International Business Report: UK SME UHT Milk Expansion into China

This report examines the internationalization strategy of a UK SME planning to expand its UHT milk operations into the Chinese market. It begins with an executive summary and an introduction, outlining the business drivers and objectives. The report employs a PESTEL analysis to assess political, economic, social, technological, environmental, and legal factors influencing the business. It then delves into trade barriers, including tariffs, subsidies, and embargoes, and analyzes the uncertainties and opportunities presented by the Chinese market. Ethical and social issues, along with cultural preferences in China, are also discussed, highlighting the impact of culture on business practices. Finally, the report details the firm's expansion methods, including internal expansion management, licensing arrangements, exporting goods, and mergers and acquisitions, concluding with a summary of findings and recommendations. The report provides a comprehensive overview of the challenges and opportunities for businesses seeking to enter the Chinese market, offering valuable insights for strategic decision-making.

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Module Title: International Business
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Executive Summary
Internationalization refers to the process through which firms expand their operations beyond
their native market to complement their domestic sales. Traditionally, businesses addressed
overseas markets via a procedure-oriented lens. Internationalization emerges in interactive
environments after a good matrix of businesses consists of both internal and overseas companies
pursuing win-win relationships. This study details the internationalization strategy of a small
business established in the United States that is considering growing its UHT milk operation into
China's fast-rising markets. PESTEL studies have been performed initially, as previously stated.
As a consequence of this, it'd be able to ascertain critical business variables. The following step
presented many types of trade obstacles, including tariffs, subsidies, embargoes, and protection.
It'd draw attention to market difficulties and weaknesses created by the Chinese central
government's trade treaties. The ethical and social challenges that a UK SME must handle were
then highlighted, and the importance of corporate responsibility in the present circumstances,
specifically in the area of global trade, was highlighted. Organizations must take into account
cultural beliefs, as has been proved. It's been established that culture has a significant impact on
many foreign company operations in the Chinese market, such as time management, greetings
and titles, business cards, and dress code. Lastly, the firm's expansion strategy has been detailed,
including Internal Expansion Management, Licensing Arrangements, Exporting Goods, and
Mergers and Acquisitions.
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Table of Contents
Executive Summary.........................................................................................................................ii
Introduction......................................................................................................................................1
Business Drivers..............................................................................................................................2
PESTEL Analysis........................................................................................................................2
Trade Barriers..................................................................................................................................4
Different Trade Barriers..............................................................................................................4
Uncertainties and Opportunities..................................................................................................4
Uncertainties............................................................................................................................4
Opportunities...........................................................................................................................5
Ethical and Social Issues.................................................................................................................7
Cultural Preferences.........................................................................................................................9
First Contact.................................................................................................................................9
Time Management.......................................................................................................................9
Greetings and Titles.....................................................................................................................9
Gift Policy..................................................................................................................................10
Business Cards...........................................................................................................................10
Dress Code.................................................................................................................................10
Meetings Management...............................................................................................................10
Expansion Methods.......................................................................................................................11
Managing Expansion Internally.................................................................................................11
Licensing Arrangements............................................................................................................12
Exporting Goods........................................................................................................................12
Mergers and Acquisitions..........................................................................................................13
Conclusion.....................................................................................................................................14
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References......................................................................................................................................15
Figure 1: Different Expansion Methods........................................................................................11
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Introduction
To successfully expand a corporation into worldwide markets, it is necessary to have more than
simply specific plans and financial resources. When expanding internationally, a company must
consider a variety of factors, such as the culture of the target markets and the purchase behavior
of the customers in that area. From the perspective of a newly formed UK SME that wishes to
export its UHT milk to China, this analysis would depict the concern of broadening as a foreign
trader in the continuously evolving Chinese market, along with the business drivers that pushed
the company's entry into the specific locality, Trade Restrictions, which prove the managerial
concerns and perils created by the govt's trade treaties in the target market, moral and
environmental aspects, the cultural interests of the intended market showcasing the impact of
culture in different activities, and social responsibility factors.
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Business Drivers
PESTEL Analysis
Political Factors
Policies that influence not just the dairy industry but also cattle breeding would have an impact
on this particular dairy. In this Dairy's favor, federal policies play a significant impact. Because
of the rules and subsidies put in place by the government, farmers are encouraged to raise cattle
or raise farm animals for their meat and dairy (Khakhar and Rammal, 2019). Fresh milk is
exempt from sales tax because it falls under the category of agricultural items. This favors both
buyers and sellers.
