Maple Field Milk: Entering the Chinese Market - A Business Report

This report analyzes the international expansion strategy of Maple Field Milk, a UK-based SME, into the Chinese market with its UHT milk product. It begins with an introduction to international marketing and the context of the Chinese dairy market, highlighting the business drivers for expansion, including an analysis using Porter's Five Forces model. The report then delves into trade barriers, including regulations and ethical issues, and the company's approach to social responsibility. Furthermore, it considers cultural preferences and the competitive landscape in China. Finally, the report discusses the expansion methods the company may choose, providing a comprehensive overview of the challenges and opportunities associated with entering the Chinese market.

International
Business

Table of Contents
(1)INTRODUCTION.......................................................................................................................3
(2) Business Drivers behind the company's Expansion into China.................................................3
(3) Trade Barriers ............................................................................................................................5
(4) Ethical and Social issues to be considered by the Maple Field Milk. .......................................7
(5) Cultural preferences to be considered by the business..............................................................8
(6) Expansion methods to be chosen by company. .........................................................................9
(7) CONCLUSION........................................................................................................................12
(8) REFERENCES.........................................................................................................................13

(1)INTRODUCTION
International marketing can be defined as the marketing which has been done on the global level.
This type of marketing is created by various multinational company on the global level. Present
study will focus on Maple field milk which is a high profile SME operating in United Kingdom.
The company is going to extend its business in China with their product UHT milk for the
children aged between 3-11 years. UK dairy sales figures have shown that the sector increased in
value by 4.5% to £10.7bn in the 52 weeks ending 31 December 2017. Fresh milk sales reached a
value of £3.28bn, 4% more than a year earlier(Armstrong and et.al., 2015).
China is becoming the most dynamic sector in the global dairy market and the whole
industry has gradually shifted from scale growth to quality upgrading. The total revenue of the
dairy industry of 2017 is 359.041 billion yuan with an increase of 7.85 percent. Report will lay
focus on the business drivers behind Maple fields expansion. It will also show the trade barriers
that company can face while expanding. Study focuses on cultural and ethical issue that needs to
be considered by firm while growing its business.
(2) Business Drivers behind the company's Expansion into China.
Porter's five forces model
Here porter's five forces model will be done to analyse competition of the Maple field company.
 Threat of New Entrants

Threat of new entrants are very high as small company like maple field which is newly launched
brand. Because company itself is a new company which is going to launch in market of China.
As the company come up with an innovative idea of UHT milk which is to be launched in China.
Therefore, company going to face threat from local companies of China.
 Bargaining Power of Suppliers
As the company maple field is dealing in Dairy products with a range of UHT milk of UK.
Maple field need to expand their distribution from UK to China. The company being expanding
to China make new suppliers attract by their demand of UHT milk. So, the bargaining power of
suppliers are relatively less. Because company has different suppliers in choice and they have
power of negotiation while dealing with suppliers(Vellas, 2016).
 Bargaining Power of Buyers
Bargaining Power of Buyers are very high because company maple field is entering into Chinese
market for which they are facing numerous competition with existing companies of China.
Customers which are satisfied with existing companies like mengniu dairy which will not shift
for new company. For such situations consumers have high bargaining power.
 Threat from Substitute Products
The threat of substitute is very high because maple field company serves only UHT milk. For
which is easily replaced by regular milk people of China consumes daily. Any local shop will
make available them regular milk. Therefore, UHT milk is having high threat from regular milk.
So, the threat of substitute products is very high.
 Rivalry among the existing players
The company Maple field is facing competition from several rivalries companies like Mengniu
diary. The Maple field will bear a high threat from other companies prevailing in the same
industry. As the company is newly established in the market of China. Thus, they will face
competition from existing local companies.
Key business drivers
 Infrastructure
Business like maple field who is expanding their distribution in new market China. Need an
infrastructure for developing and expanding their UTH milk products. The Company need space
for warehousing, shops, some retail outlets in china to attain their distribution target.

