International Business: Sainsbury's Entry into the Chinese Market

This report discusses Sainsbury's entry into the Chinese market, including an overview of the company, rationale for internationalization, recommended country and analysis, and a relevant strategy for internationalization.

INTERNATIONAL
BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Overview of the company and rationale for internationalization............................................3
2. Critically discussing which country they should enter and the rationale behind the decision.
Analysing the recommended country to support the rationale....................................................4
3. Critically evaluating a relevant strategy for the internationalization process for the specified
target market. ..............................................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
International business is defined as the trading of goods, technology, services and have
the knowledge that helps to trade with the national borders. This cross borders transactions helps
the business to grow more in the different markets. The current assignment is based on the
Sainsbury, it is one of the second largest Supermarket in UK. This report will outline the
overview of the organization and importance in order to do international trading. Further this
report will indicate on the recommended country and the country analysis in order to support the
rationale. Moreover, this report will also put focus on the strategy that is relevant for the
internationalization process in the chosen market.
MAIN BODY
1. Overview of the company and rationale for internationalization
Sainsbury’s is the second largest supermarket chain in the markets of United Kingdom. It
has 16.0% share in the supermarket industry. The company was founded in 1869 by John James
Sainsbury by opening the shop in Drury Lane, London. The cited organization was the one of the
largest supermarket in the retail supermarket of the United Kingdom. This is the holding
company divided into the three segments that is supermarkets, banks and Agros. The company
was established as the partnership firm in year 1869. They have started the retail fresh food shop
and later expanded into the big grocery store in the market of United kingdom. Sainsbury used to
focus on the quality and sustainability which makes them differ from the other supermarket in
the UK. The company has cope up with these competitors and this helps the company to grow in
the UK markets. Sainsbury used to provide the best facilities to the customers that helps them to
have increase in the target customers.
The company was to expand its business in the different more markets that helps them to
have the good profit in the market. Expanding the company makes the company to have the
more saturated market. This helps the company to have the access of the new customers and
have new competitors in the new markets (Fischer and Green, 2018). The main reason behind
going to international is to provide the goods and services to every customer in the market. By
going outside the market of EU it helps Sainsbury’s to generate more revenue. This helps them
to have more competing sales, opportunities of investments, diversifying the market and have the
new talent in the company. By going international is the best strategy that is influenced by the
different factors and the company must adopt that factors in order to succeed in the new market.

This will helps the company to have the long term success and have helps them to gain good
profits in the market. By doing the internationalization it helps the cited organization will have
the recruitment of the new people that helps the company to get succeed in the new market. By
this the company will able to learn the culture of the new market and have more foreign
investment opportunities (Ergin, de Wit and Leask, 2019). This also helps the company to have
increase in the goodwill by having the internationalization of the products and services.
2. Critically discussing which country they should enter and the rationale behind the decision.
Analysing the recommended country to support the rationale
Chinese market is now booming and has been seeing a tremendous growth since a long time as it
has a large number of wealthy class of consumers and companies who want to expand their
business in international markets and get into a highly lucrative segment can enter China. As
China has one of the largest economies and its transition from an investment-oriented market to a
consumer-dominated one can help the companies to grow. Sainsbury’s should start their grocery
line in the Chinese market looking at the potentially growing market and the prospects of growth
in such a market(Paul and Sánchez‐Morcilio, 2019). Though, the hypermarket and supermarket
industry in china have facing fierce competition over the past few years and even the sales
growth were stagnated. But, with the resuming of the sales recovery in the market, the companies
have been doing well and are gradually growing which shows a bright future for the
supermarkets in China. As consumers are now more interested in western products, Sainsbury
can attract them and grow potentially in the market and can also effectively face competition by
doing so.
Analysis for the country can be done using PESTLE analysis that will give an idea about the
Political, Economical, Social or Socio-cultural, Technological, Legal and Environmental factors
that might impact the growth of the company in the Chinese market. The analysis of these
external factors will help the company to strategize their development.
Political Factors
The businesses located in a country’s periphery are affected by its political conditions. Some of
the political factors that can affect China’s market and the businesses are-
The trade relations that the country share with other powerful nations , but it has some disputes
with US and some countries from South China, which may become a barrier in the country’s
political stability(Pestle analysis of China, 2022). But being such a powerful country, it can deal

