International Business: Expanding SMEs into Other Countries

This report explores the challenges and strategies for expanding small and medium-sized enterprises (SMEs) into other countries in the field of international business. It discusses the impact of trade barriers, ethical and social issues, and cultural preferences on SMEs' expansion. The report also provides insights into the business drivers and recommendations for successful international expansion.

International Business

Executive Summary
With the globalisation of business all organisation are concern about motivated towards
expanding business into other region and countries. Trade barrier, social and ethical issue,
culture difference are directly impacting on business goals and objectives. So with implement of
right models and theories it is identified that small and large business houses are able to expand
business into other countries. Further, with implement of expanding business like, licensing,
acquisition etc. are leading companies to enter into international market. In the last, it is analyse
that with monitor of all issue management also provides right recommendation to gain expected
outcomes from operations.

Contents
Executive Summary.........................................................................................................................4
INTRODUCTION...........................................................................................................................6
Business driver for increasing SME’s expansion into other countries...................................6
Ethical and social issue considered by SME-UK.................................................................10
Cultural preference considered by business.........................................................................11
Expansion methods for performing business in international business................................12
CONCLUSION..............................................................................................................................14
RECOMMENDATIONS...............................................................................................................14

INTRODUCTION
International business refers to perform trade activities or exchange of goods and services
across national boundaries of the origin country. In simple terms global or international business
is the cross-border trade activities by exchanging capital and knowledge within more than two
countries. This report is composed from point view of SME-UK which operates business in milk
industry. Moreover, UHT process is implemented by manufactures to pasteurise milk for
reducing bacteria, viruses and other harmful bacteria’s. European market is the largest market for
the UHT milk manufactures because of its frequent habits to storage goods for longer period
(Gray, 2019). Similarly, China is growing with fastest population and enhancing urbanization so
it works as a growth opportunity for UHT milk market. In the present scenario, cheese and dairy
products consumption for goods is too high. The current data demonstrate that 27%, butter
consumption is increased and fresh milk with 13% also increases production for UHT milk in
globalisation market (https://www.fwi.co.uk/business/china-dairy-opportunities-uk-producers).
Business driver for increasing SME’s expansion into other countries
According to the existing market conditions all organisations and industries are competing
with each other at global level. This also determines that there are various challenges are faced
by SME’s or local organisation to enhance their market area. It determines that international or
large companies cover more market area due to which SME’s loss their target market as it is
complex to compact with resources and strategy of international organisation. Therefore, SME-
UK are focused towards those business drivers such as implement of technology, international
competition, financial resources etc. through which company is able to increase their market
share by entering into developing market (Derudder and Witlox, 2016). In context of Ultra heat
milk, competition and expansion of technology are effective business drivers for enhancing
business into other areas.
 Competition- China dairy industry is immature in market so there are various
opportunities exist in market such as high demand of dairy products, increase in
urbanization etc. Along with this UK dairy products are high in quality due to which
they are rich in nutrients, vitamins and other essential items. This is also used to
increase market share in effective manner. So with providing better quality of goods it
is easy to perform in international business.

 Expansion of technology- Technology is one of the most effective aspects that is
increasing market size of organisation at global level. It refers that technology is
leading organisation to perform their work in minimum time period. From perspective
of China local dairy organisation are not concerned about implement of technology
(Temiz and Gökmen, 2014). So for SME’s of UK monitor the opportunity and focused
to enter in the market of China in order to expand the business into other countries.
PESTLE analysis
It is used to monitor and deal with external aspects that are impacting on the current
business operations. PESTLE analysis for UHT milk is mention as follow: Political factor- Government of UK is more flexible for SME by offering them various
benefits such as low tax rate, support in financial aspects and many more. Thus, SME-
UK easily expands their business into other markets because of simple and
comprehensive legal framework for milk industry. Example- China is a developing
country so it provides a potential market for company to manage the business that
directly increases sale of dairy products. Economical factor- The major factor that relates with economic aspects in context of
milk industry that majority of the raw-materials suppliers of milk are not properly
educated. It impacts on the quality and preservation of UHT milk. Sometimes large
quantity of waste also generated because of the unhurried processing. The prices factor
for UHT milk are already high so it is mandatory for the organisation to process milk at
low cost in order to enter into market of other countries. Social factor- From the perspective of Social factor it is analysed that industry as well as
residents of all countries analysed importance UHT milk as it is safe and enrich with
good amount of materials. On the other side, due to less availability and high cost
consumer avoid to purchase milk. Therefore, SME-UK also generates awareness about
good UHT milk benefits through promoting and advertising milk on social media.
Example- With the time awareness buyers consider positive perception by analyse health
benefits through constant use of better milk and dairy products (Buckley, 2016). Technological factor- The major problem to process milk is raised due to low adoption
of technology aspect. Example- Transportation is the first problem which is faced by
organisation to deliver good quality of milk. It also impacts that freshness of milk is lost

