Expansion of UHT Business in China

This report discusses the key business drivers, trade barriers, and cultural preferences for expanding UHT business in China. It explores factors such as political, economic, social, technological, environmental, and legal factors that impact business expansion. The report also highlights the trade barriers faced by businesses in China and provides insights into the cultural preferences and regulations that businesses need to consider. It concludes with opportunities and recommendations for expanding UHT business in China.

International Business

EXECUTIVE SUMMARY
In the report, it is summarised that economic condition of china is different from other
countries as there is high government intervention in this country and due to this factor it is
important for business to follow all rules and regulation. Business who wants to expand their
operation can adopt franchising as it helps them to expand their business faster as well as provide
them extra profit which is positive sign for their business. Business should follow culture factors
as it can create negative impact on their operation as people in china are more connected to their
religion, belief and values.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. Key business drivers help in expansion of business in country...............................................1
2. Trade Barrier which affect expansion of UHT business in China...........................................4
3. Cultural preference considered by business in China..............................................................6
4. Ethical and Social issues considered by organisation while expanding their business in
China............................................................................................................................................7
5. Expansion method followed by business in order to expand their business activity in China 8
CONCLUSION................................................................................................................................9
RECOMMENDATIONS.................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
International business is that business in which business sell their goods, service, capital,
technology at global level. It allows business to have cross border transaction between others
countries (Bailey, 2018). There is transaction of labour, skills, capital and other resources for
production of product and service. Milk and dairy business are related to agriculture sector and
are engage in production of milk which are used for production of various dairy products. For
development of dairy products, commercial farm is using species like dairy cows. But due to
growth of dairy farms, they are using other species like goat, camel and goat. This project
includes study of Lillie Brothers Ltd which is established in the year 1974 providing milk deliver
to their customers. It is a family business which are providing efficient services in food delivery
to their customers. Company is small business enterprises and is using UHT technology for
providing their services. This technology is used high temperature to heat liquid food which
helps to kill bacterial endospores. This technique is used by organisation to produce skimmed
milk, semi skimmed milk, organic milk, UHT milk, Goats milk and many more products. It is
one of enterprises which is planning for expanding their business operation in China in Shanghai.
There are limited numbers of provider of UHT milk in china which provide opportunity to Lillie
Brothers Ltd as there are increased demand for their product in that country specially in
Shanghai. This project report includes business drivers which helps business in expansion in
country, along with PESTEL analysis in environment of country. It also includes trade barriers
face by business in China, ethical and social issues considered by business in China, cultural
preference of business along with method of expansion used by organisation.
MAIN BODY
1. Key business drivers help in expansion of business in country
PESTEL analysis is an analysis which assess factors like political, social, economic,
technological, environmental and legal factors (Gaffney, Karst and Clampit, 2016). Lillie
Brothers Ltd are expanding their business in china which include following factors:
 Political factors: Political factors are those which include interference of government in
business. In china government regulation are high which can affect business and their
activities. Chinese government is formulating policies which are changed overnight and
affect domestic as well as foreign business. It creates threat for business and it is
1

