International Business Expansion: Calon Wen in the Chinese Market

Desklib provides past papers and solved assignments. This report analyzes Calon Wen's China market entry strategy.

International Business
1

Executive summary
In the given report, the Calon Wen organic milk company wants to enter the Chinese market to
enhance their business and growth. The objective of Calon Wen organic milk company is to
focus on the 3-11 years pre-school children and provide them with UHT milk. Calon Wen is
SME, and it is largely facing many ethical and social issues while entering an international
market. The social issues and ethical problems like reduction in customer, tariffs etc. should be
handled by the organisation. The business-driven which supports the company in business
expansion in China is PESTLE analysis and five force models. This report explained the trade
barriers like corruption, monopolies which cause difficulties to reach out the goals of the
company.
2

Contents
Executive summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
1. Background of the company....................................................................................................................5
2. Business drivers behind the company's expansion into the given country:..............................................6
3. Trade Barrier...........................................................................................................................................9
4. Ethical and Social issues to be considered by the UK............................................................................11
5. Cultural preferences to be considered by the business...........................................................................13
6. Expansion Methods to be Chosen by the Calon Wen............................................................................15
Conclusion.................................................................................................................................................16
References.................................................................................................................................................17
3

Introduction
International business is the platform where the organisation can be able to get the opportunity to
grow. In this market there are diverse and vast areas where the firm can be able to get enter. In
the international business approach, one company will be planning and gathering all the
resources to enter into a market which is across the boundaries when it originally established.
The Calon Wen organic company is located in Narberth, Dyfed. This company produces dairy
products like milk. The primary objective of Calon Wen Organic Milk Company is to enter the
Chinese market in 2020-21. Calon Wen organisation is focusing on specific Chinese market
audiences. Firstly the discussion is about the Calon Wen organic company. The objective of the
organisation is to enter the Chinese market. In this report, the driven which helps in business
expansion of the firm in the international market can be analysed with several tools, The use of
PESTLE will be done here.
4

1. Background of the company
Calon Wen organic milk company is started on 30 March 2000. It is situated in Narberth, Dyfed.
This company is running from 18 years 11 months. Calon Wen organic milk company produces
wholesale of dairy products, eggs and fats. Production and consumption of milk and milk
products give benefits to the company. The objective of Calon Wen Organic Milk Company is to
enter the Chinese market for upcoming 2020-21. Enter in the China market is challenging to all
western companies. The company is focused on selected customers of Chinese demand. It helps
to enhance the business of company because China is a rapidly growing country and the
environment of the industry is open. Customers are increases day by day in the Chinese market.
The nature of China is different in different geographical areas. For business, enhancement
Company should focus on the higher income coastal regions. Understanding of Government
policies and regulations is very important to enter the Chinese market. The proposition of milk in
the UK is better than other local countries. Calon Wen organic milk company already extends its
business in the UK and now it is trying to enter the Chinese market to take their organisation on
the next level. The company focuses on pre-school children and upward age and makes products
according to their likes and dislikes (Hedley, 2019).
There are many social and ethical issues which are faced by the company to enter in another
international market. This report provides knowledge about the barriers, culture influence and
expansion method which are used by the company. These methods help SME to enter in
international business and provide growth for business on a global level.
5

2. Business drivers behind the company's expansion into the given country:
Business-driven is a method by which Calon Wen can develop solutions that give business
satisfies requirements. China is a rapidly growing country. After 30 years, the government of
China gives open opportunities to another foreign country to do business with them and expand
the economic growth of China. Some global leaders are come to grow their business and profit,
but there is a condition that companies share a large amount of gain with the China government.
It is a reason by which the business expansion is not natural in China (Hedley, 2019). There are
many fundamental barrier cause problems in business expansion in China. There are a lot of
opportunities to expand a business, but barriers are also present.
According to the words of Safeguard Global (2018), PESTLE and five force analysis are the best
business driven and help to the extension of the company in China. These are the tools which are
used by the company to improve its growth in the China market. Porter's five forces give the idea
of using power in competition. PESTLE helps to identify the environmental factors which affect
the company and its growth.
Competition is a major factor which affects the company expansion. 5 forces model helps to
know about the competition in the Chinese market. Calon Wen knows the competition level of
the Chinese market with the help of the porter model.
If the market has a lot of entrants, the value of the market is decreasing. The suppliers are
increases the price of goods and products. Few sellers have more power in the industry.
Substitutes are a significant problem of the failure of company expansion. With the help of
Porter's five force models, Calon Wen organic milk company know about the other milk
company entrants and their strategies. This model helps to understand the price of products or
services and competition within the Chinese market. It gives a chance to the company to take
advantage of the current situation and overcome with weakness. It helps in reduce making
mistakes which offer competition to other entrants (Porter and Heppelmann, 2014)
The positive impact of 5 force model:
6