with these issues. The political environment is quite stable in the country and is also deemed to
remain so. Hence, the business environment is also generally stable for the investors.
The government regulations are very binding for the businesses but the government also
promotes subsidizes companies and businesses as can be seen with the reduction of corporate
income taxes for some qualified business in the specific industries that the government
encourages..
China is a permanent member of UN security council and many other leading organisations of
the world like WTO, ASEAN, BRICKS, etc.
Economic Factors
The economic growth of China has been very impressive and is one of the largest economies of
the world. High GDP of the country means high purchasing power of the people, which is
beneficial for the businesses(Kroeber, 2020). It has upgraded its economy to market-based from
the conventional communist-controlled.
This rapid and tremendous growth has also brought some challenges for the country like
environmental damage, inequality, urbanization, etc. The country has to deal with these issues to
maintain its economic sustainability.
Hiring employees in China is also beneficial to the companies as the labor cost in the country is
significantly low, which is also be a competitive advantage for the country.
China is one of the best places for Foreign Direct Investments (FDIs) as it has an established
infrastructure, stable political environment, cheap labour, etc. The country’s power and influence
is proved by its great investment in foreign countries.
Social Factors
China has a massive market for consumer goods as it is the most populous country in the world.
The increase in wage level of the country also increased the consumer spending. The penetration
of the urban lifestyle has lead to a change in the lifestyle of the people with a change in their
purchasing trends and social behaviour(Pestle analysis of China, 2025). The increased status
symbol consumer spending is a great opportunity for foreign as well as domestic businesses.
The literacy rate in China is also very high which is advantageous to the companies as they get
expert labourers and productive employees.
E-commerce can be a great success in the company because of its rapidly rising number of
internet users.

Technological Factors
The country has become a tech economy as it became the world’s leader in technology and
science. The technical innovations and advancement helps the companies with a surge in its
revenue and operations. It helps the companies to adopt better modes of production and
distribution.
The country launched ‘mass entrepreneurship and innovation’ programme to spread
entrepreneurship throughout the country.
Legal Factors
There are numerous laws that regulate employment practices and business in the country like
employee remuneration and benefits, labour standards, labour disputes and the PRC Labour
Contract Law 2007, Administrative Regulation Chen 2019, the PRC Labour Law 1995, etc.
regulate the other relevant issues.
The FDIs have been divided into 4 categories: permitted, encourages, restricted and
prohibited(Minzner, 2018). The production of food and drinks fall under the encouraged
category that can be very beneficial for supermarkets to operate in the country.
The country has also banned social media platforms like Whatsapp, Youtube, Facebook, Twitter
and hence can no longer be use for earning revenue.
Environmental Factors
The ecology has some indirect impacts on the country and its growth. The rapid growth in the
economy has caused severe damage to the environment. Water and air pollution, deforestation,
rise in industrial waste, loss of biodiversity, climate change, etc. are some of the environmental
challenges faced by the country. Hence, the government has taken numerous initiatives to deal
with these concerns by decentralising the responsibility to local levels, organising public
awareness programs and set up guidelines for the business to secure the environmental standards
for production(Wang and Jiang, 2019). This might lead to increase in production cost and
decrease in revenue and profits for some companies. The country’s aim of making electronic
vehicles as primary mode of transportation will also help to save the environment.
The regulations, registration process, etc. need to be explored well to enter into Chinese market
as it is not very easily accessible for foreign companies. Chinese etiquette and business culture is
quite different from that of the West, hence understanding them is very necessary before entering
the market. Competition in China is inevitable and also the influence of government and its

