luc Besson vision was to show the 23rd century New York City in full detail and broad daylight unlike Blade Runner which is more dark. To produce this effect Special visual effects supervisor Mark Stetson used model photographs in conjunction with 2-D Matte paintings. Explaining about why they opted to not use computer generated imagery for the cityscape states that Mark Stetson states : We could have done it entirely in the computer but as large as Digital Domain is, with its several terabytes of disk space and hundreds of CPUs, there was still a practical limit. A totally CG New York would have been prohibitive in terms of time, storage space and processing power. 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They used a strong light source from one direction to mimic the sunlight which caused a lot of shadows on the other side. To minimize the effect, they had to use reflectors and spotlights to create an illusion of light bouncing back on the darker areas on the buildings. In order to add depth in the shot, they separated the cityscape into different parts with their respective mattes and then added atmospheric effects and made changes to the overall lighting. Also, they relied heavily on 2-D matte paintings to mix and create the effect of endless row of buildings which ultimately imposed depth in the shot. Flying cars were the crucial element in cityscape shot which left viewers in awe. Stetson initially planned to use miniatures for the effect. But due to development of technology, an effective CG pipeline was generated which allowed them to move to computer generated imagery. They first created primitive models of cars and rough patterns of the traffic flow to pre-visualize the shot. 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They used compositing packages (mainly Nuke, Flame, etc) to put together all the elements. Finally, color corrections and grading was done to complete generating the final imagery for the shot.