London Dairies: Analysis of Chinese Market Entry and Expansion

This report provides an executive summary and detailed analysis of London Dairies' potential expansion into the Chinese market, focusing on its UHT milk business. It explores key business drivers, utilizing a PESTLE analysis to assess political, economic, social, technological, legal, and environmental factors impacting market entry. The report identifies significant trade barriers, including tariffs, subsidies, exchange controls, and anti-dumping duties. Ethical and social issues, such as corporate social responsibility, pricing, product expiry, transparency, and hygiene, are discussed to ensure responsible business practices. Furthermore, the report considers cultural preferences and their influence on business strategies. Finally, the report explores various expansion methods the company could employ to successfully establish itself in the Chinese market, concluding with recommendations for a strategic and ethical approach to market entry and sustained growth. The report is intended to help London Dairies to understand the challenges and opportunities in the Chinese market.

INTERNATIONAL
BUSINES

EXECUTIVE SUMMARY
As per the report has covered study of London Dairies Company who are selling UHT Milk
business. this report has explain the barriers that can impact company and bring the Chinese
market and also cover the pestle analysis To identify the factors that can impact the business to
take entry. It also has provided ethical and social issues to be considered for the company to
create good image in society and also the cultural performance to be considered by the company.
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Table of contents
EXECUTIVE SUMMARY.............................................................................................................3
INTRODUCTION...........................................................................................................................4
Business drivers behind company’s expansion into the Chinese....................................................5
Trade Barriers..................................................................................................................................7
Ethical & Social issues................................................................................................................8
Cultural preference......................................................................................................................9
Expansion methods to be chosen by the company....................................................................10
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16
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INTRODUCTION
International business can be defined as business organization that operates in
international market that is operating in markets outside one’s home country. In this report
expansion of a London based Dairy company in Chinese market will be discussed and different
aspects of the expansion will be discussed. Regarding milk industry of UK, it is eleventh largest
milk producer in world. In 2018 UK produced 15.0 billion liters of milk and this is highest figure
of milk produced annually since 1990. In context of dairy industry UK have negative trade
balance in cheese and butter, but in terms of milk and cream it has positive trade balance.
However, in UK number of dairy cows has reduced but yield per cow have also increased and
this increase is around 94% since 1975, this has resulted in increase of total domestic production
of milk by 12% (Elise Uberoi, 2020). London Dairies is a company that was started in 1995 and
now company look forward to tap into Chinese market for their UHT milk product. Target
audience determined by the company is children aged from 3-11 years.
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Business drivers behind company’s expansion into the Chinese
Business drivers refer to factors and elements that affect business and contribute to its
success and failure.
Pestle Analysis
This is a framework that is used to analyse external environmental factors that affect
business and its growth and success of the organisation (Song, Sun and Jin, 2017). Expansion of
London Dairies Ltd requires company to analyse external environmental factors that are likely to
affect success of the company in China.
Political Factors- This is concerned with political and governmental forces that affect success of
business and expansion of business in China. In China this is a very important factor that can
affect success of business, this is because socialist Chinese government makes unsettling
changes for policies overnight and this has a very significant impact on businesses operating
within China. This means that concerned with decision-making and changes in policy political
environment of China is very unpredictable and this is a negative factor that can affect success of
business. This can also affect plans and strategies for long term that London Dairies develops.
Economic Factors- This is concerned with economic and monetary factors and their impact on
business and its success. In terms of economy Chinese economy is an emerging economy and is
also performing very high. This is a positive factor influencing success of business expansion in
Chinese market. Consumer purchasing power in China is increasing and this is a benefit for
London Dairies when it expands in Chinese market (Achinas and et.al., 2019). This is also one of
the very important opportunities for London Dairies in which they can get benefit from sound
economic condition and large size of Chinese market.
Social Factors- In context of social factor cultural values in China play very important role in
determination of social trends in China. This involves size of family, growth of population and in
China it is very important that culture is valued by businesses. Social values in China are kept in
line with cultural requirements. However, current wave of urbanisation is affecting social values
and behaviour of customers in China and in China internet based buying is likely to increase in
near future. Regarding expansion of London Dairies in China, it is very important to consider
that consumer behaviour in China is very different from UK.
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Technological Factors- This is concerned with technological development in China affecting
expansion and success of London Dairies in Chinese market. In China internet use is one of the
very important technological factor that can affect business. London Dairies should consider the
idea of internet purchase in China. However, regarding online payment there are very few stable
online payment methods and this is why it is very important to consider conventional methods of
payment associated with online purchase. However, along with online purchasing in China in-
store shopping is also important trend. Another China trade barrier is the self imposed exchange
rate control which can impact the London Dairies. the country has variety of foreign investment
restrictions and the level of foreign direct investment in Chinese companies is also restricted.
extra exchange duties that are imposed by the China itself can decrease the profits of USD milk
producer London Dairies.