impossible for organisation to create long term plan in China. Lillie Brothers Ltd are
expanding their business in China but due to instability of policy of Chinese government,
survival of business in that country is quite difficult. They need to ensure that their
product is not against of communist party of china as it can result in ban of their product.
 Economic factors: Economic factors are those which include interest rate, inflation rate,
GDP etc. (Gholipour, 2019). Economy of china is performing well as present GDP rate is
very high. It seems that it can surpass GDP rate of Economy of US. As a result,
purchasing power of people living in China is increasing along with lower labour cost.
This provide benefit to many companies by using labour from china and selling products
to Chinese people. Growth in urban sector of company is assist in expansion of economy.
Lillie Brothers Ltd can conduct their business in China as they can get benefit of low
labour cost and can sell their product to people living in China.
 Social factors: Social factors are those which include culture, belief, values, norms,
preference etc. Culture value are high in china as it reflects their social trends. Factors
like size of family, population are affected market as well as cultural needs. Consumer
behaviour of Chinese people are different from other market as literacy rate of China is
relatively high and more portion of people living here are using internet. Social culture of
China is influenced by their political setting as goods are more regulated. Lillie Brothers
Ltd need to consider these factors while expanding their business in China as it will
provide help them for survival of business in China.
 Technological factors: Technology factors are those which include automation, research
and development, technological change etc. Technological factors are in China include
consumption of internet (Hernández and Nieto, 2016). Most of people are living in China
are using internet and prefer online shopping but at the same time, they are not stable
online payment system. Country is having physical shopping trend. Lillie Brothers Ltd
can get advantage by conducting their business in China as there are major population
using internet which allow them to sell their product through internet. This also show
people here are technology friendly which does not require much training to hire
employees.
 Environmental factors: Environment factors are those which include weather, climate
change, climate. China is generating pollution, so it is important for organisation
2

conducting their business in china to follow environment standards. Following this
standard is good for image of business organisation but it increases cost of production
and also reduced profit margin of organisation. Lillie Brothers Ltd can conduct their
operation in China but they need to follow all environmental standards to protect their
business from government interference.
 Legal factors: Legal issues affecting business are including laws and regulation
including labour law, tax law, intellectual property rights etc. China is formulating new
rules in E-commerce sectors as e-commerce sector is new and growing sector in country
of china (Ibrahim and Khan, 2019). There is trade legality as import tax in china is
expected to reduced. Lillie Brothers Ltd need to follow all trade regulations of China to
offer their product in market of that county.
Key Market Drivers: There are various key drivers which helps business in providing
opportunity to organisation. These factors which helps business of Lillie Brothers Ltd in
Shanghai and these are as follows:
Expanding dairy consumption in china: Growing influence in market and nutrition
awareness, increasing dairy industry has led to increased demand of dairy product in market
(Davidsson, 2016). All these factors increased consumption of dairy and milk product in country
as country has large population which require more product. Due to these factors, china is
becoming epic centre for expanding business in dairy and milk product. Lillie Brothers Ltd can
expand their market in China as there are increasing demand of dairy and milk product.
Company can get huge market base here as company has largest population. Organisation can
use local distributors and manufacturer to sell their product in market.
Number of supplier present in market: As there is high demand for dairy and milk
product in china and due to attraction of foreign companies, there are large number of suppliers
which supplies raw material to their product. Lillie Brothers Ltd are conducting their business in
dairy and farm business and are planning to expand their business. China has supplier which
helps them smooth of production in that country.
Due to global pandemic, people are focuses on healthy food: Global pandemic has
arisen due to spread in deceases namely Covid-19. This cause lock-down in economy of many
countries which stop growth in economy (Dvas and Dubolazova, 2018). This make people to be
more health conscious as people are avoid to go outside and are focused on taking diets with full
3

of nutrition to increase their immunity. All these factors help to increase demand for health food
in China and other country. This will create opportunity for business who are service dairy and
farm business. Lillie Brothers Ltd are serving dairy products in market and has increased market
share for their business. Company has marketing opportunity for their business in China as
people in that country are more focused for healthy food.
Market Size: China has largest market size and has largest population in compare to
other countries. It provides opportunity for business as they can conduct their business in
country. There are number of customers who create demand for product. As in china, there are
increased demand for healthy food which provide opportunity to Lillie Brothers Ltd. People live
here as diversified demand which can be a positive factor for organisation if they can identify
their customer base.
Culture and Regulation: In china there are different culture than other country.
Companies need to understand their culture and their preference to expand their market in
country. Organisation which understand culture and preference of this country has various
marketing opportunity in Chinese market. Lillie Brothers Ltd is a leading company in dairy and
milk product which can conduct research to understand preference and habits of people living in
China which helps them to increase their market share in country.
2. Trade Barrier which affect expansion of UHT business in China
Trade barriers
Traffic Barriers:
 Import quotas: Import quotas is one of trade barrier in china in which there is certain
quantitative limits on some products and service for purpose of protecting their domestic
industry. In china, there regulation is imposed by their government on foreign companies
which create barrier for firm wants to expand their business.
 License: License is also one of barrier for entity of firm in China as license for importing
of products are very limited. In that country these are given for specific products and
service.
Non- traffic barriers
 National regulation: There are some of national regulation in china over foreign
countries as government of china does not want to create negative impact on domestic
4