Economic Factors
Milk is a commodity that most people purchase, regardless of price. A rise in the price of milk
and dairy products may lower production but not completely cease it (Taoka and Beeman, 2021).
Price reductions would increase sales, as even more people would require the product and have
discretionary income. Because milk, as well as milk-based products, are perishable, the price
charged ought to be appropriate. A sudden price decline may induce strong competition in the
marketplace, resulting in long-term negative effects for all parties involved.
Social Factors
This dairy has a company image. Those who use it say it makes quality products thus enabling
them to lead better lives. To remain competitive, such customers' beliefs must always be met. To
compete effectively, one must stay current with demographic shifts. It is crucial to introduce
fresh products and items that meet customer needs (Morrison, 2010). This dairy may boost its
revenue while delighting customers by improving its abilities to enhance prepackaged foodstuffs.
To meet increasing consumer needs for low-fat, lactose-free, and certain other healthier
alternatives, the company must prepare to grow in such categories.
Technological Factors
This dairy may use technology to streamline procedures. It can also ensure sensible technological
installation and synchronization of the firm's multiple IT divisions (Griffin and Pustay, 2020).
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The organization can also use the cloud storage service to retain information and store records of
current activity. IOT can also be used to identify and GPS monitor all their tankers, check
warehouse temps and deploy transportation. Statistics can also be used to identify evolving
trends and adapt offerings to shifting consumer preferences.
Environmental Factors
This Dairy may work on many initiatives and social issues to improve the environment where it
operates. The current trend for organic foods lends a favorable attitude toward enterprises that
take such initiatives (Czinkota and Ronkainen, 2020). This can also assist this dairy to build a
marketplace where growers may sell their goods at fair pricing. It can also conduct green steps to
prevent contamination and conserve the environment. Before making a good impact, the
organization must first take action in the notion of sustainable development. The business would
only succeed through creativity and perseverance.
Legal Factors
This Dairy is constrained by law. The organization must adhere to numerous legal laws. This
could involve labor rules, payroll legislation, personnel perks, taxes, and the quality of products.
These are all set by various government agencies and must be followed to keep service. A panel
of professionals must constantly monitor modifications to enforce consistency (Peng and Meyer,
2019). The laws relating to safety and health at work, quality of the products, and cleanliness
must be adhered to. Out of all of this, the corporation must ensure that this does not trespass on
the intellectual property laws of any individual or an organization when developing new
products.
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Trade Barriers
Different Trade Barriers
The most common sort of trade barrier is a tariff, which is an import tax. Tariffs raise the prices
of imported goods relative to domestically sourced commodities. When this UHT milk is
exchanged between these two countries, it generally comes at a price (Wild and Wild, 2018).
These taxes would help governments earn income and boost the cost of imported goods,
allowing domestic enterprises to compete. Tariffs will thus be seen as a hindrance to trade since
they drive up the cost of goods for everyone, thus discouraging customers and limiting trade. The
government's support of certain home companies is another major trade barrier. Manufacturing
those goods is cheaper than on international markets because of government subsidies. This
results in lower domestic pricing. Tariffs and subsidies can raise import prices, reducing import
volume. It would so face subsidies if it entered the Chinese market with UHT milk (Leung,
2018). Several governments grant financial support to specific industries, according to the
country's interests and geopolitics. Business sectors including cigarettes, steel, and liquor have
all benefited from government subsidies. Politicians in various countries can tolerate different
levels of subsidization.
An embargo is a blockade that inhibits a country's capacity to exchange commodities.
Embargoes are still utilized, but only in times of war (Hill, 2019). Thus, an embargo can prevent
the majority country's population from obtaining UHT milk. Businesses could be barred from
dealing or financing in a country if China imposes one. The effects of global embargoes are
never trivial. Using government power allows a large market like China to cause more harm to a
shrinking economy like a target state than retribution would cause. To protect or strengthen
specific sectors or parts of an economy, trade barriers are frequently referred to as protectionist
barriers (Khakhar and Rammal, 2019). However, the costs to the economy of limiting commerce
almost always outweigh the benefits enjoyed by those protected. By reducing economic growth
and increasing costs, the Chinese market's protectionism attempt against this SME eventually
hurts the people it is meant to protect, rendering free trade more appealing.
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Uncertainties and Opportunities
Uncertainties
Offers Few Products
Additional commodities, especially high-end items, are now accessible to consumers because
of free trade agreements (Krugman, 2018). Trade restrictions have the inverse effect. Decreased
product choices due to increased import costs. As a result of these expenditures, small firms may
have less inventory available.
