Global Business Management: Zott Dairy's China Market Entry Plan

This report presents a global business plan for Zott Dairy, focusing on its potential entry into the Chinese market. It begins with an introduction highlighting the need for global expansion and identifies China as the target country due to its economic growth and market size. The report then delves into external factors, including political, economic, social, and technological environments (PEST analysis), and internal factors, such as strengths, weaknesses, opportunities, and threats (SWOT analysis). Based on these analyses, the report recommends a cost leadership strategy to cater to a broader customer base and a joint venture market entry strategy to mitigate financial risks and gain local market insights. The conclusion reinforces China as a viable market for Zott and emphasizes the importance of the recommended strategies for successful market entry and sustained business operations. The report also includes references to support the analysis and recommendations.

Running head: GLOBAL BUSINESS MANAGEMENT
Global business management
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Table of Contents
Introduction......................................................................................................................................2
Identification of the target country..................................................................................................2
Determination of the external environments...................................................................................3
Political factors............................................................................................................................3
Economical factors......................................................................................................................3
Social factors...............................................................................................................................4
Technological factors...................................................................................................................4
Determination of the internal factors...............................................................................................4
Strengths......................................................................................................................................5
Weakness.....................................................................................................................................5
Opportunities...............................................................................................................................5
Threats.........................................................................................................................................6
Determination of the business strategies.........................................................................................6
Determination of the market entry strategy.....................................................................................6
Conclusion.......................................................................................................................................7
Reference.........................................................................................................................................8

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Introduction
The current business state of affairs demands higher competitiveness from the side of the
contemporary business corporations due to the increasing complexities and ever complex market
situations. In the current time, one of the major issues or challenges for the contemporary
corporations is the maintenance of market share. Moreover, with the emergence of globalization,
competition in the market is now getting occurred in worldwide basis. Companies operating
within the national boundaries of their home country are facing the challenges of the entry of
foreign entities. Thus, they are forced to seek for foreign market opportunities for higher market
share and business potentialities. The same goes for Zott, a leading dairy brand from Germany.
Zott is founded in 1926 and currently they are offering various dairy products including cream,
yoghurts and cheese. As of now, they are having a approximately 3000 employees and is
considered as one of the largest dairy farms in the European region (Zott-dairy.com, 2019). They
are having their presence in more than 75 countries but Asian market penetration is less.
This report will discuss about the potentiality to be gained by Zott in entering in new
country along with the challenges to be faced. This report will recommend the target country for
Zott and the determining factors to be faced by them. In addition, the market entry and business
level strategies to be initiated by them will also be recommended.
Identification of the target country
It is identified that China will be the most potential foreign market for Zott due to the
reason that it is currently the leading country in the world in economic growth. Thus, the
business opportunities will also be the most for Zott. In addition, currently, Zott is not having
ideal market presence in Asia, which can also be overcome by entering in China. It is reported

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that China is one of the leading dairy markets in the world and is set to overtake the United
States as the biggest dairy market by 2022 (Fang, 2013). Moreover, China is also the biggest
country in the world in population, which will also help Zott to cater to the huge market size.
However, still there are number of factors that should be considered prior to entering the country.
These factors will be discussed in the next sections.
Determination of the external environments
Determination of the external business factors is important because Chinese business
scenario is different to that of the existing business scenario of Zott. In this case, it is important
to identify the major challenges and opportunities to be faced by them upon entering the country.
Political factors
Chinese is a communist nation with having socialistic governmental role. This may be
challenge for Zott in initiating their private business operation without the interference of the
government. In addition, it is also identified that China is getting indulged in trade wars with
different countries, which might cause economical sanctions on them. This will pose challenge in
the long term viability of Zott (Zhong, 2015). However, on the other hand, the recent pro-
business approach of the Chinese government in a attracting the foreign investment will be
favorable for Zott. There are good number of investment incentives and tax benefits getting
offered by the government. The recent data also shows that China is one of the leading countries
in the world in terms of attracting foreign direct investments.
Economical factors

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China is witnessing the highest economic growth in the world that denotes the increasing
purchasing power of the people. However, the ongoing trade war is leading number of foreign
investors backing off the country, which might stall the increasing economic growth. In addition,
China being one of the leading countries in attracting new investments is already having number
of competitors in the dairy industry (Howell, 2015). Thus, the intensity of competition for Zott
will be high and it will be challenging task for them to ensure the desired market share.
Social factors
Highest population in the world is one of the major advantages of doing business in
China. The market size will be huge for Zott. However, it is reported that more than 85 percent
of the Chinese population are suffering with lactose intolerance. Chinese government has
initiated a number of schemes to eradicate this issue and increase the milk consumption (Lukito
et al., 2015). Thus, Zott is going to have moderate social environment in operating in China.
Technological factors
Zott is already adopted with the latest and updated technologies in the dairy industry and
this will be forwarded to the Chinese market as well. In addition, China is also having favorable
infrastructure for technological advancements, which will be beneficial for Zott. They will be
able to develop new technologies, which will be cost effective and profitable and sustainable.
Determination of the internal factors
Apart from the external business factors, it is important to identify the key internal
competencies of Zott to identify the extent to which they will be able to succeed in the new
market.