regulations are sometimes stricter. These can be some of the challenges to enter into a Chinese
market but when compared to the advantages of expanding your business to the Chinese market,
the challenges are worth the risk if the company follows right and proper strategies and tools.
The major pros to enter China are that its growing economy has been directed towards
international trade and even the government is making its policies more favourable and better for
the foreign companies. China has also become one of the most prominent innovative landscape
and business innovations can definitely thrive and grow in its market than any other place. The
rich and powerful business ecosystem, competitive currency practices and low taxes make the
Chinese market unmatched. Manufacturing is also relatively cheaper in China than most of the
other developed countries, this can be a great advantage to the business. The workforce in China
is quite professional and goal-oriented and the country’s work ethics are strict that leads to good
and well organised work environment, these makes the employees more productive which
eventually makes the company more efficient. Also, the demand for imported food and clothes
have been tremendously rising in the recent times in China, this will prove to be a right time and
a great opportunity for Sainsbury’s to enter the Chinese market.
3. Critically evaluating a relevant strategy for the internationalization process for the specified
target market.
A business strategy is a long term plan of all the activities to be carried out that the business
designs to achieve the specific organisational goal. Business strategies serve as a guide to reach
the desired target for the organisations. A relevant strategy will help the business to plan its
growth and describes the pathway that the business should follow to attain it. Business strategies
are formed after analysing various factors involved with the company like internal and external
environment, organisational structure, customer preference, market size, etc.
Entry method – Sainsbury’s should enter the Chinese market by selling franchises. In an
international franchise agreement, a company who is expanding their business to the foreign
country grants the rights to sell their products and services and use its brand name to a company
based in that foreign country. The company that grants the rights is called franchiser and the
company to whom the rights are granted is called the franchisee. The franchisee operated
according to the franchiser’s business model. The training and new-product assistance is
generally provided by the franchiser. This will help the company as the franchisee is fully aware

of the country’s market conditions(Caleb and et.al., 2021). The company can also avoid
managerial constraints that are usually involved in acquisitions or other modes or entry.
The company will use product development strategy as it does not offer grocery line in China
yet. Hence, it is offering a new line of product. The company should use price penetration
strategy which is offering products at a lower price in its initial offerings so as to attract the
customers and compete with the competitors. The lower price helps the company to penetrate the
market and stay in competition with the existing companies of the same industry. Hence,
Sainsbury’s should offer quality goods at lower prices but also develop a cost structure that helps
it to sustain this low price strategy. For developing a unique cost structure, the company should
maintain close relations with the suppliers and also maintain the manufacturing and packaging
costs to keep the product cost lower. It should also focus to offer a variety of products through
product differentiation strategy that can divert the customers from the existing supermarkets. The
differentiation strategy will help the company to grow its market share by providing products and
services different from the competitors in terms of value, price, quality and uniqueness(Nunes
and Steinbruch, 2019). This helps the company to enjoy cost advantage as it can grow its market
share. The company not only will have to offer product variants and product differentiation, but
also follow an overall focused differentiation strategy.
Marketing – As the country has banned many social platforms like Facebook, Twitter, Whatsapp,
Youtube, marketing through these platforms in not possible for the company. Hence, it has to
look for ways and other sources for having an effective marketing strategy. China has its own
social platforms like TikTok, Wechat, etc. which can be used by the company for digital
marketing(Spivakovskyy and et.al., 2018). As majority of its population use mobile phones and
internet, marketing through these mediums will be greatly beneficial to the company.
Approaching various influencers has been a good tactic for the companies to promote its
business and even Sainsbury’s can use this approach. The company can also use various other
mediums of marketing like ads in TV, newspapers, etc. An effective marketing strategy will help
the company to attract customers and compete effectively with competitors. But while
formulating a marketing strategy, the company should make sure that benefits derived from it are
more than the expenses incurred for advertising and marketing.
Managing operations – Operations management refers to organising and administrating the
business practices in a way that they create highest level of efficiency in the organisation. The

