UHT Milk Market in China: PESTLE and Porter's Five Forces Analysis

This report provides information about the UHT milk market in China, including a PESTLE and Porter's five forces analysis, trade barriers, cultural factors, and ethical issues. It also suggests a target city for business development and discusses Hoftedse's theoretical framework for determining national culture.

International business

Executive Summary
This report contains information about UHT milk and its current and past situation
in China. Background information about UHT milk is also provided in this report as well
as it is compulsory to draw past information on Past data. In this project a brief PESTLE
and Porter's five forces model analysis is also performed on the basis of current situation in
market of China to analyse external and internal environment. This project contains
information about different cultural factors and different trade barriers which arise in the
process of UHT milk distribution in China.

Table of Contents
Executive Summary.........................................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................5
Business drivers which are essential in analysing external and internal environment...........5
PESTLE analysis of Chinese market......................................................................................5
Porter's five forces model.......................................................................................................7
Target city in China for business development......................................................................9
Cultural factors which are important to be considered by United Kingdom to be successful in
China.....................................................................................................................................10
Hoftedse's theoretical frame work to determine national culture.........................................10
TASK 3..........................................................................................................................................11
Trade barriers in market.......................................................................................................11
TASK 4..........................................................................................................................................12
Social and ethical issues faced in China...............................................................................12
International expansion strategy and its methods.................................................................13
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
The UHT stands for Ultra high temperature processing technique which uses specific
technology to sterilize liquid food by heating it above the temperature of 135-degree C. The
process of UHT is mainly used to kill many bacteria which is present in the food. The main
usage of UHT technology is to develop milk production in a precise manner for national and
international consumption (Bullough, 2017). The Technology which is used in UHT milk is
generally deployed to change the taste of milk and its smell. UHT milk can be stored for a longer
period of time in market and it can be different from ordinary milk. In the first half of
2019, Inner Mongolia Yili Industrial Group remained the leading UHT milk market player in
China with the market share of around 38.8 percent. The leading three Chinese UHT milk
producers covered around 74 percent of the market, slightly more than that in the first half of
2018. The market of China is covered with UHT milk and public of China prefer UHT milk in a
major sense. According to a new report published by Chinese agency over 60% people in China
consume UHT milk. If data of recent years is taken into consideration the China is largest milk
consumer in the whole world. The citizens of China drink best milk quality by using UHT
technique in a major sense for better quality of milk.
Illustration 1: UHT milk import in China, 2007 to 2013

TASK 1
Business drivers which are essential in analysing external and internal environment
In a country there are different business drivers which cause a deep impact on internal
business as well as on the external business. It is major responsibility of strategic and marketing
management to briefly analyse whole external and internal environment for functioning of trade
practices in a smooth manner. If a company wants to expand its operations in China then it has to
briefly analyse all the factors in a precise manner. The internal and external environment both
play a major role in business development and enhancement of different functions in a proper
manner (Dörrenbächer, 2019). It is the utmost responsibility of top level management and
strategic management to analyse all internal and external factors.
PESTLE analysis of Chinese market
The PESTLE analysis is most appropriate way of analysing whole market situation and
external business environment in a precise manner. PESTLE analysis of context of Chinese
economy with reference to UHT milk is mentioned below:
 Political factors- The political factors are considered as major factors which are
determined by rules and regulations imposed by government. The stability and instability
of government is major factor behind functioning of different companies which produce
UHT milk. Government is generally in favour of different organisations which produce
UHT milk in the country (UHT milk supply related to China, 2021). Along with this the
government also supports many international companies which are about to enter Chinese
market in a major sense to produce UHT milk in a major sense and sell in China. United
Kingdom can be also supported by Chinese government in a diplomatic sense to sell
UHT milk in India.
 Economic factors- In China the economic factors are major factors which are helpful in
development of a company which is existing in Chinese market. The monetary policy of
government is always in favour of different economic factors which are essential in
development of whole country (Guercini, 2020). The gross domestic product and national
income of China is high and government is ready to support different start-ups in the field
of UHT milk production. Government of China is also effectively deploying different

