International Business: Expansion Strategy for Plumbs Dairy in China

This report discusses the international expansion strategy for Plumbs Dairy in China, including the rationale behind the decision, barriers faced, and relevant implementation approaches. It also covers an overview of the company and the benefits and drawbacks of international expansion.

INTERNATIONAL
BUSINESS

Table of Contents
Executive summary .........................................................................................................................3
INTRODUCTION...........................................................................................................................1
Analysis and discussion ..................................................................................................................1
Overview of the company and rational for going international..................................................1
Critically discuss the country in which the firm can expand with rationale behind the decision.
.....................................................................................................................................................3
Barriers faced by the organisation expanding internationally.....................................................4
Relevant implementation approach for the Internationalisation process....................................5
Internationalization strategy........................................................................................................6
CONCLUSION................................................................................................................................7
References:.......................................................................................................................................8

Executive summary
The report is constructed on the international business in which the organisations are
involved internationally in the economic activities. Through the internationalization it helps the
companies in earning the economies of scale and growth which is the integral part of the
globalization. To many countries and citizens enormous benefits is provided through Trade and
globalization. The productivity has elevated and reinforced the spread of information and new
knowhows. The study is based on the Plumbs dairy Company which is looking for the expansion
internationally in China. In the study covered topics are related to the overview of the
organisation and rational for international expansion. It has also been deliberated about the
reason for the international expansion in the selected country. The barriers have been discussed
with the implementation of the internationalisation entry strategies in the market.

INTRODUCTION
The term international business defines the buying and marketing of goods, services,
technology capital crosswise the national borders and at global scale. Between two or more
countries it involves cross-border transactions. The international business is refereed as the study
of internationalization process of multinational enterprises. The trades might be possessed by the
state- or privately-owned organisation. The organisation discovers the trade chances outside its
home nationwide boundaries to spread the specific commercial activities such as manufacturing,
mining, health and education (Akrout, H. and Diallo, M.F., 2017). The expansion of the business
internationally helps the firms in improving profits by selling the products in the nations where
the cost is high. The surplus resources are utilized by the business which helps in increasing
profitability of business and development prospects are enhanced. To have right observation on
international business The Plumbs Dairy company is taken based on United Kingdom (LinkedIn,
2021). In the report the discussion is based on the rationale for going international and
recommending the country for the internationalisation of the business. Furthermore, barriers
have been discussed faced by the organisation expanding internationally and internationalisation
process is evaluated critically.
Analysis and discussion
Overview of the company and rational for going international
For the international expansion, Plumbs Dairy company is taken which supplies fresh
local milk, cheese, cream, and other dairy products. In 1951 Henry Plumb acquired the small
dairy business. The Plumb dairy was established in 1957 having 30 employees. The Plumbs
dairy is located in Cambridge, UK and is the part of dairy product manufacturing company. It
offers the flexibility in the customer service.
The internationalization is the process of expanding the business from the home market
into international market cross wise the globe. It is a key element for the good functioning of the
business. It helps the company in gaining the competitive advantage. The internationalization is
the process where the business involvement is increased in the international market and for the
development sustainability is provided (Arnold, D.G and et.al., 2019). The accessibility of
several aspects of production such as labour, capital and raw material are essential for
manufacturing diverse goods and services differs among countries. With the increase in the
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demand of the product or services in the international market or to meet the business needs the
companies in context to Plumbs dairy looks for the global expansion.
The reason of expansion depends on the business type and total market strategies.
Various factors are considered while deciding to enter in overseas market. The factors involve
cost & time in establishment a foreign subsidiary, corporate policy towards compensation,
evaluation of growth potential against required investment etc.
The Plumbs dairy looks for the international expansion due to the several reasons as they
want to be on global market.
 Potential for growth- The most common expectation of the business is growth. Due to
increases in demand the production and other functions of business increases. The chance
of globalisation process helps the Plumbs dairy in getting large marketplace being in
touch with international customers and good amount of revenue is earned which leads to
growth of company (Brown, R.A. ed., 2018).
 First-mover advantage- The business tries to take the advantage from the other
business. The product is purchased from other country at cheap rate as the other country
have the less production cost. The first-mover advantage provides the benefit to the
Plumbs dairy who wants to diversify their business strategy. It enables company to
establish strong brand recognition.