Legal Factors- In China rules and regulations regarding food safety and standards are increasing
and government is placing strong emphasis on safety of food. This is why it is very important
that London Dairies’ UHT milk and its quality is according to new and enhanced food safety and
standards of China (Gheibi and et.al., 2018). This is very important for success of the
organisation in Chinese market. Along with this, trade related laws and regulations also affect
success of expansion of London Dairies in Chinese market.
Environmental Factors- Economic development of China has affected its natural environment
significantly and because of this China has become one of the highly polluted countries. In order
to reduce impact of industries on environment and revive environment Chinese government has
taken different initiatives. Regarding this, London Dairies will require to consider that its
practices are according to environmental standards of China. This is important for ensuring that
practices beyond standards do not negatively affect success of expansion of London Dairies in
Chinese market.
Trade Barriers
Trade barriers are those difficulties that London Dairies can experience while entering
into Chinese market. These are different imposed restrictions and fees that are used to
discourage trading in Chinese market. Trade barriers are mainly divided into two parts that are
known as Tariffs and non-tariffs.
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Tariff Barriers
This is a barrier for trade in which a tax or duty is imposed on a particular class of
imports and exports. Imposing these tax and duties on import and export of goods increases their
overall price and this is a way through which customers might become unable to purchase high
priced product (Liu and et.al., 2020). Product of London Dairies UHT milk requires being in an
affordable range that customers can buy it.
Subsidies as Trade barriers
This is one of the barrier for trade in China, in this barrier incentives are allowed to
domestic producers so that their overall cost can be reduced and this is done to benefit them from
reduced cost. In this policy China creates barrier for international businesses, as they will not be
able to compete with China on the basis of price of product.
Exchanges controls
China is investing with the yuan exchanges rates the dollar a barrier to the international trade is
created against the western countries rates. Since the China effectively props up the exchange
rates there can be a the grip and seeing prices have paid dependent on the currency exchange
rates. Another China trade barrier is the self imposed exchange rate control which can impact the
London Dairies. the country has variety of foreign investment restrictions and the level of
foreign direct investment in Chinese companies is also restricted. extra exchange duties that are
imposed by the China itself can decrease the profits of USD milk producer London Dairies.
Anti dumping duties
There are many antidumping duties in place currently against China. this is the tool that is
helpful to allowed safeguard against cheap imports that are danger to local industry an at aim at
imports. but it will not have any negative impact on the London Dairies uht milk business
because Uht missed business does not come under the antidumping duties which means that
China trade barrier it’s not that impassive in this category. In order to reduce impact of industries
on environment and revive environment Chinese government has taken different initiatives.
Regarding this, London Dairies will require to consider that its practices are according to
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environmental standards of China. This is important for ensuring that practices beyond standards
do not negatively affect success of expansion of London Dairies in Chinese market.
Ethical & Social issues
It is necessary for every business to work ethically and they should always understand and gave
important to the ethical and social issues otherwise it can have negative impact on their business
and ruin their goodwill. it can be possible through the social corporate responsibility an
company should follow some of the standards within their uht milk products.
Corporate social responsibility
London Dairies should give their contribution towards the society It can be possible Through the
social work And working toward the society. Company can give their contribution in this
society by helping the poor people in managing their food, providing the home to the homeless
people and providing treatment to the people who are not able to walk or having any kind of
disease. it will help them to create a would imagine market and they were able to take
competitive advantages.
Price & quantity
To run the business ethically it is necessary for the London Dairies To provide affordable price
and quantity to their customers. There are various company in the UK market selling UHT milk
in higher prices with the lower quality. It is necessary for the London Dairies to be effective
SME to provide market price product and quality.
Expiry dates
Milk product have a fixed expiry date after That Milk product get expired. I see companies in
UK should not use the expired milk product because it can be a dangerous for the health of small
kids. to be successful small company in the international market it is necessary for the London
Dairies to work ethically and do not sell expiry date products otherwise it can ruin their image.
Transparency
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Transparency with the customers is important for the companies and SME segments of the
United Kingdom. They should always give detail of the all product ingredients so customers can
aware that what kind of things and what are the process of creating the UHT Milk. It will clear
transparency That will help to satisfy the customer needs and London Dairies We’ll have to take
competitive advantages within the market where they are operating their business and show their
presence as the fastest growing SME.
