International Business Report: China Market for SME UHT Dairy

This report analyzes the international business strategy of SME UHT Dairy, a UK-based SME, focusing on its potential market entry into China. The report begins with an industry background of the UK dairy sector, providing relevant facts and figures. A PESTLE analysis is conducted to identify key business drivers in the Chinese market, followed by an examination of different trade barriers, potential consequences, and business uncertainties and opportunities created by trade policies. The report also addresses ethical and social issues that the UK SME must consider, along with the significance of cultural factors in various business activities. Finally, it explores internationalization methods and concludes with a summary of findings and recommendations. The report emphasizes the challenges and opportunities associated with entering the Chinese market, particularly concerning the introduction of a new UHT milk product for children. It also highlights the importance of understanding and adapting to the local business environment, including legal and ethical considerations.

INTERNATIONAL
BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Industry background....................................................................................................................1
PESTLE analysis for identifying the key business drivers ........................................................1
Different trade barriers in selected country.................................................................................3
Possible consequences of trade barriers in the selected market..................................................4
Business uncertainties and opportunities created by trade policies ...........................................5
Ethical and social issues considered by UK SME......................................................................5
Significance of the culture within various activities...................................................................7
Internationalisation methods.......................................................................................................8
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
International business refers to cross-border commerce and other business transaction
between the government or firms. It refers trade of products, services and technology as well as
capital or knowledge across the national border at the global level. Globalization means to
modification in the world where firms are moving away from self-contained nations and towards
more integrated world. International events and competition which is more complex and diverse
than domestic atmosphere of company (Cavusgil and et.al., 2014). This study is based on SME
UHT Diary. It is the family owned and operated home delivery service. Report will explain
industry background by relevant facts and figures. It will indicate PESTLE for identifying the
key business drivers. It will highlight different trade barriers, possible consequences, business
uncertainties and opportunities created by trade policy of national government of China. It will
detail the ethical and social issues as well as cultural preferences to considered by the UK SME.
Industry background
The industry is the business of farming which takes place in the UK. The production in
UK around the tenth largest in the world. There are around 12000 farms in the United Kingdom.
There are currently around 1.8 million cows living on the UK's 14550 farms. As cows must
give birth to calf to produce milk, there are also around two million calves born in each year in
the UK. 90% of cows in the UK that are the Holstein-Frisian breed and other breeds involve
Ayrshire, Guernsey and jersey cows. farming is the single largest agricultural sector in the UK at
the £3.8 billion with annual milk production around the 13.5 billion litres (THE INDUSTRY IN
BRITAIN, 2018). The value of UK exports of milk exports of milk production is much lower than
value of imports although the UK is largely self-sufficient in milk. The UK had trade shortage of
about £1.5 m in products. The British industry spends millions on advertising every year. It was
£124.2 million in 2012. Yogurt products account for the biggest proportion of advertising with
44% of total amount. The UK product is supported and promoted by Co, council and UK.
PESTLE analysis for identifying the key business drivers
China is among the most attractive areas in the world. It has also grown to become one of
the strongest power. This increase and boosted international business. The legal system has been
developed. International investor try to business in China mainly because of different things
which are size of market, low cost of labour and China's growth potential together. Selected
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country has become increasingly incorporated with other portion of the world. There are many
challenges for businesses in China which are attaining strategic goals of cost reduction, localized
differentiation and strengths of core competencies in particular areas and business operations
(Colgan and Rumens, eds., 2014).
Political Factors:
It involves government regulations, different legal issues which impact on nations. Both
the formal and informal regulations that companies must continue by impact on nations. The
political force is the most undecided unit. The government focused on the development of e-
commerce over the previous years. The legal framework for e-commerce is still in early stage.
Select has little experience for drafting e-commerce regulations for subjects such as tax,
intellectual property rights protection. These challenges effect on the SME UHT Farms because
they want to expand their business in relation to introduce the new product that is UHT milk for
children aged 3-11 years.
Economic Factors:
The economy of China experienced significant growth rate of Gross Domestic Product
over the previous five years. If the China proceeds to excel at this rate, so that it will exceed
GDP of US for that different factors are helped such as sigh rate of saving, skilled and abundant
labour, more export business and potential urban growth in the selected nation. Any kind of
economic growth can have major effect on small-medium enterprises like SME UHT in relation
to new product development which is UHT milk for children aged 3-11 years in the selected
nations (Ferlie and Ongaro, 2015). The GDP rate of China suggest that each citizens is adding
more and more values to the society. The labour cost is extremely low in the China. The growth
rate is impressive but its can slow down for that some distressing trends which are high inflation
rate and property prices in selected nation.