 Entry to new markets- After the company becomes successful in domestic country it
looks to market overseas. Before entering into new market, it is required to have research
on the emerging market trend, advanced technology. The Plumbs dairy company have the
chance to capitalize in innovation and diverse variation of products and services can be
developed (Christ, K.L. and Burritt, R.L., 2019).
 Attracting new talents- It is another benefit of doing business globally which helps in
access to great pool of talent. The hiring of international talent provides advantage to
Plumbs dairy company involving advanced language skills and diverse backgrounds. It
enlarges connections with wider customer base and allow companies to create global
work team.
The pros of international expansion
 Access to new regional market for product and services- It is the utmost clear reason
for the international expansion of Plumbs dairy in the international marketplace for the
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products and amenities which leads to the higher growth and meets the demand of
people. It attracts the companies where growth is limited.
 Brand recognition- The opening of branches expands the brand recognition as new
customers are attracted and credibility in the market place is established (Cohen, J.,
2017).
The cons of international expansion
 Compliance risk- To enter into a new market can be complex. While expanding the
business into new market the business in context to Plumbs dairy adapt and operate to the
country regulations in which it is taking expansion. It is very necessary to partner with
the right people and correct business procedure is ensured as the regulations vary from
domestic country (Cohen, R.B., 2018).
 Managing international employees- To going global brings various advantages to the
company of Plumbs dairy but the drawback can be in acquisition global employees needs
a new level of HR support and administration. If these capabilities are not possessed in
home country the company has to outsource form outside. The employment regulations
also differ from the home country.
Critically discuss the country in which the firm can expand with rationale behind the
decision.
Plumbs dairy can expand its business in China. Mostly natives of China are lactose
intolerant and they cannot resist milk in their diet. This is the reason that population of this
country does not consume milk at large scale and is among lower producers of milk. But with the
emergence of globalisation, number of people from outside areas have been settled there. This
increased the demand of milk in this country (Domurath, A. and et. al., 2020).
Rational behind the decision / Selection Criteria
There are number of reasons which can be taken into account for the expansion of
Plumbs dairy in China.
 Initiative taken by government related to dairy products- Administration of China is
motivating its country men to increase the consumption of milk by increasing there
lactose in-taking capacity at the time of birth only. It has increased the demand of milk in
state. This is a great opportunity for Plumbs dairy to establish itself over there and
earning profits.
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 Rise in the population of non-residents- From last many years, people from various
areas are shifting to China in search of jobs. This has increased the level of population in
that country which resulted in hike in demand of dairy products. China itself do not
produce much of milk. So, it requires foreign companies to settle their units in the state. It
is also one of the big reasons that Plumbs dairy can expand itself in China.
 Growth Opportunity- Amid of its demand for dairy products, Company has chances to
develop itself in China. It can set its production unit over there and can use effective
marketing strategies for grasping the market share (Gleich, W and et.al., 2017).
 Updated Technology- The techniques used by Chinese people is very different. They try
their best to produce goods at low cost. Organisation in context to Plumbs dairy can take
advantage of these skills for lowering down their cost and satisfying itself according to
the market of China.
 Entrepreneurial environment- The conditions of state are business friendly. People
readily invests in organisations thus, company in context to Plumbs dairy would not face
any problem related to finance in China. Also, the country is rich in various resources
like labour, technology etc. which makes this country more favourable for expansion.
 Stability- Government of this state is stable and is growing from last few decades which
is a healthy sign for the growth of any business in that country. Such environment makes
the market predictable for firms where the company can be planned strategically. So, this
is a good chance for Plumbs dairy to expand itself successfully (Hampden-Turner, C and
et.al., 2020).
Looking at the above points it can be said that the market of China is very much suitable
for the company for going international. Growing demand of food products on one side and
shortage of its production on the other had grown the chances of growth jointly. In addition to
that, support from government is the biggest thing which can help corporation to settle down in
Chinese market.
Barriers faced by the organisation expanding internationally
The ability to enter and operating in new geographies makes the business scalable. Not
all the business are suited to international expansion which requires the deep knowledge of the
market for the business expansion in the international country like China. While having the
business expansion internationally there are several barriers faced by the Plumbs dairy company.
