International Business: Business Drivers, Trade Barriers, Ethical and Social Issues

This report explores the business drivers, trade barriers, and ethical and social issues in international business. It discusses the impact of political, economic, social, technological, environmental, and legal factors on the business activities. The report also covers strategies to deal with competition, new entrants, suppliers, customers, and substitute products. Additionally, it examines the trade barriers imposed by China and highlights the ethical and social issues in the industry.

International
Business

Table of Contents
INTRODUCTION ..........................................................................................................................4
TASK...............................................................................................................................................4
Business drivers..........................................................................................................................4
Trade barriers..............................................................................................................................7
Ethical and social issues..............................................................................................................8
Cultural factors..........................................................................................................................10
Methods of expansion...............................................................................................................11
CONCLUSION .............................................................................................................................13
REFERENCES..............................................................................................................................14

Executives-summary: From this report is analysed from the below report that
international business is the trading of goods, services, knowledge and capital to across of
national border. Organisation which provides its product at global level analysed whole country
situations and environmental conditions as well in order to take various competitive advantages.
There are various trade barriers, cultural factors and ethical as well as social issues are raised that
affect the business activities and functions effectively, all these factors must be determine
appropriately.

INTRODUCTION
International business is defined as the situation in which organisations provide its
product and services across the country's border (Clark, Li and Shepherd, 2018). Transaction of
various economic resources such as capital, people as well as skills for the purpose of enhancing
international production of various physical products and services like finance, construction,
banking and insurance service globally. International business is also termed as the globalisation.
In this report the chosen organisation is Saputo Dairy UK which is founded in 1981 that is
British leading company. Headquarter of company is situated in United Kingdom. UHT milk
(Ultra-high-temperature) is a food processing technology that is used in the sterilizes liquid food
by heating it above 135 degree Celsius. Respective process is implemented to kill bacterial
endorses. UHT is related to the production of milk production, but the process is also used in
fruit juice, yogurt and cream soy milk also. UHT milk was firstly developed in the 1960. The
demand of UHT milk in China is very high as the revenue of dairy market is 359.041 billion
yuan in 2017 as well as the consumption rate also too high (Cohen, 2018). In this report external
environmental factors, trade barriers and various models are being covered.
TASK
Business drivers
Business drivers are referred as the activities that affect the operational as well as
financial result of organisation. There are various business driver factors that affect the growth
and development of organisation. It is very complex process to identify the factors that drive
business activities. Various internal as well as external factors that affect the business process,
activities and fiction. So, organisation conduct proper analysis and research programmes in order
to take various competitive advantages as well as run business in smooth manner and ensure
sustainable growth. Pestle analysis and porter's five forces model is being used by the
organisation to evaluate their business drivers effectively. Dairy industry is the combination of
agriculture industry that deals in production, consumption as well as sale of products that are
based on milk like UHT milk, butter, cream and ice cream is the policy of China (Elia and
Santangelo, 2017). In competitive environment there are various external factors that affect
smooth running of dairy industry in other countries as well. PESTLE analysis of dairy industry is
following:

Source: PESTLE Analysis, (2017)
Political factors: There are various government policies, rules and regulations that affect
the Saputo Dairy company respective decisions effectively. To providing products and services
to other country political factors plays important role because the rules and regulations of trading
of every country is different. So analysation of political factors such as government regulations,
political stability and instability, foreign trade policies, environment lows as well as restrictions
and tax policies that affect the organisation to provide its UHT milk to another countries in order
to enhance its global reach.
Economic factors: Economic factor affect the Saputo Dairy company's purchasing power
in the whole economy of specific country. Milk is necessary product that is purchased by
customers without regardless of their cash positioning. All economic factors are referred as the
determinants of economic performance of respective country (Dranev, Frolova and Ochirova,
2019). In order to enhance international business with other countries effectively Saputo Dairy
organisation evaluate proper economic conditions that contain economic growth, inflation as
well as interest rate, income of customers, exchange rates that affect the organisational activities
Illustration 1: PESTLE analysis, (2017)