Social Factor:
The social and cultural feature of selected nation plays significant role as demographic
continuously modification. For instance: population growth and age distribution fluctuate. These
can change social trends and cultural values. Social behaviour and family size rarely effect
decisions are taken. Social element lifestyle, education, religion of consumer which are highly
effected on small-medium enterprise like SME UHT in relation to new product development
which is UHT milk for children aged 3-11 years in the selected nations. There are 420 million
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internet users in nation through which Chinese people frequently purchase the goods on online.
E-commerce has modified localised customers look shopping.
Technological Factors:
There are different technological factors which are new product being evolved,
purchasing mechanisms such as internal and external, production technology, distribution
mechanisms like internet, new method of working such as mobile telecom. The main problem of
technology is the development of business to customer industry in the China which does not
have safe and stable online payment system (Forsgren and Johanson, 2014.). The lack of safe
online card payment method is one of primary cause for this low utilization and penetration. This
kind of problem impact on small-medium like SME UHT in relation to new product
development which is UHT milk for children aged 3-11 years in the selected nations.
Environmental Factor:
The fast economic development of China has effected on natural atmosphere severely.
There are many environmental challenges such as climate change, loss of biodiversity, industrial
waste, air and water pollution which are faced by selected nation. These kinds of issues impact
on small-medium like SME UHT in relation to new product development which is UHT milk for
children aged 3-11 years in the selected nations. The government of selected nation has taken
number of initiatives to address the environmental concerns.
Legal Factors:
There are many regulations which regulates business and employment practices in
selected nation. For instance, labour standard, employee pay and benefits, labour disputes and
other laws. The list of industries for guiding the Foreign Investment regulates FDI in the nation.
Classify divides FDI into four categories such as encouraged, prohibited, permitted and restricted
(Ilieva, Beck and Waterstone, 2014). These kinds of issues impact on small-medium like SME
UHT in relation to new product development which is UHT milk for children aged 3-11 years in
the selected nations.
Different trade barriers in selected country
Trade barriers are government agree which trade obstacles which are detrimental and
reduce overall economic efficiency. This can be informed by the theory of comparative
advantage. International trade raise the number of products which domestic customers can select
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form, reduce the cost of those products through competition. It allows domestic industries to ship
their products foreign.
Tariff and Quotas:
There are two kinds of barriers to trade such as tariff and non-tariff barriers. Tariff
barriers normally take the form of taxation limiting imports from or exports to other nation. As
compared to, Non-tariff barriers to trade means set up to restrict trade in more indirect ways
other than trying to disapprove trade directly through large amount of taxes or fees. China has
been particularly demanding in ensuring which there are necessary limits imposed against goods
produced international and sold within nation (Johanson and Mattsson, 2015).
Ethical Issues:
As companies expand the business globally, they must not only understand mission,
vision, goals, policies and methods but also must take into informing the legal and ethical issues
in internation business. There are different ethical issues in global business involve working
standards and conditions, equal chance, trust, integrity, human rights and corruption. For
economic development in China, the main problem is unsafe workplace like mining accidents.
Workforce safety is rarely ignored in collieries in China in the search for fast profits.
Cross cultural:
Cultural circumstances can also make or break organization like SME UHT which is
conducting the business internationally. Every culture and country has its own history, duties,
traditions and code of ethics. Cultural barriers involve communication which refers company
must rely on translators when speaking business contact and customers (Kolk, 2016). Cultural
values are important for multinational firm to win consumers support and business as well as to
accomplish competitive advantages in specific market.
Legal Issues:
Due to recession, China has conjugated and again developing at fast rate. With the
domestic consumption expanding fast, experts predict large market growth in China over next
time period. The growing trend for exports to China by small-medium companies like SME
UHTin the Midwest. There are legal issues provides guide to help organizations during the
entering into China market (Smallbone, Welter and Ateljevic, 2014).
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Possible consequences of trade barriers in the selected market
If the small-medium company like SME UHT ignore all kinds of trade barriers, so that
they are faced many challenges and consequences while entering into China. Such as follows:
Higher Costs:
If the company ignore the trade barriers, so that it increase costs for both consumers and
organizations. For example the proposed raised tariffs on imports of China which can result in
larger prices next time. The effect of trade barriers on companies in terms of consumers and
government shifts over time. Higher prices for products which can decrease consumption by
individual ans businesses (Meyer and Peng, 2016).
