International Business: Trade Policy, Cultural Factors, and Trade Barriers

This document provides an overview of international business, including trade policy, cultural factors, and trade barriers. It discusses the impact of political, economic, social, technological, legal, and environmental factors on international business. The document also explores the ethical and social issues faced by businesses in the global market.

International
Business

Executive summary
International business is defined as the trade policy in commodities, resources, information,
money and expertise. It comprises the exchanges between the two different countries between
products and services across borders. However, global business environment includes the
economic risk, people have different background and cultures, legal problems because
organisation operate their business in various locations so they have to follow different rules
and regulations and exchange risks as well as taxation problems as countries have distinct
policies of them. International business is essential in order to maximize competition in local
market which leads to develop more opportunities in global market.

Table of Contents
INTRODUCTION.................................................................................................................................4
Business drivers.................................................................................................................................4
Cultural factors..................................................................................................................................6
Trade Barriers; Tariffs and non-tariff................................................................................................8
Ethical and social issues....................................................................................................................9
Methods of expansion......................................................................................................................11
CONCLUSION...................................................................................................................................12
REFERENCES....................................................................................................................................14

INTRODUCTION
International business signifies that buying and selling of goods and services as well
as commodities from outside the borders (Birru and et.al., 2019). It increases the competition
by innovating new things in global market to remain in competitive advantages by having
more funds in their business venture. This not only means to deliver their products
internationally but it also states that use of capital, technology, patents as well as copyright
which helps them to expand their activities and operations. Ultra high temperature processing
refers to the method where food is processes using technology which heat their product to
make them liquid and kill multiple bacteria by heating above 135 degree. This is the process
which is mostly used in milk as it is established in year 1960 but the use of this heated milk is
consumed in year 1970s. It is packed in containers which have life of more than seven
months to consumer. London Diaries is considered in this report. It is run by their family
members in New Covent Garden London, UK. This organisation is founded in year 1995 by
Simon and O’Mahoney. They sell different type of good or services such as eggs, milk,
juices, cheese, cream and many more. They have to tap into the Chinese market in order to
expand their business. This report includes business driver to conduct PESTLE analysis,
cultural factors which include Hofstede’s theoretical framework trade barriers, tariffs as well
as non-tariffs, problems related to social and ethical, significance of corporate social
responsibility and method of expansion.
Business drivers
The demand of UHT milk in China is growing day to day in the country. China
imports their UHT milk in huge quantity as their need is to drink liquid form of milk rather
than milk powder. In China, urbanisation is rising and more than 60% of their population of
milk consumption recommends Ultra High temperature Milk. The competitors who are
managing and operating their business in China are Yili, Mengniu and Bright Dairy. To
identify and understand business driver London Diaries has adapted PESTLE model which
are mentioned below:
Political: It comprises of government policy, political stability, corruption, tax policy, labour
law and trade restrictions.

Positive impact: Political stability has impacted positively on London Diaries as they
have to follow rules and regulations to operate and manage their business internationally
(Buckley, Enderwick and Cross, 2018).
Negative impact: Due to COVID pandemic restrictions there was a problem of
importing and exporting their products such as UHT milk so they decide to market their
products in China in order to expand business process and operation.
Economic: This factor states exchange rate, interest, inflation, unemployment, disposable
and unemployment rates as well as economic growth.
Positive impact: UHT milk has increased demand in all over the world as they have to
provide their milk which has aged between three to eleven years in order to increase
economic growth.
Negative impact: By tapping into Chinese market they have to acquire many
resources to enter into China market.
Social: This signifies population growth, age distribution, safety emphasis, health
consciousness and lifestyle attitude.
Positive impact: London Diaries have distributed the age such as children to target the
specific market which helps them to attract customers in market.
Negative impact: Lifestyle attitudes impacts negatively on London Diaries as
customers have different taste and preferences to drink Ultra high temperature milk.
Technological: It includes level of innovation, technology incentives, automation, research
and development activity and changes in automation.
Positive impact: Innovation in market impacts positively on London Diaries as they
are tapping into China market by launching new products or services in market place in order
to gain higher profit in business (Casson and Wadeson, 2018).
Negative impact: The cost to adapt technology to process liquid milk impacts
negatives as it requires huge investment in organisation.
Legal: This consists of employment laws, consumer protection, health and safety, copyright
and patent laws.

