Expansion Strategies for a UK Based UHT Milk Company in China

This report discusses the expansion strategies for a UK based UHT milk company in China. It covers the business drivers, trade barriers, ethical and social issues, cultural preferences, and expansion methods for the company. The report also includes a PESTEL analysis of China and the trade policy of China. MS60045E International Business

International Business

Executive summary
It is essential for a company to focus on their expansion strategies for the business. They must
scan their internal and external business environment on regular basis to analyse the opportunity
for growth of business. PESTEL analysis is one of the most commonly used framework to
analyse the external business environment is any country where a company want to expand their
business. Trade barriers can act as an obstacle for the company to export their products to their
targeted market because sometimes there are high export charges and regulations which can
harm the company to export their products to other country. There are various kinds of trade
barriers which can impose by a country to promote their local companies and local products. It is
also essential for a company to perform ethically within the new market and perform all CSRE
activities which is essential for their business growth to gain the trust of customers and
government. Identifying cultural preference is also essential for the company for their
international growth.

Table of Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................4
Main Body.......................................................................................................................................4
Business drivers behind company’s expansion within the China................................................4
Trade barriers of the targeted market...........................................................................................6
Ethical and social issues to be considered by the UK SME........................................................7
Cultural preference to be considered by the business..................................................................9
Expansion method to be chosen by company............................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................11
Online-...........................................................................................................................................12

Introduction
It is essential for every organisation to focus on their growth strategies and expand their
market well for effective and fast growth of their company within the industry. Ultra High
Temperature (UHT) milk is prepared by heating the milk at very high temperature to kill the
germs and harmful bacteria and cool down the same milk at very low temperature suddenly after
heating it. This technique is also essential for preventing some necessary nutrients and vitamins
required for human consumption. The global UHT milk market reached a volume of 118.3
Billion Litres in 2020 (UHT Milk Market: Global Industry Trends, Share, Size, Growth,
Opportunity and Forecast 2021-2026, 2020).
Europe has been an early adopter of UHT milk and recently they are leading the
global market of UHT milk by producing largest number of UHT milk packets for their
customers as well as for exporting purpose. The following report covers introduction of
UHT milk by a UK based SME within the new market. China is selected as new market
by the company to sell its UHT milk for 3-11 year old children. The following report
covers business drivers behind company’s expansion into china, trade barriers, ethical
and social issues to be considered by UK company to expand the business within China.
This report also includes cultural preferences and expansion method to be chosen by
company.
Main Body
Business drivers behind company’s expansion within the China
PESTEL analysis will help a business to identify their external business environment and
the opportunities for the growth of a company (Hou, Cao and Liu, 2018). In context of UK based
company which is planning to expand their business internationally by offering their UHT milk
to Chinese market is required to identify the external business environment of China which will
help them to analyse whether their current business environment are helpful for the company to
expand their business or not.
PESTEL analysis of China for the UK based UHT milk offered company-
Political factor- China is having stable political factors which help the companies to
invest in Chinese market. China is also having good trade relations with many other countries to
maintain their trading activities flexible and import those goods easily which they need. China is

also considered as one of the best country to maintaining proper strategies for maintaining low
prices of their raw material. Hence, this will help the foreign business to get attracted toward the
China to expand their business in China.
Economic factors- It consist of GDP, inflation rate, employment rate and many other
factors (Pan, Chen and Zhan, 2019). In context of China, their employment rate has declines by
2% due to COVID pandemic but then also they are having 63.48% of employment rate which
help foreign companies to find appropriate and skilled labours for their business operations
(Share of employed people in the Chinese population from 2010 to 2020, 2021). China is popular
for their low labour cost, labours are easily available in China and they are ready to work even at
a very low cost which is again an opportunity for companies to establish their factories in China.
GDP rate of china is high (US$17.7 trillion), hence this reflects that the purchasing power of
customers are also high in Chinese market. On the other hand, the inflation rate and the cost of
property are high in China which can be a treat for the company to offer their UHT milk in
Chinese market.
Social factors- China are the country which is having highest population on the earth
from which 90% people are literate (Detailed PESTEL Analysis of China, 2022). Hence, this will
help the company to explain them the benefits of UHT milk for their children of 3-11 age groups.
The lifestyle of people is changing and they are stepping toward quality of products and they
prefer to consume those eatable products which are healthy. They are having 420 million internet
users, customers of Chinese market are switching to online purchasing activities and this will be
beneficial for UK based companies to advertise their UHT milk product through e-commerce
and sell them on any popular e-commerce shopping platform of China.
Technological factors- Technology play an important role to attract new companies to
expand their business in other countries (Bao and et. al., 2020). In context of China, they are
having effective technologies for the growth of their corporate sector. Hence, the UK based
company can gain advantage to use high technological tools and machines for preparing their
UHT milk and offer them to targeted customers.
Environmental factors- China is the country which is having appropriate natural
resources for their citizens. The country has made various standards and regulations to prevent
their natural resources from wastage by the corporate sector. Customers of China are also
attracted toward those companies who are more concern about their environment and social

