International Business: Expanding into a New Market

This report discusses the concept of international business and its benefits. It explores the challenges and opportunities of expanding a business into a new market, focusing on the case of Rachel's Organic expanding into China. The report also highlights the importance of considering ethical and social issues in international business.

International Business

Table of Contents
Executive summary.....................................................................................................................................3
INTRODUCTION.......................................................................................................................................3
Business drivers behind company’s expansion into a given country.......................................................3
Trade barriers..........................................................................................................................................6
Ethical and social issues to be considered by the business.......................................................................7
Cultural preferences to be considered by the businesses..........................................................................9
Expansion methods to be chosen by company.......................................................................................10
CONCLUSION.........................................................................................................................................12
RECOMMENDATION.............................................................................................................................12
REFERENCES..........................................................................................................................................14

Executive summary
International business defines the buying and selling of goods and services, technology,
knowledge, language, value, customers etc. across the national borders. This helps in showing the how
the international business is useful to promoting the offering of the business on a global level and earns
a high amount of profits. This includes the various terms that help in showing the entry of new market
methods so that domestic company can place their existence on the foreign countries. It also helps in
enhancing the GDP of the country. this report has taken the Rachel’s organic that is one of the SME in
the UK and expand their business unit in the china that helps in earning the high profits and also faces
some problems at the time of expanding the business like language, customer perception etc. and to
deal with this company can focus on the various aspects that helps in enhancing the business units and
enjoys the high revenues with sustainability.
INTRODUCTION
International business refers to a process of trading of products, technology, services,
capital and knowledge across all over the world and outside the national boundaries. It
encompasses all the commercial activities that can be taken place to promote the transfer of
goods and services. This report is based on UHT milk in UK and china market. In UK it includes
Dairy UK, Lyburn farm makes, Nestle etc. In China DANONE Group, Parmalat, Arla foods etc.
The economy of china is based on centrally planned system and it is more market oriented
economy and it shows the second world largest in the nominal GDP. Its GDP growth is 6.6%.
This report is based on the contemporary issue that is involved in the international business. It
can also involve the global context that can be used in international business in the twenty-first
century. This project also involves the methods of entry into a foreign market. It may include
alternative theories of internationalization. Further it helps in giving the knowledge related to the
impact of multinationals on both home and host nations and evaluate data on a country markets.
It helps in enhancing the business units in all over the world and increases the market growth of
the company internationally(HOTEL, 2016).
Business drivers behind company’s expansion into a given country
Two significant business drivers for internationalization for UK- SME

Production of goods and services has been increased in the global world and due to which
many firms takes advantage of it by expanding their business in all over the world. There are
various drivers that is face by the companies when they internationalize their business. in this
small and medium companies face more drivers in internationalization. It can be discussed
below(Kolk, 2016).
 Competition - It is the main driver that is face by the firm at the time of
internationalization of business is competition. In this an action, behavior of a competitor,
their strategies and corporate capabilities, and how they create interdependence in the
geographical market. By evaluating all the facts and figures a firm can enter into the new
market. For example- Rachel’s organic is an SME in UK want to expand their business in
China. At this time they need to identify their competitors to enter into the China market
after that they operate their business. it helps in earning profits and market growth of the
company.
 Expansion of technology – It is a principle driver in the international market. Advanced
technology and the skilled labor force is the pulling factor of the business when they
operate their business in some other countries. Because of using advanced technology
company can connect with large people who attracts towards their products, who invest
money in the firm for exploring in the world. For UK SME firm it is very important
aspect to increase their business and expand in the China because China is the best
technology driver country in the world. For example- when Rachel’s organic, UK wants
to expand and operate their dairy business than they need to use advanced technology in
tier organization so that they will stay in the market for the longer term(Strange and
Zucchella, 2017).
Porter’s five forces factors with relevant trade theories
Porter’s five forces factors help in identify and examine the competitive forces that help
in shaping the industry weaknesses and strength. It includes five factors i.e. purchasing power of
buyers, purchasing power of suppliers, threat of a substitute and threat of a new entrant and
rivalry of a firm. All these factors helps in identify the situation of an industry in which a
company enter. It also includes the trade theories with porter’s five force factor in the below
explanation.

