International Business: Expansion of CafePod Coffee Co. in China Market

This report discusses the internationalisation process of CafePod Coffee Co. in China market. It covers the rationale behind the decision, typical barriers faced by the organisation, and approaches for internationalisation.

International
business

Executive summary
International business is referred as cross-boundary transactions of business products and
services. International business facilitates organisation to expand business operations in other
country and gain higher profitability and sales objectives. In this report, chosen organisation is
Cafepod Coffee Co. that expands its business operations in China market. This report contains
introduction of organisation that is going to expand its operations at international level. There are
various barriers or challenges are faced by the organisation to internationalise business
operations in other country are discussed. Furthermore, approaches of internationalisation are
discussed in this report.

Table of Contents
Executive summary .........................................................................................................................2
INTRODUCTION...........................................................................................................................1
Analysis and discussion ..................................................................................................................1
Overview of organisation and the rationale for going international...........................................1
Critically discuss which country you would recommend them to enter and the rationale behind
the decision..................................................................................................................................3
Discuss typical barriers that will be faced as the organisation expands internationally.............5
Approach for the internationalisation process for the specified target market...........................7
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
International business is defined as the trade as products, services, knowledge, capital and
technology across national boundary. It includes cross-border commerce as well as transactions
between government and organisations in different countries. Organisations conducts their
business operations across borders with the objective of growth and development. It enhances
organisational customer base and profitability through selling products and services to other
country. In the process of international, organisation faces various challenges and barriers that
impacts whole business and its profitability. In this report, the chosen organisation is Cafepod
Coffee Co. which was established in 2011 and want to expand its operations in China
(CAFEPOD COFFEE CO., 2021). The report covers various reasons to internationalise business
operations in other country. Challenges or barriers that are faced by business in the process of
expanding business operations are mentioned. Furthermore, approach of internationalisation in
specific target market is covered in this project report.
Analysis and discussion
Provide a brief overview of the chosen organisation and the rationale for going international
Overview of organisation:
CafePod Coffee Co. was founded in 2011 by Peter Grainger and Brent Hadfield.
Headquarter of organisation is situated in London, in UK England. It produces and supplies
Nespresso compatible coffee capsule. Organisation aims to provide better quality coffee to its
customers that enhances their experience with brand. It delivers coffee to doorsteps of its
customers to bring happiness in their lives (CAFEPOD COFFEE CO., 2021). CafePod Coffee
Co. is an independent craft coffee business that provides quality coffee to its drinkers at home.
Organisational journey was started when its entrepreneur Peter was travelling in South America
for a year. He quit his job at the time of financial crisis and stumbled to coffee plantation as well
as an independent shop that produces Nespresso compatible capsule through utilising exciting
and unusual coffee. Peter observed that in retailing supermarkets of UK has lacked of excitement
and energy high street coffee shops. So, he decided to design range of exciting as well as strong
coffee blends to the coffee enthusiasts. CafePod Coffee Co. organisation provides its products in
supermarkets and through online retailing. It provides range of Nespresso compatible aluminium
Pods, Roast Whole Beans and Ground coffee to its customers.
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Rationale for going international
CafePod Coffee Co. conducts its operations in the country of UK and deciding to expand
its business operations in international coffee market to enhance market share and customer base.
Internationalisation of business facilitates to attain high sales and development objectives.
Coffee is the most consumable drink in the world, that facilitates CafePod Coffee Co. to expand
coffee business at international level. There are various reasons that are considered by the
organisation to expand business in other country are mentioned below:
 Entry into New markets
Taking business operations at international platform facilitates business to expand in new
market and gain new customer base. It helps organisation to increase sales revenue through
selling quality products to wide area of customers. Internationalisation of business facilitates to
expand business operations in market and grab opportunities. When organisation find no
opportunities in existing market place then it moves to international markets (REASONS TO
EXPAND INTERNATIONALLY IN 2020, 2021). CafePod Coffee Co. expands its operations in
the country of China market to new customers for its products. Through internationalisation,
business can provide its products and services to higher market and enhance the ratio of sales and
profitability.
 Gain Competitive Advantage
Expanding in international market facilitates organisation to gain competitive advantages
before its competitors. Internationalisation helps CafePod Coffee Co. to get saturated market that
have various growth and development opportunities. Organisation expands its business through
establishing coffee shop in china market (Benefits of international expansion, 2021). It provides
various advantages to organisations through become first mover in market before any
competitor. If there is no competitor is available then it enable business to cover high market
share and customer base.
