Analyzing International Business Drivers: Saputo Dairy in China

This report examines Saputo Dairy UK's international business strategy as it expands into the Chinese market. It identifies key business drivers using PESTLE and Porter's Five Forces analyses, highlighting political, economic, social, technological, environmental, and legal factors, as well as competitive intensity, the threat of new entrants, supplier power, buyer power, and the threat of substitutes. The report also addresses trade barriers and ethical and social issues, alongside cultural factors influencing business operations. Various methods of international expansion are explored, providing a comprehensive overview of Saputo Dairy's approach to entering and competing in the Chinese dairy market, with a focus on UHT milk for children and strategies for achieving sustainable growth and profitability. Desklib provides similar solved assignments for students.

International business

Table of Contents
Executive summary: ......................................................................................................................3
INTRODUCTION...........................................................................................................................4
TASK...............................................................................................................................................4
Business drivers..........................................................................................................................4
Porter Five force model ..............................................................................................................7
Trade barriers..............................................................................................................................8
Ethical and social issues............................................................................................................10
Cultural factor...........................................................................................................................11
Methods of expansion...............................................................................................................13
REFERENCES..............................................................................................................................15

Executive summary:
The report states that international business is a procedure of conducting business
activities at international level across national boundaries. Different trade drivers which plays
essential role in performing business functions internationally. There are various methods of
expansions that help business to explore its functions in different market to attain growth and
development objective. The report covers various business drivers, social and cultural issues as
well as trade barriers in international business.

INTRODUCTION
International business encompasses various commercial and business activities that take
place transfer of organisational goods and services, ideas, resources, people as well as
technologies across different national boundaries. In international business, organisation operates
different activities at global level and perform range of commercial functions to attain the
objective of gaining higher profitability and maintain effective brand positioning in global
market place (Boa, Wattanatorn and Tagong, 2018). It provides international expansion
opportunities to business to gain higher revenue. In this report the chosen organisation is Saputo
Dairy UK which is founded in 1981 and it is leading dairy organisation of British. Organisation's
headquarter is situated in United Kingdom and it want to expand its business activities and
functions in Chinese market to gain in opportunities. Respective organisation analyses demand
of UHT milk in the market of Beijing and consumption rate of dairy. Organisation target
audiences are children of age group 3 to 11. 17,200 employees are working with business and
organisation faces competition from various competitors like Darigold, Byrne and Leprino foods
that provides similar dairy products and services to customers (Saputo, 2021). revenue of
respective organisation is approximately 14.94 billion Canadian dollars in 2020 that shows that
organisation covers higher share of marekt. the report covers key driven factors that impacts
business activities such as Pestle analysis and porters five forces. Furthermore, cultural factors,
ethical factors as well as social factors are covered. There are various trade barriers and
international business expansion methods are covered in this project report.
TASK
Business drivers
Business drivers determined as the factors and activities that affects organisational
operations and functions positively and negatively. There are various factors are included in
business drivers that existed inside or outside of business boundaries and influences business
growth and development. Saputo Dairy organisation access all key business drivers of china
market through conducting effective market research than take decision of entering in Chinese
market and target specific target customers such as children. Respective organisation provides
higher proportion of UHT milk in Chinese market than local business areas for the gain higher
profitability. In order to evaluate different trade barriers of respective country, Organisation

conducts Pestle and Porter's five forces (Adrodegari and et. al., 2017). It is important for
organisation to examine all external business drivers before entering in international market than
develop effective strategies and policies to maintain effective positioning in international market
and gain competitive advantages. Factors of Pestle analysis are mentioned below:
Pestle analysis
Source: PESTLE Analysis, (2017)
Political factors:
In external business environment, political factors are the effective business drivers that
impacts organisational functioning and performance when organisation conducts its operations at
international level. There are different risk factors are associated in political factors that are
examined by the Saputo Dairy organisation to gain growth and development objective in Chinese
market. As Chinese political and and government rules and regulations are different form UK
that affect organisational overall functionality and decision-making process (Nugroho and et. al.,
2017). Political conditions of China is different from UK so, organisation have to evaluate there
conditions and related laws to sustain. These business drivers plays important role in business
activities because every organisation must follow all rules of regulations of the country in which
Illustration 1: PESTLE analysis, (2017)

