Freshways: UK Dairy Company International Business Report

This report provides a comprehensive analysis of Freshways, a UK-based dairy company, and its international business strategy with a focus on entering the Chinese market. The report begins with an executive summary and introduction to the context of the UHT milk market in China. It then delves into business drivers, using PESTLE and Porter's Five Forces models to evaluate the external and competitive environments. The report further examines cultural factors impacting Freshways' expansion, trade barriers, and social/ethical issues. Finally, it evaluates the overall international expansion strategy, providing a detailed assessment of market entry considerations and strategic recommendations for Freshways' venture into the Chinese market, including UHT milk for children.

INTERNATIONAL BUSINESS
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EXECUTIVE SUMMARY
The study revolves around the UK based organization Freshways which is basically a
part of dairy industry. The organisation has targetted an aim to to expand its business in the
Chinese market. The report consists of various cultural factors including power distance,
Individualism/ collectivism, masculinity/ Femininity in terms of China's cultural factors. The
report further includes the business growth drivers which can be analysed through Porter's five
forces model and the PESTLE analysis of Freshways which is a UK bases organization. The
report further consists of the Ethical and Social issues like corporate social responsibility,
Environmental issues and Human rights.
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Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
PESTLE Analysis of Freshways in order to determine the important business drivers.............4
Porter's five forces model of Freshways in order to determine the important business drivers..6
TASK 2............................................................................................................................................9
Determine the cultural factors that will have an impact on Freshways business on expansion in
China...........................................................................................................................................9
TASK 3..........................................................................................................................................10
Determine the trade barriers which can be faced by Freshways while expanding its business.
...................................................................................................................................................10
TASK 4..........................................................................................................................................11
Determine the Social and Ethical issues that could be faced by Freshways during its
expansion...................................................................................................................................11
TASK 5..........................................................................................................................................12
Evaluate the expansion strategy of business at International Level..........................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
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INTRODUCTION
International Business is referred to buying and selling of goods, services, technology
knowledge and capital beyond the national borders. International business refers to cross border
transactions of goods and services between two or more countries. There are basically five types
of International business which are- Export and import, Licensing, Foreign Direct Investment,
Franchising and Joint ventures or Strategic Partnerships. International Business refers to the
business activities that occur beyond the geographical borders of a nation. International trade
involves movement of goods and services, personnel, capital, Intellectual property and
technology across the international borders.
Freshways is a UK based dairy company which is owned by Nijjar Group Holdings.
Freshways Limited is located in Coventry, UK and it is a part of Dairy Products Manufacturing
Industry. It produces a full range of dairy products including fresh milk, spread, Butter, Cream,
Yogurt, Cheese and Eggs along with bread and flat breads. Freshways has planned their key
objective to focus and expand their target market. Freshways has planned to expand into Chinese
market. Freshways aims to have an access to the international suppliers. Freshways has an
intention to utilise the reputation of UK as in land quality, reliability and transparency. The
study revolves around the International Business Strategy of Freshways (Aguilera and Grøgaard,
2019).
TASK 1
PESTLE Analysis of Freshways in order to determine the important business drivers.
Pestle analysis helps in determining the external factors which have an impact on an
organization. The PESTLE analysis comprise of Political factors, Economic factors, Social
Factors, Technological factors, Legal Factors and Environmental factors (Apetrei, Kureshi and
Horodnic, 2015). The pestle analysis of Freshways is explained below-
 Political factors: Political factors have a strong influence on the long term profitability
and sustainability of Freshways. The organization is sensitive enough to be effected by
the political environments of different countries. The various political factors which
affect the operational strategy at Freshways are- Changing Policies, Pressure groups and
protests, Bureaucracy and Corruption, Taxation policies and trade restrictions.
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 Economic factors: Economic factors are very important to be considered in an
organization. As these facilitate the organisation to estimate the growth trajectory of the
organization or the industry. The economic factors which affect the operations at
Freshways include Inflation rate, Employment, interest rate, exchange rates, Labour
market conditions and financial market efficiency (Beamish and Lupton, 2016).
 Social Factors: Social factors also have a strong influence on the operations of an
organization in terms of trends, values and societal norms. The social factors which
influence the operations at Freshways are Demographic trends, Equality and power
distance, Gender roles, Expenditure pattern and behaviour and Online shopping are some
of the important factors.
 Technological factors: Technological factors refers to the rapid advancement and
diffusion in terms of technology. The technological factors have increased the importance
of understanding the strategic decision making process across the globe. An in depth
study of Technological factors will help Freshways in making a detailed analysis. There
are various technological factors which have an impact on Freshways such as Social
media marketing, Technological innovation, Research and development and Product Life
cycles.