companies due to international companies. So, they put various restriction over
companies which is from foreign country.
 Exchanges controls: China is intervening for their currency in terms of dollar which
create problem for international business of western companies. This is due to prop ups
of exchange rate by china as there is discrepancy in paid price which is depended on
exchange rate. Country is putting various control over foreign investment in china.
Some other control face by business in conducting their business in market of china are as
follows:
Government challenges: Government of country china is formulating various rules of
business including product design, sold, use, develop along with compliance in market. This can
create issues for business conducting their operation in China. Government challenge is one of
major trade barrier in economy of china as it put many restrictions and control over business and
their activities which need to be followed by enterprise to ensure survival of business in China.
SPS measure: China has put sixty-one sanitary and phytosanitary measure which is one
of major barrier of companies who want to conduct their business UHT milk or other dairy
products. These measures are important as Lillie Brothers Ltd are conducting their operation in
china to provide UHT milk for school going kids.
Culture of country: Business culture is an important aspect in conducting their business
in country as product and service should be in accordance with cultural preference of people
living in that country (Le Nguyen, Larimo and Ali, 2016). In international business, it is
important for managers to understand cultural and value of people as aim of business is to
conduct operation of organisation without hurting sentiments of people living in that country.
Business Locations: To conduct business activities, it is important for managers to select
right locations for their business. It is important for companies to know that some area or cities
existing in China is free trade zones. These areas are special area which is free from interference
of custom authority. In these areas, business is manufactured and handle without any
interference. To conduct business activities, it is important for managers to select right locations
for their business. It is important for companies to know that some area or cities existing in
China is free trade zones. Managers of Lillie Brothers Ltd need to proper research for conducting
their business, it is difficult for them to identify these areas and take permission to conduct their
business as government is supporting local manufacturer.
5

Trade Policy of China: Economic policy like liberalisation and privatization of some sectors are
affecting economic policy as these sectors are previously in control of government but at the
same time control of government in economy is high (Odlin and Benson-Rea, 2017). China is
increasing their exports which results in positive trade balance. Other than this, China has
increasing surplus of current account and value of foreign net assets shows that China is not
spending money in country. But in recent year, saving and investment gap in country is reducing.
There are high saving and investment level shown in GDP of country. It is important to increase
consumption level in country. There is various factor in economy which support growth in
country but there are many set restrictions in country.
Opportunity factors in Economy: Trade policy creates positive impact in china as it
increases growth rate of china and increase their surplus. China has positive surplus of trade
which is result of increased export of country. It increases purchasing power of people living in
china. Lillie Brothers Ltd is expanding their business in UHT milk in china which is for specific
market segment that is school going kids. Due to increase purchasing power, it creates positive
impact of any business.
Risk factors in Economy: Trade policy is also creating negative impact on business as
China is putting high regulations on business. They control design, quality and other factors
related to manufacturing of goods and service. All these factors are increase threat for business
as china as unstable trade policy which can be changed by government any time. Lillie Brothers
Ltd is facing threat from trade policy of china as government can change in trade policy any
time.
3. Cultural preference considered by business in China
Hofstede’s Cultural dimension theory: This theory is developed by Geert Hofstede which
provide a framework to understand differences in culture around world and include ways in
which business carry out their activity in different culture. This theory is focuses on
differentiating between national culture as well as dimension of various culture and also helps in
assessing impact of setting of business. It includes various culture category including
collectivism against individualism, power distance, femininity against masculinity.
Cultural factors:
Culture factors plays important role in business as it affects their working and operation
in country specially in international business (Schmid and Wurster, 2017). There are various
6

