Danes Coffee: Analyzing China Market for Global Expansion

This report examines the potential for Danes Coffee to expand its business into the Chinese market. It begins with an executive summary outlining key findings and recommendations. The report identifies China as a promising host country due to its large population and potential for low operational costs. It then analyzes the external environment using the PESTEL framework, assessing political, economic, social, technological, environmental, and legal factors. The report highlights challenges such as political interference and economic fluctuations, while also identifying opportunities like rising coffee consumption and technological advancements. Furthermore, the report employs Porter's Five Forces analysis to determine the industrial competitiveness of the coffee market in China. Finally, the report provides strategic recommendations for Danes Coffee to achieve long-term sustainability in the Chinese market, considering the identified opportunities and threats.

Running head: GLOBAL MARKETING
Global marketing
Name of the student
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Executive summary
The aim of this report is to discuss about the potentiality of Danes in doing business in China. In
this report, the challenges and opportunities that to be faced by Danes in doing business in China
are being identified and analyzed. It is identified that by operating in China, Danes will gain
huge market opportunities by means of market size. On the other hand, they are about to face
strict and unfavorable political environment in China. In addition, this report also discussed
about the potential industrial competitiveness in China and it is identified that they will face
higher level of competitiveness. Based on the identified factors, this report recommended a few
steps and strategies that can help Danes in gaining the long term sustainability in China.

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Table of Contents
1. Introduction..................................................................................................................................3
2. Identification of the host country.................................................................................................3
3. Determination of the external environment.................................................................................4
3.1 Political environment.............................................................................................................4
3.2 Economical factors................................................................................................................5
3.3 Social factors.........................................................................................................................7
3.4 Technological factors.............................................................................................................7
3.5 Environmental factors............................................................................................................8
3.6 Legal factors..........................................................................................................................8
4. Determination of the industrial competitiveness.........................................................................9
5. Recommendations......................................................................................................................10
6. Conclusion.................................................................................................................................11
7. Reference...................................................................................................................................13

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1. Introduction
In the current business scenario, it is not enough for the contemporary business
organizations to operate within the national boundary. This is due to the reason that increase in
the competition is posing challenges for the business organizations and reducing their viability in
operating within the domestic circuit. In this case, business firms are opting for foreign market
operations in order to increase their market size and business revenue (Coeurderoy & Murray,
2014). Moreover, the recent surge in the globalization is also contributing in pushing the concept
of foreign market operations for the business firms. However, on the other hand, there are
number of factors should also be considered by the investing firms in selecting the host country
for operation. These factors will be influencing in the long term viability of business operation in
the host country.
Danes Coffee is one of leading boutique coffee manufacturers and brands in the
Australian region. They are founded in 1994 by Paul Jackson in changing the way, coffee was
tasted. Currently, they are having their operations across the country and offering good varieties
of coffee both as wholesale and retailers. However, they are already well established in the
Australian market and should now look out for new foreign locations in order to increase their
presence. This will also help them to global identity, which will act as their competitive
advantages in the long term (Clark, Li & Shepherd, 2018).
This report will discuss about the potentiality of Danes Coffee in doing business in the
foreign country. In addition, a potential foreign country will be selected for Danes Coffee as their
host country and key external factors will also be discussed using the PESTEL framework.
Porter five forces analysis will also be done to identify the competitive forces to be faced by
Danes Coffee in operating in the host country. Based on the factors to be identified, a few
recommended steps will be discussed.
2. Identification of the host country
It is recommended that China will be the most potential country for Danes Coffee for
their foreign business operations. This is due to the reason that China is the largest country in the
world in terms of population, which poses huge opportunities for Danes Coffee. In addition, the
cost of operation and manufacturing will also be low in China (Chow, 2017). This is due to the

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reason that China is known for cheap human resources. Thus, Danes Coffee will gain
competitive advantages in terms of lower cost of operation. China being an Asian country is
having the popular culture of tea and coffee consumption, which will also offer enough
potentiality for Danes Coffee. Moreover, the strategic geographical location of China will also
pose enough opportunities due to the reason that Danes Coffee will be able to tap the emerging
South Asian countries (Ansar et al., 2016). Thus, it can be concluded that China will be most
perfect choice for Danes Coffee in terms of their foreign market operations. The following
section will discuss about the key external factors to be faced by Danes Coffee in doing business
in China and the major positive and negative factors will also be identified.
3. Determination of the external environment
3.1 Political environment
The major challenge for Danes Coffee in doing business in China will be due to their
political factors. This is due to the reason that China is having communist government with high
level of interference in the private business operations (Zhong, 2015). The more will be the
interference of the government, the more complex will it become for Danes Coffee to operate in
the country. The scenario of political stability also does not hold favorable condition due to the
fact that their score of political stability as per the global economy is -0.25, which is leading
towards the weak political stability. This will also pose challenge for Danes Coffee in doing their
business.