 People and operations
Maple field need to recruit people for distribution of UTH milk. Also, they need guards for
warehousing and storekeeper to operate daily function. Sales and marketing executive also hired
by company for generate awareness among public of China. They need to recruit people from
China for successful operation and functioning of the company Maple field.
 Strategy
The strategy being followed by maple field is expanding into new market in new market. UTH
milk is launched by company in China as they are trading in UK. So, maple field need to
accelerate their growth by research of demand and target customer base. Also, company need to
aware of their competitors in China(Eteokleous and et.al., 2016).
(3) Trade Barriers
The Following are some of the Trade barriers that 'Maple Field Milk' have to face while entering
into Chinese market.
1. Regulations- The Chinese government is mainly concerned with the health and safety of
Dairy products after the occurrence milk scandal in China in 2008. General
Administration of Quality Supervision and Quarantine (AQSIQ) and China Food and
Drug Administration (CFDA), established in 2013 are responsible in regulating and
implementing the laws for food and dairy products in China by the foreign countries.
Maple Field Milk will have to resolve the web of different regulations and try to find out
different bodies that implement these policies and regulations. Regulations are based on
the quality of milk that ensures to meet the food safety and quality objectives of the
products. Maple Field Milk will have to meet the quality standards being implemented by
these bodies for its milk products, so as to survive and acquire growth in Chinese market.
2. Ethical Issues- The main issue of the Chinese market is the increase of Labour disputes
rate for about 91% in the past few years. Maple Milk Field will have to face this issue as
in order to initiate its establishment in China, the company will require local workforce
and employees. Second is the issue of “corruption” that is increasing in China in recent
times. Most importantly Chinese government holds about 76% of total assets of the
country and allowing only a quarter of assets to the people. Maple Field Milk will have to
negotiate with the state and this may slow down the pace of the company performance.

Most of the Chinese youth are concerned with various environmental issues and carbon
footprints by a company. They are on the hold of their statement that says that they will
continue to stick to their old brands on the contrary if the company reduces its carbon
footprint. So the Maple Field Milk will have to consider all the issues and find out an
optimistic solution to them.
3. Cross cultural/ Social preference to taste- Most of the Chinese population, especially
children and youth prefers to have flavoured milk for their milk consumption. People
from Beijing prefer flavoured milk with high intensity of thickness and sweetness,
whereas people from Chengdu preferred with medium intensity of sourness and
sweetness . Thus Maple Field Milk will have to manufacture its products according to the
different tastes of the Chinese people in different regions(Morgan and et.al., 2018).
4. Competitors- Competitions to be faced by the Maple Field Milk in Chinese market
would be at greater extent. Modern Dairy which is an Chinese domestic firm deals in
dairy farming and milk production. Modern dairy has developed itself as largest dairy
farming along with high-quality milk raw milk supplier and a quality milk processor in
China. The other competitor is Yili Group which is also an Chinese milk industry that
deals in Dairy products. Yili Group has been ranked as the NO.1 Milk industry in Asia.
Other competitors consists of Nestle Hulunbuir Ltd. that has been selling Dairy products
in China. Thus Maple Filed Milk will have to identify these competitor's strategies and
accordingly plan out its activities, considering the various threats from them.
5. Possible Consequences on ignorance of these Barriers by Maple Field Milk- On
ignoring the regulations by the government Maple Field Milk will not be able to establish
its business in the Chinese market on the basis of political factors. On ignoring the culture
and preference of the people in China, Maple Field Milk will not be able to sell its
products and create he customer base in the market and this will turn in loss of revenue
by the company. On ignorance of the competitors, Maple Field Milk will not be able to
acquire more market share in the market and unable to have an competitive advantage as
well. Thus Maple Field Milk company will face many consequences on ignoring the
above trade barriers and factors that impact on business.