Increased prices:
As trade barriers, increased the prices of imported goods. Domestic producers are not
forced to decrease their prices from raised competition. Domestic consumers are left paying high
prices as outcome. It also decreases efficiencies by allowing firms which will not exist in more
competitive market to remain open.
Business uncertainties and opportunities created by trade policies
If the company is created trade policy, so that it negative impact on small-medium
companies like SME UHT in the China. The trade policy of government can affect business by
making it easier or more difficult to trade across international borders. Trade policy can involve
imposition of import tariffs, quotas on imports and exports of certain goods and subsidies for
localised producers to help them against international competition (Shenkar, Luo and Chi,
2014). There are many risks for business such as cultural understanding, increase operational
costs, economic inactivities and so on. This impact on small-medium like SME UHT in relation
to new product development which is UHT milk for children aged 3-11 years in the selected
nations.
In order to that, If the company is created trade policy, so that it positive impact on small-
medium companies like SME UHT in the China. It involves increase revenue, profits and
productivity of business. This impact on small-medium like SME UHT in relation to new
product development which is UHT milk for children aged 3-11 years in the selected nations.
Ethical and social issues considered by UK SME
As the SME UHT which is UK based SME is planning to launch its UHT milk for the
children aged from (3 to 11 years) in the Chinese marketplace. For this company have to
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consider the ethical and social issues which could create the barriers in their business in the
Chinese market. Like they provide the milk for the children so milk should be the pure and the
ingredient of that milk are used which could help the children in their physical and mental
growth that the other competitors in the china market are not able to provide. To consider the
ethical and social issue SME UHTdiary company must plan the their CSR (Corporate social
responsibility) in such away that could help the company and can impro0ve the society as well.
Importance of the Corporate social responsibility of the SME UHT company for launching the
UTH milk for the children in Chinese market (Kolk and Van Tulder, 2016).
Improving the Company's brand image - If the SME UHT company plan the CSR and
for being the social responsible company in the china market the CSR of the company will help
them to be being social as regarding to the China's children and their population. If the CSR will
be planned as accordance to increase the society condition and provide the pure milk by
launching the UTH milk it will improve the brand image of the SME UHT company in the
Chinese market.
Engaging Customers – By developing the relationship with the customers SME UHT
company can engage their customer with their UTH milk product. Developing the relationship
with the customers is the key point and reason for being a successful company and also having
the social responsibilities with respect to the customers will impact the buying decision of the
customers. If the SME UHT company provide the enough milk at a low price as their
competitors are not provide and building the healthy relation with the consumer by giving them
good services it will encourage the customers to willingly pay for the UTH milk for their
children (Perrini, 2015).
Retaining the top talent – This CSR also help the company to retain their employees
with them for a longer time. If the company plan the CSR for their employees like the SME UHT
company take care of the employees by motivating them, boost their moral, providing the best
benefits to employees, it will increase the productivity of the UTH milk in the china market.
Talented employees will also take of the social and ethical issue regarding the products. They
will make their strategy and plan in a way that will give the best milk for the children at low cost
and also increase the sale of the UTH milk in the Chinese market that will help the SME UHT
company to gain more profit (Ethics in Corporate Social Responsibility,2019).
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CSR gives the opportunities to all the employees of the SME UHT organisation toward to
contribute the society, environment and country. CSR of the SME UHT company improve the
condition of the society. As social responsibilities mostly clashes with ethical responsibilities.
CSR of the SME UHT company will be responsible for the damaging and health and care of the
children by providing good and healthy milk to the Chinese market. If the children get ill and
their health get unbalanced it will create the social issue and because of this customers can clam
on the SME UHT company for their UTH milk product that will be ethical issue for the company
that will damage the brand name of the SME UHT company internationally (What Are the Issues
of Social Responsibility & Ethical Behavior,2019).
Significance of the culture within various activities
It is very essential for the SME UHT company before launching the UTH milk products
in the Chinese market to understand the cultural distinctions between the different cultures.
Selling the same kind of the products in the Chinese market very important to understand the
cultural background of the China market because these cultural background influence the
different activities of the SME UHT in launching the UTH milk product in the China.
Every country have its own different culture, personality and attitude of the people. This
culture influence the different activity of the SME UHT organisation. As the company is UK
based SME where have different culture of the country and different activities has to to follow
according to them. Chinese market have different culture that will impact the all the activity of
the SME UHTcompany as human resource, marketing, production as accordance with the
cultural background of the country (Leung and et.al., 2015). For producing and launching the
UTH milk product in the market company have to consider the culture, like people's choice and
buying behaviour and willingness to pay. As china is developing country there is scope for the
SME UHTcompany. Company should have the production and packaging in a way that attract
the children because it is specially for the children and their parents as well.