Positive impact: London Diaries adapt consumer protection laws to protect them
against any problems in products and services in order to develop business performance.
Negative impact: When selected organisation not follows rules and regulation which imposed
by United Kingdom government then it affect the performance of business.
Environmental: This factor signifies weather, climate, environmental policies, climate
changes and pressure from NGOs.
Positive impact: Environmental policies help London Diaries to follow them to
maintain the temperature of milk so that they can deliver good quality UHT milk to
customers.
Negative impact: Climate may affect company which impacts negatively on business
because the temperature affects the import and export of products and services in market.
All the cooled products are produced by three sites in Shanghai and the plants in
Wuhan, Xian and Beijing. The Heilongjiang and Inner Mongolian plants manufacture UHT
milk. The milk is sold in Shanghai, but UHT milk is available on the eastern coast of China
in other provinces. UHT milk developed at this facility may be distributed in Beijing or
shipped to other provinces, including Fujian and others on the outskirts (Cavusgil and et.al.,
2020).
Porter five forces
This is effective model to analyse industry. Here, this is used to analyse the industry
of China for the purpose of ascertaining effectiveness;
Competitive rivalry: This help in determination of competition in market. In respect
of London Diaries and industry the amount of is stiff and less scope for an organisation. This
shows the power of competitors is high.
Supplier buyer: In respect of London Diaries and industry, the number of suppliers are
high. This shows that power of suppliers is low and organisation has chance to build
business.
Buyer power: In respect of London Diaries and industry, number of buyers are high in
industry but competition is also stiff so initially power of an organisation is low.

Threat of substitution: The number of substitute products are available in market so
the threat of substitute powers is high in market.
Threat of new entry: Rules and regulations are supportive in industry of china that
helpful for business to start. So, this shows the power of an organisation is high in industry.
Cultural factors
Cultural factors include a variety of beliefs and philosophies of a certain culture or
collective of persons. It is an individual’s culture that determines how customer will react in a
particular situation. The consideration affect a person’s purchasing decision significantly. In
context to London Diaries, the consumption of milk affects the production of Dairy industry
in china. It is helpful for their business which they operate in United Kingdom. Selected
enterprise adapt Hofstede’s theoretical framework which helps them to identify and
understand the national culture of United Kingdom as well as China. The detail information
of this model in relation to London Diaries is explained below:
Hofstede’s theory of cultural dimensions is created by Geert Hofstede is a tool used for
understanding cultural distinctions throughout nations and for recognizing approaches as well
as process is conducted out across communities. In addition to this, it distinguishes the
aspects of the society or their effect on the corporate environment between different regional
cultures.
Power distance index: The measure high power distance reveals that a society
embraces inequities as well as differing power promotes compliance and has great regard for
position and rule. On the other side, the low power shows the society promotes flat
organisation and make decentralised decision participatory management style and emphasises
the allocation of resources.
Collectivism vs. Individualism: Individualism shows that the achievement of
specific objectives is of greater significance. In this division an individual’s self-image is
identified as “I”. On the other hand, Collectivism shows that the aims and well-being of the
individuals is described as “We” in this division.
Femininity vs. Masculinity: Masculinity has the various attributes such as separate
gender stereotypes, strong and focused on financial success and the development of money.