economic factors to support different companies which are involved in production of
UHT milk.
 Social factors- The tendency and attitude of society is positive towards different
companies which are selling UHT milk in the country. In other words, society is giving
positive response to different factors which are helpful in providing quality products. The
culture of China is supportive for different companies which are involved in selling UHT
milk in the country (Amsaraj, 2021). The society is also helpful in increasing growth of
various multinational companies by adopting goods and services in a precise manner.
 Technological factors- In China whole country is practising business on the basis of
different technological factors. The country uses high profile computer systems, software
and machinery to produce UHT milk. IT experts who are present in Chinese market are
also engaged in bringing different techniques of customer handling which is done by
using different software and techniques. Chinese market is also producing high quality
machinery which is beneficial in providing UHT milk to the government in order to
distribute it to general public. Government is also bringing IT related laws and techniques
which are beneficial in providing safe products to Chinese customers.
 Legal factors- Legal factors play an important role in development of different legal
factors which are essential in providing safe practices to different customers. The rules
and regulations which are developed by local authorities of China are compulsory to be
followed by major and minor companies. It is very much important for a company to
follow different techniques which are lawful in nature to develop different organisational
goals and objectives (The current status of UHT milk, 2021). In the era of stiff
competition between different companies in the market of China it is essential for a
business to comply with different rules and regulations which are formulated and
developed by Chines government.
 Environment factors- The environment related factors are essential to be followed in a
major sense in order to develop a critical approach at marketplace. A company can easily
follow the simple environmental policy which is formulated by Chinese government in
order to learn different techniques of development in a major sense (Hickmann, 2017).
The environment related policy of government is a major factor which puts a bar on
different multinational companies and also provide different benefits to the nation.

Porter's five forces model
The porter's five forces model is a major approach which is beneficial in determination of
different factors that are essential in development of a business. In producing UHT milk in China
a company has to keep in mind different factors which are essential for development of internal
business environment. Explanation of Porter's five forces model is given below in relation to
UHT milk production-
 Bargaining power of buyers- In Porter's five forces model this is considered as a major
approach which is related to bargaining power of buyers. In context of UHT milk, the
bargaining power of buyers is high as there are several companies in market which are
concerned with development of different business activities (Ansari, 2021). Business
development in the field of UHT milk is possible through the bargaining power of buyers
and it is the responsibility of a company to provide UHT milk on cheap rates.
 Bargaining power of suppliers- The bargaining power of suppliers is also high in
context of UHT milk. In market of China there are various companies which are
producing UHT milk using advanced technology. Demand for UHT milk is increasing
day by day in this competitive market of China. Most of the companies which are
engaged in development of business are demanding UHT milk from Chinese market. Due
to bargaining power of suppliers the demand for UHT milk is increasing day by day. On
the other hand, bargaining power of suppliers is also increasing price of milk on daily
basis.
 Competitive rivalry- In market of China there are many different companies which are
producing UHT milk in high quantity. Earlier the competition between different
companies was relatively low and now the competition is increasing due to different
start-ups in a major sense (Hooper, 2020). Various companies which are producing UHT
milk in China are facing competitive rivalry with different companies in a major sense.
 Threat from new entries- It is also to be noted that many multinational companies
which are engaged in the production of UHT milk are also entering Chinese marketplace.
The different companies are coming with precise strategy to attract large number of
customers from Chinese market. New companies from United States and United
Kingdom are trying to enter Chinese market with full competition. This is increasing

competition in market of China and also giving opportunity to different companies to
perform operations in Chinese market.
 Threat from substitutes- Threat from substitutes is very low in Chinese market as the
customers are generally preferring UHT milk as a whole. The companies in Chinese
market are giving competition in the field of UHT milk production and are having less or
very less threat from the substitutes. Chinese government is also trying hard to provide
different subsidies to various companies in order to develop Chinese market.
Illustration 2: Consumption of flavoured milk in China
compared to other countries,2021

Target city in China for business development
Shanghai is the major city of China which is very much developed and is suitable for
selling UHT milk in a major sense. Shanghai is most populous city so the availability of
customers to a company will be very high. The consumers of UHT milk in China are very large
in number so the profit of start-up will be high. Existing companies which produces UHT milk is
also very high so a new company will face stiff competition. The Chinese government is ready to
provide support to different companies which are involved in the production of UHT milk. If
Chinese market is taken into consideration the government is also providing subsidy opportunity
to most of the multinational companies (Kourula, 2017). If United Kingdom wants to open a
company in China it has to take support of different policies and regulations which are
formulated by government in order to survive at the marketplace.
Illustration 3: Shanghai, China, 2021