 Power of suppliers- This indicates the power of suppliers that its control over the
prices. If it contains high power than it affect the business profitability and its cost of
production. It is very important to lowering the power of suppliers because it helps the
firm to earn higher profits. For SME in UK it wants to expand their business in China for
this they examine the suppliers power in country if its is low than they purchase the raw
material from that and enhance their profits but if it contains high than they exports so
that it can lowers the cost and helps in enhancing the profits(Cravino and Levchenko,
2017).
 Power of customers – Consumers are an important source for every business. Customer
power affects the firm pricing and quality. If there are fewer consumers than they have
high bargaining power but if is less than it contains less power. For UK SME they open
an outlet in China firstly they examine the customer base it they have many customers
than they will enter into the market and enhance their revenues and market share. For
this they need much labor who can produce the product as per the customer demand and
it helps in earning more and more profits.
 Threat of new entrant- It is difficult to enter into the new market in a new country with
their existing product. For UK SME it is very essential to modify their products from the
competitors and then enters into the market. For this they need to identify the land, labor,
capital in that area where they operate their business because it is very essential to
examine this. It helps in enhancing the profits and revenues in a long term for the small
and medium size enterprise.
 Threat of a substitute – It is very essential to examine the substitute product in the
market where a UK SME establish their business. in this to remove this threat it is very
essential to modify their products that attract many customers at any price and it assist in
gaining more financial resources and market growth(Brannen, Piekkari and Tietze,
2017).
 Rivalry of a firm- This factors shows the intense competition in the market place. it
shows the existing competitors that was present in the market. For expanding their
business in China by a UK SME than it is very important to analyze the rival firms. This
will helps in reducing the competition and stay in the competitive market by knowing
their strategies. It is very important to understand and examine the competition on the

basis of various factors of production. This helps in earing more and more profits and
helps in longer sustainability in the market place.
Trade barriers
Trade barriers – It refers to a barrier that is imposed by the government of a country on
the flow of international products or services. it refers to a restrictions that is present on direct
overseas, delay investments or a potential to do a business. There are various trade barrier which
can be explained below.
Three trade barriers in UK – SME context
 Ethical issues – It is created when a decision, frameworks and scenario develops
conflicts in a society’s moral principle. In these ethical issues both an individual person
and a whole business is involved. It essentially involved customer trust and their
integrity. For successful business it is necessary to keep the consumer in faith. For
example – Rachel organic in UK is follows a proper business ethics of maintains the
relations and trust with customers than it will earns more and more profits with large
loyal customer base. And if they open their outlet in China then it is very beneficial for
them because it follows a proper business ethics which is very important for successful
run an sustain a business enterprise(Alcácer, Cantwell and Piscitello, 2016).
 Cross cultural - International business not only cross their borders but they cross their
culture too. Culture play an important role in doing a business globally and one can
influence on people thinking, their communication and how they behave. For example –
if a UK SME firm like Rachel’s organic can do a business in China then they need to
examine their culture, language, workplace etiquette, organizational hierarchy so that
they easily operate their and attracts large customers base this helps in earning more and
more profits.
 Competitors – It is an important element in trade barrier where a firm needs to identify
the competitors in an industry where it establishes their business enterprise. In context of
the UK SME they need to open their business in China market for this first they need to
examine the competitors base what products and services they offers to their customers
and by noticing all this facts they operate their business in China. It contains the high risk
for the new entrants.

Possible consequences if these trade barrier are ignored by the SME
If these trade barrier is ignored by the SME of UK than it faces a drastic loss and also
faces the bad image in the market. If it is ignored than they face high loss in the market share and
they cannot sustain in the market for a long run. if they ignored their culture than it will not
attract the customer base. If they cannot examine the competitors than it will affects its market
and share. So it is very important to examine the facts related to these barriers to enhance the
profits(Cantwell, 2017).
Business uncertainties
Due to the business uncertainties it is very difficult to operate a business and conduct an
enterprise very smoothly. In UK, because of Brexit occur it will create a uncertainty for the firm
to enter into the foreign market and enhance their business globally. Because of Brexit there are
many problems in dealing with foreign companies. Due to this uncertainty is surrounding in UK
economy and because of this economic condition is not stable in the country. This will create
hindrance in operating a business unit in a new market. It will also affect the SME in earning
higher profits and maintain their market growth.
Business opportunities
Internationalization gives the best opportunities for the business as they provide more
growth and good brand image in the market. It also helps in strong the economy of a country and
earns foreign investments. It also gives the employment to many people because of this
purchasing power of customer’s also increases. It also gives the working experience from other
country where a firm wants to establish their market. Capturing the business opportunities gives
advantage to an individual person, an organization and whole country economy(Buckley, 2016).
Ethical and social issues to be considered by the business
Importance of corporate social responsibility when operating internationally
Corporate social responsibility refers to a self-regulating business unit that helps an
organization to socially responsible about itself, stakeholders and public. It incorporates the
sustainable development of the enterprise and place a positive impact on social, economic and