cultural factors which affect business. Some cultural factors considered by Lillie Brothers Ltd
while serving market of china are as follows:
Guanxi: Society of China is relationship oriented as it is important for business to have
interaction and network in that country. Guanxi refers to network and interaction which is
established between partners to build relationship. This will help business in minimising risk and
failure as people living in china prefer to work with trust.
Confucianism: Confucianism is one of factor which affect business and its practice as in
this all relationships are unequal. It is important to business in china to respect education
background, age and seniority. In this factor, manager is behaving like father and it is not
disrespectful to ask question to them. Manager is getting loyalty from their employees and
obedience, in return manager helps employees in their personal life.
Meetings and greetings: In china, it is important for business person to pay respect in
meetings (Semrau, Ambos and Kraus, 2016). Hand shaking are some of gesture which are
important while exchanging cards and doing meeting with other people. In china, people lower
their eye sight instead of eye contact while greeting someone as it is a sign of respect in Chinese
people. Manager of Lillie Brothers Ltd should consider all these factors in mind while
conducting their business in China.
Significance of culture in business activities
Communication: Culture is important for business as it helps them in ensuring
communication within organisation between employees as well as to local people about product
and service. For business who are conducting their operation at global level, it is important to
understand culture of country where they are operating as it ensure communication which is
important to avoid confusion. Lillie Brothers Ltd is an organisation which can get advantage of
smooth flow of communication by understanding culture of China.
Decision making: Culture is important for business as it helps them in decision making a
decision-making process is different in different place. For decision making by company related
to business activity, it is important to understand culture and decision should be taken
accordingly. To include employees in decision making, it is important for organisation to
understand culture pattern of country as it helps them to provide familiar environment to their
employees. Managers of Lillie Brothers Ltd can take quick and effective decision according to
environment of China by understanding cultural aspect.
7

Survival of organisation: Culture is import for survival of organisation as these culture
factor can affect business in many ways (Strange and Humphrey, 2019). It is important for
business to understand culture of country in which they are conducting their business activities.
Culture understanding provide support to product and service to their product and service in
china as they are only work and buy product on which they have trust. Lillie Brothers Ltd is
ensuring survival of business by understanding culture aspect of china as these aspects can affect
operation of business in country.
4. Ethical and Social issues considered by organisation while expanding their business in China
Ethical issues are problem caused by people themselves and create negative impact on
individual as well as society (Popli and Kumar, 2016). Social issues are those which are
influence large population and create negative impact on number of people. Social and ethical
issues face by Lillie Brothers Ltd are as follows:
Corporate social responsibility: Corporate social responsibility is introduced with
intention of realising of social obligation to business beyond of generating profit. Socials
responsibility of business is helps them to increase profit of enterprise as well as help them to
fulfilling their responsibility in order to protect society. Following corporate social responsibility
is major issue for business as it important for all business for fulfilling their responsibility for
society. Lillie Brothers Ltd needs to fulfil social responsibility for conducting business in china
as it increases their image in that country and they will get support from local people.
Workplace diversity and equal opportunity: It is corporate social responsibility of
enterprise to reduce workplace diversity and provide an environment to their employees in which
they feel equal. This will increase morale of employees and also increase mutual trust between
employees and employer. It also responsibility of company to provide equal opportunity to their
workers and avoid discrimination from workplace.
Trust and integrity: Trust and integrity is important between customer and origination
as well as between employees and management. This trust can build by performing social
responsibility be firm which include provide fair wages to their employees, reduce pollution
level, fair price for heir product, high standard of quality. These helps Lillie Brothers Ltd in
building trust as well as integrity ain their employees as well as customers.
Consumer rights: In china, there are many scandals occur which are related to consumer
rights. It is important for business to follow food and safety laws and other consumer laws while
8