TASK 2
Cultural factors which are important to be considered by United Kingdom to be successful in
China
In expansion of a business or to open new business in domestic market it is essential for a
company to determine all the factors related to culture. A company should keep in mind the
following cultural factors:
 Language- The language is an important cultural factor which is to be considered by a
company when it tries to enter international market. A company should train employees
to speak native language (Flores, 2021). A business entity can also use a translator who is
helpful in business growth and development through language guidance.
 Lifestyle- It is very much important for a business to consider and evaluate different
factors which are important to be considered as they are related to lifestyle. A business
organisation should take help of strategic management in order to develop lifestyle in a
precise manner.
 Diversity- A company should work according to diversity which is present in
international market (Li, and et. al., 2017). There are various companies in international
market which hires professional human resource management that is helpful in
achievement in group goals. It is the responsibility of HR management to train employees
according to different skills which are essential for diversity management.
Hoftedse's theoretical frame work to determine national culture
The great management scholar hoftedse proposed different ways in which culture of
nation is determined in a precise manner. The model is mainly adopted by different companies in
global and national market in order to develop the organisation in a major sense. When a
company enters international market it is essential for a business to develop a critical approach in
determination of nation's culture (Loveday, 2021). Many companies in international market are
today successful because of this model. This scholar in the field of management gave five major
dimensions which are mentioned below:
 Individualism
 Power distance

 Uncertainty avoidance
 Masculinity and femininity
TASK 3
Trade barriers in market
In the functioning of an organisation there are different trade barriers which create an
obstacle for different companies. The trade barriers are essential to be eliminated in a short
period of time by different companies in order to survive at the marketplace. Different types of
trade barriers are explained below:
 Ethical barriers- In the functioning of a company in international market the ethical
barriers are major issue for a business (McWilliam, and et. al, 2020). The different human
rights violations and economic inequalities are two major reasons behind unethical trade
practices. Different countries in international market try to develop ethical business
through partnership for better results.
 Cultural barriers- In international market due to presence of different cultures a
business organisation must keep in mind different techniques of cultural resolution. In an
international market a company's human resource management play a major role in
development of business by dealing with cultural practices.
 World trade organisation- This organisation was set up in 1995 and is headquartered in
Geneva, Switzerland. The world trade organisation is considered as a major body which
regulates international trade between different countries. This organisation majorly stops
illegal trade practices which can be negative for a country (Silva, 2021). There are
different illegal trade practices which happens between different countries and they are
controlled by world trade organisation.
 Tax and import duty- Many companies in international market suffers from high tax
and import duty in order to compete at the marketplace. Huge financial loss is suffered by
different companies when they export or import trade practice. The government of
concerned country should impose less tariff on trade in order to promote trade practices
between different countries.

TASK 4
Social and ethical issues faced in China
A company has to keep in mind different social and ethical issues which are helpful in
determination of different opportunities for business development. In China there are several
ethical and social issues which are essential to be maintained in a proper manner in order to gain
competitive advantage at the marketplace.
Child labour
In China the government's rules and regulations are tough for stopping child labour in the
country. The children in minor age should be not engaged in any type of economic or business
activity. It is also important for different companies to follow major guidelines related to child
labour which are formulated by government (Shageeva, and et. al, 2017). The child labour in the
country should be stopped in a major sense in order to develop an example for other countries.
New multinational companies which are about to enter Chinese market should ignore child
labour in their surroundings to develop ethical business.
Equal opportunity
At workplace discrimination should not be practised in a major sense in order to avoid
malpractices in the business. There are different companies which are producing UHT milk in
market and are practising discrimination in a major sense. Government of China is trying hard to
eliminate sexual harassment and discrimination at workplace. The multinational companies have
to keep in mind different rules and regulations which are imposed by government to avoid
discrimination at the workplace. In most of the developed countries like China various steps are
taken by the government in order to develop a competitive advantage (Vidal, 2021). A business
should also keep in mind major concerns related to sexual discrimination in order to conduct
business with honesty and integrity.
Human rights
The human rights and fundamental rights are essential to be maintained in a country in
order to develop a perfect democracy. Chinese government implement various strict rules and
regulations which are important in development of the whole country. There are various
companies in China which keeps in mind all the necessary measures to be taken by the
government in order to survive at the marketplace. It is compulsory for new start-ups in the field