due to store them for longer period. So technology is the prime factor or function for
SME-UK that leads companies to retain value of milk specifically for UHT because it
faces too many challenges for entering into the market of other countries. This also
results it is also easy for SME to target right customers. Environmental factor- This is one of the major issue that is faced by countries due to
increase in pollution and population. From the recent years government, companies and
industry all are aware about the environmental safety and leading organisation to perform
work with motive of performing operations that not impacts on environment
(Karabarbounis, 2014). UHT milk is generated with automated process by SME-UK
through using updated machine which works as a positive aspect for organisation to enter
in market by increasing their goodwill. Legal factor- Due to globalise business industry each country government develops right
framework which ensure welfare of local organisation. SME-UK performs their work
with positive aspects that directly increases market share for enhancing sale of UHT milk.
The main concern for legal aspect is that industries authorities concern to perform and
manage work in ethical manner. Moreover, UHT milk delivers good quality products for
satisfying needs of customers properly.

Trade theory
Absolute trade theory indicates the importance of specialization in terms of production
aspects and division of labour that provides better advantage to company. It was developed by
Adam Smith which argue it is complex for other countries to manufacture similar quality of
goods. The main concern to select absolute trade theory is that management generate free trade
activities which lead company to gain various advantages. Along with this wealth of the
countries is also relates with citizens like if people generates manufacturing industry then it work
to increase GDP of a country (Narula and Verbeke, 2015). UHT milk also boost the economic of
both countries through exchanging prices and products as a trade action.
Production trade theory works as a simple model in which both countries generate two
commodities. UHT milk performs and manages its work by understanding both factors of
production that is capital and labour. According to present market conditions market area is
derived to generate better view of economics through which management understand concept of
labour and factor of production. Land, labour and capital are most crucial terms for production.

Therefore, UHT milk produces its work as per consideration that boost economic of country for
increasing economic value of products.
Trade barriers
Trade barrier is the restraint due to which exchange between products and services is
directly impacted. There are various barriers such as tariff barriers, ethical issue, legal issue and
many more impacts on sale of SME-UK products (Warwick, 2014). Some consequences faced
by management along with their solutions are mention as follow:
 Regulation- The trade barrier regulation defined as the instrument that comes in effect in
the year 1995. Main aim of regulation barrier is to help business for overcoming from
trade barriers through developing activities in overseas market. UHT milk is designed for
removing obstacles and to perform trade in different countries. For SME-UK it lead
company to tackle foreign trade practices by performing all operations in ethical manner.
 Ethical issue- International trade defines to perform work across gross domestic product
as rise in industrialization and innovation works as a positive aspect to perform work in
different countries. But some continues challenges which are generated in ethical trading
are economic inequalities, human right violations and to perform in cheap labour
countries. SME-UK explores market of China to enter in market because of dairy
products initiatives but to strict human rights rules it is complex for organisation to
establish factory under local premises.
 Tariff barrier- The tariff trade barrier is imposed by the nation on import of goods or
services. Protective barrier generates the import of products less attractive for buyers
rather than domestic products. UK and China both are facing major challenges to perform
its business because of price fluctuations. Moreover, SME-UK determines positive
aspects but GDP of China is at developing stage due to which there is major difference in
both organisations (Enderle, 2015).
Consequences face by SME in international business market
Micro and macro environment aspects both are impacting on lower rate of participation
of SME in international trade. Key aspects of the internal constraints are infrastructure cost and
lower level of digitization that are faced by SME-UK to manage business in milk industry. So if
small organisation not consider this challenges then it directly impacts on profits of company