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 Language barrier- While engaging in international business it is important to consider
the language spoken in in the countries in which the company wants expansion. The
Plumbs dairy company can face the language barrier. To translate the message into
another language an interpreter can be hired. For any kind of communication, the
language becomes need and the problem arises when the people are not able to
understand each other's language. The inability to communicate using a language is
called as language barrier. The China person are not able to understand English whereas
as Americans does not understand Chinese language. The lack of good language skills
can hinder the performance in the market (Hu, Y. and et.al., 2017).
 Cultural differences- It is also considered as barrier for the company in context to
Plumbs dairy who looks for an international expansion of business. Each country has its
own make-up of language and having its own specific culture. The culture comprises of
social norms, ethics, traditions and foods followed by specific group of people. The
working time can also differ and needs to have the understanding of their cultures of
countries in which the business is expanding while managing teams in office abroad,
selling product to international retailer.
 Managing global teams- It is another barrier for Plumbs dairy in international business
of managing employees who lives all across the globe. The difficulty occurs in the
functioning of teams regarding the language barriers, cultural differences, time zones and
varying level of technology (Luo, Y. and Bu, J., 2018.).
 Supply chain issues- It can be challenging for managing a supply chain that crosses
national boundaries. The factors like imports, exports, shipping, and logistics are huge
time consuming and complex. The delay in the procurement of goods puts the negative
impact on the company in context to Plumbs dairy reputation, leads to high operating
costs and sales is also affected.
 Political issue- The international business is impacted by the political instability. The
profitability of the Plumbs dairy is reduced because of government decision and
implementation policy of trade protectionism. In accordance to both micro and macro the
international business is impacted. To run the business internationally the environmental
issues must be considered in China.
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Relevant implementation approach for the Internationalisation process
The process of internationalisation increases the international activity of the firm. The
internationalization process defines the dynamic process of firm's entry into international market.
The internationalization of the business provides the opportunities to the company. The Plumbs
dairy company uses various approaches for the internationalise of the business internationally.
 Export- It is the common strategy for the company to internationalize the goods. The
company in context to Plumbs dairy is directly involved in the export process or have the
commercial intermediary that negotiates or distributes product abroad through in
directing exporting. The exporting is the selling of the product and service in the overseas
nations that are obtained from domestic country. It is a low-risk strategy that Plumbs
dairy finds attractive. In the direct exporting the firm itself approaches the overseas
buyers an consider all the formalities. In the indirect exporting the participation of firm in
the operations is minimum and most of the exporting tasks are carried by the middlemen
such as export houses (Martin, S.L. and Javalgi, R.R.G., 2019).
The advantages are exporting is the easy way of entering in to overseas market as
compare to other modes of entry and it is less complex activity. The exporting does not need
ample of venture in overseas nations, experience to foreign investment risk is nil in context to
Plumbs dairy.
The disadvantages are as the goods move physically from one nation to another which
contains the extra packaging, transportation costs. On reaching the shores of foreign countries,
such goods are theme to custom duty and a diversity of additional duties and charges. Taking all
collectively the expenses and payments enrages the product costs and makes low inexpensive to
Plumbs dairy.
 Joint ventures- It defines the partnership among the local and national firm whereas the
partners invest the money and share ownership. In the particular market two or more
companies agree to work together and third party is created to undertake this. Between
the partners the risk and profits are shared equally. The joint ownership undertaking can
be carried in 3 ways- i) external investor purchasing an interest in resident company ii)
resident firm obtaining interest in prevailing foreign firm iii) both foreign and local
entrepreneurs jointly forming a new enterprise.
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The advantages are the resident partner contributing to the equity capital which the firms
find less financially burdensome in the expansion globally. The joint venture makes possible in
large projects for the execution by requiring huge capital outlays and manpower. In several
cases entering into overseas market is very expensive and perilous which can be evaded by
allocating the risk with local partner under joint venture agreements.
The disadvantages are, international firms entering into joint ventures shares technology
and trade secrets with the domestic firms in overseas countries which faces the perils of
technology and secrets being revealed to others. The double proprietorship arrangement can lead
to fights. The working and resources are not distributed equally. There is lack of leadership and
support in the early stages.