in direct and indirect manner and customers purchasing power as well as price of respective
products.
Social factors: Social factors are related to various dimension of environment that
represents the different aspects such as demographic characteristics, income distribution, health
consciousness, population growth rate and customers values within the organisation provides its
services. As Saputo Dairy provides its product of UHT milk to other countries like China, so
respective organisation has to evaluate all these social factors in order to target certain group of
specific customers. China evaluates all factors and apply them in organisational procedures
accordingly.
Technological factors: Technological factors such as innovation, automation and new
technologies of production affect Saputo Dairy company in favourable as well as unfavourable
manner. Various technological changes, research and development activities facilitate respective
organisation to create new methods of dairy product production and distribute them to different
countries (García-Sánchez, Suárez-Fernández and Martínez-Ferrero, 2019).
Environment factors: In the current competitive environment, environment factors are
very important that affect business effectively. Environmental factors become more important
due to scarcity of materials and rules that are set by government. Saputo Dairy organisation
consider climate and weather conditions, ecological aspects and changes that facilitates it to take
various sustainable competitive advantages.
Legal factors: Legal factors overlaps with political factors that includes various laws
such as employment laws, discrimination laws, copyright and patent laws, consumer protection
law as well as health and security laws that affect the business performance. Saputo Dairy
company follow al these legal requirements in order to conduct all business activities in smooth
and ethical manner.
Porter's five forces of model: porter's five forces model is referred as the process of
identifying as well as analysing industry's strengths and weakness and help the organisation
formulate effective corporate strategies. It is applied by the Saputo Dairy organisation to
understand competition level in industry and increase organisational long-term productivity as
well as profitability. This model provides necessary information about market competition and
condition so respective organisation prepare plans accordingly.

Competition among the industry: Number of competitors as well as their abilities affect
the functioning of business. Saputo Dairy organisation provides UHT milk in the market that is
similarly provided by other organisations also. It will affect business profitability level. In order
to deal with it, respective organisation have to implement various strategies such as promotions,
price cutting with compromising product quality facilitate the organisation to achieve high sales
and profitability.
Threat of new entrants: The power of respective organisation is affected by the new
entrants in respective market. Few barriers, cost and money attract new entrants to enter in the
market and get high market share that weakened the position of Saputo Dairy organisation. So, in
order to decrease this affect organisation implement various barriers and high cost to enter.
Bargaining power of supplier: Suppliers plays important role in the making effective
organisation competitive positioning (Porter, 2017). Saputo Dairy have range of suppliers that
provide it raw material and inputs at reasonable price. So, organisation is able to switch suppliers
with having lower switching cost. Hence, bargaining power of suppliers if low for the respective
organisation.
Bargaining power of customers: The ability of customers to drive the prices of products
and services affects the business profitability and productivity (Lee, and Geum, 2017). As Saputo
Dairy organisation provide its dairy products and services to the large area of customers so
organisation would not spend high amount to find new customers for buying its products. Hence,
there is low bargaining power of customers is exist.
Threats of substitute products: Substitutes of respective products and services that is
used by customers in place of organizational product enhance the threats. Saputo Dairy
organisation provide the dairy products that is also offered by the other organisations and
decrease the profitably ratio. So, there is high level threat of substitute products is faced by
respective organisation (Petersen, Porter and Miskowiak, 2019).
Trade barriers
Trade barriers are referred as the government policies that are related to imposing
restrictions on international trade. Trade barriers are the organisation in order to prevent the
organisation from actively trading. China government imposed various rules and regulations in
order to decrease the amount of imposts such as UGT milk from the Saputo Dairy organisation
of UK (Kolb, Fröhlich and Schmidpeter, 2017). China imposed various restrictions as well as