it operating its operations. Respective organisation examines foreign trade policies, trade
policies, taxation policies and trade restrictions before enter in Chinese market.
Economic factors
There are various factors are included in economic factors like economy's inflation rate,
interest rate, saving and consumption rate of customers that affect overall business investment
and customers demand for organisational products in the market of China. As every country
economic conditions are different from each other so, it becomes important for Saputo Dairy
organisations to analyse economic factors to China and develop strategies accordingly for
gaining various sustainable competitive advantages. Organisational revenue is 14.943 billion
dollar and net income is 582.8 million in the year of 2020. to enhance profitability ratio,
respective organisation expand its business in China where demand of UHT product is high. At
initial stage, economic conditions of China impacts respective organisation's sales and
profitability level. Before entering in the market of China, organisation examines economic
condition of country, customer's purchasing power their income level run business in
international market efficiently.
Social factors:
In social factors range of dimensions are included like customers value, their
consciousness towards health, demographic characteristics, income distribution as well as growth
rate of population in society that impacts organisational performance. As Gross domestic rate of
China is 8.44 that reflects that country is growing at fast rate and it provides employments to
large number of people that enhances their purchasing power. Growth and development of
country attracts respective organisation to expand business. Saputo Dairy organisations
organisation provides UHT milk to children aged between 3 to 11 so, it becomes important that
organisation analyse customers taste and preferences and provide them product accordingly with
full safety and health consciousness (Dumas and Fantinato, 2017). Respective organisation
considered all social factors of China before entering in market. Through conducting proper
market research, respective organisation develop appropriate strategies and policies in order to
attain all defined goals and objectives of higher profitability and market share.
Technological factors:
There are various technological advancement are happened in current international
business environment that impacts organisational performance. As Saputo Dairy organisations

expands its business operations in China market so, It is necessary to analyse changes in
technological factors, automation and research and development to gain higher productivity and
profitability objectives (Ansari and et. al., 2019). As the growth scale of China's digital economy
is 3.8 trillion yuarn that is the 36.2 percent of GDP. Respective organisation invests in
technological factors to gain higher market share and customer base. Adoption of technology
helps to enhances productivity rate on Saputo organisation. In china latest technologies are used
in production so, organisation develop effective cost structure, analyse existing technological
advancement and than provide training to employees to adopt technologies efficient that
enhances organisational productivity and provides various competitive advantages than other
competitors. Saputo Dairy organisations conduct research and development to identify various
methods of production and also use social media technologies to enhance reachability potential
target customers.
Environment factors:
Environment factors play important role in business and affects its decisions-making
process and functionality. There are various aspects are included in the environmental factors
like country's climate and weather conditions, rules and regulations related to environment and
pollution level that affect food and beverages industry in various manner (Savicki, 2020) (Wilson
and Popp, 2017). As Saputo Dairy company expands its activities in the marker of China so, it
adopts renewable technologies and waste management process for the purpose of reducing
carbon footprints and protecting environment. Scarcity of material make it more important to
consider environment factors in business policies and strategies. Respective organisation
involves corporate social responsibility aspects in business operations to maintain effective
image in target market place of China.
Legal factors:
In legal factors various laws and regulatory compliances are included that are formulates
by the government and every organisation have to follow then to regulate business functions in
efficient manner. Every country has its own rules and regulations that may be different form
other country rules. So, Saputo Dairy company examines legal laws and compliances to conduct
business operations in China market. Legal factors includes various laws such as employment
legislations, consumer protection laws, health and safety regulations and other compliances that
impacts organisational performance and activities. As target customers of organisation are