Loss of Profit
Many businesses profit from foreign markets. The inability to export commodities might result in
sales and profit losses. Trade obstacles impact productivity expansion. For instance, high tariffs
prevent emerging economies from exporting products, limiting their capacity to grow and
diversify.
Increasing Monopoly Power
Free trade encourages international competition, forcing local businesses to maintain costs
affordably. Trade obstacles work against them. So companies can cost more since monopoly
strength and rivalry are reduced (Hofstede, et al., 2010). The lowering rivalry also causes
inflation, reducing consumers' buying capacity. Protectionism may also hamper creativity by
discouraging companies from investing in new technology.
Opportunities
The rise in Domestic Consumption
Imported commodities become more expensive as a result of customs duties. A tariff on
importation imposed by a government seeks to deter domestic consumers from buying foreign
goods. In this way, the demand for locally produced goods rises due to a decrease in the supply
of alternatives.
Local Job Growth
Adoption of locally produced goods rises in lockstep with the expansion of domestic economic
prosperity. Increased domestic production is required to keep up with the increased preference of
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consumers (Buckley and Casson, 2021). As a result, additional jobs will be generated.
Unemployment levels would fall and formerly jobless people would be able to make a living.
Increased National Income
Importing items or solutions might be taxed to increase profits. Importers pay duty straight to the
government's revenue department (Daniels, et al., 2015). Although tariffs are intended to restrict
imports, some commodities are vital. The state earns extra money by raising tariffs on these
commodities or charging commodities that were originally duty-free.
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Ethical and Social Issues
This is critically vital for a firm, particularly a small and medium-sized enterprise (SME) located
in the United Kingdom, that it operates in a way that exhibits ethical considerations and social
responsibilities while expanding its operations into overseas markets. Though it's not a
contractual mandate, it would be considered good corporate behavior for a company to consider
social and environmental challenges when making decisions (Carrigan, et al., 2019). As a result,
social responsibility and the highest standards of ethics are critical to the success of this
SME.CSR would convey to consumers that this UK SME is a company that is concerned with
broader societal concerns except those that influence its company profits, thereby increasing
brand awareness who hold the same views. As a result, operating ethically makes good business
sense (Hill, 2019). The advantages of corporate social responsibility speak out loud about how
vital this is and how this SEM must make more of an effort to include it into its company's
operations and culture. Some of the most obvious advantages of corporate social responsibility
are listed below:
Reputation Boost
This seems to be critical because customers consider a company's brand persona while selecting
to choose whether or not to purchase from them. It would take anything as easy as members of
staff spending one hour every week on charitable matters to demonstrate that this SME is a
responsible company for the well-being of others (Krugman, 2018). As a consequence,
these small and medium-sized enterprises (SMEs) would contribute to improving more favorable
to customers.
Higher Brand Identification
If this small business in the United Kingdom appears to be consistent with ethical business
methods, the word would go out about its efforts (Peng and Meyer, 2019). As a result, more
customers would become familiar with the brand, resulting in a rise in brand exposure for this
UHT milk business in its targeted Chinese marketplace.
Cost Savings
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Some modest modifications in support of sustainability and ethical business practices showing
concern for the society and its people in a considerable manner, including utilizing fewer
containers, may help to cut the business's overall manufacturing costs.
Competitive Advantage
By embracing CSR, this SME may separate from counterparts that compete together in the same
industry (Morrison, 2010). Thus, with a competitive edge over the nearest competition, this UK-
based UHT milk SME would be able to position itself as a company devoted to moving one level
beyond by addressing social and environmental considerations.
Improved Customer Involvement
If this SME adopts environmentally friendly materials, it must share them with the world. Thus,
it can broadcast it on its different social media platforms as well as channels and construct a tale
out of its strained endeavors (Daniels, et al., 2015). Additionally, it must also display its work to
local news outlets in the expectation it will offer the business some exposure. Consumers in the
Chinese market would embrace this and connect with the brand and activities ultimately.
Higher Staff Involvement
For client involvement, this firm likewise requires to guarantee that its personnel knows its very
own CSR strategies. It’s established that employees plan to collaborate more for a business that
has a favorable global perception than someone who does (Tang and Koveos, 2018). Moreover,
by proving that it is dedicated to topics like human and civil rights, it is far more able to impress
and keep the top prospects even in the foreign markets like the Chinese ones.
Additional Employee Perks
There seem to be several advantages for the personnel of this SME personnel when it accepts
CSR from the ethical considerations within the firm even (Richman, 2018). The workspace of
this SME will be a much more meaningful and beneficial place to live and work, and by bringing
up things like volunteerism, it would be able to support professional as well as personal growth.
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