high fees to discourage the trading. There are various taxes such as tariff and corporate taxes are
imposed. These barriers are divided into two categories such as tariffs and non-tariffs barriers of
trade. Some of barriers are discussed below:
China Tariff trade barrier: Tariff is related to the essentially taxes or duties that are
imposed on specific imports and exports (Lagoarde-Segot and Paranque, 2017). Tariffs are
increasingly at world-wide level to the various countries in order to decrease the rate of import as
well as export from other counties that creates the high competition to the domestic products and
industries. In the UHT milk china imposed various taxes and other exercise duties in order to
enhance the trade of domestic products. On the luxury products china imposed high level tariffs
such as cars and other luxurious products. The respective country imposed the three type of taxes
to limit the imports and exports like value-added tax (VAT), general custom duties and
consumption that enhance the cost of exporting products and services.
Non- tariff trade barriers of china: There are various barriers related to the quantity or
quota of import and export in imposed by the government of china. These barriers are qualitative
limits on imported products in order to products of china from outsider impacts. In is basically
self-imposed regulation by the home country to the other countries that act as the barrier to
foreign firms. In current scenario the china government quota imposed is on the almost 40
different products. China government decided the amount of UGT milk quality that the country
can import during a specific period of time By applying the quota country prevent the respective
domestic customers to import goods in order to enhance the own countries products trade and
consumption as well. Licences are used in the non- tariff barrier of trade or entry.
Voluntary export restraints: Voluntary export restraints is imposed by the government
to limit the amount of specific goods and services that can be exported by the country within
defined particular timer frame. This is not provide any immediate benefits to the respective
company through imposing these barriers but it prevent the country from measurement of
another countries suffering from cheap products import. This is the part of the effective trade
negotiations between various countries and groups.
Exchange rates control: Exchange rates control is the effective tool to create barrier to
the trade. According to exchange rate controls government set the high rate to exchange the one
country currency to another. China implements the self-imposed exchange rates control policies.

This creates the effective barrier to trade because it restricts the involvement of foreign countries
in trading.
There are various uncertainties and opportunities are created by the implementation of
these rules and regulations that are imposed by the government to the another countries products.
As these barriers limits the import as well as export of products from other country (Luo, Zhang
and Bu, 2019). There are various uncertainties are raised that domestic customers do not take
advantages to products of other countries.
Ethical and social issues
Ethical issues are related to the issues that are encompasses by the business within
organisation according to various ethical standards. Ethical as social issue plays very important
role in the perform business activities at international level (Luo, Zhang and Bu, 2019). These
issues are properly evaluated by respective organisation attain organisation goals and objectives
in defined manner. Some Ethical and social issue are discussed below:
Working standards and conditions: Working standards and conditions issues of an
organisation is related to the paid work as well as the employment relationships. If organisation
contains the effective working standards and conditions according to employees than it facilitates
the Saputo Dairy organisation to enhance the performance level of employees and motivate them
to work with their full efficiency in order to achieve defined goals and objectives on time.
Working conditions includes various issues such as remuneration, work schedule, hours of work,
employees physical health as well as mantle demands at work place. Respective organisation
monitors all current trends, working time, work organisation and work life balance as well as
other emerging issues in order to create effective working environment and enhance sustainable
competitive advantages as well.
Work place diversity and equal opportunity: Work place diversity is referred as the term
that is used at the work place in order to includes employees with having various characteristics
like gender, age, physically abilities, education, language, ethnicity as well as culture (Workplace
diversity,2021). Saputo Dairy organisation enhance the work diversity in organisation in order to
increase creativity, problem solving, enhance profits, organisational reputation as well as
employee turnover (Merediz-Solà and Bariviera, 2019). Equal opportunities is referred as the
equal and fair treatment of work force within organisation regardless of their gender, disabilities,
religion and nationality.

