Business Drivers for Expansion into Chinese Market

This article discusses the business drivers behind the company's expansion into the Chinese market, including competition and technological advancements. It examines Porter's five forces factors and relevant trade theories. It also discusses trade barriers and their consequences if ignored. The article explores business uncertainties and opportunities, ethical and social issues, and the significance of cultural preferences. Recommendations for internationalization are provided.

International
Business:

Table of Contents
Introduction:.....................................................................................................................................1
Business drives:...............................................................................................................................1
Discuses the business drivers behind the company’s expansion into the Chinese market:..1
Examine the porter’s five forces factors with the relevant trade theory that would lead the
SME to identify key business drivers.....................................................................................1
Trade barriers:..................................................................................................................................1
Discuss the trade barriers and their possible consequence if they are ignored by the SME:1
Demonstrate the business uncertainties:.................................................................................1
Ethical and social issues to be considered by the UK SME:...........................................................1
The significance of Cultural preference to be considered by the business....................................1
Expansion method for internationalisation business:.....................................................................1
Recommendation :...........................................................................................................................1
Conclusion:......................................................................................................................................1
References:.......................................................................................................................................1

Introduction:
The international trade and business are associated with the movement of goods and services
beyond the national borders. It is platform for the businesses to expand their operational
activities from domestic level to the international market and earn the desire level of profit
margin in the competitive market places.UHT milk stands for the ultra high temperature milk
refers to the process of sterilized milk to kill the spores and germs present in the milk but
preserve the nutrients of the milk. Under this report, the NFU organisation are trying to enter
into Chinese market to target the children who are best customer for the milk goods.. Yili is a
UHT milk producer in the chine market offering the milk to the target market. further there will
discussion on the business drivers which helps in expansion and what are the trade barrier which
UK SME faces while expanding into the Chinese market. discussion the corporate social
responsibility of the UK organisation and see how the culture influences the customer buying
decision(Antras, and Foley, 2015.)
Key statistic and current trends for the UK industry
 The Uk is the 7th largest milk producer in the world.’
 Milk production is 16.9 % of agricultural outcomes of the UK in 2018 and hold the
worth for price $4.6 in the market.
 The UK offers 15.0 billion litres of milk in the 2018-2029
Current trends of UHT milk in Chinese market:
 Market size of the UHT milk is around the 90 billion in the 2017-2018.
 Rapid growth in the china market for the UHT milk and increase in the number of the
customer for the UHT milk products.
 The china economy also enhance due to increase demand of UHT milk in the past five
to six years.
Business drives:
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Discuses the business drivers behind the company’s expansion into the Chinese market:
The UK SME organisation are focussing on expanding their business at the international Chinese
market as there are lot of opportunities present in the china market . there are various different
business driver which helps the UK based UHT milk producer to expand their operational
market into the new Chinese market : some of the important business driver are stated as below:
Competition: due to the larger competition in the UK market , the organisation are required to
expand and grow their business at the international market so that they can capture the new
market and take the competitive advantage in the work environment. In the UK market , there
are various different producer who are also selling the UHT milk to the market so NFU
organisation wants to expand their production into the Chinese market and target the children
from group age between the 3 to 11 years. (Asteriou, Masatci and Pılbeam,2016)
Expansion of the technology: the china market is known for its advance technology which
helps to produce the goods and service at the best quality in the international market place. the
UK SME organisation finds the technology is a effective business driver for their production
process of UHT milk which helps them to perform in better manners and offers the UHT milk
which is high on nutrient for the target customer. the advance technology helps the UK market to
enter into the Chinese market as UK SME are known for their good quality of the product and
service which are to be offered to the customer.
These business driver helps or show the way for the internationalisation of the UK SME
organisation into the Chinese market and grow their business at the global market places.
Competition will push the organisation to expand their business to the next level and take the
competitive advantages in the market.
Examine the porter’s five forces factors with the relevant trade theory that would lead the SME
to identify key business drivers.
To identify the key business driver the UK SME organisation need to examine the competition
present in the market to expand their business in the Chinese market places which is relevant for
the trade theory so that organisation are able to perform their operational activities in
productivity manners. the porter five forces are applied to study the competition present in the
new market and affects the trade practice of the organisation.
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Porter five forces is a model determine the business driver which helps in shaping the milk
industry for the UK SME organisation. this model is applied to any part of the segment of the
economy to examine the level of competition present in the industry.
Rivalry among the existing competitors: this force shows how the competitive and profitable
industry is in the market. there are large number of the firms competing for the market share
which leads to lowering the profits for organisation in the target market share, here the
organisation have less power inn their hands and similar products are available in the market.
Bargaining power of the suppliers: under this stage, there are large number of the buyers and
lesser number of the seller of the product in the target market which allow the supplier to charge
the higher prices for the goods and services. the UK SME organisation are lesser in the new
market which make them to lower this prices for few time and then increase the prices in long
run. (Baldos, and Hertel,, 2015.)