 Get new talent
Internationalisation facilitates business to get potential employees who have skills,
abilities, talent and proper knowledge of market. It enables business to attain growth and
development objective in new market place. CafePod Coffee Co. gains various advantages
through appointing local employees from China who belongs from higher educational
background and advanced language skills. These employees help business to serve products to
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customers and persuade them to purchase organisational products and services. Organisation can
hire international employees for operating business operations with more efficiency and
effectiveness. Skilled employees enhance productivity and proficiency rate of CafePod Coffee
Co.
 Brings Diversity
Internationalisation of business operations bring diversity in business. If business only
conducts operations in home country then limits business potentiality to attain success. On the
other hand, internationalisation facilitates business provides various opportunities to expand it in
another country. If business faces downturn in local market, then having existence in
international market protect organisation during economic recession. CafePod Coffee Co. takes
decision to explore business in China that enable it to protect against various unforeseen events
such as economic recession.
 Business growth and development:
Internationalisation of business operations facilitates it to gain the objective of higher
growth and development. CafePod Coffee Co. enhances sales and profitability ratio through
serve coffee to higher customer base. Through providing quality products and services to
international customers at affordable price organisational can maintains brand reputation in
international market. Organisation also gain advantages of globalisation by gaining skilled,
talented employees and other resources at comparatively lower prices. Organisational
profitability and performance is enhanced with growing business at international level.
Critically discuss which country you would recommend them to enter and the rationale behind
the decision
CafePod Coffee Co. is recommended to expand business operations in the country of
China. Respective country is situated in East Asia. China plays important role in global economy
as a leader as well as provides investment opportunities to businesses. Respective country has
fastest growing consumer market and it is popular as second largest importer of products in the
world. In China market, labour and raw material is available at low prices that reduce
organisational cost and enhance revenue. Respective country has high growth rate that attracts
huge foreign investors. During and after the pandemic of covid-19, China is the only country that
has stable growth by 6.5% GDP in 2020. if market has stability and consumers has higher
purchasing power than it provide benefits to organisation to maintain continuous sales and
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growth. From above information, it can be stated that China has higher growth potentiality and it
provides stable platform to foreign businesses. There are some reasons that are considered by
the CafePod Coffee Co. to expand business in China. These reasons are mentioned below:
Favourable Government Policies
CafePod Coffee Co. selects China to expand business because its government develops
various rules and regulations that support entrepreneurs of home as well as foreign country.
Government of China supports new generation, offer subsidiaries and financial assistance for
business expansion and encourage innovations (Cohen, 2018De Grauwe and Ji, 2017). There are
clear and effective legislations and policies are formed by the government that are related to
investment, taxation and various other which helps business to run in efficient manner. As China
is the part of World Trade Organisation (WTO), so it reduces barriers to foreign trading system.
It formulates foreign trade laws to enhance international business in country. In august 2013,
state council of China has approved Free Trade Zone to promote foreign trade and investment.
Growth opportunities:
Expansion of business operations provides growth and development opportunities.
Government of China takes favourable decisions regarding international business. Minimum
trade restrictions and regulations facilitates CafePod Coffee CO. to conduct business operations
properly and analyse various possibilities of business expansion. Political environment and
economy of China is quite stable that promote foreign investment in country. Because of strong
economy it hardly faces recession condition that it beneficial for respective organisation to
expand operations in market place. After analysing these factors, CafePod Coffee CO. takes
decisions to start business operations in market place of China. Chinese economy growing at
very fast rate and respected country implement free-market reform in the year of 1979 to
enhance foreign trade and investment. It provides growth and development opportunity to
organisation in order to expand business operations.
Captivating Market:
Internationalisation is the process that facilitates business to offers its products and
services in another market place across national boundaries and attract new customers. It helps
business to enhance sales as well as profitability ratio. China has stabled and strong economy in
the world that have approximately 1.41 billion population. It facilitates CafePod Coffee CO. to
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serve its products to huge and stable market of China. Wide market and higher purchasing power
of customers are the reason of expanding business in the country of China.