environmental factors. It can be benefitted when a firm wants to operates their business
internationally. It can be explained below.
 Employment engagement - The main importance of the corporate social responsibility
is that it helps in engaging the employees within the companies. For this they need to
know the CSR policies of the firm so that they enjoy their working and it also enhances
the image of the enterprise. In this organization need to show the human rights they
follow that helps in attracting and retaining them for the longer term. For doing a
business on a global level it is very significant for the SME firm to follow a CSR strategy
because it increases the employment engagement(Narula and Verbeke, 2015).
 More benefits for employees – In this CSR policies company follows the range of
benefits to the employees at the workplace. In context of UK SME when they open a
business in a China market than it is very essential to provide a healthy and friendly
working environment according to the Chinese culture this helps in retaining the
employees within the company and its also enhancing the performance of an employees.
 Increased brand awareness and recognition – If an organization can committed
towards the ethical practices than it will helps in maintaining the brand image of the firm
in the long run. in context of the UK SME when they expand their business in China than
this practice is very helpful to attract many customers and create a awareness in the
people mind. They will attract towards the company products and it increases the profits
and sales.
 An advantage over competitors – If a business enterprise follows and adopts the CSR
practices than it is an effective aspects that gives the competitors advantage to the
organisation. For UK SME it is very essential to follow ethical practices of CSR so that
they will beat the competitors in the Chinese market. Because it helps the social and
environmental factors by not harming the resources of that was generated from social and
environmental factor(Buckley and Ghauri, 2015).
Relevant theory of ethics
 Bribery and corruption – It refers to that issues in which a person get an unearned
reward to influence someone else. To enter into the china market by UK SME it is not
beneficial to break the ethical practices because it decreases the image of the company. in

this firm can follow a Deontological ethics in which an organization do the right thing
and avoid the wrong thing that will create a bad image in the customers and employee
mind(López‐Duarte, Vidal‐Suárez and González‐Díaz, 2016).
 Labour issues – To solve this ethical issue UK SME could follow a normative ethical
theories where firm adopts the proper rules and regulations and set some standards and
principles on the basis of which business enterprise do their business. it is very important
ot resolve this issue because it helps in retaining the employees and increase their
performance so that they give productive results to them.
 Environmental issues – It is an essential to remove the environmental issues by reducing
the wastage from the resources. China is one of the best countries who can use the
resources very optimally to reduce this drawback and earns maximum profits by
optimally utilization of the environmental resources. So it will help in increases the
customer base. In this company can choose utilitarianism ethical theory where they
utilize whole resources in a best way that does not harm the environment and a people
who live in the society(Perri and Peruffo, 2016).
Cultural preferences to be considered by the businesses
Significance of culture within various activities associated with international business in
Chinese market
 Language – It is very important to understand the language of the country where they
operate their business. Language is the important source to clarify and gives their
thoughts. The language of UK is different from the language of china and because of this,
UK SME can understand the language of china so that they get connected towards them
and it will very beneficial to sustain in the market. Every nation has its own language and
they are very particular towards their language. Like China people focuses on Chinese
language and UK people can use British language. So it is very important to understand
and learn a language of China. It will attract many more customers and helps in earning
more market growth which is very important for international business(Boddewyn,
2016).
 Customer perception - customer perception is the core for every business. if a firm
produce those product for this customer has negative perception than it will not earning

