International Business Report

This report examines Trewithen Dairy's potential expansion into the Chinese market with their new UHT milk product. It analyzes the business environment in China, including political, economic, social, technological, environmental, and legal factors. The report also discusses trade barriers, ethical and social issues, cultural preferences, and expansion methods, providing insights into the challenges and opportunities of entering the Chinese market.

International Business

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
PESTLE Analysis........................................................................................................................1
LO 2.................................................................................................................................................3
Various types of Trade Barriers which are to be analysed by Trewithen with launch of its new
product.........................................................................................................................................3
LO 3.................................................................................................................................................4
Ethical and social issues in Trewithen while operating into China with UHT milk....................4
Cultural preference in business ...................................................................................................6
LO 4.................................................................................................................................................8
Expansion Methods to be chosen by Trewithen..........................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
For any business to go on international level it is very much important and essential part
as this means that they will be trading into country where they have not gone before. It involves
the cross- border transactions of products and services in two or more countries. Trewithen Dairy
is the family business which was started by Clarke family (Ang, Benischke and Doh, 2015). The
business was established in year 1976 and started selling dairy products in year 1994. The
company is engaged in producing the various dairy products. By 2001 company started selling
the milk bottles and cream to their customers. Company wants to expands their new product of
Ultra-high temperature processing (UHT) in China where the growth of the country is remains
steady. The report covers the various analysis while Trewithen is entering into China with its
new product. This will help the company to realize all the threats to the company which will be
the problem for the company to enter into China. UHT is also called to as ultra-high temperature
processing which uses the technology of liquid food and mainly milk with heating it over 135°
C.
The company also comes to know about the various trade barriers while entering into
China with its new product of UHT milk and how to overcome all the trade barriers before
entering into the market. It also covers that how the company can expand its business into China
while selecting one best option for the company which will be giving company more profits
(Augustin-Jean and Xie, 2018). Business Drivers that affects can affect UHT MILK launch in
Chinese market
As the China's urbanisation is expanding and middle class families are growing which is
also increasing the need of dairy products of high- quality. The most important factor which adds
in the milk industry is the removal of one- child position. On the other hand, one more point is
attracting the China's dairy industry is the abolition of EU milk quota system.
LO 1
PESTLE Analysis
Two years back the scenario of dairy industry in China was very bad as there was no
proper transportation of dairy Products. One of the supermarket in China took two to four days
of transportation of milk from supermarket to Chinese consumer's home. Currently, China is
having fastest sales channels to pricing as the entry barriers in the country for foreign countries
are removed (Bakker, 2018). There is also new cross- border e- commerce been implemented by
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the country which will be helping Trewithen to expand the business in their China. As the
company is analysing its expansion of new product into market of China. The changing need and
demand of customers into the market will help company analyse the growth of milk product in
Chinese market. According to the EU SME Centre Report China is the largest consumer of
imported food products (Bakker and Datta, 2018). China can also become the largest consumer
of milk products by year 2018. From year 2014 to year 2019 China has been gone through
increase of 9.76% of increment in the dairy products. There are many reasons which tells that
why China will be best suited for the expansion of milk product into its market especially with
launch of UHT milk.
Pestle analysis of UHT Milk
Pestle analysis is a type of framework that can use to analyse and monitor the macro
environmental factor that may influence the business performance and efficiency (Ngo, 2018). It
is beneficial for Trewithen Dairy firm that will expand their UHT milk product in china. In this
way, it can be considered the different factors that impact on the business through UHT product
in the china.
Political Factor
This factor impact on the product of UHT milk in china because government makes some
policies and regulation on the diary item that will affect on the business of Trewithen firm and
always keep extract the milk out of them. In china, which can import the other agriculture
product instead of own item. In this way, UHT milk product also affected by the rules and
regulations.
Economic Factor
This factor is affecting the Diary industry because of the purchasing power of china
economy. UHT milk is the basic requirement of every people but they make still efforts to
purchase item. As a result, the industry sales the milk in china with provide the UHT milk at low
prices. Moreover, it also increases the purchases that can boost the sales of UHT milk in china.
Social Factor
A move towards the lifestyle will impact on the sales of dairy product in marketplace.
Many people will focus on the lifestyle and choose the dairy product in their diet. In this way, it
helps for Trewithen diary firm to launch the UHT milk in chain because many people consume
the milk in their food diets (Pang and et.al., 2018). For example- in china, Muslims community
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do not believe on the other product so that it will great opportunities for expand in the UHT milk.
Technological Factor
Technology is the great opportunity for Trewithen diary firm to manufacture the UHT
milk and expanding in the china at lower price. It has provided the advancement for embedded
into the farming practices. The organization will use the machinery technique for the purpose of
packaging of UHT Milk (Fessenden and et.al., 2019). This technique will use for dairy firm that
can increase the performance and efficiency.
Environmental Factor
This factor is important part of diary firm that can change their method as per
environmental condition. Dairy product must be considered the health item but it effects on the
body on negative ways because of climate change. In the warm climate, Trewithen diary firm
will use the different method for the preservation in order to maintain the shelf life of milk. In
this way, UHT milk has been preserved by using refrigerator and export the Milk from one
nation to another.