Trust and integrity: Trust and integrity is the very important social as well as ethical
issue that must be followed by the organization to ensure its success with highly competitive
environment. Saputo Dairy organisation build effective relationship with its employees and
create trust and integrity for the organisation. This allowed employees to share their point of
views and effective suggestions that make organisational decisions more effective.
Corporate social responsibilities: The concept of corporate social responsibility is
referred as the mechanism that help the organisation to establish legal, social, ethical and
ecological standards effectively. CSR is the management concept in which organisation
integrates with various social as well as environmental concern to ensure the effective business
operations as well as interaction with respective stakeholder. It creates the balance between all
environment, economic and social factors. Corporate social responsibility is very important in
dealing with international level (Corporate social responsibility,2021). As the Saputo Dairy
organisation provides it UGT milk product in China market and ensure its product quality, price,
hygiene, efficiency as well as consistency to attract potential customers. Implementation of CSR
facilitates the respective market in enhance its public image as well as reputation, increase the
brand recognition and awareness in targeted market segments and provide sustainable growth
and competitive advantages than its competitors (Mukherjee, Makarius and Stevens, 2018). It
saves cost that helps the organisation to achieve all defines objectives within specific period of
time.
Cultural factors
Cultural factors is the combination of various factors such as moral values, traditions ,
beliefs, languages that are formulated by the nation or communities. and various laws Culture is
the most important factor that affect business functions, performance as well as profitability level
of organisation. There are various cultural dimensions of china that must be understand by the
respective organisation to run business efficiently. In order to provide product and services to
other country customers it is important to analyse all cultural situation of that particular country
to sustain in competitive environment. As Saputo Dairy organisation provide UHT milk in the
market of Chins so, it have to evaluate all cultural factors that affect the business activities and
profitability as well as conducting business in other country successfully. There are Hofstede's
cultural dimension theory is utilised to evaluate cultural factors that are discussed below:

Hofstede's cultural dimension theory: The respective framework is provide the deep
understanding about the differences of culture of various countries and also provide the direction
to business to conduct all activities at global level . Generally, it is the framework that
distinguishing thenational culture, cultural dimensions as well as access their impacts on
business. All factors are discussed below:
Power distance index: It is considered as the extent that is related to the inequality as
well as power that are tolerated. High Power distance index is defined as the culture that includes
the inequality and various power difference on the other hand, low Power distance index
indicates as the organisational structure that access the decentralised decision making and
participative management style. All factors must be evaluated by the organisation than
appropriate decisions are taken accordingly.
Individualism and collectivism: It referred as the degree at which various societies are
integrated with several groups as well as perceived all their obligations (Niendorf and Alberts,
2017). Individualism preferred to attain personal goals on the other hand collectivism is
important to achieve all group goals and objectives.
Long term orientation and short term orientation: These dimensions are related to the
time horizon. Long term orientation is related to the focus on achieving their long tern goals and
objectives with emphasizes persistence, perseverance on the other hand, shorty term orientation
is focus on attaining the defines short term goals (Qi, Roth and Wald, 2017).
Apart from these factors there are various other factors such as uncertainty avoidance
index, femininity and masculinity and restraint vs. indulgence. All these factors are utilise by the
respective organization to identify the cultural conditions of China in order to conduct all
business activities in effective and efficient manner. There are various other factors of China that
is determined by the Saputo Dairy organisation in order to conduct business effectively are
discussed below:
Methods of expansion
In order to deal with other countries, organisation conduct the various activities that
facilitates the organisation to provide its products and services at international level. As Saputo
Dairy organisation provide UHT milk to the china (Zhu, Freeman and Cavusgil, 2018). The
respective organisation adopt the method of export based internationalisation method to expand
business. There are various factors are evaluated and theories are implemented that provide it