because China citizens are more price conscious to purchase a product. So it is mandatory to
overcome from all issue whether small or large for sustaining longer period in the market.
Business uncertainties
With globalisation of the industry there are various challenges are faced by management
that leads organisation to earn better amount of profits. According to present market conditions
Brexit is one of the major challenges that impacts on goals of company. SME-UK is performing
its work with motive of completing its operations into other countries. But due to Brexit sale and
demand of products reduces with 30% in China market (Milosz and Milosz, 2017). Similarly,
trade wars is also impacting on market as dairy industry of China is not favourable towards the
other international companies.
Ethical and social issue considered by SME-UK
Corporate social responsibility works as a self-regulating model for business which leads
an organisation to accountable on social basis. With implement of CSR practices large business
houses and SME-UK are conscious about all aspects of society. This includes economic,
environmental and social. It is also known as corporate citizenship and it is followed by SME to
manage and operate work which support society in positive manner. The main motive of
implementing CSR practices by SME-UK is to deal with ethical and social issues that work as a
barrier for organisation to enhance business size. Moreover, according to present data and
information milk production is directly increased as it raise production with 1.8% that means to
produce UHT milk with 2.7 million tonnes. Along with this it also enhance China milk
production rates with 14% for satisfying needs of large people. It also determines that number of
cows and milk is also increased so it is essential to perform all task with ethical approach.
On the other side, social issue determines that there is constant change in milk prices due
to change in region and quality of milk. Along with this dairy authorities also research that the
more distance in export and import about dairy products both situation enhance demand of milk
to fulfil demand of products. Therefore, all task to expand business in other country is discuss
with aspect of relevant theory that is based on ethics is also implemented by SME-UK which
also mention as follow:
Utilitarian theory- It is one of the first ethical system which is based on normative ethics,
utilitarianism, is often relates with concept of providing benefits to a major society (Shixian,
Caiping and Junfei, 2017). Ideas related with ethical decision based on the action and activities

that are performed by SME-UK. In the context of UHT milk it often provides benefits to citizens
and organisation of both countries. So with implement of Utilitarian theory all operations are
performed by management in ethical manner. Further, SME-UK also implements ethical action
such as monitor of overall performance so that minority society individuals are also benefited.
The main motive to implement Utilitarian theory is to overcome from pollution and the labour
issue which is impacting on SME-UK and its operations because of excess population in China.
Moreover, they are also moving towards urbanization so it generates challenges to perform work
in ethical manner (Jia, Wu and Gosling, 2019).
Cultural preference considered by business
International trade defines that operations and functions are performed to deal with cross
border. It also works as the transactions which occur between two different cultures. In simple
terms, culture profoundly relates with specific region and buyer. It demonstrates and influence
how individuals think, behave and communicate with each other. In context of China, local
regions are able to retain and manage its local culture which is related with Buddhism and
Taoism.
Along with this there are various culture are also adopted by China to perform business with
other countries. Guanxi is one of the best culture that is utilised for developing positive relations
with local stakeholders of China such as suppliers and customers. Example- With implement of
Guanxi culture challenges related with language barrier is reduced by generating trust among
them.
Mianzi it is also recognised as the face culture. This is one of the most important purpose for
business interaction. In simple terms Mianzi culture demonstrate dignity and public relation. This
is mandatory for SME-UK to develop optimistic perception about its products by offering more
value in its products as compare to China market. Example- SME-UK concern that there
meetings are managed in proper and well-mannered way. It enable individuals and management
to gain loyalty and positive aspects about the products.
Collectivism majority of the China citizens implement the Chinese culture that is collectivist
oriented. According to collectivism culture whole group who engage in project is appreciate
rather than specific individual (Lin and et. al., 2017). UHT milk is manufactured by both local
and international manufactures. This refers SME-UK also gain benefits as it save cost to
establish them as a brand and label.