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Figure 1: political stability of China
Source: (theglobaleconomy.com 2019)
However, on the other hand, there are few opportunities also be faced by Danes in doing
business in the Chinese market. One of the major opportunities will be the gradual rise of China
in the corruption index. It is showing that China is witnessing continuous growth in the
corruption index since 2014. This is denoting that Danes will face lower intensity of corruption
in doing business in China. The recent pro business approach being taken by the Chinese
government will also help Danes to get necessary support and resources for their business
(Cheung, Chung & Lin, 2016). However, it should also be noted that Danes will face more
political issues in trading from their facilities of China because China is having diplomatic issues
with many countries and not having good ties with them. Thus, Danes may face the restrictions
of exporting from China.
Figure: 2 corruption index ranking of China
Source: (theglobaleconomy.com 2019)
3.2 Economical factors
Economical factors are also important to determine due to the reason that economical
factors will determine the monetary viability for Danes. It is reported that China is the leading

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country in the world in terms of the growth of national economy. Thus, the huge growth being
witnessed by China will be beneficial for Danes to increase their sales volumes and revenue. The
rate of inflation is also reducing in the Chinese region, which denotes that Danes can have their
products in most competitive prices (Cao & Birchenall, 2013). It is reported by the global
economy that the rate of inflation In China is constantly falling since 2010 and it will help Danes
to have the favorable purchasing condition from the side of the customers.
Figure 3: fluctuations in the inflation rate of China
Source: (theglobaleconomy.com 2019)
It should be noted that above graphic is showing inflation rate in China and it is identified
that fluctuations are evident. In this case, the major challenge for Danes will be to forecast the
rate of inflation in the coming years considering the fluctuation based strategy. The internal
market competitiveness is also high and will also pose challenges for Danes. This is due to the
reason that the intensity of the competition is more in China than in Australia and thus Danes
will face difficulty in gaining the market share (Findlay & Watson, 2013). According to the
economic forecast of the international monetary fund, the economic growth rate of China will get
slower in the coming years. Thus, reduction in the economic potentiality and growth will pose
challenge for Danes in managing their business viability.

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3.3 Social factors
It is reported that coffee is set to take over tea as the most popular drink of choice. Thus,
Danes is having huge market opportunities in the coming years. Considering the huge population
in the country and coffee being the most popular drink will make Danes a profitable venture in
China. It is also reported that the consumption rate of coffee in China is increasing by 20 percent,
which is 2 percent higher as compared to the global rate. In terms of the globalization, the score
of social globalization in China is rapidly increasing, which will enable Danes to offer their
standardized products in China.
Figure 4: Growth of social globalization in China
Source: (theglobaleconomy.com 2019)
However, on the other hand, it should be noted that China and Australia are poles apart in
terms of cultural factors. Thus, cross cultural factors should be adhered by Danes in their
Chinese business operation. For instance, the advertisements should be in accordance to the local
cultural trends in China. In addition, Danes may face the challenge of different taste pattern of
the customers and the Chinese customers might not like the taste of Danes. Thus, it is a challenge
for Danes to design their products according to the Chinese social preferences.
3.4 Technological factors

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Technology is a major determinant in influencing the operational efficiency and thus it is
important Danes to have the access to latest technologies in doing business in China. According
to the reports, China is rapidly growing in terms of innovation index and showing steep growth
since 2013. This is denotes that Danes will have the access to innovative ideas and factors, which
will further reduce their operational cost and increase the service efficiency. Danes will also have
the advantage of selling their latest coffee products such as grinder and brewing machines in the
country. However, on the other hand, it should also be noted that cost is involved in the
development of the technologies and it is important for Danes to reduce the cost of development
of technologies. China is a cost conscious country and hence, the initiated technologies should be
cost effective and value for money for the customers. In this case, the existing higher end
technologies being possessed by Danes in their Australian operation might not be successful in
China.
3.5 Environmental factors
Danes will not have direct environmental impact from their business operation but their
sourcing policy should be sustainable enough. This is due to the reason that currently Danes is
sourcing their coffee beans from countries and it is important for them to ensure the
sustainability in their supply chain. The coffee cultivation is having environmental impact and
Danes should ensure the proper management it. China is having number of environmental
standards and regulations that should be adhered by Danes (Zhang & Barr, 2013). This includes
carbon neutrality in the business operations. However, the major challenge for Danes will be the
regulation of cost involved in initiating the environmental standards.
3.6 Legal factors
There will a few challenges to be faced by Danes in terms of legal factors as well in
China. It is reported that the regulatory quality in China is towards the weak section and this is
due to the reason that government is the supreme power in the country. Private business entities
are having limited access to regulatory assistances in their operation. Moreover, China is also
known for number of stringent laws, which may be difficult for Danes to adhere.