the profits and also it cannot be sustain for a longer period. For UK SME it is very
important to know the customer perception of the Chinese people because it is different
from the UK people. So it is very essential to understand the perception, taste and
behavior of the customers. by research on this company can decide in what price a
company can sell their products. To know the customer perception firm need to
communicate the people where they operate their business so that they know what type of
products they used to prefer and according to that they can produce and sell it. It will
enhances the profits and revenues and also helps in longer survival of the
organization(Cumming and Zahra, 2016).
Expansion methods to be chosen by company
Identification the range of potential internationalization methods
 Acquisition – It refers to a purchase of one business by another organization or other
business units. It can be of two types such as in a hostile or friendly manner. It defines
when the firm gain control of another company by buying their stocks or exchange its
stock for its own. Its main advantage is that by using this mode a firm can enter into an
international market in a fast manner. It also contains some drawback as it contains high
cost and there is a integration issues with domestic offices(Raichstein and et. al., 2017).
 Joint venture- It refer to that market when two or more companies joint their venture
and all the resources to accomplish the desired task and earns a high profits. it can done
for a single purpose like for increasing production or a research activity. It is an
contractual agreement that is done for earning profits and taking the risk mutually.
 Licensing – It refers to that arrangement in which one company provides the permission
to another company to manufacture and sales its products for a specified amount and sale
them on a desired money. It can be done for a fixed period of time(Enderle, 2015).
 Franchising – Franchising refers to a marketing concept that is used to expanding the
business in all over the world. It is a form of business in which owner of a product
obtains distribution through dealers. It is a useful term in a international business because
its entry it fast and it contains low cost and low risk. On the other hand it contains less
control.

 Greenfield investment - A green field investigation is almost similar to foreign direct
investment that means one company can make its presence in a different country by
opening a subsidiary outlet. It contain a benefit as it gain the knowledge about the local
market where it operates its business. it contains maximum controls and appoints those
who have proper knowledge about the local market where they establish their
business(Giovanni, Levchenko and Mejean, 2016).
From the above modes of entry for internationalization Rachel’s organic could choose licensing
in this they take the license or permission to sale and manufacture the products in the China and
for this they take specified payments. It is less risky and contains low cost due to this it is
beneficial for the SME firm to enter into the large market with less risk. By using this mode they
quickly enter into the foreign market without any problem. Because they permit those business
entity who are local dealer in that area. It will helps in enhancing the business and attracting
large number of audience in limited time period(Gribble, Blackmore and Rahimi, 2015).
Ansoff Matrix
This model is also known as the product and market expansion grid. It includes four
quadrants. In the context of international business it is an essential term to examine all the factor
and choose the suitable one that gives more profits and revenues to the company and also helps
in longer sustainability in the market place. it can be explained below.
 Market penetration- This strategy focuses on selling the existing product in the existing
market. it is a very safest strategies that is followed by the company when they increase
their profits for a short term basis. Because by using this tactic firm only earns small
amount of profits(Perchard and et. al., 2017).
 Market development- It refers to the best strategy that focuses on enter into the new
market with an existing goods and services. It helps in expanding the business in the new
market and enhances the market profits and growth. it helps in attracting new customers
within the new market(Hooper, 2016).
 Product development – This strategy is focuses on introducing the new offering into the
existing market. It helps in attracting and retaining the customers and also earns more

profits and market growth. it is used when an current market not fulfills the demand of
the current customers.
 Diversification – This strategy is focus on introducing the new product into the new
market. it is very risky where both market and the products are new. It can be based on
two types such as related diversification and unrelated diversification(Bücker and
Korzilius, 2015).
UK SME – Rachel’s organic could choose the market development strategy where they sell their
products to the new country i.e. China. It is an effective strategy for the company to earn
maximum profits and enhances their market growth. it also helps in attracting the new customers.
When a firms need to internationalize their business this strategy is very beneficial. In this they
provide the license to the Chinese firm so that they attracts large number of customers. by using
licensing with market development contains less cost and less risky. Because, they know the
culture of the local area and it will enhances the revenues of the organization.
CONCLUSION
From the above report it is to be concluded that the international business is an important
term to enhance and explore the presence of the business globally. To ensure this company need
to identify the various drivers for internationalization with porter’s five forces model. Further it
suggests the various trade barriers that place at the time of doing a business on a global level.
Therefore, it also explains the ethical issues and cultural issues that is considered in the business
and it is beneficial to earns profits and revenues and also longer sustainability in the market
place. al last it shows the expansion methods like licensing that is used by the business to explore
it in a new country. if business can follow all the set rules and regulations than it will earn more
profits and enhances the loyal customer base.
RECOMMENDATION
 For targeting the Chinese market UK SME can follow a cost-based pricing for a short
period time so that it will increase the customer base and increases the profits.

 To enter in the Chinese market and stay for a long term than they differentiate their
product regularly according to the market demand this helps in longer sustainability in
the marketplace.
 Using advanced technology like digital tools to advertised their product on social media
so that it will attract large customer base in a very period of time.
 Choosing licensing so that they expand their business without any risk because they
know the local market and it gives effective results.
 Regularly research the market and its customers so that they will earn more profits and
revenues. It will helps in long term sustainability.

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