 Licensing- It is a contractual arrangement where the firm transfers the right use of
product and service to another firm in the context of Plumbs dairy. It is described as the
technique of overseas operation where a firm in one nation agrees to permit a business in
another nation to usage the rights of manufacturing, processing, trademark, know-how. It
involves the little expenses and involvement. The permission is granted by the firm to
another firm is licensor and in the foreign country the firm is acquiring such rights to use
is known as licensee (Ratten, V and et.al., 2017).
The advantages are the licensor sets up the corporate units and private currency is
invested in the corporate. Into the international business the licensing is considered as less
expensive mode of entry. In the foreign country the business of Plumbs dairy is managed by the
by the licensee who is a local person, there are low risk of business takeovers or government
interventions.
The disadvantages are to the licensor it has loss of control of the intellectual property.
The licensor has to depend on the skills, abilities and resources of the licensee to generate
revenue. To the licensee the drawback is it has to pay a fee or royalty. In context to Plumbs dairy
the conflicts can arise among the licensor and licensee over matters such as maintenance of
financial records, imbursement of royalty and non-adherence to norms concerning to
manufacturing of superiority goods.
 Franchising- The term is applied to the service business. The strict rules and regulations
are set by the franchisers as to how franchiser should operate while running its business.
The intellectual property rights are sold to franchisee which is similar to the licensing
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(FRANSCHISE DIRECT, 1998-2021). Under the global franchise agreement, the right to
use its brand name is granted by company to foreign company to sell product or services.
For all the operations franchisee is responsible but agrees to operate in accordance to the
established franchiser business model.
The advantages are risk of failure is abridged by franchising as the business is based on
proven idea. The recognises brand name and trade mark can be used. The support is been
provided by the franchisor. The franchisor provides training which ensures franchisee to
establish skills requiring to operate the franchise and no prior experience is required. It provides
the exclusive right in territory.
The disadvantage are in the franchising the cost is high and the franchise agreement
involves restrictions on how to run business. The franchisor can go out of the business and have
the bad reputation on brand.
In accordance to above the best strategy of entry can be exporting for the Plumbs dairy as
it can directly involve in the exporting process. Through exporting of the products and services
in the global marketplace can help in the development of more market share and business
growth. The exporting can help in more access to consumers and businesses and provides
diversifying market opportunities. The business turnover is boosted, creates jobs and becomes
more innovative.
CONCLUSION
It has been concluded that business in local market becomes tradition in the international
business. In the international business the international market provides the opportunity to the
business in maximizing profit and to enjoy economies of scale due to availability of wider
market. The concept of international business is concerned with the trading of goods and services
globally. It encourages the business to acquire the foreign exchange which is utilized in the
export of goods from the global market. The company growth and profits are improved by
selling the products in across the nations. The company internationalise through various entry
modes such as joint venture, exporting, licensing and many more.
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References:
Books and Journals
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citizenship. In Perspectives on corporate citizenship (pp. 185-197). Routledge.
Cohen, R.B., 2018. The new international division of labor, multinational corporations and
urban hierarchy (pp. 287-315). Routledge.
Domurath, A. and et. al., 2020. New venture adaptation in international markets: A goal
orientation theory perspective. Journal of World Business. 55(1). p.101019.
Gleich, W and et.al., 2017. The influence of competition on international sourcing strategies in
the service sector. International Business Review. 26(2). pp.279-287.
Hampden-Turner, C and et.al., 2020. Riding the waves of culture: Understanding diversity in
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Hu, Y. and et.al., P2017. Mediating effects of business process for international trade industry on
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Martin, S.L. and Javalgi, R.R.G., 2019. Explaining performance determinants: A knowledge
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Ratten, V and et.al., 2017. Internationalisation of family business groups in transition
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Wurm, C., 2020. Business, Politics and International Relations. De Gruyter.
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Online-
LinkedIn, 2021 [ONLINE] Available Through <https://www.linkedin.com/company/plumbs-
dairy-limited>
FRANSCHISE DIRECT, 1998-2021 [ONLINE] Available
Through<https://www.franchisedirect.com/what-is-franchising-definition/>
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