Expansion of Dairy Land in China: A PESTEL Analysis

This report discusses the expansion of London originated company Dairy Land in China through a PESTEL analysis. It covers the business drivers, trade barriers, ethical and social issues, and cultural preferences. It also provides insights on expansion methods. The report is relevant to international business and is suitable for students studying business courses. Course code, course name, and college/university are not mentioned.

International business
TABLE OF CONTENTS

TABLE OF CONTENTS..............................................................................................................2
EXECUTIVE SUMMARY-............................................................................................................3
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................4
Business drivers..........................................................................................................................4
Trade Barriers.............................................................................................................................6
Ethical and social issues..............................................................................................................8
Culture Preferences.....................................................................................................................9
Expansion Methods...................................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

EXECUTIVE SUMMARY-
This study will show us about the expansion of London originated company Dairy Land in
china, by identifying the key factors that are necessary to identify the business drivers with the
help of political, environmental, social, technological, economical and legal factor analysis
shortly known as PESTEL analysis also it will show the trade barriers that comes in between the
global trade, this report will also show the cultural preferences as well as ethical and social
preferences. Thus, the Chinese Market is suitable for the UHT milk for 3-11 years of age of
children from where the market will be able to get attracted towards the product and can enable
the growth of the company at higher level. Also, the report will include the trade barriers social
issues and significant factors (Brunt, Sanders, Ernste-Nota and van Soest, 2021)
INTRODUCTION
International business is also known as global business, it is the type of business which is carried
on outside the geographical boundaries of the country, internal business includes the three main
components- import, export and entrepot in which the import means purchase of goods from
another country, export means to sell the goods to another country and the entrepot means import
of goods from another country to export it to another country (Matović, 2020). This report will
discuss some international business factors in relation with the UK originated SME Dairy land, it
was formed in the year 2013 by Kashiq Razzaq and Mohammad shahid, the main idea behind
this firm is procurement of dairy products with superior quality this organisation sells milk,
yogurt, butter, cream and cheese. The current business is going to launch in Chinese market as it
is suitable for the product as the demand of UHT milk in Chinese market is developed from
where the business can be able to grow and develop at international level by adopting and
understanding some relevant information and strategies. However, the 75% of people demanded
the UHT milk products which describe the growth and development of the company (Khalid, and
Rahman, 2019). This report will discuss about the business driver for expansion of the firm in
china, trade barriers in the foreign market, ethical and social issues, cultural preferences and the
methods of expansion.

MAIN BODY
Business drivers
Conduction of trade theories like PESTEL analysis is so necessary to identify the key business
drivers.
PESTEL ANALYSIS
PESTEL analysis consists of six main factors for the analyse these factors are Political,
Environmental, Social, Technological, Economical and Legal factors, let’s see all these factors in
relation with Dairy land: -.
Political factor: - There are some political factors that has impacted Dairy land while expansion
is Governance system, Regulatory practices, Taxation policies, time scale and allocation of
governmental resources, political stability.
Governance system - the government body’s favouring towards the organisation is the best
advantage for a firm grow in a country, because of good superior quality goods being procured
by Dairy land and it’s very affordable for the person who are purchasing the products of the
company, thus by watching these factors the government of china is appreciating and giving
advantages to the company for expanding itself in china (Salazar-Cabrera, and Pachon, 2019).
 Regulatory practices - the current changes in the regulation of china due to covid have made
it very harder for any firm to enter the market also mostly times the government of china
doesn’t create competitors over the world they just appreciate their own companies.
 Taxation policies - Over some time the taxation policy of the country is befitting the Dairy
land by providing less taxes on the products as it satisfies the necessity of the child of the
countries, which has been resulted in the high profit as well as increase in the spending of
the firm on research and development.
Environmental factor: -These can be said as the factors that provide benefit to the environment
that doesn’t affect environment and the factors related to environment that can affect the smooth
running of business, these factors are as follows: -
 Looking at the factor at the particularly business in UHT milk in children school 3-11
years.
Recycling of the products is becoming norm not responsibility, and for that the Dairy Land have
make or follow up some regulations that are related to recycling of product like the polythene
bag recycling is necessary in China as the people doesn’t through the poly bottles or bags