Legal factor
In china, there are some specific rules and regulation regarding the food products which
will not different from Diary milk. In this way, it has required for Trewithen diary firm to follow
all the laws and also imposed the food regulatory bodies. This will help for business to promote
UHT milk in china and operates. The organization will comply the legislation regarding the
advertisement of UHT Milk and also mention the potential causing ingredient.
LO 2
Various types of Trade Barriers which are to be analysed by Trewithen with launch of its new
product
Since year 2011, China has reduced the trade barriers for the foreign countries to enter
into China for business and has liberalised foreign trading systems. China has been entered into
the most favoured Nation where the country has lowered the tariffs from 15.3% in year 2001 to
9.8% in year 2017 (Beugelsdijk, Kostova and Roth, 2017). This will be helping Trewithen to
decrease their cost of production and will lead to increase the profits for the company which is
linked with its UHT milk production. In year 2018, dairy products tariffs have been came down
which involves 1449 products of China (Liu, 2017). The average tariffs rate has been decreased
from 15.7% to 6.9% which shows the decrease of 55.9%.
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China has also decreased VAT brackets from four to three brackets in which 13% bracket
has been removed by the country (Cruz, 2017). The foreign who are producing in China will be
imposed of VAT but when they will again export the products to the outside country then the
companies can take rebate of taxes. Extra amount will be paid back to the companies by
Government of China. Enterprise business tax has also been lowered from 30% to 25% for the
domestic and foreign companies which will also benefit Trewithen with its UHT milk product as
this will help the company to decrease the cost of production and increase profits for company.
From 2005, China is removing Quota and License requirement for the foreign countries
to enter into China for business purpose which will be very much helpful for company in launch
of UHT milk (Brannen, Piekkari and Tietze, 2017). China has signed 17 Free Trade Agreements
with the foreign countries for business purpose. Now, the Quotas are only on 40 different
categories of commodities which do not include dairy products.
In year 2016, it has been noted that where the foreign companies in China were having
huge profits has been now decreasing (Huang, and et.al., 2017). This is mainly because of huge
competition companies are not having that much profits which they used to earn in past. The
main threat of Trewithen is that all the foreign companies are being replaced by Domestic
Information and Communication Technology. China also uses many industrial policies which
lead to limit the imported goods and foreign enterprises to enter into the country. Hence,
Trewithen is having very less trade barrier while entering into China which will help the
company to enter fast in the country with its product of UHT milk without any barriers ( Carter,
2017).
LO 3
Ethical and social issues in Trewithen while operating into China with UHT milk
In every organization there are ethical and social issues that will affect functioning of
company in the future. As ethical issues will be related to breaking company's rules regulations
that will breakdown by employees of company in the future. This will be related to working
environment that will create conflict between employees in Trewithen company. Conflict may
lead to break relation between employees and through this their trust breakdown and may lead to
demotivation among employees regarding company policies and procedures (Cuervo-Cazurra,
2016). It is essential for employees to maintain peace in the company that will motivate them to
do work effectively and efficiently in the future course of action. Employee respect also help in
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providing different perspective that will bring opportunity for growth in Trewithen. Every
employee have to behave ethically that will provide opportunity in the company. This will bring
changes in process of company's operation as it will lead to create differences among employees
in the future. It can be added that China market demand for milk and its product is very high as it
is one of the best source for nutrients (Carter and Li, 2017).
Figure 1: UHT milk
[Source: Clay, Garnett and Lorimer, 2019]
In Trewithen employees are not behaving properly that will lead to create conflict and
they are not working properly that will lead to increase employee turnover from the company. It
will affect decision making process of company as some employees are stolen information from
the company and use it outside in an unethical way that will be disturb functioning of company
in the future (Picciotto, 2017). Nowadays, cybercrime issues are coming out that will create
tension among employees and reduce their motivation as they are not able to work properly in
Trewithen. These issues will impact business operation as well as profitability of business. For
reducing these issues from company it has to follow proper regulations and rules that will help in
growth for business in the future.
Social issues are related to beliefs, norms, values that will be followed in Trewithen. All
employees working come from different geographical areas and they have their own beliefs and
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norms that will influence its working in the company (Cruz and Alley, 2017). There are many
ways through which company's beliefs will be affected by them as they are following their own
beliefs that will create conflict among employees. Lack of education is also an issue that will
impact organisations working in the future. Religious conflict will also impact company's
operation as there are different employees with different rituals that will affect various
departments and beliefs of Trewithen (Zander, McDougall-Covin and Rose, 2015). Environment
in the company will also have impact on business as if environment is not good then it will affect
working of company and that will lead to decrease productivity and profitability in the future.
Caste ism is also another social issue that will bring conflict among employees and affect
working as well. Through this company's operational activity will be disturbed and employees
are not feeling safe and secure while working in the company (Beugelsdijk, Kostova and Roth,
2017). Therefore, all these ethical and social issues will affect functioning of the company.
Corporate social responsibility will also bring awareness regarding maintaining discipline
and helps in reducing issues from Trewithen.