society. In context of UK based UHT milk providing company, they must use those packaging
packets which can be decomposed easily and which can be reusable after one wash.
Legal factors- It is also essential for the companies to follow all legal laws and
regulations of the country where they planned to expand their market. In context of China, they
have banned social media like Facebook, Instagram, Twitter and many other platforms (Detailed
PESTEL Analysis of China, 2022). Hence, the UHT milk providing company of UK will avoid
advertising their milk through social media marketing in China. They are also having few
restrictions on foreign investment hence, it is essential for the UK based UHT milk providing
company to analyse the eligibility and all essential criteria to enter within the Chinese market.
Trade barriers of the targeted market
Trade barriers are those restrictions of a country which they imposed on international
trades to promote their local companies and businesses. There are various types of trade barriers
and few of them are explained below-
 Regulatory trade barrier- This is the type of trade barrier which is imposed by the
government of a country and it provide a standard which must be met by the companies
before exporting their products to other country (Jakšić, Erjavec and Cota, 2021). It
includes safety standards, pollution standard and product standard by testing the quality
of product and analysing whether the product is healthy or not. In case the product is
unhealthy and did not match the standard of country than the government will not allow
international company to export their products within the geographical location of their
nation.
 Anti- Dumping Duty- When companies export their products below the cost then it is
called dumping. Here, government allow only those companies to trade who can sell their
products below the cost price which includes the cost to manufacture the product. Most
of the companies refuse to export because this will impact upon their earnings and may
push their companies toward a huge loss.
 The subsidy- This is the benefit provided by the government for their local companies.
This will help the local companies to lower their cost and become more competitive in
international as well as local market (Shishcan, 2019).
 The Tariff- Tariffs are the taxes which are imposed on imports of a country. The main
aim of this type of trade barrier is to raise the prices of imports so they are not consumed

by local people. When the taxes are imposed on international products then they
definitely raise their prices and this can impact upon customers purchasing preferences
and they get influence to purchase similar kind of products from a local company.
Trade policy of China-
Import Duties- According to WTO, China’s tariff rate had lower from 15.3% in 2001 to
7.5% in 2020 (Trade Regulations of China, 2022). This will help the UK based company to
export their UHT milk in Chinese market with low tariff rate of China. The highest tariff rate is
for agricultural products in China which is 13.8% otherwise the average tariff rate for non-
agricultural products is 6.5%.
Quota and Licensing- From 2005, China has started restricting the imports of their
country in context of quantity of products. They only allow a fixed number of product’s quantity
to enter their geographical area. They also impose necessary licensing for few of the companies
which are related to those nations which are having some issues with China. This makes sure that
the company is not serving any harmful product to their citizens.
Product standard- According to this, it is essential for the companies to qualify for
effective result of the quality of their products before offering it to Chinese market. Here, few of
the government companies are responsible to test the samples of the products which are imported
by the China and in case they found any negative result related to quality of product then they
refuse to import it. Hence, it is essential for UK based company to offer high quality of UHT
milk to Chinese market.
Trade description and labelling- All goods sold in China must be labelled in Chinese
language with the true description of their contents, specifications, expiry date, manufacturing
date and many other essential information. Hence, in context of UK based company, it is
essential for them to label their products in both languages in English as well as in Chinese.
Hence, they need to hire high quality of labelling machine.
Ethical and social issues to be considered by the UK SME
It is essential for every organisation to perform corporate social responsibility while
entering a international market (Xia and et. al., 2018). Today, most of the businesses are focusing
to gain customer’s trust by providing benefits to environment and social society. There are
various kinds of CSR activities which can be performed by UK based UHT Milk Company to
expand their business in China and few of the CSR actions are mentioned below-