On the other hand, femininity is characterised by the following aspects such as complex
cultural norms, humble, caring and standard of life (Hannibal and Knight, 2018).
Short term vs. long term orientation: Focused on potential and long term
orientation means delayed short term progress or satisfaction with long term success. In
longer term patience, dedication and long term growth is considered. On the other side, Short
term attention is on the coming years, brings short term progress as well as satisfaction and it
is emphasised on the current rather than future. It is guidance which stresses the rapid success
and traditional respect.
From the above analysis, it is evaluated that China is viewed as a group culture
whereas United States is more individualistic because of the cultural distinctions. However,
Chinese and Americans deal separately with cultural bonds. In addition to this, Chinese
choose hierarchical structure while dealing with anyone. In Hofstede’s study, the United
Kingdom is deemed to be a masculine culture. British culture continues to appreciate
competitiveness, accomplishment and performance which are putting less value into virtues
such as good working relations, modesty and standard of living control. In context to china, it
is argued that Chinese culture and enterprise have a longer term outlook that causes barriers
and problems to be removed over a certain amount of time rather than to have to rush to do
anything. Males and female cultures in China have caused a lot of cultural norms and
prejudice in China to be missing. In this aspect, China is favourable to the west. However,
China has large power gap than the UK.
Trade Barriers; Tariffs and non-tariff
Trade barriers include two types which is tariff and non tariff which is mentioned below in
context to dairy milk industry:
Tariff barrier: This is the barrier which is imposed by UK government on taxation.
In addition to make import quite efficient, legislation raises duties on goods of various
products. The rise in taxes on manufactured products would cost the commodities that will
never benefits the business as the buyer would not be forced to spend increased expenses for
goods produced in different nations (Hooper and Holtbrügge, 2020). However, trade barriers
in dairy industry as the security of milk food has always been an important matter for the
milk sector in China. This involves some limitations which are levied and exchange
payments.

Non tariff: This is the policies and standard implemented by the nation to find it
tougher for international firms to trade. Thus, protecting their interests and providing them
with a business position. This non-tariff represents a major challenge for companies seeking
to establish market in different states for goods or services. These obstacles make it
impossible for corporations to manage their goods or services and quantity of sales as per the
study and make survival on the market which make business expensive. The occurrence of
non-tariff barriers has become one of the undesirable waste goods of a more globalised dairy
market.
Quotas: It applies to the administrations activities which placed a specific quota on
shipments of goods from various nations. The government sets certain quotas to regulate the
import of greater quantities of goods by companies which are potentially adverse to the
national growth. In addition to this, they retain the equilibrium between the financial sector
and organisation imports, the government places some restrictions on import capability and
above these restrictions (Hult, Gonzalez-Perez and Lagerström, 2020). However, they are
prohibited and treatment of firms as illegal. Britain has the country's third surplus in milk
trade. 16% of UK dairy is now supplied from 98% of the imports from the EU. This market
with the UK is the only supplier of dairy products to the UK for 10 percent of all exports of
EU dairy products to Ireland and France.
Subsidies: These are the restrictions and incentives which are provided to local
enterprise by UK government that allow them to gain a competitive advantage over
international organisation. Therefore, the government provides the local firms with the
incentives so that private manufacturers may be assured investment and foreign investors
cannot control the economy in that particular country. This subsidies favour local businesses
which do not give international business which give advantage to it.
Licenses: It is the main part to run and operate their business and helps them to
regulate their organization. It is an official document which helps them to give permission to
conduct their business everywhere where licensed is applied. London Diaries have to regulate
their company and should be registered under FSSAI for milk products
Ethical and social issues
Social problems may be described as concerns or issues that affect a broad
community. On the other hand, ethical problems are challenges created by people itself which
have an adverse effect on both the person and environment. However, the social ethics of