6. Business uncertainties and opportunities created by the trade policies of the national
government of China- The following are the uncertainties and opportunities created by
the trade policy of Chinese government:
Policies toward Foreign Direct investment- Chine has been relying on the Foreign Direct
Investment in order to develop and make a growth in its economy. The main motive behind this
policy is to gain an technological exchange between the different investing firms from other
countries. The government of China encourages FDI in the country to greater extent, thus it
serves as an great opportunity for Maple field Milk to establish its business and enter into the
Chinese markets with ease(Gillespie and Riddle, 2015).
Ownership Restrictions- Chinese government believes that FDI must lead to the economic
development of the country and also insist the technology transfer as well. The government
makes a mandatory regulation for the foreign companies to initiate a joint-venture with the local
Chinese firm, in order to acquire control over the Foreign company and its activities. This serves
as an uncertainty and drawback for the Maple Field Milk of giving its control and permitting the
Chinese firms to interfere in its business activities.
(4) Ethical and Social issues to be considered by the Maple Field Milk.
Social responsibility has been of significant with the companies over the last few years.
Whether its a responsibility of helping the environment, or trying to create employment
opportunities or concerns regarding the consumers health and their satisfaction, CSR is being
carried out by many companies in their business activities. There are many reasons as why the
firms adopt CSR and why it is important for International business. Improving the company Brand- Being socially responsible will empower Maple Field
Milk to build and creates its brand. Public image and perception of a company is
important to gain customer and shareholder's confidence in the company's brand. Also,
by being involved actively in the community or society and engaged with the customer,
the employees are indirectly doing the marketing process of Maple Field Milk. Engaging customers- Building better relationships with he customers will result in social
responsibility and accordingly create impact on their buying decisions. Also, some
customers are willing to pay m,ore if they know that a portion of profit is going to a
worthy cause. This nature of customers will automatically boosts the sales of Maple Field

Milk and expand its growth in international markets. As a result having a good
relationships with customers will increase the sales revenue and help in maximising
profits of Maple Field Milk and also create a strong customer base as well. Retain Top Talent- CSR towards the employees such creating better workplace for them
and initiating different benefits can boost their morale and make hem more productive for
the company. This practice of Maple Field Milk will not only engage the existing
employees but also hunt some extra talented fellows for the organization. Also knowing
that the products are also helping with the social cause can create a sense of pride for the
employees and make them engaged in the company for longer duration. All these factors
will help Maple Field Milk to establish skilled workforce in its organization and result in
more efficient performance of its business activities globally(Mathews and et.al., 2016).
 Competitive advantage- Apart all the benefits, CSR will provide most important benefit
of gaining competitive advantage to Maple Field Milk from the other companies in same
industry. CSR creates a good brand image of the company in the minds of customers as
well as government, hence Maple Field Milk will be able to beat its competitors through
its goodwill, customer base and a team of skilled employees and also through political
advantage of the country as well.
Apart from all the above reasons there are many benefits of CSR such as-
 CSR balances corporate power with responsibility.
 Discourages government regulations.
 Promotes long term profits for the business.
 Improves business value and reputation.
 Promote Democracy and freedom to Maple Field Milk in foreign countries.
(5) Cultural preferences to be considered by the business.
China is the most populated country in the world consisting population of 1.42 billion
and about 145 people living per square mile. The country is 3rd largest in size and 1st in terms of
population. With the rapid changes in the country's demography and rising incomes of people,
increased spendings and increasing open business environment has led the Chinese market easily
attracted by the western countries. The following are Cultural preferences to be considered by
Maple Field Milk in order to enter in Chinese market-

Identifying Market- With a population of more than 1.42 billion, China serves to be a big
market for trade related activities. The country also offers potential market opportunities for
foreign goods and services. The market is also divided according to the different types of
industries and respective areas Hence it is important for Maple Field Milk to identify its target
market for operation of the business and study different Demographics of the market and then
plan out the activities accordingly. People have different taste and preference as according to the
regions, for instance people from Beijing demand Flavoured Milk, so its important for Maple
Field Milk to conduct a research and identify the target group of markets and launch its products
accordingly(Wu and Naidoo, 2016).
Cultural Understanding- China expects the foreign countries to show sensitivity towards
Chinese Culture. Hierarchy plays an integral part of business culture in China with leaders and
managers being more strict than in many western countries. The leaders expect the obedience
without any question and respect them. The culture follows no cross question and agree the
leader's ideas with positivity and giving credit to them. Thus the Maple Field Milk has to use
ways such as giving gifts, accepting invitations, addressing people by their designation, and
showing genuine interests in the local culture in order to show obedience to China. This will
create positive image of Maple Field Milk in the eyes of Chinese Government and lift up all the
political and legal implications with ease. Chinese business culture also delays decision making
and take longer periods in making any decision with the foreign countries, It is very common for
Chinese business people to make decisions after passing the deadline, so the Maple Field Milk
will have to be prepared for these circumstances and not rush into the deal in order to achieve a
successful agreement with them. Western countries usually fail to conduct business or invest in
China on ignorance and neglecting this Chinese Business culture.
(6) Expansion methods to be chosen by company.
The following are the different Methods of Internationalization. These methods are classified
into three categories-
Export Based Methods for Internationalization- It is the traditional and the most common
method being used by the firms to deal in international business transactions. Here the firm
produces its products in the domestic markets but exports a proportion of its products to foreign