Hygiene
It is necessary for the London Dairies to follow the hygiene practises at their units where they are
creating a UHT Milk businesses. If there is no proper hygiene facilities there than it can impact
the health of the small child which can be unethical practise by the company. it is important for
them to implement all the facilities that will make sure hygiene at the workplace and company
were able to provide a quality food and milk product to the customers and they will be satisfied
with the services they get.
Cultural preference
Cultural references affect the businesses mostly on the global level because every country have
their own cultural preferences, way of communication and their beliefs.
Chinese people are more strict about their culture and they follow all the cultural rules within
their country. If any business want to be successful then they have to adopt the culture of the
Chinese people otherwise there is no chance to be successful. here are some of the things that
need to be take into the account by the London Dairies if they want to be successful in their
business-
Language is the biggest barrier for the organisation and to overcome from the language barrier it
is necessary for the community to adopt employees from the local market who can easily
communicate with the client and understand he needs of customers.
Changes in the product according to the Chinese culture is necessary, there is always and small
things that create huge differences so company could follow the Chinese culture and adopt had
effectively.
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Chinese people have different way of working that need to be adopted by the company so they
can be expectable by the people.
Expansion methods to be chosen by the company
There are various international expansion strategies that can be used by the London Dairies.
There are way thirds of expansion an international expansion strategies that can be used by the
company to expand their business in Chinese markets And they are the most valuable
approaches that can be used by the company.
Franchising
the franchisor is the original business who sell their rights to the other companies or businessman
to use their idea and name. it can be effective strategy for the London Dairies To expand their
business in China. they can give franchisee to the other businessman who are living in the China
they will give some share of the profit with the real owner for using their name and brand.
Direct exporting
Direct exporting is the globalisation strategy that is quite popular and easy to use. Exporter
directly send their goods and product to the foreign buyers through the agent who are already in
the foreign country. The agent can be a friend, family member or anyone who are already living.
they communicate with the manufacturers or suppliers in the country and add them for import
the product from them. London Dairies can UHT milk In Chinese country if they are having
some Contacts in Chinese market.
Licencing
Licencing is the legal way to enter in the Chinese market for the London Dairies. They can take
licence from the Chinese government too start their own business in the China 2 selling UHT
Milk for the children’s . Licencing is the legal way but there are some issues like it is necessary
for the company to renew the licence again and again which can be a time wasting process for
the company.
Joint venture
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Joint venture is the one of the best recommended strategy where two organisations together take
entry in the country by putting equal amount of capital in the business. both organisations sign
agreement for the partnership and work together for the common goals. it is effective strategy
That can be used by the London Dairies to take entry in the Chinese market and they were able
to exit if they failed. it is becausr both the company will equally share the profit and losses which
means that if London Dairies do the partnership with someone than they do not have to suffer
from huge losses.
ANSOFF Matrix
ANSOFF metrics one of the effective model that is helpful for the organisation to provide a
effective strategy that can help them to take competitive advantages. It has covered four
strategies market penetration, product development, market development and diversification.
every strategy have some strength and weakness.
Market penetration
Market penetration is strategy in which company increase their sales of the existing product in
the existing market. it means that London Dairies Try to increase their sales of existing product
in the market where they are operating their business already.
Strength- people are already aware of product and popularity which means that company can
easily sell their product in the market more through the advertisement an other strategies. they
will totally focus on this single product to increase their profitability so they can take competitive
advantages within the market where they are operating their business.
Weakness- in this strategy is that London Dairies well totally focused on single product which
means that sales of other product will decrease.
Product development
Product development is the strategy in which company focused to introducing new product in the
market where they are operating their business already. London Dairies is already famous in
United Kingdom and people are aware of their product and services.
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Strength- it will be less risky strategy because London Dairies Is already famous in United
Kingdom so people will easily accept the new product because they are aware of the brand. Due
to the trust on the brand people will easily accept the product that is introduced by the London
Dairies and company will easily take competitive advantages within the market where they are
already operating their business.
Weakness On the other side product development can be ineffective for the London Dairies if
the new product will not able to satisfy the customers needs. It will ruin the companies image
within the market and it will be necessary for the company to be aware of customers need so they
can satisfy them with a new product and take competitive advantages.
Market development
Market development is the another strategy that has total focus on entering the new market by
using the existing product.
Strength- This can be a effective strategy for the London Dairies Expand their business in China
because They can expand their business with the product that already popular which is UHT
Milk product. People in China like make their child drink the UHT Milk so there are higher
chances for the company to be successful in the Chinese market because They will Able to fulfil
the needs of the market with the existing product and the new market and take competitive
advantages.