 Legal factors: The Legal factors play a crucial role in operations of Freshways.
Freshways need to comply with the legal environment and obligations and study the
regulatory structure of the market. The understanding of legal factors help Freshways in
avoiding or getting rid of some serious challenges. Legal factors which have an influence
on Freshways are Employee protection law, Consumer protection law and intellectual
property law (Buckley and Ghauri eds., 2015).
 Environmental factors: The Environmental factors are key components of PESTLE
analysis which help in determining the impact of external factors on the organization.
The changing climatic conditions and growing environmental consciousness have major
impact on the environmental analysis. The environmental factors, environmental laws,
environmental standard and regulation differ from one market to another. It is very
important for an organization to analyse the environmental factors in order to avoid the
unforeseen circumstances of the organization. The environmental factors which have an
influence on the operations of Freshways are Recycling and waste management,
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Renewable technologies, Weather and climatic conditions, environmental regulations in
order to reduce or avoid depletion of resources and the attitude towards the environment
friendly or Eco friendly products (Buckley, Enderwick and Cross eds., 2018).
Porter's five forces model of Freshways in order to determine the important business drivers.
Porter's Five forces model is a strategic tool which helps in determining the key business
driver. Porter's five forces model helps in planning and goal setting process. It also facilitates
companies in decision making purposes. The model helps in analysing the external factors of an
organization through five aspects. The five aspects are- Bargaining power of the buyer,
bargaining power of the supplier, Rivalry inside the industry, Threat of new entrants and threat
of the substitute. The factors of Porters five forces model helps in determining the position of the
organization in the industry along with determining the trends and the potential in the industry to
drive the business in a better way. The porter's five forces model for Freshways is described
below-
 Rivalry inside the Industry: Rivalry inside the industry refers to the competition among
the organization of a specific industry. The rivalry depends upon the number of the
organizations and their strength in the organization as well as the strategies of the various
organization. The industry with very few dominant player face less competition or rivalry
whereas the industry which have fragmented and huge number of organizations face
tough competition in the industry. The rivalry in terms of Freshways is discussed below-
Level of competition
Freshways faces a moderate level of competition in the industry as there are huge number of
fragmented organizations who act as competitor to Freshways. The level of competition is high
also due to the homogeneous products being offered by all the organizations of the industry
(Cantwell, 2017).
Building competitive advantage
Freshways has tried to establish a distinguishing competitive advantage with the help of
investment in research and development and work towards creating a unique and strategic
communication. The high level of competition has also led to the higher rate of innovation
among the industries in the industry. Freshways also introduced a variety of effective and
efficient innovation techniques to enhance profit and growth of their organization. The players of
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the industry aim to operate with the economies of the scale and also help in adapting to the
modern brand management.
Implications of the Industry Rivalry
The higher level of competition among the organizations of the industry have led to an overall
growth of the industry along with the development. Freshways focuses on the technological
advancement and brand management as well as development to sustain the competitive
advantage (Collinson, Narula and Rugman, 2016).
 Bargaining power of the buyer: The bargaining power of the buyer refers to the power
or the authority in hands of buyer which puts up pressure on the organization and the
company. The pressure not only relates to offering competitive prices but also on offering
high quality of product with better customer service and through ethical means. The
factors comprising of bargaining power of the buyer in aspect of Freshways is described
below-
Market Fragmentation
Freshways has a wide variety or range of consumer as it produces and sells its products across
the borders as well as locally. The high number of customers or the consumers have a lower
impact on the bargaining power of the buyers and hence strengthens the position of Freshways in
the industry.
Switching Cost
Switching cost refers to the cost incurred in switching from one product to another or may be one
organization to another which offer similar product in the market. Usually the similar cost of the
product offered by different players reduce the switching cost for the consumers. The switching
cost differs according to the needs and wants of the consumers as in the type of variant they
prefer to choose. Hence the focus of the market players is upon the brand development and
marketing communication (Gligor, Esmark and Gölgeci, 2016).
Distribution Channel
The higher are the channels of distribution of the industry the more accessible is the product to
the consumers of the organization. The increasing number of distribution channel and market
helps in developing a wider base of consumer for organization in the industry. This is true and
applicable in the case of local as well as international markets and hence it decreases the
bargaining power of the buyer (HOTEL, 2016).
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 Bargaining power of the supplier: Bargaining of the suppliers refers to the influence of
the suppliers on the organization. The reason behind the pressure from suppliers can be
due to price fluctuation, inconsistency in quality and scarcity of the raw material an
inputs. The bargaining power of the supplier has a direct impact upon the profitability
and competitiveness of the organization. The bargaining power of buyer can be
considered high when business feel the switching cost of supplier is high. The bargaining
power of supplier is high also due to the limited number of the suppliers in the industry.