Beneficial Entrepreneurial Environment
Chinese government developed various trade policies that are in the favour of
international business. It attracts CafePod Coffee Co. to expand business in the market of China
to attain the objective of growth and development. Entrepreneurial environment of China
facilitates respective organisation to conduct business efficiently and attain defined objectives on
time. In China various cities are top in technological infrastructure such as Beijing, Shenzhen,
Hangzhou and Shanghai. Business runs operations in these cities efficiently. CafePod Coffee
Co. organisation adopts new technology or coffee machines to produce better quality coffee at
affordable prices. It attracts customers towards brand and enhance profitability ratio.
Discuss typical barriers that will be faced as the organisation expands internationally
Expanding business operations at international level provides various growth and
development opportunities to business. There are various barriers are faced by organisation in the
process of internationalisation. Barriers directly impacts on business sustainability as well as
performance in competitive business environment (Iurkov and Benito, 2020). To conduct
business operations in other country, business faces differences in culture, language, trade
restrictions and policies. CafePod Coffee Co. considers all these barriers and challenges before
expanding business operations in other country. Some barriers in international business are
mentioned below:
Cultural differences and language difficulties:
Differences in culture as well as language is the factor that create challenge or obstacles
to business that expands its operations in another country. Before establishing business in other
country, organisational should identify which language is spoken in targeted country. If
organisational managers and sales persons are not able to communicate with customers than it
impacts on business reputation and leads customers towards dissatisfaction (Jain, Kuvvet and
Pagano, 2017). Gaps in communication with international suppliers resulted financial loss to
business. Differences in culture is the major barriers for CafePod Coffee Co. faces in
international business. Culture of China is different from UK in terms of tradition, preferences of
customers and food items. Respective organisation considers all these factors then provides
products to customers according to their taste and preferences in order to mitigate barriers. There
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are some cultural differences are found in China and UK such as Chinese society is about group
on the other hand UK prefer individualism. Environment of China is more friendly than UK that
create barrier in for CafePod Coffee Co. to operate business in China.
Currency rates
In international business, currency rates are fluctuating at fast rate that is the most
effective barrier impacts business operations. Before operating business at international level,
organisation should analyse these changes and create strategies accordingly. Continuous
fluctuation create difficulty for business to forecast profitability and sales ratio. Differences in
currency directly impacts business performance, profits and balances. In China, two types of
currencies are used such as Yuan and Renminbi. Both of currency have similar bank notes but
they are published under different ISO codes. ISO code of Renminbi and Yuan are CNY and
CNH. These currencies are used in country for national as well as international businesses.
Changes or fluctuations in these currencies impacts CafePod Coffee Co. profitability and
performance in China. Organisation has to convert its currency in Chinese currency to conduct
business operations. Fluctuation brings instability in business and impacts business operations.
Political Risks
Political instability and uncertainty creates risk as well as challenge to business which are
operating at international level. Emerging markets facilitates organisation to provide
opportunities of growth and expansion. On the other hand, it creates various barriers to business
as well. CafePod Coffee Co. conducts business operations in China so it analyses risk that
associated with political and economic environment of country (Liu, Adair and Bello, 2017). In
political environment of country, government has changed after specific period of time. New
government formulates new policies, regulations or modifies in existing one. It brings instability
in business and impacts its performance. Government of China imposes various restrictions on
online content as well as social media sites such as Facebook, You-tube and various others
(Challenges in international business, 2017). Chinese government do not allow its local business
to use these social media sites for promotional purpose that create barrier for business to conduct
business operations properly.
Foreign rules and regulations:
Every country has its own rules and regulations that may be different from others. In
international market, it becomes important to analyse rules and legislations of specific country
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before entering in it for business purpose. Business should evaluate tax implication of country
through navigating different trade laws as well as legal requirements (Manolopoulos,
Chatzopoulou and Kottaridi, 2018). Trade restrictions and taxation policies impacts international
business through reducing sales and enhancing cost. In China, lengthy administrative process is
used to get registration, permitting certificate and get license to establish business and start
operations. It creates barriers for CafePod Coffee Co. organisation to open coffee shop in China.
Respected country follows different labour requirements and employment laws that impacts on
organisational proficiency. CafePod Coffee Co. requires too much time and investment to fulfil
legal requirements to establish business in China. Administration, product approval and licensing
are the factors that impact on business. To respective organisation it is very biggest task to hassle
these regulations to success in Chinese market.
Supply chain issues:
In international business, supply chain across boundaries create challenge and barrier for
businesses. Import, export, shipping and logistics are the factors that takes too much time and
enhances complexity to business that operates their operations at global level. Break or delay in
such activities impact on business reputation and sales (Marano, Tashman, P. and Kostova,
2017). CafePod Coffee Co. faces difficulty in getting required raw material to produce high
quality coffee for customers due to lack of suppliers in country.