Weakness of this strategy is that every country have their own culture language and many other
barriers that can impact the business and people get denied to accept products from the company.
it is necessary for the companies to change according to the culture an needs of the particular
country where they are entering so they can use this strategy in most effective mand r.
Diversification
Diversification is this strategy an one of the most riskiest for the company because in this
strategy companies entering the new market with the new product.
Strength- there are higher chances for the company to get failed in this strategy and they can
suffer from huge losses. It is necessary for the company to be aware of the market needs and
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there should also create a product according to the customers needs so they can satisfy and take
competitive advantages. if the company is successful in this strategy then they can earn huge
profitability and cover the large market shares.
Weakness- London Dairies should not use this strategy because it is most risky strategy but that
is 1 way to try this strategy. Company can entering the market through the joint venture market
entry strategy so there will be a less chances to get failed and if they will get failed then company
will not need to suffer from the huge losses.
Porters Generic Strategies
There are total 4 strategies that are introduced by the Porter that is helpful in providing
competitive advantages to the company. uht milk producer company London Dairies Can use it
for entering the new Chinese market And company can be successful.
Cost effective strategy
Cost effective strategy is used for gaining the competitive advantages within the market.
Company try to sell more quantity as compared to the prices and prices are decreased by the
company to increase the volume of sales. London Dairies can also use the cost effective strategy
to take competitive advantages an overtake the other competitors in China.
Stringth - they can provide their UHT Milk in lower prices that will attract customers and they
will able to increase the volume of sales and take competitive advantages within the new market
and achieve success. they were able to increase their market shares which is the main motive of
this strategy and also increase the probability.
Weakness- minority process are fixed and it’s not that easy for the companies to decrease price
of products like milk
Differentiation strategy
Product differentiation strategy is another best strategy that can be used by the London Dairies
To be successful in the Chinese market. in this strategy companies try to improve this product
and services and try to create some differences in their product as compared to the competitors
products and services. London Dairies And also create some differences in their product like
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attractive labelling, description of the product ingredients and more details that provider
effective information to the customers can be helpful for complete two add differentiation. it will
make the complete different from the others company available to pay competitive advantages in
the new market and they were able to show their presence in the Chinese market as well. it will
improve their productivity and they will able to gain loyalty of the customers I’m still the others
market shares. On the other side this strategy can be ineffective for the London Dairies because
it will be hard for the London Dairies to create difference in UHT milk because almost everyone
use the similar method.
Strength- Provide competitive advantages And satisfy customer needs
Weakness- Require lots of research and information that takes time and money both.
focused strategy
companies use focus strategy to give their total focus toward the nature markets. and by
understanding the dynamics of market an unique needs of customers within it. they try to create a
unique low cost I product that can be satisfied customer needs. Because they serve customers in
the market uniquely and they tend to build a strong loyalty with their customers so they can
repeat their buying.
Strength- London Dairies can also use this focus strategies too target the UHT Milk bar
customers by understanding their unique needs.
Weakness- ineffective mostly
Recommendation
From the above strategy Product differentiation strategy can be useful for the London Dairies
Company. To use this strategy it is necessary for the company to bring some changes in their
products so they can show some uniqueness to their customers. It is not necessary that changes
can be only bring on the basis of taste but it can also be the packaging of the product and quality.
to attract the customers company can improve their packaging and make some difference from
the other sellers packaging.
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CONCLUSION
As per the report has been covered study of London Dairies Company who are selling UHT Milk
business. this report has been explain the barriers that can impact company and bring the Chinese
marke I Knox also cover the pestle analysis To identify the factors that can impact the business
to take entry. It also has been provided ethical and social issues to be considered for the company
to create good image in society and also the cultural performance to be considered by the
company. In the end of this report has been provided expansion methods including the strategies
that can be used to take entry in China market.
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REFERENCES
Books and Journals
Song, J., Sun, Y. and Jin, L., 2017. PESTEL analysis of the development of the waste-to-energy
incineration industry in China. Renewable and Sustainable Energy Reviews. 80. pp.276-289.
Achinas, S and et.al., 2019. A PESTLE analysis of biofuels energy industry in
Europe. Sustainability. 11(21). p.5981.
Gheibi, M and et.al., 2018. Controlling air pollution in a city: A perspective from SOAR‐
PESTLE analysis. Integrated environmental assessment and management. 14(4). pp.480-488.
Liu, L.J and et.al., 2020. Environmental and economic impacts of trade barriers: The example of
China–US trade friction. Resource and Energy Economics. 59. p.101144.
Online
Elise Uberoi. 2020. UK Dairy Industry Statistics. [Online]. Available Through: <
https://researchbriefings.files.parliament.uk/documents/SN02721/SN02721.pdf >.
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