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4. Determination of the industrial competitiveness
Apart from the determination of external factors, it is also important for Danes to analyze
the industrial competitiveness. This is due to the reason that the more will be the competitiveness
in the industry, the more will be the challenges for Danes in getting foothold in the foreign
country. Porter five forces analysis will be used in the following sections to determine the
industry competitiveness.
Bargaining power of the buyers  Bargaining power of the buyers is high in the Chinese
market.
 There are number of options available for the
customers in the coffee sector.
 However, point of differences is more in this sector and
thus Danes can initiate distinctiveness by offering
different value proposition (Tingchi Liu et al., 2013).
 Product differentiation can help Danes in reducing the
bargaining power of the customers.
Bargaining power of the
suppliers
 Bargaining power of the suppliers is moderate for
Danes.
 Existing suppliers from the South American and
African countries will be sued for sourcing (Gaudin,
2017).
 Price of the materials will determine the end price of
the products.
 Probability of leveraging on the Chinese suppliers is
low (Heese, 2015).
Threat of new entrants  Threat of new entrants is moderate for Danes.
 It is difficult for the new entrants to start the business in
countrywide scale and match the operational expertise
of Danes (Kasemset et al., 2014).
 However, there are number of global brands or foreign
brands same as Danes are willing to enter the Chinese

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market.
 Entering in the market in small scale is easier and is
having higher probability.
Threat of substitutes  Threat of substitutes is high for Danes in the Chinese
market.
 There are number of similar competitors operating in
the market and offering similar value proposition.
 However, customer loyalty and brand recall value
determines the threat of substitutes (Schwenger, Straub
& Borzillo, 2014).
 Switching cost is low for the customers and thus Danes
should initiate branding activities in retaining the
customers.
Competitive rivalry  Competitive rivalry is more in this sector in China.
 Each of the brands is trying to gain the market
leadership position.
 They are trying to provide premium experience to the
customers in lower cost (Converse & Reinhard, 2016).
 Seasonal offers and benefits are being initiated by the
brands to attract customers.
Thus it can be concluded that industrial competitiveness will be more for Danes in doing
business in China. However, it should be noted that each of the emerging countries currently is
having higher industrial competitiveness but the huge market size of China will provide enough
potentiality for all the players in gaining profits. Thus, the challenges to be faced by Danes in
doing business in China can be adjusted by having the huge sales volumes in the country.
5. Recommendations
 It is recommended that Danes should initiate direct exporting entry mode in entering the
Chinese market in the initial stage. This will involve lower cost and risks for them.
However, in the later stage, if the market potentiality is identified as favorable, then

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Danes can also initiate direct investment in the country. Thus, the gradual process in
entering in the Chinese market will be beneficial for Danes to regulate the risks
involvement.
 It is also recommended that they should position their products on the basis of
characteristics in the Chinese market. This is due to the reason that positioning on the
basis of product characteristics will help Danes in aware the customers about the different
taste of their coffee. This will enable Danes to initiate the differentiation strategy in doing
business in China.
 Market adaptable approach should be initiated by Danes in operating in the Chinese
market. The promotional activities to be done in China should be in line to the local
social preferences of the market. This will help Danes to get the further reach in the
market and have deep market penetration. Brand recall value among the potential
customers will also get increased.
 They should initiate intensive distribution approach in selling their products in China.
This will help in getting the products available in all the leading stores and hypermarkets
in China and gaining more reach among the customers. Initiation of the intensive
distribution strategy will help Danes to maintain the brand level by not getting available
in any brick and mortar stores as well as getting more market exposure compared to the
exclusive distribution.
6. Conclusion
This report concludes that China is the most potential country available for Danes in
terms of their foreign business operation. There are number of challenges and opportunities to be
faced by Danes in doing business in China are being identified using the PESTEL and Porter five
forces analysis. It is identified that economic growth and huge population size of China will be
biggest benefits for Danes. The potential market opportunities in China will be beneficial for
dames in fending off the other challenges. This report recommends that Danes should initiate
direct exporting strategy in the initial stage and investment in the later stage. This will reduce
their involvement of risks in operating in the foreign market. In addition, it is also recommended
that Danes should have market adaptable approach to gain the maximum market penetration in
China.

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