anywhere, they submit it to the company’s outlet in the store for operating the scarcity of natural
resources or to give less harm to atmosphere. Thus, the UHT milk product will take care of the
sustainability and using the recyclable plastic and jute bag to contain the UHT products
(Santeramo, Lamonaca, Nardone and Seccia, 2019).
 Use of renewable technology can be said as the interesting area for the Dairy Land also
china is investing in the firm those are using renewable technology in their sector this can be
seen as very helpful for Dairy Land
 Extreme weather can be seen as the extreme factor that may affect the Dairy Land by
increasing the cost of operations.
Social factor: -Every society or country has its own culture according to which the business has
to run to stay in the cut throat market, some of the social factors are as follows: -
 Attitude - the attitude of the people towards the hygiene, safety and health is highly
appreciable as they only engage in the product or purchase the product that goes through
high level of safety inspections and quality checking as the Dairy Land product is highly
based on natural resources and is safe and hygienic is the best way to attract the consumers.
The UHT milk product is especially for the 3-11 years of age of children where it will help
them to not acquire the much fat products and can maintain their health.
 Societal hierarchy and norms - As in maximum countries there are groups divided according
to caste, colour, income of the people but in china there are not any groups between the
people’s which is the best thing for the Dairy Land, also the organisation must have to build
a team that is grateful in knowing the norms and behaviour of society so that the firm can
serve the consumer in much better way.
Technological factor: -Innovations are very necessary in any organisation, to run and attract the
customers in the business, there are so many ways that are affecting the Dairy Land, these factors
are as follows: -
The impact of spending of money on both micro and macro level in china is very high because of
Covid which can cause the scarcity of these products because of lack of human resource
(Bellmann and van der Ven, 2020).
 Innovation in the technology is disrupting the supply chain very firstly as the innovation is
giving access to the greater information to not only to the partners of supply chain but also to
the competitors.

 Decrease in production cost is the main factor that can impact the Dairy Land as the use of
new technology produces the product earlier than it used to be and it also takes less cost.
Economical factor: -This factor includes the conditions of the labour market, rate of exchange,
rate of taxation, rate of interest, rate of inflation etc. Some major economic factors in the brief as
follows: -
 Government interventions in the cycles of customer sector and in processing of particular
food may affect the Dairy Land in china
 The volatility in exchange rate of china can harshly impact the investment plan of Dairy
Land not only in short term but in long term too.
 The covid pandemic may cause the increase in the inflation rate making the production cost
higher and the products unaffordable for the consumers may result in decrease of sale and
affect the Dairy Land
Availability of core infrastructure is the good issue for company as the government helps at its
best during the establishment of great infrastructure as it directly concludes in the development
rate of the country or nation (Janssens, Havlík, Krisztin, Baker, and et.al., 2020).
Legal factors: -Factors related to legal environment affects a lot in the food processing sector of
any of the economy. Some of the laws plays a vital role in this factor these laws are data
protection law, property protection, time duration in providing justice, copyright law, system of
justice etc. Some of the major factor that affect the firm are as follows: -
 Employment law in china is the basic factor that can impact the organisation
 The UHT milk product is tested in the laboratory and allowed by the legal structure to sell
them in the Chinese market where the company is following all the legal practices and
guidelines in definite manner.
 Guides and law of environment, it includes the level of environment law and what does the
Dairy Land do to meet the requirement of this law.
 The country follows the business law of world trade organisation and Asian union.
Trade Barriers
Trade barriers are said to be the barriers that were induced by a nation’s government on
international or global market, the four types of trade barriers in the report are - natural Barrier,

Tariff Barrier, Non-Tariff barrier and Anti-globalisation barrier, let’s discuss all of these in brief:
-
 Natural Barriers - Physical or cultural impediments to trade might exist naturally. Even
while farming cattle in Argentina's relative warmth is less expensive than raising beef in
Siberia's severe winter, the expense of carrying the meat from South America to Siberia may
push up the price. As a result, one of the inherent impediments to international trade is
distance. Another natural trading barrier is language. People who are unable to properly
communicate may be unable to establish commercial deals or may send the incorrect items.
Tariff Barriers –A tariff is a levy levied on imported products by a country. It might be a price
per unit, such as per barrel of oil or each new automobile; a percentage of the items' worth, such
as 4% of a $300,000 cargo of shoes; or a mix of the two. Any tariff, regardless of how it is
calculated, raises the cost of imported goods, making them less competitive with domestic goods
(Kühn and Viegelahn, 2019). Imported goods are less appealing to customers than domestic
goods because of taxes. Protective taxes on imported poultry, textiles, sugar, and some types of
steel and apparel exist in the United States, and the Trump administration slapped tariffs on steel
and aluminium from most nations in March 2018. On the other side of the globe, Japan charges a
60 percent levy on American cigarettes, making them more expensive than Japanese brands. If
there were no taxes on cigarettes, American tobacco companies believe they could capture up to
a third of the Japanese market. They have less than 2% of the market due to tariffs. However, the
UHT milk products can get impacted by the tariff barriers as it will worth 3% of the product and
creates the competition in the market and transportation areas.
Nontariff barriers - Tariffs aren't the only instrument used by governments to limit commerce.
Import quotas, or restrictions on the amount of a certain item that can be imported, are one sort
of nontariff barrier. Setting quotas has the objective of limiting imports to a specified amount of
a given commodity. Quotas are used by the United States to safeguard its dwindling textile sector
(Munoko, Brown-Liburd, and Vasarhelyi, 2020).
 Anti-globalisation barriers - The anti-globalization movement is a global activist movement
that opposes capitalism's globalization. Anti-globalization activists are particularly critical of
capitalist globalization's undemocratic aspect, as well as international organizations such as
the International Monetary Fund (IMF) and the World Bank's advocacy of neoliberalism.
The Organisation for Economic Co-operation and Development (OECD), the World Trade