This culture also affect the marketing activity of the SME UHT company in the Chinese
market. Buying behaviour of the customers, their local language affect the marketing. SME
UHTcompany have to make their marketing plan and promotion in a way that will attract the
customers (Importance of Understanding Culture in International Business,2019). Like if the
people of the china do prefer to buy online so the company should make plan for providing this
UTH milk product through online as well as in the local market. If the people are not able to pay
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more for the Milk product company have to cut off the cost of the milk product that will give the
best value for the products.
Culture of the china also affect the leading activity of the SME UHT organisation, as the
people of the china only prefer to talk in their local language so it may create the communication
issue in the organisation and because of this the leadership is also be affected. Leader may have
the problem to lead and talk with the employees and guide them and clarify the goal and
objective of the SME UHT company in the Chinese market. This will affect the overall profit of
the SME UHT company and the objective of the company will not be achieved in the Chinese
market (Hennart and Larimo, 2017).
This culture of the china will also affect the Human resource management' of the SME
UHT company. For operating and launching the UTH milk product in the china company have to
hire local employee in the company, whose have the understanding and better knowledge of the
local marketplace and culture and people. According to them they have to apply the different
recruitment and selection methods, and the have to provide the different training and
development services that will increase the moral of the employees and motivate them to work
effectively in the market, if there is set working day by their government SME UHT company
have to follow these rules and norms of the Chinese government and provide the wages and
different culture in the organisation as well like role or person culture.
For example when in meeting with a businessman in china , foreigners show the respect
and sincerity by handshaking and exchanging the cards. When Chinese meeting with other they
do not look straight in the eyes but lower their eyes, they refer it as a sign of respect and defence.
Internationalisation methods
To enter into the Chinese market or to internationalisation there are various channels and
ways through which SME UHT organisation can also be use to enter in the international
marketplace. The internet, exporting, licensing, international agents, international distributors,
joint ventures, overseas and many more ways which can help the SME UHTto expand and
launch its new UTH milk in the Chinese market.
Exporting – There are the direct and indirect approaches to exporting the products to
other nation. SME UHT company can also export the UTH milk to other nations and china
directly and expand it business globally. For this it can do direct exporting which straightforward
and gives greater control over the brand and operations overseas. Or SME UHT can also employ
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a agency who will sale its product in the Chinese market it comes in indirect exporting and that
agency will handle all the operations on the behalf of the SME UHT(Ways to Export
Your routes to new international markets,2013).
Joint Ventures – Organization can also set up a new company in the global market with
the help of the other company which will help the company to expand its business in the Chinese
market. In this other company have the share and proportion of the business profit. Many
company set up a joint venture to access the new technology and management skills, to gain the
entry in the global market and can access the distribution channels, manufacturing and R & D are
the most common forms of the joint ventures.
Franchise – Franchise is the rapid market expansion. It works well to enter into the new
global market. As company have the unique productions and have strong brand image to
producing milk for the children. This will help the organisation to easy recognisance of the brand
name in the new marketplace and also creating the new competitive in future by franchising.
International agents – Organization can hire the agents for the marketing of their
product in the Chinese market. Agents could be individual or the organisation that sign the
contract with the company on the behalf of the particular country. The agents will take the
responsibilities and ownership of the products, and also more commonly take the commission on
the sold products (Masum and Fernandez, 2018).
SME UHT can also be use this exporting to operate its business in the Chinese market
and launch their UTH milk product for the children in the china market. In this way SME UHT
company do not have the burden of the investing more and arranging the capital to producing
milk and launching in the Chinese market. exporting will be very beneficial for the SME UHT
company as it will get the support of the company as well. As the name indicate SME UHTand
other company can jointly start new firm and produce the UTH milk product in the China
market. In this profit is to be shared equally by both the companies and also invest equally in the
market. So this is might be the best way to enter in the Chinese market by the SME UHT
company and to produce the UTH milk.
CONCLUSION
This report has summarised that background of industry by relevant figures. It can be
concluded that utilizing the Pestle analysis for determining the business drivers during entering
into selected market for business expansions. It can be discussed that different trade barriers such
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as tariff and quotas, ethical issues, cross cultural and legal issues in selected country.
Furthermore, report has completed that importance of corporate social responsibility in operating
in internationally. It can be concluded that significance of the culture within various activities
while expanding the business in selected nation. It can be discussed that internationalisation
methods such as exporting, joint venture and other utilised by selected small-medium company.
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