issues including the allocation of basic commodities, misconduct, inequality, criminal justice,
conflict and harmony, criminal justice, conflict and harmony which can understand as
implementation of ethical reasons. Therefore, it includes work policies, rights, environmental
standards, exploitation and legal duties of multinational companies are the significant ethical
problems of international industry (Kahiya, 2020). This is tough for London Diaries to run
businesss working in Chinese market when these things are new for business and the culture
of society and standard are diverse for the corporation as well. The firm has to take the ethical
and social path for development and performance of organisation in global sector because
then the industry can retain new buyers and build a positive market profile to support it in the
future outcomes. There are various challenges which are faced by London Diaries which are
mentioned below:
Working conditions and standards: It signifies that organisation works in an
environment and in all situations which impact employees in workplace which involves
working hours, laws relating to their duties as well as responsibility. In context to London
Diaries, management gives proper training to the workers so that they meet the requirement
of them in order to fulfil goals and objectives effectively and efficiently. However, While
tapping into China market they have to follow all standard so that they can run their business
in an appropriate manner.
Bribery and corruption: It is an social problem which reduce the development of
organisational activities and process. It impacts the spirit of honest people to do their work.
Thus, it affects the proper supply of funds and resources in a negative way because when
company give bribery to them then it creates wrong impact. The selected organisation should
not give money to any government departments whether in United Kingdom and China for
delivering UHT milk to customers (Kolk, Rivera-Santos and Rufín, 2018).
Human rights: Human rights and freedoms are the fundamental constitutional rights
of all people in the world from generation to generation. The basic rights are founded on
common principles such as freedom, liberty, equality and autonomy. These principles are
legally established and secured. In context to international, the international human rights law
is an existing global institution which wants to prevent the individual’s person freedom. This
right is a legislation which aims to ensure basic rights.
Using child labour: Employees who work for children are an illegal offence and
businesses have to ensure that they do not hire minors to prevent the associated implications.

Some nations are quite protective and can make it harder for organisation to succeed. Child
labour is a task which hampers the kid’s health and well being learning, growth and potential
living conditions.
Importance of corporate social responsibility
Corporate social responsibility is defined as management term that incorporates
community and ethical issues into enterprise and engagement with its investors. The main
aim of this framework is to contribute to the society, taking part in charitable activities and
providing meaningful social impact for companies in social responsibility. In addition to this,
Companies turn into corporate social responsibility to influence their business and create a
strong image as well as reputation in market. It is a way of doing business that offers fiscal,
financial and political gains to sustainable growth (Koveshnikov, Tienari and Piekkari, 2019).
It also covers programmes by which an organisation is responsible for its impact on economic
and environmental quality of life. CSR reveals that they are an enterprise interested in
broader social problems, including those who don't affect the profitability that draw
consumers who have the same ideals. Therefore, a sustainable operation is a sound economic
sense. There is various importance of CSR which are mentioned below:
 Improved public image: This is important because as people decide whether to
purchase it, they judge the brand profile. Everything forward, like workers volunteers
at a foundation for an hour per week which demonstrates that the London Diaries
brand help others. This makes them even more consumers friendly.
 Increased brand awareness and recognition: The information will circulate when
London Diaries is engaged in ethical activities. Therefore, more consumers will learn
about the products which help them to increase brand recognition.
 Cost savings: When London Diaries improves their basic environmental which reduce
the labelling will helps to lower the costs of production.
 Greater employee engagement: You must also mean that workers are familiar with
your CSR tactics, equivalent to retaining customers. It has proved to be more
appreciated by workers with a business with a strong public profile than one not. In
addition, you are far more likely to receive and keep top prospects by proving you are
dedicated to topics like individual rights (McWilliam and et.al., 2019).

