HookStarbucks conquered China and lost Australia
In August 2008 Starbucks closed 61 of its 84 Australian stores in a single announcement, retreating from a market it had entered just eight years earlier with accumulated losses reported at around A$105m. The same company, in the same decade, was building what became one of its most successful markets in China — thousands of stores, tea-based drinks on the menu, large lounges designed for family gatherings rather than grab-and-go commuters.
Same brand, same coffee, opposite outcomes. Australia already had a dense, Italian-influenced café culture built by post-war Greek and Italian migration; a better flat white cost less at the independent café on the corner, and Starbucks offered nothing locals were missing. China had no incumbent café habit at all — Starbucks was selling a new 'third place' between home and work, and adapted everything from menu to store size to get there. That contrast is the whole of 3.3: global demand is there for the taking, but only for companies that read the demand-side factors — culture, income, demographics — market by market.
MechanismResponding to global demand — glocalisation
The winning strategy has an ugly name: glocalisation — a global brand and supply chain carrying locally adapted products. McDonald's is the canonical case. In India, where it opened in 1996, there is no beef or pork anywhere on the menu; the flagship is the McAloo Tikki, a spiced potato burger, and kitchens run separate vegetarian lines because that matters deeply to a large share of customers. KFC, the first Western fast-food chain into China in 1987, serves congee and youtiao at breakfast and has grown past 10,000 Chinese outlets — several times its American estate.
The pattern extends far beyond food. Netflix commissions local-language originals — Squid Game in Korea, Money Heist in Spain, Lupin in France — because global demand is won locally: Squid Game (2021) became the platform's most-watched series ever, topping the charts in more than 90 countries. A global pipe, filled with local content.
The trade-off is real, and it is the evaluation point examiners want. Standardisation earns economies of scale — one product, one campaign, one supply chain. Adaptation earns local demand but multiplies costs: new recipes, separate marketing, extra suppliers, duplicated quality control. The art is choosing which elements stay global (brand, quality systems, logistics) and which go local (flavours, price points, portion sizes). Starbucks Australia failed partly because it adapted almost nothing; Starbucks China succeeded because it adapted almost everything except the logo.
MechanismGetting close to the customer — partnerships and relationships
Entering alone is not the only route. A joint venture pairs the global firm's brand and capital with a local partner's market knowledge and political access: Starbucks entered India in 2012 through a 50:50 venture with Tata, sourcing beans locally and navigating India's restrictions on foreign retailers. Licensing and franchising go further, renting the brand to local operators who carry the risk in exchange for most of the profit. The price of partnership is shared control — and occasionally a partner who learns the business and becomes a competitor: Danone's Chinese joint venture with Wahaha collapsed into open legal war in 2007 after the local partner built parallel businesses around the brand.
Relationships also mean people and price. Local managers read signals head office cannot; sponsorship of local teams and festivals buys legitimacy; and pricing structures must respect how customers actually buy. Unilever sells shampoo across rural India in single-use sachets priced at roughly one to two rupees, because that is the cash customers hold day to day — and sachets account for a very large share of Indian shampoo volumes. Same product, rebuilt price architecture.
ModelDemand-side factors — culture, income, demographics
Three families of demand-side factors decide whether a product travels.
Culture, religion and language: beef in India, alcohol across much of the Gulf, halal certification through large parts of Asia — and translation risk. HSBC reportedly spent around $10m rebranding in 2009 after its 'Assume Nothing' campaign was translated in several countries as 'Do Nothing'. Colour symbolism, humour and gift-giving norms all shift meaning across borders; promotion that charms one market can insult another.
Income levels: not just averages but distribution and price points. A £3.50 latte is an everyday purchase in Manchester and a luxury in Manila; firms respond with smaller pack sizes, local value brands and sachet pricing rather than one global price list. Income also sets which VERSION of a category sells — in high-income markets premiumisation drives growth, while in low-income ones the battle is fought at the entry price point, pence at a time.
Demographics: Nigeria's median age is about 18; Japan's is about 49. The same categories — gaming, baby products, retirement savings, healthcare — face booming demand in one and shrinking demand in the other. A global firm is really a portfolio of demand curves at different ages and incomes, and the skill is matching product to curve rather than exporting the home market's assumptions.
DataOne burger, many prices — what the Big Mac index reveals
The Economist's Big Mac index prices an identical product in dozens of countries as a light-hearted test of purchasing-power parity — and a serious lesson for global pricing. If one global price ruled, a Big Mac would cost the same everywhere once converted. It never does: local wages, rents, competition and tastes set local prices, which is why McDonald's varies prices — and products; India's Maharaja Mac is chicken — market by market. For a global company the index is a standing reminder that revenue models must be rebuilt for each market, not translated.
In July 2023 a Big Mac cost about $5.58 in the United States and about ¥25 in China. Implied purchasing-power-parity rate: 25 ÷ 5.58 ≈ ¥4.48 per dollar. The actual exchange rate at the time was roughly ¥7.2 per dollar, so at market rates the Chinese Big Mac cost about 25 ÷ 7.2 ≈ $3.47 — some 38% below the US price ((5.58 − 3.47) ÷ 5.58 ≈ 0.38). Measured this way the yuan looked 'undervalued' by roughly the same margin. The pricing lesson: Chinese consumers pay far less for the identical product because local incomes and local competition demand it. A firm that exported its US price list to Shanghai would be pricing for customers who are not there.
VocabularyKey terms the mark scheme pays for
TrapsMisconceptions that cost marks
ExamWhat examiners want
3.3 questions in Paper 3 usually hand you a named firm entering a named market and ask you to assess its approach. Anchor every answer in the standardisation–adaptation trade-off: economies of scale on one side, local demand fit on the other, with the judgement depending on how culturally sensitive the product is — food and media are high; cement and jet engines are low.
Name real cases — the McAloo Tikki, KFC's Chinese breakfast, Tata Starbucks, Starbucks Australia — and quote a number where you can (61 of 84 stores closed; 10,000-plus KFC outlets in China). The discriminator at the top level is explaining WHY a factor matters for THIS firm: demographics for a toy maker, income distribution for a premium brand, religion for a meat product. A generic 'cultural differences matter' paragraph sits at level 2 no matter how elegantly it is written.