Bargaining power of the buyers: here there are large supplier for the goods in the market and
lesser buyer so the power is in the hands of the buyer as they can switch the another company
product if the goods are available at lower prices in the market.
Threats of new entrants : this force helps the UK SME organisation to determine how easy it
is or not to enter into the UHT market in the Chinese market, here when the more organisation
compete with each other for the same market share then profits starts to fall for the organisation.
this forces is high when amount of capital is low for entering into the new market.
Threat of substitute: this threat indicates that buyer will switch to another organisation product
if there are able to finds the substitute good at the good quality of material in the market . the
UK SME company need to examine this factors so that they can reduce the impact of this
substitute product.
Trade theory: the trade theory helps the UK SME organisation to find out the drivers which
will helps them to enter into the new Chinese market and earn the desire level of profits in the
market.
Comparative advantage: this situation occurs when a country are not able to produce the
product more productivity than the other country. The UK SME organisation such as NFU are
able to produce the effective UHT milk and tries to expand their business into the Chinese
market targeting the children from the age of 3 to 11 year by offering the ultra high temperature
product milk which helps the customer to get the effective benefits of milk.
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These trade theory helps the organisation to have the competitive advantage by examining the
competition present in the target segment of the market
Trade barriers:
Discuss the trade barriers and their possible consequence if they are ignored by the SME:’
International trade is a process of buying and selling the goods and services over the nation and
earn the profits margin .the import and export of goods are depended upon the trade barriers the
industry have . the trade barriers are imposed by the government such as tariffs and import
quotas , voluntary export restraints and non-tariffs. (Bertoletti Etro and Simonovska, 2018)
Tariffs: it is most used trade barriers as it increase the cost of the imported goods and services .
it is used to collect the revenue on the product which are imported . it is used become of some
reasons which are stated as below:
Domestic employment: trade barriers are used to protect the domestic employment , as
consumer buy import good as they are cheap in price,.
Low foreign wages: here the domestic production includes the high wages for the labour and
taxes whereas the foreign imports have comparative advantage form the domestic process as low
foreign wages.
Unfair trade: under this situation, the foreign industries uses unfair trade to take the advantage
from the domestic producers as they sell the goods and services at the lower prices as compared
to the domestic producers.
Import Quotas: under this tariff, the import quotas refers to the limit posed on the good and
service that can be imported , these are the legal restriction imposed by the domestic
government .this type of trade barriers require licence for importing the goods , this also keep the
restriction on the good if they are reached to the limit then no more goods can be imported.
Legal issues: the trade barriers have various different legal regulation which are stated to
protect the domestic producers from the foreign trade . the foreign company have to fulfil the
legal requirement to offer the goods in the market.
The consequences that can be arise in the SME organisation if they don’t apply the trade barriers
in their economy is that domestic market is not protect by the foreign organisation. form the
international trade barriers the government are able to save the domestic industries and key
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justification is that production in consumed by the domestic economy and pay taxes to
government other than foreign company. (Coşar,and Demir, 2016)
Demonstrate the business uncertainties and opportunities:
The political condition among the US and china is not stable which affects the productivity of the
various small and large scale organisation at the international market .
The china and US trade war is a ongoing economic conflict which affecting their operational
activities at the international market place. in the January 2020, conflict have reach to turning
point with the signing of the stage one trade deal where addition import tariffs are levied by the
china and US. The president Donald Trump has accused the china for the unfair trading particles
, intellectual property theft, transfer of the American technology . China believes that US is
focusing on restrict its global economic power. The Brexit refers to the “British exits “ from the
European union, the UK was withdraw their business activities from the British which have
affects the economy for the very long period of time most of the people have lost their jobs and
economy have low growth rate .
The US is focusing on improving their domestic market and organisation and enhance the
production for the local companies which brings the opportunities for the local manufacture and
farmers to grow their business which was earlier gets affected by the international trade ,
importing the good and services from the other foreign market. the UK market is always
favourable for the having international trade and to expand the organisation business to next
level.
Ethical and social issues to be considered by the UK SME:
The corporate social responsibility refers as self –regulating business model which helps in
becoming the social accountable for using the raw material and various another resources to
make its organisation function properly in the competitive market. the UK organisation uses
the corporate social responsibility one of the important part of the management as they are
answerable to the its stakeholders and the society at whole. The CSR is involve business
practice that support the sustainable development into the business model. It also have positive
impact on the economic and environment factors . the UK organisation uses these CSR
activities which helps them to create the good image of the company in the eyes of the customer
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and building the brand image in the market. the Chinese market look up the UK organisation
who are incorporates the CSR in their organisation to satisfied the consumer , its employees and
stakeholder. There are various theory on the ethic which helps the Chinese organisation to gain
the benefits of the CSR: (Coşar, and Fajgelbaum, 2016.)
Environment issues: the one of the important part of the ethics is the environment in which
organisation have large carbon footprints and the organisation focus on reducing these carbon
things .