With understand and monitor of all cultural aspects it is identified that Business and local
culture both perform a different role in a country. This is also used by management to manage
task which leads to expand work in both countries through exchanging trade activities with in
ethical manner.
Expansion methods for performing business in international business
International or globalise market is not the same with local marketplace like there are
different rules, regulations and strategy are implemented by management to perform operations
in international market. Some of the most effective methods for internalise business is mention
as follow:
Acquisition- An acquisition takes place when an organisation purchases all asset of
another company in order to gain control of company decisions. With purchase of more than
50% market share and stock SME-UK acquire rights for making decisions without approval of
other shareholders (Zhang and et. al., 2018).
Joint venture- The term joint venture works as a commercial enterprise that take place
between two or more parties. This not impacts on the identities of the organisation which is also
used by management to perform business by engaging more than two or more parties. SME-UK
implement this to start a new project.
Licensing- Licensing is defined as the business contract and agreement in which an
organisation authorizes another company through issuing a license for temporarily offering its
rights such as copyright, trademark etc. to another person.
Franchising- The term franchise works as a type of license that is offer by franchiser to
franchisee for allowing them to gain access of a business. This also refers that with gain of
process and trademarks both organisation sell its products and service under a particular brand
name. SME-UK implement this to gain short term benefits within organisation.
Greenfield management- In economics, the term greenfield investment refers to foreign
direct investment. In a greenfield investment an organisation construct long term facilities
through performing its trade activities across cross-border. In this parent organisation generates
subsidiary in another country (Child and et. al., 2017).
From the perspective of SME-UK it is identified that Joint venture is one of the most effective
method for organisation to perform all trade activities in international market. UK and China
market are not similar so with adopt of joint venture methods. This is to perform and implement

same methods which leads organisation to manage in both countries. Moreover, joint venture
also works as an effective tool to make right investment in organisation for performing right
operations in other countries.
In the present scenario, Diary is a big business that is expanding its size on yearly basis. There is
no surprise that it provides wide range of consumer needs that increase protein consumption.
This results overall health of an individual is increased. Ansoff matrix
Market penetration- SME-UK implement the method of market penetration for achieving long
term success in the existing market. UHT milk consider various benefits for organisation through
which all task and operations performed by to ensure competitive position in existing market.
Product development- UHT milk consider that all products must be innovate in order to provide
more value to organisational products. Along with this by new product management sale of
products is also increased in current market of organisation.
Market development- With market development strategy it is identified SME-UK perform its
task into new market through selling organisational products into new market. Example- UK-
SME concern to enter into market of China so management must implement market development
strategy in organisation.
Diversification- This is last and most appropriate step for SME-UK to enter into market of
China it determines which is totally a new market for organisation (Huimin and et. al., 2014).
Along with this UHT milk also new product that is store by company for longer period.

CONCLUSION
From the above report it is summarised that majority of the organisation and industry are
performing their work at global level. SME as well as large companies both are managing its
task and operations according to international level. Moreover, there is large difference between
market of developed and developing country. Competition, expansion of technology, financial
resources are some of the effective business drivers which lead to enter into new market.
Theories and tools also perform an essential role to understand business environment of
organisation. In the last, various barrier and issue are also included in this report for identifying
opportunities of market.
RECOMMENDATIONS
International market assists an organisation to earn better amount of profits through
understanding micro and macro environment. SME-UK is focused towards earning more
revenues by performing their business into other markets that leads to internationalise an
organisation and its operations. Price is most important aspect for each organisation which is
focused to enter into new market by adopting and implementing right strategy for attracting right
number of customers. UHT milk is high in prices so it is mandatory for organisation to
implement right price strategy such as price skimming for earning huge amount of profits.
Moreover, differentiation strategy is also used by organisation to perform all business operations
with creative and unique way. This result it leads business management to gain competitive edge
for entering into market of China. In the last, with right strategies such as promotion and
advertisement tool SME-UK promote UHT milk easily among global market. Further, there are
various methods are also present in market to enter into international market among which joint
venture is one of the most effective methods that leads SME-UK to expand their business among
international market. So with the expand of business in international market management of
SME-UK is increasing their customer base and revenues through establishing themselves as a
brand in global market.

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