 Porter five force models help in the planning of the organisation.
 It helps in dealing with buyers and suppliers.
 Porter's five force model is helping to identify the structure and strategies of other
companies.
The negative impact of 5 force model:
 It focuses on only 5 factors and ignores other factors.
 It is not used by all type of industries.
According to the words of O’Neill (2017), PESTLE is defined as political, economic, socio-
cultural, technological, legal, and environmental factors. It is a tool which helps Calon Wen to
identify external factors how they affect their goals and objectives. It helps to give competition to
other industry in the Chinese market.
 Political factors: Include the rules, regulations and policies which affect the economy for
example tax and employment laws.
 Economic factors: Include variation in rates of product and services, supply and demand
of customers.
 Socio-cultural factors including the culture of China, variation in the lifestyle of the
population.
 Technological factors: Refers to change in technology, and what technology is used in
different sectors of company and industries.
 Legal factors: Define as laws of employment, health and safety law which affect the
growth of the industry.
 Environmental factors: Affect the business which includes climate change, pollution
etc.
The positive impact of PESTLE analysis:
 It helps to reduce the effect of conflicts and potential threats.
 Development of creative thinking in an organisation.
 PESTLE analysis provides a simple and easy framework for business.
 It helps the organisation to enter new markets
The negative impact of PESTLE analysis:
7

 High cost and time consuming which limits the effectiveness of techniques.
 The decisions which are taken by an organisation are based on the PESTLE subjective.
 It didn’t increase the investment of an organisation.
A PESTLE analysis is helping to identify the factors which affect the company expansion in the
Chinese Market. The manager of Calon Wen should use the PESTLE analysis for decision
making. The manager should focus on the culture, lifestyle and demographics of the consumer.
Environment and legal factors also affect the business. It changes the brand in future. PESTLE
analysis helps to know these factors and provide a suggestion in making a decision which helps
to build a reputation in the Chinese market. It gives choices for planning the goals and objectives
of the company.
8

3. Trade Barrier
The 4 trade barriers for entering the international market are:
Ethical issues:
Society of China is fast growing and changing so, it is necessary to aware of all the ethical codes
and standards. Lack of knowledge about ethical standards can cause a barrier for entering an
international market. An ethical barrier can cause the problem in decision making according to
the laws and code of ethics.
Legal protection:
The constitutional protection is poor in foreign countries so the companies will not feel safe
while engaging in the international market ( Dhingra, et. al., 2016). Inadequate legal protection
is the most significant barrier. If the company does not know about the trademarks and patents,
then the company may suffer a loss in the market.
Tariffs: A tariff is the most common barrier for entering the international market. In tariff, the
government applies the tax policy on imported goods. Tariff increases the price of the goods
which are introduced as compared to domestic products. In trade barriers when there are some
uncertainties, then there are some opportunities also that demonstrate the business and even
created by the trade policies of the national government of the trade market.
Cultural Barrier:
Every country has a different culture so, it causes a problem in doing business in other countries
than domestic country. Knowledge about the lifestyle, culture, tradition and custom is most
important and it is a little bit difficult to understand in little time.
Risk or opportunities of trade barriers:
Ethical Barriers: The risk of ethical barrier refers to occurring negative unexpected
circumstances by unethical actions.
9

Tariffs: In tariffs, the government of foreign countries apply high tax policy for importing the
goods so the competition will decrease as many companies will not able to pay the tax and hence
will not able to engage in the international market. As in duties, the international government set
the tax policy while doing importing. So by this price of the goods will increase and it may lead
to misbalance in the investment.
Legal protection: Internationally the constitutional protection is inferior, and so the Company
has to face many issues while taking the decisions. Legal protection is beneficial for a company
because it provides protection to staff, customers, materials etc.
Cultural barriers: If the company understand the culture of China, it would be easy to enter the
Chinese market and stay for the long run in China.
10

4. Ethical and Social issues to be considered by the UK
When the enterprise works in its own country, most of the people working in the enterprises are
familiar with the culture. It would be easy for them to understand requirements of local people
there but when the company enter in an international market, then, most of the customer whom
they are dealing with have different cultural values (Schafer, 2016). The importance of corporate
social responsibility when operating internationally is:
 Improve public image: Being socially responsible helps to improve the image of the
company in society. The perception of the public towards the company is based on
review and the confidence of the customers. By prominent a positive image, a company
can become financially profitable and can also make a name for itself. Being dynamic in
the community, the employees of the company can quickly engage with the customer and
will help the company to make its name internationally and also make more and more
profit (Droppert and Bennett, 2015).
 Recollecting best talent: Being part of corporate social responsibilities will help in
boosting the employee's morals and also lead to an increase in the productivity of the
company. It will motivate the employee, and hence the performance of the employees
will increase. The employees of the company can also have a chance to improve their
communication skills. For entering an international market, it is necessary to have
excellent communication skills.
 Attractive customer: Building a good relationship with the customer is the foundation to
make the company more successful and to be socially responsible can make the customer
buy milk. Some of the customers are keen to buy the milk if they know the profit margin.
If the company has a positive image in public, then it will help the company to increase
the sale internationally and can also increase the profit margin.
 Rise media attention: Media plays a vital role in the publicizing the company. The
Company has to make sure that it will make a good relationship with the foreign media
outlets so that they can cover the stories about the company. It will help in increasing the
popularity as through media, people will get to know the company and it will improve the
sale and will also increase the profit. It will help in raising the goodwill of the company.
11

It will also enhance the market value and the value of the product in the eyes of the
customer. This also helps in creating awareness of the product.
12