Philanthropy: business in the China and UK are practice the social responsibilities by offering
goods and services , donating the money to the society who are in need of it.
Ethical issues: here the organisation treats its employee fairly and equally under the CSR
activities. this is important for the organisation who operates at the international location having
different labour laws that are different from the US. (Neary, 2016. )
Volunteering: here the volunteer do good deeds without expecting in return from the society
The corporate social responsibility and theory on the ethics are important part of the
organisation which are operating their operational activities in the UK and china market as its
consumer and stakeholder are the essential resource for any successful organisation and saving
for the next generation so that they run the business effectively.
The significance of Cultural preference to be considered by the business.
The cultural preference of the Chinese markets is different from the UK market as customer are
from different social and culture background which affects the international business among the
china and UK SME organisation. the significant of the culture on the various different
international activities of the Chinese market is that customer have their own belief system ,
their culture is different from each other and different taste and preferences in good and service
which have impact on their business between the countries in the market places. The UK SME
organisation are focusing on expanding their business activities in the Chinese market but they
face the cultural difference as their local language barriers arises in the trading in the market ,
the customer of the Chinese market have various form of perception about the UK products. As
the UHT milk is a target product from the children group age between the certain year have
different culture from the UK market culture. The new market in the Chinese market may have
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various assumption about the UHT milk which can influence their buying decision about the
milk and its product (Feenstra, 2015)
Expansion method for internationalisation business:
There are various method which are used for the internationalisation by the UK SME
organisation to enter into the new Chinese market , these methods helps the organisation to
expand or grow their business at the international market places by making the effective business
strategies which shows the path to the UK SME organisation to follow to enter into the new
market into the new location. there are different model of doing the international business some
of them are discussed as follows:
Acquisition: under this method, the acquiring company take the majority stake in the acquired
firm without changing the name and legal structure of the organisation .where the one
organisation take the assets and liabilities of the another company and start it operational
activities in the target market places.
Joint venture: it is business arrangement in which two organisation agrees to pool their
resources for the purpose of carrying out the business task in the effective manners . each party
is liable for the loss and cost involved into it and share the profits earned by performing the task.
This helps the local organisation of the UK SME to enter into new foreign market of the Chinese
market. (Gelderblom,, 2015. )
Licensing: it is a business arrangement where one organisation gives another company
permission to produce its goods and service for the specified payment , this way the organisation
of the UK SME are able to enter and operates its activities into the new market places.’
Franchising: it is method where the business is carried out by the owner of the goods and
service and distribute the with the help of franchisees. Here the franchisor give licensed
permission to so the business in the target market place.
The joint venture is one of the best method for the UK SME organisation as they will able to
get the organisation have effective resource which are necessary to conduct the operation in the
most effective manner.
The Ansoff matrix: this model is used by the organisation to make the effective expansion and
growth strategies which helps the UK SME UHT milk organisation to expand their business into
the Chinese market:
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Market penetration: according to this matrix, the UK SME organisation can offers the existing
good and services to the existing market and focus on increasing the market share of the
organisation in the target market . (Jones. and Kierzkowski., 2018)
Product development : as per this, the UK SME organisation can introduce their new goods
and service into the existing market , this will help the organisation to have target customer
already in the market they need to offer the new goods.
Market development: here the SME organisation wants to enter into the Chinese market places
with the existing product of the UHT milk for the target segment of the children group. This will
provide a huge market for the organisation to offer the new good quality of products.
Diversification: here the UK SME organisation focus on entering into the Chinese market with
the new product and services in the marker places. The UHT milk is high quality good which
needs to be introduced to the premium customer of the market and UK SME organisation are
able to expand their business. (McGovern., 2018)
This Anosff matrix helps the UK SME organisation to make the effective and sound business
strategies which helps them to expand their international trade with the Chinese market and
earn the desire level of profits.
Recommendation :
It is recommend to the UK SME organisation to have effective plan and strategies for entering
into the Chinese market so that they are able to expand their UHT milk business at the large
scale in the target market.
 The UK SME organisation needs to have pricing strategies which helps the UHT milk
producer to charge the effective price for its goods from the Chinese market as they are
similar companies offering these good.
 The SME organisation must focus on providing difference good and services to its
customer to attach and retain them for longer period of time.
 The UK SME organisation must have effective advertising skills to promote the UHT
milk for the target segment of children in Chinese market.’
 The SME company must need distribution channels to reach out to larger audiences in the
long term .
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 The UK SME company must focus on enhancing their operational activities by using
different method such as joint venture, merger and acquisition and licensing (Meltzer, ,
2015. )
Conclusion:
According to the above discussion, it can be concluded that international trade is platform where
the business activities take place between the two countries .there are different drivers which
affects the business at the international market. various trade barriers have huge impact on the
business among the nation and have to follow the CSR activities to build the strong brand
image. Undertaken various internationalisation method used by the UK SME organisation to
enter into the Chinese market place.
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