of UHT milk to consider all the major factors which are related to human rights to develop best
organisation at the marketplace.
TASK 5
International expansion strategy and its methods
In the competitive environment in global and domestic market international expansion for
business growth. A company has to develop a pre-defined strategy in order to develop
international business with maximum capacity. If a company from United Kingdom has to enter
Chinese marketplace, then it has to perform a brief analysis of market by using PESTLE
analysis.
International expansion strategy
The international expansion strategy is a tough planning for the future which leads to
organisational success in global market (Turkoglu, 2019). In many different companies the top
level management hires professional staff members in strategic management in the global
market. The strategy related to international business is very much important to be developed in
a precise manner in order to minimise risk associated with the business.
 Market research- In today's competitive world it is important to gain in depth
knowledge of market by doing effective marketing research. Many companies in global
market perform marketing research with the help of professional marketing management
in order to minimise risk and know consumer trends.
 Advertisement and publicity- A company has to develop a precise business plan with
the help of professional marketing management in order to advertise for the products. A
business entity should include maximum expenses on advertisement in order to attract
large number of customers. Company should choose appropriate media for advertisement
of different products at the marketplace.
 Business plan- It is compulsory for a company to develop a precise business plan with
the help of elite business management in order to enter international market (Wei, 2018).
Business plan should contain all the detail related to management of business in
upcoming global location for better guidance.
Methods of international business expansion
The different methods of international business expansion are mentioned below:

 Collaboration- In collaboration there are two different companies which merge up with
each other and performs different business operations. Collaboration includes partnership
of two or more companies in order to survive at the marketplace. The collaboration
increases burden or pressure on the management of a company and also develops
business in a precise manner.
 New market entry- A company can also enter a totally fresh market in international
level to expand business operations. The new market is a new opportunity for every
company which totally changes role of management. In new market entry there are
chances of high risk as the market is totally new.
 Export and import- In order to expand business in international market a company can
also perform export and import related functions (Xiong, and et. al., 2020). This
expansion method requires maximum formalities which a company has to perform in a
specific manner. Many different companies in national market export products which is
essential in business development in global market.
 Acquisition- In international market a company can easily acquire another company and
perform different business operations. In acquisition a company purchases all the
products and services along with whole organisation in order to develop a business. In
acquisition huge investment is required and many companies take over other companies
with a good amount of capital.
Type of Entry Advantages Disadvantages
Exporting Fast entry, low risk
Low control, low local knowledge,
potential negative environmental impact
of transportation
Licensing and
Franchising Fast entry, low cost, low risk
Less control, licensee may become a
competitor, legal and regulatory
environment (IP and contract law) must
be sound (Xiong, and et.al. 2021).
Partnering and Strategic
Alliance
Shared costs reduce investment
needed, reduced risk, seen as
local entity
Higher cost than exporting, licensing, or
franchising; integration problems
between two corporate cultures

Type of Entry Advantages Disadvantages
Acquisition Fast entry; known, established
operations
High cost, integration issues with home
office
Greenfield Venture
(Launch of a new,
wholly owned
subsidiary)
Gain local market knowledge;
can be seen as insider who
employs locals; maximum
control
High cost, high risk due to unknowns,
slow entry due to setup time

CONCLUSION
From the above discussion it can be concluded that UHT milk's demand is growing at
faster pace in China. The opportunity for a new company or a multinational company which is
about to start business in China is also very high. This report concludes that a multinational
company before entering Chinese market has to consider all the major factors related to external
and internal environment of China to conduct ethical business. The above mentioned report
concludes that management of a concerned company should follow different ethical and integrity
related practices in Chinese market to develop a competitive edge. This report also concludes
that a company has to keep in mind all the rules and regulations related to government policy in
order to survive at the marketplace.

REFERENCES
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Online
UHT milk supply related to China, 2021[Online]Available through:<
https://www.statista.com/statistics/1085940/china-leading-uht-milk-brands-market-share/>
The current status of UHT milk, 2021[Online]Available through:<
https://www.persistencemarketresearch.com/market-research/uht-milk-market.asp>