providing their goods and service. As Lillie Brothers Ltd are providing UHT milk which need to
follow all food and safety measures as well as consumer rights. These rights can be creating
issue for business.
Environment pollution: In china pollution is relatively high die to industrial process in
country. Business are using some resources which can reduce their cost but increase pollution
level in environment and disposing of waste material dispose these into air or water can pollute
water and air in china (Rugman, 2017). Due to these issues business in china need to follow
environmental standards as there is increase demand of healthy environment in China which a
business needs to understand. Lillie Brothers Ltd need to follow all these health safety measure
to avoid pollution in country as these create issues for business.
5. Expansion method followed by business in order to expand their business activity in China
Licensing: Licensing refers to arrangement which include permission of one party to
another of selling good using their name, trademarks of licensor but does not include operating
control or marketing controls (Walker and Lloyd-Walker, 2016). In this, licensor require license
to access to limited requirement design for purpose of protection to property rights of licensors
and also include performance requirement but licensor does not provide marketing plan which
should be followed by license. Lillie Brothers Ltd can adopt this method for expansion of their
business as it provides them extra income for technical services. It allows them to access market
of china which might cannot possible by export because of existing facilities.
Franchising: Franchising is a method which is beneficial for growing percentage of sales
of goods as well as service in world. It refers to a method in which distribution of goods as well
as service is marketed through other parties by using name and mark of owner by using
impression that they are part or a system associated with owner of business (Zhao and Ferran,
2016). Lillie Brothers Ltd can adopt this method to expand their business in china as it helps
them in getting returns on investment and provide them speed to expansion and growth of their
business.
CONCLUSION
From above mentioned project report it can be concluded that international business is
conducted between two or more countries for exchange of goods and service currency,
technology, finance. There are various factors which helps business to expand in China
9

including increasing demand of milk product as well as increasing awareness of healthy products
in country. Organisation who is planning to expand their market can use PESTEL analysis to
analyse factors which can impact on business. These factors include economic, political, social
and technological factors. An organisation which expanding their business to other country are
facing many trade barriers like rules and regulation of government, cultural aspect, environment
measure etc. Business at international level also face social and ethical issues like corporate
social responsibility, working environment, customer rights as these factors can create problem
for business in market. Cultural aspect is related to preference, habits, value and belief of people
of particular country. There are various cultural factors which should be followed by business to
ensure their survival and increase their market image. Organisation adopt various methods to
expand their market share, these methods are direct exporting, licensing, franchising etc.
Internationalisation of business provide many opportunities to organisation as to increase their
market share, profit and provide access to different resources.
RECOMMENDATIONS
The recommendation for the company Lillie Brothers Ltd is as the following as this
company is small medium enterprise, that deals in the dairy segment having the
recommendation. As this company is the dairy company that is based in the village, this have to
be established in the main cities of U.K, because the peoples are liking the products so much and
the demand of the company is increasing day by day. The further recommendation is the product
have to work in also the different segments like the company also have to offer ice creams and
sweets apart from the yogurt butter and milk. The company have to increase the product line due
to the company is the small medium enterprise, that is why, they have to enhance the product
line like try to make some new things and also get focused on the different segments of the
products. Because now a day’s customers always prefer to buy the organic products these things
can attract the customers for buying the new things.
The consumers are the mostly health conscious because of their health. This is also
recommended that the company have to improve their marketing strategies because the product
they are providing that are pure organic and the comparison of the product the company is not
doing the marketing strategies according to the company. Because sometimes proper advertising
of the product is also needed to improve, because products sometimes need to be famous that
more and more peoples can know the products, and what are the qualities present into the
10