Cultural preference in business
The large unorganized milk market in the developing countries and consumer concern for
less nutritional value of UHT milk are the key restraints for the growth of the market ( De Villa,
Rajwani and Lawton, 2015). China was the major market globally in 2014, and its share is
further expected to increase during the forecast period, owing to the increasing urbanization and
growing apartment culture in the country.
Culture plays an important role in business as it will help in retaining employees in the
company for long term. If company's culture is good then it will motivate employees to do
effective work, it will help in contributing happiness among employees as when they are happy
this will increase productivity and profitability. If company is performing well then it will bring
new innovation and ideas that will affect business operations. As innovation also create a good
culture in Trewithen (Brannen, Piekkari and Tietze, 2017). Innovation lead to bring more
opportunities and growth for employees as there are various factors that will affect culture of
company such as political, social, environmental and technological factor.
This will lead to bring efficiency in work and may create fruitful environment in the
company. There are different perspectives that will bring effective culture in the company.
Various strategies will be applied that will enhance culture in the company for the future course
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of action. It is important for maintaining culture of the country in which it is going to be
established so that it will bring harmony in business (Cuervo-Cazurra, 2016). It is also important
that giving vacation to employees will help in increasing their productivity. There is various
perspective that will be creating effective culture in the company that will attract more talent
towards it. Culture also build by attitude of employees in Trewithen as they are contributing
more in business and promote effective working in the company (Hovhannisyan and Keller,
2015). It helps in influencing values, beliefs and norms that will bring harmony in business.
Relationship between employees also enhances culture in the company. Different people are
working with different values that will impact on organizational culture. There are different
segments that will enhance culture in the company. There are different culture based companies
that will bring new concepts and methods for enhancement of business at international context.
There are different activities that are practised into company that will bring efficiency for
the future course of action (Cuffia and et.al., 2017). Different country is performing different
activities that will differ according to culture that is taken into account will help in enhancing
culture for different purpose in Trewithen. Culture plays an important part in the company that
will provide various aspect and will influence employee’s nature in the company while they are
launching their UHT milk in market. There are different factors that will be providing to
employees for contributing in enhancing various perspective that will bring more opportunities in
business (Teagarden, Von Glinow and Mellahi, 2018). Different employees are working that will
bring different culture and it will enhance productivity and earning more profit. Culture is
important in Trewithen that will help in motivating employees for the future so that they are not
facing much problem while expanding business in China. Culture brings effectiveness and
efficiency that will create more opportunities in business. Therefore, culture is essential for
expanding business in other countries and provides different aspects that will be help in gaining
more experience. Employee relation will also enhance culture in the company as if employees
are happy then it will bring growth and possibility in Trewithen for future.
The employees who are more concern about their health will also be promoting the new
product into market on large and new bases. They can help into getting out connection with the
customers by explaining them the benefits of UHT milk (Cuffia and et.al., 2017).
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LO 4
Expansion Methods to be chosen by Trewithen
There are various kinds of trade expansion methods that can be used by companies to
expand their business internationally (Xie, and et.al., 2016). These methods provide various
growth opportunities for companies which help them to expand their business successfully.
Methods used for expansion are described below:
Franchising: Franchising is one of the most efficient method to be used whenever expansion of
a business comes into picture. It is beneficial for companies because of two main reasons first is
that it requires low investment and second is that the business is given in hands of experienced
people. It also reduces overall cost of training, recruitment, equipments, inventory and various
others (Zarour and et.al., 2018). If Trewithen Dairy company wants to introduce their product
UHT milk by expanding their business in China then they can opt for franchising as it will save
both time and money that is required to be invested by them.
Joint venture: Joint venture is a business arrangement where more than two parties agree to club
their resources in order to accomplish a specific tasks. This tasks can be anything either a new
business activity or a new task. All the parties involved in joint venture are responsible for loss,
profit or any expenditure associated with it. Joint venture can help Trewithen Dairy company to
introduce their UHT milk product in China by partnering with anyone or two of the established
organization that are already present in China. It will help them to access distributed network and
new market in an easy manner, all the cost and risks will be shared and access to large number of
resources, technology and finance.
Limited partnership: Limited partnership is done where there are two or more than two partners
who are ready to unite their business. In this all the partners involved do not receive dividends in
fact enjoy direct flow of income. But it has two requirements: first is that all the partners
involved should be passive and second is that the general partner should solely take
responsibility to raise capital (Mannion, Furey and Kilcawley, 2016). This partnership has
limited liability to the business debts, all the profit and loss between partners is shared but it also
has some disadvantages such as: general partners are completely liable for business debts. So this
limited partnership is only fruitful for Trewithen Dairy company if they are not general partners.
Licensing(Dealership/Distributorship): Licensing can be defined as a business arrangement
where one company gives permission to another company to manufacture their products. It helps
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in increasing the line of distribution which helps in increasing the sales of a company
(Kostadinov, 2017). It helps in providing uniqueness to customers which one's competitors do
not have, it helps the companies to get a little better margin. But its main advantage is that this
partnership makes it much easier for companies to enter into foreign market.
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Mannion, D. T., Furey, A. and Kilcawley, K. N., 2016. Comparison and validation of 2
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