Business Plan Report: Expanding Commodity Trading in China Market

This business plan report details the expansion of a UK-based financial services company into the Chinese market. It begins with an executive summary and company overview, followed by an industry analysis of the financial sector and a PESTLE analysis of China's political, economic, social, technolog...Read More

Running Head: BUSINESS PLAN 0
Business Report
Expanding Business in China
Student Details
7/31/2019

BUSINESS PLAN 1
Executive Summary
The Business plan is written in relation to expansion of commodity trading and financial
services business in new market and region which is China. The major elements of business
plan are discussed in the report to make a profitable decision by board of members. The
various elements of the business plan discussed in the report include:
• Marketing Plan
• Industry Analysis
• Operational Plan
• Customer Analysis
• Financial Plan
The report has described the major concerns of the management before investing in China
which are required to help in decision making. PESTLE analysis of china is conducted to
understand China market.

BUSINESS PLAN 2
Contents
Company Overview...................................................................................................................3
Industry Analysis.......................................................................................................................3
PESTLE Analysis.......................................................................................................................3
Political...................................................................................................................................4
Economic................................................................................................................................4
Social......................................................................................................................................4
Technological.........................................................................................................................4
Legal.......................................................................................................................................4
Environmental........................................................................................................................5
Customer Analysis.....................................................................................................................5
Marketing Plan...........................................................................................................................5
Operations Plan..........................................................................................................................6
Management Team.....................................................................................................................6
Financial Plan.............................................................................................................................6
Bibliography...............................................................................................................................8
Appendix....................................................................................................................................9
Figure 1...................................................................................................................................9

BUSINESS PLAN 3
Company Overview
Business plan is the process of developing the steps and measures to understand the type of
the business to build the action plan in targeted market.The target market can be new range of
products, customer segment, location or region. The business plan helps in analysing the
major elements before entering in the new market it helps in analysing and discussing the risk
involved in huge investment (Dwyer & Hopwood, 2013). The report is focused on the multi-
national business in financial services business. The company was founded in UK in 1980;
the business concentrates on providing specialist insurance, trade finance, and associated
services, including consulting, for companies involved in international commodities trading.
The company is registered in London stock exchange with a roster of institutional
shareholders. The largest shareholder of the company is an insurance company who has stake
of 6%. The other directors collectively own around 1.5% of the company. The company has a
Capital of £440 million and to expand the company night need to impact the debt-equity ratio
as the company has no debt. The report has discussed major element of the country China to
estimate the success of the Investment plan.
Industry Analysis
The financial sector includes the wide range of firms which includes retail banks, investment
banks hedge funds. The economic output defines the contribution of any sector in the
economy. The Finance sector of United Kingdom is discussed to understand the growing
trend of the company in local markets.
The UK finance sector and insurance sector has shown fluctuations since 1990. However, the
graph indicates strong growth during the early 2000s. In 2018 the sector has contributed 6.9%
of the UK economic output (Allen, 2018). It varies from region to region the fact shows that
London is accounted for half of the total Gross value output in 2017. (Please refer fig 1 of
appendices.)
PESTLE Analysis
To expand in new location it is important to understand the external factors of the China
financial sector, PESTLE Analysis is adopted to analyse the important elements of external
environment and these are Political, Economic, Social, Technological, Legal, and
Environmental factors in china. China is considered as the most developing economy in the

BUSINESS PLAN 4
whole world because the country has the huge potential for economic growth as the country
is known for its huge market and savings in labor cost. China has opened to cross- border
economic activities.
Political
In this factor, the major two elements discussed are government rules and regulations. The
Chinese government can be categorized as communist dictatorship which provides china as
stable economy. The government of china focus has started towards e-commerce and foreign
business which has promoted commodity trading as well. The china is growing as the market
leader through its dynamic growth in China Commodities (Euro Money, 2018).
Economic
In last five years, china economy has experienced substantial growth rate as the country has
abundant skilled labor which is contributing in export business (Yeung, 2018). The country
also has potential for infrastructure and urbanization. Another factor to focus is the lending
system of china, it is seen that the central bank has stringent lending system which shows the
economic concern for the country. The china is also investing in offshore exchange which is
the boost to global commodities trading (Shidong, 2018).
Social
The social and cultural factor plays a huge role in entering any market. As far as china social
and cultural ethics are concerned the majority Chinese are literate and the use of internet is
very common. The online buying and selling of commodity can prove profitable in context of
demographics of the country.
Technological
The most common features of technological factors are the scope of change in any external
environment. In current era technology is changing fiercely and it has provided the platform
to all the developing nations to match with world’s expectation. In China, new products, new
product technology, updated mechanism like intranet is introduced (Wilson, 2019). In all the
countries the safe online trading and payment system is adopted which is one of the factors
that is promoting global business in China.
Legal
The legal factors are the legal issues faced by company while entering in the new market. The
china has various foreign trade laws in place which are needed to follow to expand business

