International Business Assessment - UHT Milk Market in China

This assessment analyzes the UHT milk market in China, including business drivers, cultural factors, trade barriers, ethical and social issues, and methods of expansion. It concludes with recommendations for success in the market.

INTERNATIONAL BUSINESS
ASSESSMENT

EXECUTIVE SUMMARY
This summary gives a brief analysis on the market and detailed use of UHT milk in China. As
per the analysis done it can be clearly assessed that demand for milk is high in China and in
order to expand they want to export their products but due to high rate of tax and restriction
on the limit of quantity they can export they are not able to achieve growth. Even cultural
differences and social issues are creating a difference for them. In order to achieve success
they need to make changes in their procedure.

Contents
INTRODUCTION...............................................................................................................................4
Business Drivers................................................................................................................................4
Cultural Factors.................................................................................................................................5
Trade barriers, Tariffs and non tariffs................................................................................................6
Ethical and Social Issues...................................................................................................................7
Methods of Expansion.......................................................................................................................7
CONCLUSION....................................................................................................................................8
REFERENCES....................................................................................................................................9

INTRODUCTION
Ultra-heat treatment, or ultra-pasteurization is a food processing technology that almost
sterilizes liquid food by heating it above 135 °C (275 °F) – the temperature required to kill
many bacterial endospores – for 2 to 5 seconds. Demand for UHT milk is high as the
consumption level of milk in country is highest across the world. Some of the companies who
compete on a big level in this sector are Yili, Mengniu and Bright Dairy.
Business Drivers
Pestle Analysis
Political Factors-
This factor has a huge impact on UHT milk as the regulations made by government
and on the basis of that they have to import materials required for it (Welch and Piekkari,
2017).
Economic Factors-
UHT milk is sold at less prices because demand is high in China which is why they
set the prices as per the purchasing power. This helps them to meet the demand of people and
boost up their sales.
Social Factors-
People in China consumes dairy in their diet which leaves a positive impact on the
sales of UHT milk. Also it is their belief that without dairy items their meal is empty.
Technological Factors-
They have adapted new technology so that they can increase the aspect of
productivity and efficiency. With the help of increment in digitization IT practices will
improve which will help the sector.
Legal Factors-
There are laws as per the quality used for milk which needs to be followed.
Environmental Factors-
Focus is on building and working up with sustainable activities in farming so that
environment is sustained and levels of production can be maximized.

Porter’s five force Analysis
Threat of New Entrants-
Market of China in Dairy sector is huge and new entrants will bring products in less
prices so that they can reduce the costs. Although in order to tackle them existing companies
in China will have to achieve economies of scale in order to achieve profit.
Bargaining Power of Suppliers-
Suppliers bargains a lot which reduces their profit and for that companies dealing in
UHT milk will have to focus on building chain of supply that is efficient and offer them
alternatives of the product.
Bargaining Power of Buyers-
Customers have high demand as they want high quality in less prices and in order to
handle that pressure they need to serve large base of customers and bring innovation so that
they can reduce negotiation.
Threat of Substitute Products-
If there are many alternatives preferred to UHT milk in China, then market of UHT
milk will reduce and lead to losses.
Rivalry among existing competitors-
Rivalry in this sector is high which is why their prices are down and in order to
survive they will have to offer differentiation or the association of China will have to
compete in better way (Strange and Zucchella, 2017).
Mongolia is the province of China.
Cultural Factors
Power Distance Index-
The power distance index is focuses on the emphasis that power is distributed
unequally. Citizens of UK feel that they are superior than China over quality and other factors
which creates gaps between them and in order to serve successfully they need to remove this
gap.
Uncertainty Avoidance-