The factors responsible for the High bargaining power of the supplier for Freshways are
described below-
Substitutes
Freshways is dependent upon the manufacturing for producing and marketing the offerings and
products. As Freshways is focussed upon the Manufacturing and thus high power lies with the
supplier. Hence the businesses must contract with their supplier as they lack substitutes and this
will also help in ensuring the quality of production. Thus the lower number of substitutes lead to
higher switching cost which directly leads to increase in bargaining power of the supplier.
Supplier Strength
Freshways has a limited number of suppliers in the international as well as local market.
Freshways are restricted to a selective number of suppliers in order to ensure the quality as per
the contractual agreement which need to be carried out (López‐Duarte, Vidal‐Suárez and
González‐Díaz, 2016).
 Threat of new entrants: Threat of new entrant is referred to the increase in competition
within the industry due to a new entrant for the already existing players in the market.
The situation where the new entrant also sells similar product, it lead to a threat to the
competitiveness of the existing players. The threat of new entrants in aspect of Freshways
is discussed below-
Technological Advancement
The industry of Freshways is highly dependent upon the technological infrastructure.
Technological advancements and innovations are carried out in order to facilitate ease in the
business operations. They further require capital investments and high expertise.
Size of operations
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The existing competitors have a large area to conduct operations and thus the new players also
need nee to have sustainable economies of scale in their business process. Due to this the new
players need time to get into a tough competition with the existing players. Thus it can be
concluded that threat of new entrants is comparatively low for Freshways (Malyarets and et.al.,
2017).
Barriers to industry
The industry faces moderate barriers fr entry in the industry. This ultimately leads to a lower
impact on Freshways from the entry of new competitor. The industry involves strict and rigid
policies formulated by the government which restrict entry of new entrants in the industry.
 Threat of new substitutes: Threat of substitutes is referred to the products from the other
industries that can conquer the market of the product of a specific industry. The
substitutes tend to offer same qualities and similar advantages. Hence it can be concluded
that a substitute affects the competitiveness of a specific industry. The threat of new
substitutes in case of Freshways is discussed below-
Switching Cost
The Switching Cost in aspects of Freshways is considered high as the substitute products can be
imported by paying extra amount in terms of Custom duty which is an extra cost attached with
the actual cost which ultimately impacts on high price.
Availability
The Availability of Freshways product in the market is quite low as they are available through
limited platforms or selective channels or outlets which shows a lower demand.
Accessibility
The Accessibility of Freshways products is low as they are not easily accessible. Also they do
not utilise mass marketing tools (Meyer, 2017).
TASK 2
Determine the cultural factors that will have an impact on Freshways business on expansion in
China.
The globalisation has turned China into an attractive place for the foreign investors. The
cross cultural management and communication is a challenge for the cooperation between China
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and its UK based partner. There are various cultural differences between UK and China and in
order to clarify the differences between China and UK, Hofstede's 5 Cultural dimensions can be
considered. Cultural differences are referred to collective programming of the mind which
differentiates the member of one category of people from another. The Hofstede's 5 cultural
dimensions comprises of five dimensions which are Power Distance, Individualism/
Collectivism, Masculinity/ Femininity, Uncertainty avoidance and short/ long term orientation.
 Power distance- The dimension of power distance deals with that all individuals are not
equal in the society. Power distance can be referred to the extent to which the inferior or
the less powerful members of the organization or institutions of a specific country, expect
and accept that there is unequal distribution of power. China is a society where they have
a common belief that inequalities among people are acceptable. China ranks higher in
terms of power distance in the world (Peterson, Arregle and Martin, 2020).
 Individualism/ Collectivism- The degree of interdependence of a society maintained
among its members is a fundamental issue. In individualist society, people tend to look
after them and their family only. In Collectivist society, people consider the groups they
belong to and they exchange loyalty and take care of them too. China follows a highly
collectivist nature (Picciotto and Mayne eds., 2016).
 Masculinity/ Femininity- A high score in Masculine in terms of dimension indicates that
the society will be driven by achievement, competition and success where success is
termed as the winner or is termed best in field. It is a value system that is approached in
school and is carried forward throughout the organizational life. A low Feminine Score
on the dimension states that the dominant values in society are caring for the quality of
life and for others. A feminine society is the one where the quality of life is considered as
the sign of success. So the fundamental challenge relates with what motivates the people
whether wanting to be the best i.e. Masculine or Admiring what you do i.e. Feminine.
China can be considered as a Masculine society which is more of success driven.
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TASK 3
Determine the trade barriers which can be faced by Freshways while expanding its business.