children so organisation must follow all rules that restrict government interferences and ensures
that business operations run in most efficient manner (Helms, 2021). As respective organisation
is relates to food industry so, it must consider these legislations for ensuring success in
international market.
Porter Five force model
Saputo Dairy organisation analyses and evaluate different aspects of porter’s five forces that
facilitates it to understand competition level in industry and facilitates to gain competitive
advantages through expansing business in the market of China and offer UHT milk product that
differentiated the organisation from other competitors. It facilitates organisation to take effective
decisions to attain sustainable development objective. Factors of porter's model are mentioned
below:
Competition among the industry:
As there are various organisational are conducting their operations in food industry that
enhances overall intensity of competition among industry and impacts of organisational
functions and profitability objectives. Saputo Dairy organisation provides UHT milk children in
the market of China. Organisation promotes its products through advertising on social media
platforms and provides products at lower price then competitors without compromising quality.
There is high competition for respective organisation because various organisations provides
similar products to customers. There is low barriers are imposed by the industries and
competitors such as Darigold and Byrne offers similar dairy products to customers that affect
performance and profitability of Saputo organisation.
Threat of new entrants:
Threat of new entrants impacts on overall organisational market share and profitability so
restrict new entries in market organisation imposes various trade barriers, restrictions and long
procedure to establish business that limits them to enter in market (Fuad and Sinha, 2018).
Utilisation of resources to reduce organisational cost and maintain effective positioning in
market. Threat of new entreats is high for Saputo Dairy organisation. As there is high chances of
gaining profits so organisations attracts towards industry and enhance threat for existing business
because it reduces organisational customers and market share. Respective organisation bring
innovation in product to enhance market positioning.
Bargaining power of supplier:

Suppliers are defined as the parties that provides material and market information to
business for their operations in competitive market place. Saputo Dairy company has range of
suppliers who provides better quality products at affordable prices. Respective organisation
creates chain of effective suppliers and get material from multiple suppliers to reduce threat.
Suppliers are in negotiable power for respective organisation that impacts overall proficiency and
profitability ratio of organisation. Suppliers bargaining power is moderate because all dairy
product are made by milk and there is no substitute is available in market.
Bargaining power of customers:
Customer's bargaining power is defined as the abilities of customers that affects
organisational products and services as well as profitability ratio of Saputo Dairy organisation.
Customers demands in food industry is higher and non-fluctuated (Elliott, 2017). As there are
low switching cost to find new customers so there is low bargaining power of customers for
respective organisation. Customer's bargaining power if low for Saputo organisation because
there is no substitute is available in market of dairy product. So, customers have to purchase
products on prices that are provided by the organisation.
Threats of substitute products:
Substitutes are defined as the availability of similar products in the market at same prices that
impacts organisational profitability ratio directly. In food industry, range of organisations
provides similar products that creates competition to Saputo Dairy organisation from
competitors. Respective organisation provides better quality and innovative products to
customers for gaining competitive advantages than other competitors. As there is low threat of
substitute products to the organisation because all products are prepared by the milk and
organisation provides similar products at differentiated prices.
Trade barriers
Trade barriers are determined as the various policies and planning of government that
imposes various restrictions on international organisations which operate their functions in
country. Saputo Dairy organisation expand it business in China market where it get growth and
development opportunities as well as exploration than local market of UK. Chinese government
creates various rules and regulatory framework for reducing imposts of country and it charges
corporate taxes, tariff, higher custom duties and other fees that discourages international trade.
These trade barriers are imposed by the Chinese government to protect local traders form

international competition (Salmon and Tordjman, 2020). As respective organisation offers UHT
milk to children in the marker of China, organisation has to face various trade barriers that
restricts organisational performance and productivity. Some trade barriers are defined below:
China Tariff trade barrier:
Tariff trade barriers are determined as the important and essential taxes and other duties
that are imposed by the government of country on export and import of some goods and services.
It is implemented by the various countries in order to reduce country imports that create
competition for domestics traders. There are various charges and taxes are imposed by the China
government like custom duties, exercise duties and other charges on the products of UHT milk
that is provided by Saputo Dairy organisation that enhances overall cost of organisation and
creates barriers in trading. China government imposed VAT, consumption duties and general
custom duties for the purpose of limit organisational imports.
Non- tariff trade barriers of China:
There are various trade barriers are imposed by the Chinese government on other
organisation through executing regulations on quantity of country imports and exports.
Respective country set quantitative limit or decide quota in which country can import products
and services form other country (Kraus, Ribeiro-Soriano and Schüssler, 2018). As per current
data, China establishes non tariff barrier on almost 40 products. For respective organisation,
China government has decided specific quantity that can be imported at a specific time period
that protects domestic traders for higher competition. Licence is also required to conduct
business in other country that work as a trade barriers to enter in global business.
Exchange rates control:
To restrict international business in country, exchange rate control is the effective tool that
create barrier for business. China government adopts exchange rate control as trade barrier in
which, government charges higher exchange rate for converting foreign currency into domestic
currency. There are self-imposed rates of exchange are executed by the China to control
international business activities.
Excessive bureaucratic procedure:
Excessive bureaucratic procedures is considered as the idiom in which various rules and
regulations are imposed on country imports and exports. These formal regulatory regulations