Any change made by the companies in UK must be made aware to the people of
China and observe their reaction on it that if or not they comply with those changes. Society
of China scores high on this factor which is why they have to be made aware and everything
needs to be serve as per the guidelines and laws.
Indulgence vs Restraint-
Society of UK is indulgence as their people are free to work on their own desire but
this is not in the case of China which as their people are restricted to follow their desires
which is why it creates difficulties to settle and operate business in China.
Trade barriers, Tariffs and non tariffs
Tariff trade barriers-
Tariff is the tax or duty that has been charged on imports and exports of products.
Tariffs on a global level are increasing again when the goods are from China. Even European
Union decided to increase their rates from any imports from China which is why the UHT
milk is getting costlier to others and its demand will see a rate of change as not many people
will be able to afford it. This is why many of the companies who are looking to imports UHT
milk from China first analyse the rate of tariff as per the demand of the product in their
market so that they can work profitably (Hassan, Ghauri and Mayrhofer, 2018).
Non-Tariff Trade Barriers-
In the market of China’s UHT milk non tariff barriers are also known as quota which
is basically a trade barrier in China which is done so that they can increase the quantitative
limit on the product so that domestic sector can be protected. This is imposed by China to
protect and safeguard their products from foreign countries as it acts as a barrier to trade. This
is the result why Chinese people do not consume products from outer countries as their rate
are too high to the duties charged on them. This is why the demand and consumption for
UHT milk is high in China.
Subsidies-
This is for the benefit of milk producers as they get less cost and it acts as a barrier to
international trade because there are many international companies dealing in that same
market. With the help of this Chinese manufacturers stand a chance to compete in the
segment of UHT milk.

Export Restraints-
This is imposed by government of China on how much quantity is allowed to export
their product in one set of time frame. This is done in order to increase the negotiation for
UHT milk so that they do not have to suffer from the factor and fall into the category of
cheap imports.
Ethical and Social Issues
Ethical Issues-
Corruption-
Many of the companies in China are adding harmful substances which leads up to
contaminated milk. This is very harmful to the people who consumes it as it can lead the way
to hospital (Gaur and Kumar, 2018).
Child Labour-
Many manufacturers in China are using child labour to reduce their rate of production
and increase their profits but although it is illegal for them and not ethical.
Workplace diversity and equal opportunity-
Many of the employees do not feel that opportunity is given equally and working
from another culture they feel that decisions are taken biased which is not at all ethical.
Importance of CSR in international market-
CSR in international market is important because it helps to reclaim positive image in
market as activities are done for environment, employees, communities which result in their
benefit. In order to work towards the benefit of environment the packaging used for UHT
milk will be used in recycled packaging which will change it a lot.
Methods of Expansion
Exporting-
Exporting is believed to be the easiest method to enter in international market and that
is why many of the companies in China work with this method to sell their UHT milk as they
do not have to establish anywhere they just deal with local distributors. This is the most
suitable method as per the business model of most of the companies dealing in China in the
sector of UHT milk (Dvas and Dubolazova, 2018).

Partnership and Strategic Alliances-
Some of the businesses consider this method to enter with as they just have to come
into terms mutually on a contract and work for a common goal. This can also be suitable as
with the help of this they will be able to make an impact on other market with their products
and services. More they increase the value of their product more beneficial it will be for
them.
CONCLUSION
From the above studies it has been concluded that UHT milk is highly preferred in China and
UK but due to the level of tariff imposed on them they are not able to make a difference. It
has been important for them to work with measures that are beneficial for them such as
working with the activities of CSR providing equal opportunities and dealing as per the
culture that is followed in the market. In order to achieve success business needs to be done
with the cultures that are followed in other countries and respect them so that they can work
with diversity too which will help them to achieve growth.

REFERENCES
Books and Journal
Dvas, G.V. and Dubolazova, Y.A., 2018. Risk assessment and risk management of innovative
activity of the enterprise. In Innovation Management and Education Excellence through
Vision 2020 (pp. 5650-5653).
Gaur, A. and Kumar, M., 2018. A systematic approach to conducting review studies: An
assessment of content analysis in 25 years of IB research. Journal of World Business, 53(2),
pp.280-289.
Hassan, I., Ghauri, P.N. and Mayrhofer, U., 2018. Merger and acquisition motives and
outcome assessment. Thunderbird International Business Review, 60(4), pp.709-718.
Strange, R. and Zucchella, A., 2017. Industry 4.0, global value chains and international
business. Multinational Business Review.
Welch, C. and Piekkari, R., 2017. How should we (not) judge the ‘quality’of qualitative
research? A re-assessment of current evaluative criteria in International Business. Journal of
World Business, 52(5), pp.714-725.