 Using biodegradable packaging materials- It is essential for the company to use those
packaging materials which have the properties of biodegradable and which can be easily
decomposed so that the bottles or other packaging materials of the UHT milk will not
harm the environment when it is burnt or dig in soil.
 Reducing carbon emissions- It is also important for the company to prepare their UHT
milk in such a way which will not produce harmful gasses and most essential is that the
company will not release any harmful gasses in the environment (Wang, Hsieh and
Sarkis, 2018). For this, the company is required to purchase high quality of machines and
tools to prepare their UHT milk in China without releasing any harmful gasses in their
environment.
 Donating to charities and orphanages- UK based company must focus on gaining the
trust of their customers and society where they are going to expand their business. Hence,
the company must provide the donations to the charitable trusts or orphanages of China to
recognize their brand within the society. This will also help them to gain effective
goodwill from the targeted market.
 Providing free UHT milk to poor people- Focusing on those people who cannot even
afford milk for their children is also one of the best CSR activities by the company to
reduce poverty or malnutrition by providing them eatable and nutritious products. In
context of UK based UHT milk Company, they must provide few bottle of milk to poor
parents so that they will feed their children with all benefits of nutritious UHT milk. By
doing such kind of CSR activities, company can also gain the trust of Chinese
government and they will start helping them for expanding their business so that more
benefit will be gained by their local people and economy.
 Planting more trees and cleaning water bodies- This is another important CSR activity
by the companies to gain the trust of their customers by providing benefit to environment
and society. Here, the company can plant more trees and clean the bodies like lakes,
rivers which are near their factories and make sure that they will not release any harmful
chemical in these water bodies.
 Providing effective and safe working environment to employees- Employees are most
essential asset for a company (Franco and et. al., 2020). Hence it is essential for the
company to maintain safe working conditions for their employees while working within a

company. In context of UHT Milk Company, they are required to provide safety kit to
their employees who are working in manufacturing department with huge and electrical
tools and machines to protect their life from any kind of injuries and harm.
Cultural preference to be considered by the business
Cultural preference plays a very important role in the success of a business in
international market. Hence, a company is required to focus on the local culture of that nation
where they plan to expand their business because maintaining the ethical business and respecting
the culture of the country will help them to gain the trust of employees and also help them to
conduct their operational activities appropriately and effectively.
According to Chinese culture, people like to work with unity and want a disciplined
working environment (Bi and Lehto, 2018). Hence, this is must be concerned by the UK based
company so that when they hire employees in China for managing their business activities in
Chinese market than they must focus to maintain their organisational culture very disciplined.
They also make sure that their employees in China will work within a team to achieve their
organisational goal.
On the other hand, the people are very concern and serious about their traditional culture
like traditional cloth, traditional food, occasions and many others. Hence, it is suggested to the
UK based UHT milk company that they should avoid to harm their traditional culture through
any direct or indirect message by their promotional activities (Li, Liu and Qian, 2019). In case it
is found by the local people that the company is insulting their traditional culture through their
promotional activities to promote their product then the concern people can even raise their voice
to boycott the product and company from their country.
Chinese people are also very serious and concern for their local language because they
prefer to communicate within their local language with the company and other business aspects.
Hence, it is essential for the company that they must hire those employees for their marketing
activities which can communicate with Chinese customers in Chinese language and influence
them to buy the product for their health benefits by indicating various benefits to consume UHT
milk. It is also essential for the company tom label in both English as well as in Chinese
language on the bottles or cans of their UHT milk. The company can focus to hire those
employees who can communicate in both language Chinese as well as in British English so that
the employees of company’s headquarter in UK can also communicate to Chinese employees in