impacts on international business that restricted or create barriers on organisations that are
providing their products and services in other countries.
Ethical and social issues
To perform various business functions at international level, it becomes important for
organisation to consider ethical and social issues in operations for ensuring sustainable
development in other country. Saputo Dairy organisation to attain organisational identifies social
and ethical issues and consider them in organisational strategies and policies to attain defined
goals and objectives in best possible manner (Khan and Bhatti, 2018). These factors facilitates
organisation to manage and maintain its transparency,reliability as well as loyalty in the market
of China. Some social and ethical issues that impacts on Saputo Dairy organisation activities are
mentioned below:
Working standards:
Working standards are the ethical issues that contains maintaining organisational working
procedure and develop effective employees relation within organisation to run all ac6tivities and
functions in proper manner. Respective organisation creates effective working environment at
workplace in which employees can perform their defined functions efficiently to attain common
objectives. In working standards various things are included such as effective working hours,
appropriate working schedule, employees remuneration and physical as well as mental safety of
employees that facilitates organisation to attain defined goals and objectives efficiently. Saputo
Dairy organisation analyses working standards of China and execute them in organisation to gain
sustainable advantages.
Work place diversity and equal opportunity:
As in organisation employees are come from different backgrounds, culture and places as
well as their way of thinking is also different from each other that create issue for organisation to
manage them and lead towards achieve common goals. As culture of China is different from UK
that creates various difficulties for Saputo Dairy organisation to conduct its operations properly.
Respective organisation provides equal opportunities to their employees so they can perform
defined functions in more efficient manner. Diversity at workplace helps organisation to reduce
employee turnover rate and maintains organisation image or reputation in respective market. On
the other hand, if organisation fails to manage diversity at workplace then it impacts business
activities negatively.

Trust and integrity:
In order t perform functions at international level, organisation maintains trust and
integrity with employees and customers that facilitates organisation to gain sustainable
competitive advantages in new market and maintain its differentiates positioning (Thielborger
and Ackermann, 2017). As Saputo Dairy organisation creates effective relations with customers
and employees through understating their point of view and provide better quality products and
services.
Corporate social responsibilities:
The concept of Corporate social responsibility is determined as the well-defined
mechanism or aspect that helps organisation to implement various legal, social and ethical
standards that facilitates it to attain defined goals and objectives in sustainable manner. Saputo
Dairy organisation adopts various social as well as environmental norms that facilitates
respective organisation to run all business functions and operations in ethical manner. It provides
various sustainable competitive advantages to organisation and help to conduct business
activities and functions properly (Corporate social responsibility,2021). Saputo Dairy
organisation ensures various standards such as quality, prices, hygiene, consistency of product
that attracts customs in new market place. It facilitates organisation to maintain effective brand
image and enhances awareness of organisational products and services that improve the ratio of
sales and profitability.
Cultural factor
Cultural factors play essential and important role in conducting business operations and
functions in other country with full effectiveness and efficiency. Every country has own cultural
aspects such as values, beliefs and other things that may be different from other culture. As
respected organisation conducts its operations in the market of China so it becomes important for
organisation analyses cultural aspects and values of China to run business efficiently.
Hofstede’ cultural dimension model is adopted by the organisation to for addressing cultural
factors China that enables organisation to business functions properly and provides competitive
advantages in market place (López-Robles and et. al., 2018). Organisation considers various
cultural factors in business activities before decision to expanding business in the market of
China through providing UHT milk to China. Hofstede framework facilitates organisation to
distinguish cultural dimensions as well as help to identify the impacts of cultural differences on