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Essay on International Business

   

Added on  2021-05-28

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ESSAY ON INTERNATIONAL BUSINESS Business Drivers 1.Economical factor:The economy of China is at the peak since it experienced a high growth in GrossDomestic Price which will cross the US GDP very soon. A lot of other factors whichentail in china growth are qualified and active labour, export more import less,improved technology, which grows urban areas potentially etc.SME gets encouraged while concentrating on the country growths as it suggests thatevery company add values. Due to the high population in china, labour cost isextremely low which provides an advantage to companies in many ways such as itprovide a benefit to international investors who are targeting this market.International investors make their income after investing in this market because theyenjoy readily available labour and a market for their products (Amadeo, 2020). Thecurrent status of the Chinese economy could have an impact on any SME which hitthe market. On the other hand, some issues that pose a threat and could lead to adecline of the economy are as follows:1.The current inflation rate has been increased.2.There are high prices of property in china which makes a difficult for investorsto buy property.Thus, the government is not taking any serious moves to control inflation ratehowever the central bank of Chinese has directed other banks to take less loanbecause the interest rate is very high and have no positive impact towards thedevelopment of UK SME in the country. In addition to this, the reserve requirementof commercial banks is now nine-time higher (Vanessa, 2020). Also, there is anotherelement that has control over the Chinese market is Trade Politics. The politics havemade it difficult for international companies to set foot in the market because of highimport duties. In context with UK SME, a high rate of inflation and a high price inproperties may affect the stability of a company in coming years. 2. Social Factor:The population of China is vast and it took a change rapidly based on demographicschange. It fluctuates in many ways which are the growth of population, age, familysize, values, change in behaviour, etc. The Chinese population varies in age andgrowth and this could affect preference and social values. Based on Hofstede’stheory, China has a collectivistic culture. China has strict rules and regulations which apply in the educational sector so theyhave an over 90% literacy rate. The economy of China has a huge population that

focused on e-commerce and they make their online shopping so easy for companiesto venture into the market to promote their products through digital networking sites(Rahman, 2020). Change in the population is helpful for companies because it opensmany opportunities to remain constant in the market. As the middle-class familiesare raising and china urbanisation is growing which increase the need for dairyproducts. The foremost factor which adds to the milk industry is the removal of theone-child policy. The culture of china is intensely tied in with its political communism.It means that goods are frequently regulated, and mostly the population is in thesupport of regulations (Farooq, 2019). Trade barriers and Trade theory Trade Theory:International trade theory assesses the effects of different trade policies.Comparative Trade Theory:It is a theory of international trade that reflects thecountry’s capability to manufacture products or services at lower opportunity costas compared to their trade partner country. For example, China and UK both areproducing UHT milk but UK has more capability to produce UHT milk at a lower costas compared to china. As a result, UK gets acomparative advantageto create andexport UHT milk to the Chinese market (Hayes, 2020). Trade Barriers:China has heightened the non-tariffs since the milk scandal had hit the country andleft many children sick and also it leads some dead. Consequently, it leads to thetighten restrictions which were to make sure that there were limited imports becausethe consumers lost their trust in local milk brands and they depended only on theimports (Chandra, 2016). Several trade barriers can be faced by UK SME whilegrowing their business in china is as follows: 1.Tariff Trade BarriersThe added charges on export to China are divided into three types:1.Value-Added Tax2.Consumption Tax3.General Custom TaxThe other tariff are the specific tariffs and this is an additional charge on a unit ofimported commodity and this could be added tax per litre of UHT milk exported tochina. Another tariff is an Ad Valorem tariff that is a percentage charged on entireproducts exported to china like15%tax is charged on all UK UHT milk (Imbruno,2016).2.Exchange Rate Controls:China makes it difficult for international companies to compete in their market because theyinfluence their exchange rate. They have a self-structured exchange rate which affects the

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