Approach for the internationalisation process for the specified target market
Internationalisation process is considered as the systematic approach that are used by the
business to expand operations across national boundaries or international level. In
internationalisation of business in specific targeted country, various approaches are implemented
to expand business operations. There are various approaches are used organisation to enter in
new geographical areas. CafePod Coffee Co. evaluate various modes to enter in international
market then chose appropriate one. Some methods of internationalisation are mentioned below: Exporting of goods and services: Exporting of organisational products and services is the
most common and efficient approach of internationalisation business in other country. It
is related to transportation of final products and services where they are manufactured to
another country. This method of expansion facilitates organisation to produce products in
home country with low cost and sell them at higher price to other country (Mukherjee,
Makarius and Stevens, 2018). It provides competitive advantages to the organisational
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and enhance profitability ratio. Business has control over production and other operations
that enhances operational efficiency of business. If expansion is not beneficial for
organisational or it bringing loss to business than it can exit that market easily.
Advantages: Exporting expands business market and reduce dependency on single market place.
It provides huge customer base and diversification opportunities.
Disadvantages: It requires high investment of produce quality products and services as well as
contains higher risk. Making direct investments: Business makes direct investment in foreign market for the
purpose of expanding business operations in international market. Direct investment is
related to investment in foreign business enterprise to expand business in particular
sector. It provides capital funding in exchange of an equity interest without purchasing
organisational share and stock. Organisation of a country operates its business operations
in another country is considered as foreign direct investment.
Advantages: Foreign direct investment enhance organisational capital flow and employment
opportunities to business. It increase organisational export and facilitates to gain latest
technology, financial tools and operational practices from all over the world that increase
production rate.
Disadvantages: Political changes impact the direct investment procedure of organisation and
contains higher cost. It impacts domestic investment negatively and local companies start losing
their interest in domestic products. Partnerships and alliances: When organisation is not ready to make direct investment in
foreign countries then it can prefer partnership and alliances. Structures and policies of
internationalisation alliances varies according to business goals as well as partners
(Muralidharan, Wei. and Liu, 2017). Partnership is the formation of company in which
parties are involved with the objective of sharing business profits and losses
proportionately. Whereas alliance is considered as the collaboration of existing business
without giving up own independent status. It is related to franchise agreement through
which local organisation purchase right to operate operations under foreign brand. In
partnership, business requires less investment to expand its operations in foreign country.
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Advantages: Partnership provides additional knowledge and capital in business operations that
enhances profitability and productivity rate of organisation. It requires less paperwork and it
contains less financial burden.
Disadvantages: In partnership, organisational members can not take decisions independently and
profits are being divided among all partners.
CafePod Coffee Co. is expanding its business operations in the market of China to attain
growth and development objectives. Respective organisation will consider direct investment
option from the above internationalisation approaches. Foreign direct investment facilitates
business to conduct operations in the market of china directly. It will facilitate business to
enhance customer base and profitability ratio. It helps business to remain its control in
organisational intellectual property. It will facilitate CafePod Coffee Co. to compete with local
business that are already serve their products and services in market. Respective organisation
will provide Nespresso compatible capsule of coffee that attracts coffee drinkers and enhance
organisational sales and profitability ratio. there are certain disadvantages also faced by the
organisation by implementing foreign direct investment as a method of expansion. It contains
high investment risk to business (Ratten and Tajeddini, 2017). Organisation will use horizontal
investment to expand business in similar product line such as CafePod Coffee Co. deals in coffee
in UK and it also provide coffee in China. It will help organisation to diversify its market and
generating higher profitability through providing products to international customers.
CONCLUSION
From the above report, it can be concluded that the concept of international business
plays important role in business growth and development provide facility to expand trading
products and services to other country. It facilitates business to enhance its reach towards new
customers and expand market share. CafePod Coffee Co. expands business operations in the
market of China to attracts more customers and enhance business sales. In the process of
internationalisation, business faces various barriers such as differences in culture, customer’s
preferences and regulations of government. Business uses various approaches of
internationalisation to expand business in targeted market of other country. Foreign direct
investment is the appropriate method of internationalisation that facilitates organisation operate
business in activities in foreign market.
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REFERENCES
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Online:
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CAFEPOD COFFEE CO..2021 [Online] available through
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