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Strengths
The major strength for Zott is their years of experience and expertise in the dairy
industry. This will help them to design their value proposition in accordance to the Chinese
market preferences. In addition, Zott is already a global company with having presence in
number of countries. Thus, they are having financial capability and knowledge about how to get
viable in the new foreign country. Lastly, the diverse portfolio of dairy products of Zott will also
be beneficial in meeting the different taste and preference pattern of the huge population of
China.
Weakness
One of the major weaknesses for Zott is the lack of market presence in the Asian region.
Thus, majority of the population of China will not identify this brand and it will be challenging
for Zott to create the market. In addition, majority of the products of Zott are designed according
to the western preferences and tastes, which might not find acceptances in the Chinese market.
Opportunities
Zott will gain higher opportunities in entering in new markets due to the reason that the
existing markets of Zott are already getting saturated and more competitors are entering. Thus,
market development for them will be helpful in increasing the business revenue. In addition, the
increasing trend of dairy products consumption in China will also hold a good business
opportunity for Zott in catering to larger customer segments (Spicka, 2013). Lastly, they will
have to design new products for the Chinese market and these products might be find
acceptances in the other Asian countries as well. Thus, the business potentiality for them will get
further enhanced.

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Threats
One of the major threats for Zott will be the increase in competition. Be in their home or
host markets, the more will be the competition, the more will be the challenge for Zott to ensure
their business viability. Moreover, increase in the vegan trend is also posing challenge for Zott
because vegan trend is stalling the consumption of milk products.
Determination of the business strategies
There are number of business factors identified in the above section and it is important
for Zott to initiate the business strategies that will be able to survive in this market scenario.
Hence, it is recommended that Zott should initiate cost leadership strategy due to the reason that
with the help of the cost leadership strategy, more customer segments can be catered and brand
identity will get increased for them (Teeratansirikool et al., 2013). In addition, cost leadership
can also be gained by leveraging on the low production cost in China. Sales volume will also get
increased from the initial stage of their operation.
Determination of the market entry strategy
It is recommended that Zott should follow the joint venture entry strategy due to the
reason that it will reduce their financial risks and liabilities in the foreign market. Zott should
have their manufacur9ing facilities in China to cater to local trends and gain cost effectiveness
but direct Greenfield investment will increase the financial liabilities for them. On the other
hand, exporting the end products will increase the cost. Thus, with the help of joint venture, a
local firm should be partnered and market insights can be gained from them. Based on the data
from the local firm, business approach should be designed (Yao et al., 2013). Hence, joint
venture strategy will be the most balancing among all the available market entry strategy.

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Conclusion
This report concludes that China will be the most viable and potential country for
business for Zott. There are number of reasons behind choosing China discussed here. With the
help of the PEST and SWOT analysis, different determining factors are located, which will
influence the business of Zott. In addition, this report recommended that Zott should follow cost
leadership strategy in order to gain the competitive advantages from the very first stage of their
operation. Furthermore, joint venture market entry strategy should be followed to operate in
China, which will be beneficial for Zott in reducing the investment risks as well as having the
manufacturing facility in the country.

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Reference
Fang, C. (2013). How can Chinese economy achieve the transition toward total factor
productivity growth?[J]. Social Sciences in China, 1(9).
Howell, A. (2015). ‘Indigenous’ innovation with heterogeneous risk and new firm survival in a
transitioning Chinese economy. Research Policy, 44(10), 1866-1876.
Lukito, W., Malik, S. G., Surono, I. S., & Wahlqvist, M. L. (2015). From'lactose
intolerance'to'lactose nutrition'. Asia Pacific journal of clinical nutrition,
24(Supplement), S1.
Špička, J. (2013). The competitive environment in the dairy industry and its impact on the food
industry. Agris on-line Papers in Economics and Informatics, 5(665-2016-44948), 89-
102.
Teeratansirikool, L., Siengthai, S., Badir, Y., & Charoenngam, C. (2013). Competitive strategies
and firm performance: the mediating role of performance measurement. International
Journal of Productivity and Performance Management, 62(2), 168-184.
Yao, Z., Yang, Z., Fisher, G. J., Ma, C., & Fang, E. E. (2013). Knowledge complementarity,
knowledge absorption effectiveness, and new product performance: The exploration of
international joint ventures in China. International Business Review, 22(1), 216-227.
Zhong, Y. (2015). Local Government and Politics in China: Challenges from below: Challenges
from below. Routledge.
Zott-dairy.com. (2019). Zott - The Gourmet Dairy. Retrieved 11 September 2019, from
https://www.zott-dairy.com/en/

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