Organization (WTO), and free trade agreements such as the North American Free Trade
Agreement (NAFTA), the Free Trade Area of the Americas (FTAA), the Multilateral
Agreement on Investment (MAI), and the General Agreement on Trade in Services (GATS)
are all common targets of anti-corporate and anti-globalization movements (GATS).
Demonstrators strive to call attention to the often-disastrous impacts.
Ethical and social issues
Ethics means principle where an individual or a business requires understanding the importance
of the ethics and corporate social responsibility so that they can be able to conduct an effective
business at a place. Corporate social responsibility is a process or activity where an organization
is required to adopt the rules and regulations for the betterment of the internal stakeholders of the
company or practicing the activities to protect the natural environment and surroundings
(Beauchemin, Côté, Drolet, and Williams-Jones, 2021). To expand a business in international
market performing the sustainability and corporate social responsibility is important as it helps
and supports the organization and government to put the positive impact and can contribute the
best efforts and practices which will make the company and society to obtain effective results
(Amor-Esteban, García-Sánchez and et.al., 2018).
Even, many of the companies who expanded their business in international market focuses on the
social issue rather than obtaining the profitability and margins from which they can be able to
attract the maximum number of consumers and can increase the sales. As business expands
internationally, they are required to focus on other areas too not only vision, mission and goals.
They are required to focus on their ethics and social responsibility where these kinds of business
are mostly affected while expanding at international level (Karimi, Sultana, Babakan, and
Suthaharan, 2019). The company Dairy Land also should consider and understand the ethical and
social issues. There are different kinds of social issues raise such as outsourcing, working
standards, workplace diversity and equality, human rights and corruption and most importantly
environmental concerns. Conducting a business an individual is required to keep focus on these
areas and maintaining and following the CSR practices will help them to grow and develop their
business accordingly.
The mentioned business is required to create a proper and excellent management so that
they can deal with these issues in positive manner and can expand their business successfully
(Fatehi, and Choi, 2019). The main aim and purpose of the company is to provide the quality

product to the Chinese market and managing the workplace diversity by giving the equally
opportunity to the employee will lead the company to obtain profitability and high margins.
From delivering the quality product as UHT milk which will ensure the children’s good health
and can create a reputation in the international market. The company is also required to maintain
the environmental pollution from their business and practicing the sustainability at the
organization will help them to create a good image in front of the consumers and can obtain the
effectiveness in the Chinese market.
The UHT product which company wants to deliver in Chinese market is qualitative and
founded healthy as while manufacturing of these kind of milk products kills the microorganisms
and protects the body and human being. Even, in previous studies also it has been founded that
adopting the sustainability and ethics in the organization leads them to obtain the higher amount
of profit and can grow and develop their business in Chinese market successfully (Anwar, 2018).
Ethics or principles is important in every business sector or organization as it supports them to
manage their work process and controlling the corruption which will reduces the risk of getting
failed at international level and can grow widely.
Culture Preferences
Culture defines the people locality religion, traditions which impacts the business while
expanding it at international level. It is not the business is expanding internationally they also
across the culture. To run an international business successfully an individual organization is
required to respect each other cultures and increase the knowledge of the culture so that nobody
can disrespect the culture and tradition from which no dispute can occur (Klimova and Dubinka,
2019). Understanding the local people culture can manage the employee and can handle the risk
appropriately. There are different types of culture barriers takes place such as language,
behaviours and signs and symbols and much more (Souza, Melzer, Meira and Tanaka, 2019).
Many of the companies do not much aware of the cultural differences issues and launch
themselves in new market from which they have to struggle harder for conducting a better
management. Cultural differences create an issue starts which from the employee and
management roles.
For example, the mentioned business wants to expand their business in Chinese market
where they have to understand their cultural norms so that they can perform the business
accurately but if the company do not keep the focus on cultural areas then the diverse employees