markets. Its growth can be reduced to the liberalisation of the trade that has taken globally due to
concept of free trade like European union, Association of south east Asian nations and Asia
Pacific Economic Corporation. There are two divisions of this method- Indirect exporting- In this method the firm carries physical distribution of goods and
services through intermediaries in foreign markets. This intermediaries are called export
houses that buys the product from the domestic firm and sell those in the foreign markets.
This house bring foreign buyers and domestic sellers in contact and guarantees the
payment on commission basis.
 Direct Exporting- Here the firm is directly involved in the trade and sells its products
directly to the foreign countries. It initiates the interaction between the buyer and seller
and also make long term commitments of trade and business in future(Yang, 2018).
Non Equity Based methods of Internationalization- In this method the firm either sells its
technology or conduct business in the form of contract involving patents, trademarks and
copyrights. This method takes place in the form of Licensing, Franchising and other contractual
agreement. Licensing- In this form a permission on license is granted by the firm to the foreign party
in order to use the technology through the contract of business. The buyer buys the right
to exploit technology and products from the seller, which is protected by the intellectual
property rights like patent, trademark or copyright. The buyer benefits from the seller’s
local knowledge and distribution channels. This is a low cost strategy for
internationalization of business.
 Franchising- Here the buyer(franchisee) purchases the right to undertake business
activity using the seller's (franchisor). Many firms adopt this method of
internationalisation as it establishes the firm's business in a very short time with a very
little investment and creates the global image through standard marketing approach. It
also helps the Franchisor to have control over its business and understand the local taste
preference of the customers.
Equity Based Methods for Internationalization- Here the firm directly invests in the foreign
markets that is termed as Foreign Direct Investments. This enables the firm an advantage of
having greatest level of control over its business and its technology. A firm uses different ways

of FDI as by acquiring an existing firm, creating joint ventures, merge or establish a foreign
operation of its own.
As the regulations being implemented in trade policies of China, it initiates a conclusion that a
foreign firm cannot directly enter in Chinese market with a total control over its activities and
implements half of the control by the state, so Maple Field Milk have different options listed
below. The following are the most suitable methods for Maple Field Milk to establish its
business in China-
1. Acquisition and establishment of its own firm- Maple Field Milk can acquire an existing
company in China to make its business emerge in the country. This technique will
benefit Maple Field Milk to create its immediate presence in the Chinese market and also
give the ready data and knowledge of the local market. The issues regarding the cultural,
legal and other political factors will be resolved leading to a steady functioning of the
business(Sapouna and et.al., 2018).
2. Joint Ventures- Joint venture is a method of creating a new firm by collaboration with an
existing firm. Joint venture will enable Maple Field Milk to take less risk and burden over
its establishment of new business in China. This will also fulfil the Chinese government
regulation of Technology exchange and also let the business being conducted in readily
acquired market and customers. Also, Maple Field Milk can use technology exchange
over readily available manpower and other resources.
3. Merging with a firm- Maple Field Milk can buy stake of the Chinese firm in the form of
equities and merge itself to conduct business activities. Here Maple Milk Field gets an
ready infrastructure along with the local market knowledge which it can use to extend its
business rapidly and improve its market share compared to its competitors(Watson and
et.al., 2018).
(7) CONCLUSION
From the above study it has been summarized that company while expanding has faced huge
amount of competition. Various factors like change in rules and policies by Chinese government
has affected their growth. Also, the firm has been involved in analysing the taste and preference
of Chinese people which has increased the sales of UHT milk. Firm has collaborated with other

organization so that they can reach out large range of consumers and grow their business. It has
assisted firm in growing.