product, this only be possible after doing the effective marketing strategies. The other
recommendation as this is small medium enterprise so the company have the limited staffs,
sometimes limited staffs not able to handle every work, and if the work is not in their proper
process, this is also the reason the quality of the product is also getting decreased. The staffs
sometimes not doing their job properly because they have too many responsibilities because of
the limited staffs in the company. So, the other recommendation is doing some investment in the
company and getting hired the responsible staffs who can manage their works, in a proper way.
So, the customers are get satisfied from the products and services of the company this is also a
very important step for the company.
The another recommendation is the safety of the staffs and the employees in the
company, because for the organic products the staffs have to do the labour very hard, in both the
shifts, so this will be better if the company is get concerned about their as a priority and giving
them proper perk and benefits on behalf of the company, this is the reason the staffs feel
privileged in working this company and do their job in the better way. The last recommendation
for the company is offering the price of the products according to the quantity and quality of the
products, sometimes the products price is increased in comparison to their quantity, that is the
reason sometimes customer’s id being refused to buy the products, because they are no satisfied
by the quantity of the products. So, this is the important thing that have to be considered by the
company.
11

REFERENCES
Books and Journals
Bailey, N., 2018. Exploring the relationship between institutional factors and FDI attractiveness:
A meta-analytic review. International Business Review. 27(1). pp.139-148.
Davidsson, P., 2016. A “business researcher” view on opportunities for psychology in
entrepreneurship research. Applied Psychology. 65(3). pp.628-636.
Dvas, G.V. and Dubolazova, Y.A., 2018. Development and business support of innovative
enterprises in the Russian Federation. In Innovation Management and Education
Excellence through Vision 2020 (pp. 5654-5657).
Gaffney, N., Karst, R. and Clampit, J., 2016. Emerging market MNE cross-border acquisition
equity participation: The role of economic and knowledge distance. International
Business Review. 25(1). pp.267-275.
Gholipour, H.F., 2019. The effects of economic policy and political uncertainties on economic
activities. Research in International Business and Finance. 48. pp.210-218.
Hernández, V. and Nieto, M.J., 2016. Inward–outward connections and their impact on firm
growth. International Business Review. 25(1). pp.296-306.
Ibrahim, A.K. and Khan, S.M., 2019. Domestic debt and economic growth in Nigeria: An ARDL
Bounds test approach. Economics And Business. 33(1). pp.50-68.
Le Nguyen, H., Larimo, J. and Ali, T., 2016. How do ownership control position and national
culture influence conflict resolution strategies in international joint
ventures?. International Business Review. 25(2). pp.559-568.
Odlin, D. and Benson-Rea, M., 2017. Competing on the edge: Implications of network position
for internationalizing small-and medium-sized enterprises. International Business
Review. 26(4). pp.736-748.
Popli, M. and Kumar, V., 2016. Jumping from springboard? The role of marginal cultural
distance in cross‐border M&A deal completion. Thunderbird International Business
Review. 58(6). pp.527-536.
Rugman, A.M., 2017. 9. Research in International Business: A Canadian Perspective.
In International Management Research (pp. 105-114). De Gruyter.
Schmid, S. and Wurster, D.J., 2017. International work experience: Is it really accelerating the
way to the management board of MNCs?. International Business Review. 26(5). pp.991-
1008.
Semrau, T., Ambos, T. and Kraus, S., 2016. Entrepreneurial orientation and SME performance
across societal cultures: An international study. Journal of Business Research. 69(5).
pp.1928-1932.
Strange, R. and Humphrey, J., 2019. What lies between market and hierarchy? Insights from
internalization theory and global value chain theory. Journal of International Business
Studies. 50(8). pp.1401-1413.
Walker, D. and Lloyd-Walker, B., 2016. Rethinking project management: Its influence on papers
published in the international journal of managing projects in business. International
Journal of Managing Projects in Business.
Zhao, J. and Ferran, C., 2016. Business school accreditation in the changing global marketplace:
a comparative study of the agencies and their competitive strategies. Journal of
International Education in Business.
12

13