will get an issue and creates a conflict between the management and employees (Phillips,
Schrempf-Stirling and et.al., 2020.). This conflict and issues can resolve when the company build
the workplace diversity management which will allow and ensure them to obtain the effective
result. It has been already known that each and every person has its own capability likewise, each
culture has its own identify and their followers from which implementing the workplace
diversity can support the business widely. Workplace diversity is the powerful and effective tool
which can enhance the creativity and inclusion and also can draw a high-quality global talent.
A diverse workforce encourages the fresh approaches to problem-solving and also reduces the
language barriers in cultural differences. Implementing the diverse culture at workplace will
support the company and an individual to understand each other beliefs and customs by proper
communication which can provide excellent outcome. Giving the equally opportunity to each
employee will reduce the conflicts and can increase the productivity (Orzuza, 2018). The
mentioned organization also can provide the effectiveness diverse training which will increase
the communication between each other and can put the efforts in making the workplace diverse.
Respecting each other culture and norms will create a positive feeling and can reduces the risk of
workplace conflicts due to cultural differences.
To expand the business widely in new market, they have to focus on the locality and its
business also a consumer behaviour which can help the organization to be aware of their customs
and religions and can adopt the localized approach (MELENDEZ, and GRACIA, 2019). A good
communication can reduce this kind of conflict at work place and can increase the productivity
and growth of the company in new market areas. Every country is different from each other
where the company Dairy Land which is based in London is also different from the Chinese
market where they have to expand their business has unique culture and religions. Culture
awareness can put the great impact on the business and also can increase the productivity in
effective manner. A good level of knowledge of the new market and their culture will impact the
business positively and can enhance the growth and development which will also influence the
consumer as well.
Expansion Methods
To run a business or an organization at international level there are many different methods and
strategies which they are required to implement and adopt so that they can be able to expand
their business appropriately (Aditya, Ferdiana, and Kusumawardani, 2020). International

expansion strategies are formal and multi-level strategic plans from which the business can be
grow quickly and definitely. Overseas business plans required to be focused and appropriate so
that they can be able to recognize the risk and can understand the utilization of the different
resources, timelines and expansion plans. The main purpose of expanding the business or an
organization is to increase their sale and can be able to build the good reputation in the new
market as a mentioned company requires to develop a business in Chinese market areas
(Doshmanli, Salamzadehand et.al., 2018). To expand a business in a new market the company
requires to adopt some expansion strategies and methods which includes three major subjects
which are described below:
Licensing arrangement: The term licensing arrangement includes the two organizations where
one company is having special permissions such as using patents and copyrights. In general, a
company gives a permission to manufacture their own product under their company so that they
can be able to increase their sale in cover of another reputable company. To run a business
internationally, most of the companies use this kind of licensing arrangement where they can be
able to obtain the beneficial results (Dal Mas, Tucker and et.al., 2022.). For example, in the
Chinese market a dairy firm who is already having a licensing of their own organizations where
the UK based company Dairy Land can sale their products under the own licensing Chinese
market firm from which they can increase their sales and can give rights to them to manufacture
the products by their name (Salvioni and Gennari, 2019). Adopting this, it decreases the risk of
getting failed at international market and can save or protect their reputation.
Mergers and acquisition: This factor or method includes the two companies to get merged from
which the financial transactions can be equally divided so that company can gain the profitability
in the market. Combination of two firms and organizations can build a good image in the market
or can develop and grow in the new market place (Klimova, Klimova and Dubinka, 2019). On
another side, if one company takeover another company than a company also can obtain the
profitability but requires a good knowledge and sense of marketing and consumer needs of a
specific market from which they can be able to acquire the market positions effectively.

CONCLUSION
The report has concluded the brief about the international business areas. To conduct a
business in new market globally requires to focus on different areas and can create an awareness
positively. The report has included the different areas of the business where a mentioned
organization wants to expand their business at new international market from which they can be
able to grow and develop effectively. It has included the different business drivers which impacts
the organization widely where pestle analysis has been performed I the report.
Also, while expanding the business at international level the company can face the
different trade barriers so that they are required to be aware. Along with this, it has mentioned
the ethical and social issues and its importance of international business area where by adopting
this can increase and develop the organization perfectly. Even, it has also mentioned the
significance of the culture norms which can affect the business sales. At last, the report has
performed the expansion methods from which the company can easily grow and develop them
and can increase their profitability in the new market.

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