company has been managing its operations using departmentalisation in its stores, which should
be continued for the Chinese market as well. Operations become easier and more manageable
when they are divided into relevant categories. The employee policy of the company should be
designed just like it has been done till now by developing better employee-employer
relationships and giving preference to the personal requirements of the employees. The company
should have an adaptive strategy to remain in the market for a longer period of time. It should
also maintain close relationships with its suppliers to enjoy better quality and lower costs
advantage(Dimitrova and et.al., 2018). The company should ensure that the resources are
effectively utilised and they have simple business model. The company should manage their
supple chain effectively so that inventory and stock is managed so that all the required goods are
available in all the stores and proper training for the franchisee should be given to ensure smooth
running of the business.
The company will also have to develop an effective location strategy while entering the market
which should focus on the areas and locations where the stores should be located so that they are
more feasible and easily reachable for the customers. They should select appropriate locations so
that they do not lead back from the competitors in terms of feasibility.
Managing human resources – Human resource is one of the most important key in an
organisation’s success. Hence, managing the human resource of an organisation is a very crucial
part of the company’s management. Sainsbury’s should first focus on acquiring local manpower
who are skilled and efficient by conducting an effective recruitment process. The company
should anticipate future needs of human resources well in advance so that the productivity does
not decrease due to shortage of manpower, the company should also manage its employees’
competency and their development by conducting timely training programmes to enhance its
employees’ skills and match the needs of the business(Stone, Cox and Gavin, 2020). The
company will have to assign work to the employees considering their skills and ensure that they
are not overloaded as it can reduce their productivity. The performance of the employees should
also be regularly evaluated so that their inefficiency can be known and worked upon. Policies for
employees and their welfare should also be formed to motivate them and also to keep them
disciplined.

CONCLUSION
The report made in the context of Sainsbury’s gave an overview of the organisation and
highlighted the reasons for the company to go international. In this report, a suitable country
which is China has been recommended to Sainsbury to expand its business in international
market and also the rationale for choosing this company has been given. The country was
analysed using PESTLE analysis to understand the factors that could affect the business in the
suggested country. The analysis was done to support the rationale. As China is among the most
powerful and economically developed country, it is seen to be one of best choices for a business
to expand in the foreign market. Moreover, critical evaluation of the relevant strategies that the
company should adopt for internationalization in the specified market is done based on the above
analysis. The strategies in terms of entry method, marketing, managing operations and managing
human resources have been evaluated.

REFERENCES
Books and journals
Caleb, H. T. and et.al., 2021. R&D activities and innovation performance of MNE subsidiaries:
The moderating effects of government support and entry mode. Technological
Forecasting and Social Change. 166. p.120603.
Dimitrova, B. V. and et.al., 2018. Retail internationalization: A review and directions for future
research. Journal of marketing channels. 25(1-2). pp.1-21.
Kroeber, A. R., 2020. China's Economy: What Everyone Needs to Know®. Oxford University
Press.
Minzner, C., 2018. End of an era: How China's authoritarian revival is undermining its rise.
Oxford University Press.
Nunes, M. P. and Steinbruch, F. K., 2019. Internationalization and the need of business model
innovation-A theoretical approach. BBR. Brazilian Business Review. 16. pp.207-221.
Paul, J. and Sánchez‐Morcilio, R., 2019. Toward a new model for firm internationalization:
Conservative, predictable, and pacemaker companies and markets. Canadian Journal of
Administrative Sciences/Revue Canadienne des Sciences de l'Administration. 36(3).
pp.336-349.
Spivakovskyy, S. and et.al., 2018. Marketing strategies of companies in internationalization
process. Journal of Advanced Research in Law and Economics. 9(6 (36)). pp.2155-
2162.
Stone, R. J., Cox, A. and Gavin, M., 2020. Human resource management. John Wiley & Sons.
Wang, Q. and Jiang, R., 2019. Is China's economic growth decoupled from carbon
emissions?. Journal of Cleaner Production. 225. pp.1194-1208.
Fischer, S. and Green, W., 2018. Understanding contextual layers of policy and motivations for
internationalization: Identifying connections and tensions. Journal of Studies in
International Education. 22(3). pp.242-258.
Ergin, H., de Wit, H. and Leask, B., 2019. Forced internationalization of higher education: An
emerging phenomenon. International Higher Education. (97). pp.9-10.
Online
Pestle analysis of China. 2022. Available through:< https://www.edrawmax.com/article/china-
pestel-analysis.html#:~:text=The%20PESTEL%20analysis%20of%20China%20shows
%20that%20several%20external%20conditions,from%20a%20rapid%20economic
%20slowdown. >
Pestle analysis of China. 2025. Available through:< https://howandwhat.net/pestel-analysis-
china/ >

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