BUSINESS PLAN 5
in China. The china has a very strong position in context of foreign direct investment (Hui,
2019). Being a member of World trade organization the china companies need to follow the
specific obligations and non-discrimination principles while making market entry.
Environmental
With the Changing environmental condition, the country also has strict rules to follow
environmental laws. The china with its increasing FDI the country has sustainable
development policy in place (Cox, 2015). The aim of the government of China is to promote
rules-based investment climate. The company has to follow the sustainable policies to expand
business in China.
Customer Analysis
The customers are the most important stakeholders in any company as the consumers van
influence the profit if the organization in long run. To expand it is very important that
customer needs and perceptions are taken into consideration (Wynn-Williams, 2016). For this
Customer, analysis is conducted. Customer analysis is a critical phase of any business plan.
The business plan helps the management to identify target customers, ascertains their needs
and then connects them with the desired product.
The business’s clients are mostly from UK. The major profits come from London commodity
traders and brokers. There are a few European based companies who provide the rest of the
business
The company’s clientele is moving towards china and it is seen that the company can grow
more if the commodity buyers are present in the same region. The company customer
analysis tells that Chinese buyers in London want this service in their local market. The
important thing to note is that the company provide service to Australian commodity business
which exports to China.
Marketing Plan
In this section, the plan is discussed relating to how the business will approach the clients.
The business is focused in positing its brand strongly as the company has incurred losses in
past in US market due to not reaching to the major clients. The company is planning to
introduce commodities which are mostly traded in Chinese market and are exported by
Australia. Importantly, the company has to work on the promotions plan, which can be

BUSINESS PLAN 6
executed through online offers in their current market and sending newsletters to the potential
customers (Rosenbloom, 2012).
Operations Plan
The operations plan provides details of the key operational processes which a business need
to execute on a monthly basis to measure the results Moreover, The operation plan helps in
identifying the steps which can lead to the success in coming 1 to 3 years according to the
business plan. For the financial business plan, it is important that the commodity buyers
should be communicated that are already interested in dealing with different stocks. To
achieve success the management has to execute the process which defines role of each and
every employee and department in detailed manner.
Management Team
The company will require a managing team which can execute the business plan in efficient
way. The Audit, Sustainability, and Remuneration committee are responsible to analyse and
make business decision in regard to the requirement of the employees in new office (Croci,
2018). The team should be comprised of external independent auditors to operate the
financial plan in the new location. The aim of the team is to establish the business with the
same reputation and goodwill. The company has to recruit regional Chinese employees as
that will help in understanding the culture of the country. It is important to have sales team
who speak Chinese to target untapped market of china. The team should be comprised of
executive members and non-executive members to have accurate decision making (Mallin,
2018). The whole process is based on the responsible investment which can lead the
management team to work in sustainable manner.
Financial Plan
The financial plan is the plan of action related to the finance sourcing and budgeting each and
every phase of the expansion. The company’s Group turnover is £500 million per annum with
net profits at £ 60 million, and profits, after-tax, are £45 million. The best part is that the
company has no debt. Return on Capital Employed is 35%, which shows that company has
good position in context of employing the capital. ROCE explains the relative profitability
compared to the capital employed by the company. In this case, the company can take debt to
start new office in China. The estimated new business is expected to have sales turnover of

BUSINESS PLAN 7
£150million in one year. The net profits are estimated to be £48 million in China and profits,
after-tax, are £31 million. The capital requirement for the expansion of the business is £60
million. The company need huge investment in start of the business as the company has to
fulfil all the legal obligations to enter in new market. This investment has a huge potential in
earning profit. The business should expand to china as china is the booming economy in
context of financial services and commodity trading.

BUSINESS PLAN 8
Bibliography
Allen, K., 2018. UK finance industry dominates European scene. [Online] Available at:
https://www.ft.com/content/88cdec40-b03c-11e8-8d14-6f049d06439c [Accessed 6 August
2019].
Cox, J., 2015. Corporate social responsibility and social capital. Journal of Banking and
Finance, 60, pp.252-70.
Croci, E., 2018. The Board of Directors: Corporate Governance and the Effect on Firm
Value. Berlin: Springer.
Dwyer, J. & Hopwood, N., 2013. Management Strategies and Skills. New york: McGraw-
Hill Education.
Euro Money, 2018. Gateway to New Horizons of Opportunity in China Commodities.
[Online] Available at: https://www.euromoney.com/article/b19yk6gnl6pzm6/gateway-to-
new-horizons-of-opportunity-in-china-commodities [Accessed 6 August 2019].
Hui, L., 2019. China sees steady FDI growth in May. [Online] Available at:
http://www.xinhuanet.com/english/2019-06/13/c_138140681.htm [Accessed 6 August 2019].
Mallin, C., 2018. Corporate Governance. United Kingdom: Oxford University Press.
Rosenbloom, B., 2012. Marketing Channels. USA: Cengage Learning.
Shidong, Z., 2018. How does China, the largest commodities buyer, become a price maker?
Owning an offshore exchange is a start. [Online] Available at:
https://www.scmp.com/business/china-business/article/2155531/how-does-largest-
commodities-buyer-become-price-maker-owning [Accessed 6 August 2019].
Wilson, E., 2019. Financial markets: What's next for China? [Online] Available at:
https://www.euromoney.com/article/b1fzrv0xm5cnf1/financial-markets-what39s-next-for-
china [Accessed 6 August 2019].
Wynn-Williams, M., 2016. Managing Global Business. London: Macmillan Publishers
limited.

BUSINESS PLAN 9
Yeung, K., 2018. China’s moves to open financial markets to foreign investors risk a weaker
yuan, analysts say. [Online] Available at:
https://www.scmp.com/business/china-business/article/2169195/chinas-moves-open-
financial-markets-foreign-investors-risk [Accessed 5 August 2019].

BUSINESS PLAN 10
Appendix
Figure 1
Source: ONS Series KKP5 and KKK9