wide range of information to make business successful. To expend business these international
expansion strategies are implemented that are discussed below:
Export based methods of internationalisation: It is the most common way to become
international by producing quality products to the domestic market and some of its proportion
export in the foreign market. Such as Saputo Dairy organisation providing its UHT milk in China
markets. Respective organisation using this method of expansion to provide its product sand
service to China. As organisation analyse the market and demand than analyse their requirement
before providing products. There are various strategies are implemented by respective
organisation such as indirect exporting, direct exporting of domestic products in the foreign
markets.
Non equity based international method: It is related to selling technologies as well as do
business in the form of contact, copyright, patents and trademarks. All these business need
licensing, franchising as well as other contractual methods of internationalisation.
Equity based internationalisation method: It is the form of international business to
invest physically to another country, this process is called as Foreign direct investment. Saputo
Dairy organisation use various methods to enhance its international business activities through
including joint venture, acquisition as well as merging with other firms (Riviere, Suder and Bass,
2018). Respective organisation include following strategic framework in order to provide better-
quality UHT milk in China market. All framework are discussed below:
Ansoff Matrix: The Ansoff matrix is determined as the strategic planning tool which
provide a effective framework to the executives, marketers and senior managers to implement all
strategies in effective and efficient manner. Saputo Dairy organisation use the respective
strategies in order to target potential market. These strategies are discussed below:

Source: Ansoff Matrix.(2021)
Market penetration: In this strategy business provide its existing product in existing
market place in order to enhance market share respective organisation decrease its product price
and enhance promotions to cover wide area of market.
Market development: According to this strategy Saputo Dairy organisation provide its
product such as UHT milk in new geographical countries like China to cover different market
segment. In order to provide better-quality products company use latest technologies and
methods as well. This is become the strengths to the organisation to provide UHT milk product
in China market. Respective organisation develops its product to provide it in different market in
order to fulfil all needs and demands. There are various modifications are done to meet
requirements.
Product development: According to product development strategy, respective
organisation creates new product and services according to requirement of customers and offer
then to existing market place and attract new costumers by publishing advertisement and
promotional activities (Yayla, 2018).
Diversification: In diversification strategy, respective organisation introduces in
offerings in new market place in order to enhance market share. In this respective strategy both
Illustration 2: Ansoff Matrix, (2021)

product as well as market development is required. Saputo Dairy organisation provide wide
range of products to the to the china market and various other countries.
Porter's generic model: The respective model facilitates the respective organisation to
determine its position in relative market as well as states various strategies to gain long run
sustainable competitive advantages. There are four strategies are defined like cost leadership that
help the organisation to become low cost producer within industry because of new technology
and process. Second one is differential that states that respective organisation provide quite
different product from its competitors that are valued by customers. Third strategy is focused
strategy in which Saputo Dairy organisation focus on specific market segment and serve its
products at comparatively low price with various differentiated features. It provide various
competitive advantages to the respective organisation to offer UHT milk product in China
market at low price.
Market segmentation and target market strategy: Market segmentation is referred as the
process of dividing a total heterogeneous market into smaller homogeneous market segment on
bases of various factors such as geographic, parapsychological and demographic parameters.
Saputo Dairy organisation choose divide the whole China market into different segments on
behalf above parameters and target the most effective and potential customers in order to provide
dairy product according to their requirements (Zhu, Zou and Xu, 2017). By the help of these
strategies respective organisation target most potential customers and provide them better-quality
product and services in order to gain various competitive advantages as well as ensure
organisational growth and development. On the other hand, it is quite difficult to select the
potential market and it needs lots of investment, time as well as efforts.
CONCLUSION
As per above report, it can be concluded that international business becomes important is
current environment to sustain in high competitive environment. Organisation choose various
strategies to cover potential international markets in order to enhance profitability level.
Diversification and product development help organisation to enhance its global market reach.
Globalisation plays the main role in order to enhance greater opportunities to international
business. International business is related to the trading goods, services, knowledge, technology
as well as capital across national borders also enhance trading to global and transactional level.
In includes concept of trading between two or more countries. Internal as well as external

analysis of country's situation is required to perform business activities globally. All strategies
and methods such porters generic methods and market segmentation help business to expand in
global market.

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