Methods of expansion
International growth policies constitute structured, inter planning initiatives that
companies use to reach the overseas market. The plans for international expansion make
development stronger and more organised. When London Diaries correctly formulated these
strategies reduce risks of growth and promote effective utilization of continued growth
capabilities, timescales and money. A market entry method includes choices for key focal
areas, the establishment of the targeted client and distribution channels, the deployment of
resource, offers of product or service quality, the branding and the development of brands.
An effective market growth plan means that organisational capital are used more
appropriately and efficiently which helps them to expand the business of London Diaries to
expand internationally (Müllner and Filatotchev, 2018). There are different methods to
expand their business internationally which are mentioned below:
 To find new talent or talent gap: Acquiring new talent and experienced people in
company helps them to develop the performance of firm along with the productivity
in enterprise. London Diaries has to hire international employees for example they
have to tap into china market and launch UHT milk in the Chinese market in order to
expand business operations and process as well as they have to deliver new services to
attract customers towards brand. The organisation is based on the strategy of business
in which they manage and operate their business.
 To extend the sales life of products: Extension of life of products and services give
the people to buy more goods from them. It helps them to make the decision to
purchase from particular brand. However, they have to recognize and analyse which
products has more life so that users take appropriate products which is suitable for
them. London Diaries has tapped into the china market to target the children which
has age group of 3 to 11 years so that they can import and export their milk in
different states of china.
 Exporting: It applies to the sale in a different country of goods and services. That is
the best way to reach the industry despite having to pay a great deal on it. If the
answer is great, the firm cannot expand perhaps in higher amounts. The positive here
is how it would allow the business to enter quickly through a lot of responsibility and
the downside is the business's lack of accountability and understanding of the local
business operations.
 Licensing: Fast consumer access is an asset, but in tomorrow's environment the

franchisor will be a business's rival and reduced monitoring of the franchisee's
operations would be a drawback for the brand. To operate and manage their business
internationally then they have to follow the rules and regulations to diversify their
business effectively and efficiently (Prud’homme, 2019).
From the above analysis, it is analysed that to enter the Chinese market, the business
should use an exporting approach because it requires minimum expenditure and this is not
dangerous because since there is always a great demand for Ultra High Temperature milk in
the Chinese market which enables organisation to draw prospective buyers.
Greiner's model of growth
Greiner's Growth Model depicts stages that associations go through as they develop.
A wide range of associations from configuration shops to makers, development organizations
to proficient assistance firms experience these. Every development stage is comprised of a
time of generally stable development, trailed by a "emergency" when major authoritative
change is required if the organization is to continue developing.
Growth through creativity
Here, the business people who established the firm are occupied with making items
and opening up business sectors. There aren't many staff, so casual correspondence turns out
great, and prizes for extended periods of time are likely through benefit offer or investment
opportunities. This is best in respect of London Diaries to start or expand business in China.
Growth through direction
Development proceeds in a climate of more proper interchanges, financial plans and
spotlight on isolated exercises like promoting and creation. Impetus plans supplant stock as a
monetary prize.
Growth through delegation
With mid-level administrators opened up to respond quick to promising circumstances
for new items or in new business sectors, the association keeps on developing, with top
administration simply observing and managing the large issues.
Growth through coordinating and monitoring

Development proceeds with the recently disconnected specialty units re-coordinated
into item gatherings or administration rehearses. Speculation money is assigned midway and
overseen as indicated by Return on Investment (ROI) and not simply benefits.
Growth through Collaboration
The conventional controls of stages 2-4 are supplanted by proficient better than
average as staff gathering and re-bunch deftly in groups to convey projects in a lattice
structure upheld by complex data frameworks and group based monetary prizes.
Growth through extra organisational solutions
Greiner's as of late added 6th stage recommends that development may proceed
through consolidation, re-appropriating, networks and different arrangements including
different organizations.
CONCLUSION
From the above analysis, it is concluded that the research revealed that the strong life
span at the room temperature which means that there is more preferences foe Ultra High
Temperature milk in the Chinese market. Ultra High Temperature milk has a large public
which use the product and can draw prospective buyers in the Chinese industry as they
operate and manage their business to tap into that place to expand their business domestically
and can’t increase cline satisfaction and wants. The selected organisation will ensure that
better quality milk is required in the dairy industry of China and the individuals are prepared
to pay a sum that gives companies greater income. These flexible foreign trading strategies
enable international companies to sell their products and services around the world. This aims
to make useful foreign exchange profit for these institutional systems.

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Online:
Survey of UHT milk in China. 2020. [Online]. Available through:
<https://ageconsearch.umn.edu › record › files>
Hofstede’s theory of cultural dimensions. 2021. [Online]. Available through:
https://www.managementstudyguide.com/hofstedes-cultural-framework-as-applied-to-
china.htm