British English language and collect the report of their local market like preference and feedback
of their customers regarding their UHT milk.
It is also found that the people of China are very concern about their health and their
family member’s health especially small children in the family (Liu, Lu and Wang, 2020).
Hence, the company can especially target people while promoting their product and mentioning
the benefits of their product for 3-11 year old kids in the families. This can definitely influence
household ladies and they can start purchasing the UHT milk of the company.
Expansion method to be chosen by company
It is also one of the essential tasks for a company to analyse the appropriate expansion
method for their company to expand their business within the selected market. In context of UK
based UHT milk company, they have various options to expand their business in China and few
of the expansion methods are mentioned below-
Exporting- It is one of the most common ways to enter a new market where companies
manufacture their product in their home country and export it to the targeted market (Utama and
et. al., 2018). Here, company is not required to invest high for establishing their factories and
offices within the new market; they are only required to pay their charges of import and exports.
The companies are having agreements with marketing agencies, distributors and various retailers
to sell their products.
Partnerships- It is another way to expand the business within the new market where a
company comes in partnership form with another company which is popular in the nation where
first company is aiming to expand their business (Zheng, Cao and Zuo, 2021). For example, in
case UK based UHT milk company is aiming to expand their business in China then they will
first analyse the situation of UHT milk industry within China and then find a local Chinese
Company within the same industry to perform partnership agreement so that the UK based
company can work with local company and gain all required knowledge about Chinese market.
Here, UK based company can also use the tools and human resource of local Chinese company.
Franchising- It is the way of expanding business internationally where main UK based
company is considered as franchisor and this company allow other companies to sell their
products with permission and the companies who sell UHT milk only they are the franchisee.
Franchisee is required to follow all rules and regulations which are made by franchisor.

In context of UK based UHT Milk Company, exporting method is considered as one of
the best international method for them to expand their business in China market. Exporting
method is chosen for the business because it will help the company to save their cost for
establishing building for within the new market. Here, the mentioned company can manufacture
their UHT milk in UK and export it to China. There is low change of risk in exporting and with
the help of this method the mentioned company can also analyse the level of demand in China
for their product (Dal Poggetto and Serpa, 2020). In case they found a huge level of demand for
their product than only they will plan to establish their factories in new geographical area.
Another advantage of exporting for the mentioned UK based company is that they can build a
good brand image within China and analyse the needs, preferences and wants of Chinese
customers. Assigning local employees and distributors will help the company to reach customers.
Conclusion
From the above information it is concluded that every organisation aim to expand their
business well to earn higher profit. Companies are required to analyse the drivers for expanding
their business to specific country. PESTEL analysis will help the company to identify their
external business environment to analyse the opportunity for growth for the company. Trade
barriers are those restrictions which are imposed by government for their imports to promote
local companies. There are various kinds of trade barriers such as tariffs, anti-dumping duty,
subsidy and many others. It is essential for a company to analyse trade restrictions and charges
for export of their products to specific country where they are planning to expand their business.
It is also concluded that CSR activities are essential to perform by the company while expanding
their business internationally to gain the trust of customers and government of the nation to
support their business. Knowing cultural preference is important for the company so that they
will avoid harming any societal group by targeting their traditional culture and showing
something negative about their culture in their promotional activities. There are various methods
of expanding a business at international level such as exporting, franchising, partnership and
many others. A company is required to analyse the pros and cons of each expansion method and
chose that method only which are having more pros than cons according to their business nature.

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Online-
UHT Milk Market: Global Industry Trends, Share, Size, Growth, Opportunity and Forecast
2021-2026, 2020 [Online] Available through:
https://www.imarcgroup.com/uht-milk-processing-plant/
Detailed PESTEL Analysis of China, 2022 [Online] Available through:
https://www.edrawmax.com/article/china-pestel-analysis.html/
Share of employed people in the Chinese population from 2010 to 2020, 2021 [Online] Available
through:
https://www.statista.com/statistics/239153/employment-rate-in-china/
Trade Regulations of China, 2022 [Online] Available through:
https://research.hktdc.com/en/article/MzM0NTEzMzcy#:~:text=According%20to%20the
%20WTO%2C%20China's,%E2%80%91agricultural%20products%20was%206.5%25./