There are two types of trade barriers such as tariffs and non-tariff barriers which are used
as a common measure to control exports and imports. The tariff barriers are imposed by raising
taxes and non tariff barriers are imposed by deciding the limits of the goods to be traded. The
trade barriers imposed by China which will have an impact on the dairy industry are explained
below-
A. Non tariff trade barriers
 Quotas: The non tariff trade barriers such as quotas are self imposed by the country to
safeguard against other countries. The non trade barriers can impose a quantitative limit
on the dairy products to protect their indigenous dairy industry. At present, China has
imposed quotas on around 40 different categories of the commodities (Roberts and
Dörrenbächer, 2016).
 Licensing: Licensing is also a very common non tariff barrier to restrict entry of the
foreign industries. Licensing deals with getting official government approval for
everything from selling products to setting up new manufacturing units. In China, the
number of products that are in subject to import licensing controls are limited.
B. Tariff Barriers
 Tariff trade barriers is referred to taxes that have been imposed on a particular class of
export or import. China has imposed tariffs on imported goods varying from 0% to 100%.
The main categories of tax and tariffs are Consumption tax, Value added tax and General
custom duties.
C. Voluntary Export Restraints
 Voluntary Export Restraints is limit imposed by the government on the amount of good
that can be exported to a country of a particular category in a fixed time frame. No
immediate benefit is witnessed into existence by imposing the limits but it helps to
prevent measures of another country that is suffering under cheap imports.
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TASK 4
Determine the Social and Ethical issues that could be faced by Freshways during its expansion.
There are various social and ethical issues which can be faced by organization while
operation of the business. The various social and ethical issues are discussed below-
 Corporate Social Responsibility
The issue of corporate Social Responsibility was introduced in China in 1990 as China
acts as a supplier of many global corporations. Corporate Social responsibility is an idea that
defines the social obligations of an organization which is above and beyond the motive of
making profit. There are sides of the CSR policy, the first one is that the only social
responsibility of a business is to make profits and maximise them. The second phase of the
Corporate Social Responsibility is the socio economic view which holds that management's
responsibility is more and beyond just making profits which includes protecting and improving
the society and work in order to increase the welfare of the society. Corporate Social
Responsibility can be considered as charitable deed as well (Rohlfer and Zhang, 2016).
 Human Rights
There have been various business scandals which have seen a significant growth over the last
few years in China. The most significant business scandal related to Human rights took place in
2008 which was the milk scandal. It reflected a food safety incident involving milk and infant
formula which was found to be adulterated with melamine. This issue grabbed concern towards
the food safety and human rights and also it had an adverse effect on China's image. The another
aspect of human rights is safety at workplace which is a very important factor under human
rights (Wettstein and et.al., 2019).
 Environmental issues
In China, The environmental pollution is mainly caused due to the industrial process of
industries. The main reason behind this is disposal of the untreated waste directly to the
environment. The main causes of environmental pollution was regarding the air quality and
poisoning of drinking water. The demand for clean and healthy water has grown rapidly and is
still growing in China. There are various industries like chemical factories, Steel factories, textile
factories and power plants which can not resist exposing their untreated waste into the nature
directly through air and water bodies.
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TASK 5
Evaluate the expansion strategy of business at International Level.
There are various methods of expansion depending upon the industry to which the
company belongs. There are various types of methods which facilitate the expansion of business.
The various expansion methods are Corporate expansion, Joint ventures, Limited partnerships
and licensing.
 Corporate expansion: Corporate expansion facilitates possible higher profit per location
whereas it requires additional employees and an expanded hierarchy. Corporate
expansion decreases ability to expand the business rapidly. Corporate expansion also
increases capital risk.
 Joint venture: Joint venture method is basically used for aggregating capital and the
entrepreneurial skills or the managerial skills. The owner gives up equity and the possible
control to an entity which will be used to expand the business. Joint venture are not
designed for businesses which wish to rapidly expand their business. This mode of
expansion has legal obligations which are difficult to be followed. The major requirement
for joint venture is to have limited partners with passive investors and the owner of
intellectual property must assume the role of general partner.
 Licensing: Licensing is the method of expansion with a primary goal to increase the lines
of distribution of the sale of company products (Santacreu-Vasut, Shenkar and Shoham,
2017).
CONCLUSION
It can be concluded from the above study that International Business refers to trading of
goods and services across the international borders. The study revolves around the UK based
organization Freshways which is basically a part of dairy industry. The organisation has targetted
an aim to to expand its business in the Chinese market. The report consists of various cultural
factors including power distance, Individualism/ collectivism, masculinity/ Feminism in terms of
China's cultural factors. The report further includes the business growth drivers which can be
analysed through Porter's five forces model and the PESTLE analysis.
13

REFERENCES
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