International Business: Neal's Yard Dairy's China Expansion Analysis

This report provides a comprehensive analysis of Neal's Yard Dairy Limited's planned expansion into the Chinese market, focusing on the UHT milk sector for children aged 3-11. The introduction outlines the company's background as a London-based cheese retailer and its objectives for internationalization. The main body of the report delves into the business drivers behind the expansion, employing a PESTLE analysis to assess the political, economic, social, technological, environmental, and legal factors influencing the decision. It also examines potential trade barriers, including tariffs, exchange rate controls, subsidies, and voluntary export restraints, and discusses ethical and social considerations, such as consumer preferences and cultural nuances. Furthermore, the report explores the company's expansion methods and the importance of adapting to cultural preferences in the Chinese market. The conclusion summarizes the key findings and strategic recommendations for Neal's Yard Dairy's successful entry into the Chinese market.

International Business

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
a) Introduction.............................................................................................................................3
b) Business drivers behind company’s expansion into the given country..................................4
c) Trade Barriers.........................................................................................................................6
d) Ethical and social issues to be considered by the UK SME...................................................7
e) Cultural preferences to be Considered by the business...........................................................9
f) Expansion Methods to be chosen by company......................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
International business is defined as cross border business and commerce transactions
between companies or government. In order to engage in foreign business, it requires proper
understanding of legal requirements, rules, regulations of country where firm is going to start
business (Beamish, 2013). It refers trade of services, goods, capital, technology, knowledge
across borders at global or transnational level. There are two factors which need to be considered
for globalisation. The first is eliminating barriers for cross border trade and second is
technological change that in information processing, transportation and communication. The
given assignment is based on Neal's Yard Dairy Limited which was founded in 1979 by
Randolph Hodgson and Nick Saunders. It is London based small cheese retailer, milk producer
organisation. This report covers about background information of organisation along with drivers
consider for business expansion with help of PESTLE analysis. For expansion of business, trade
barriers may arise which need to be considered and ethical and social issues arise in firm. Also,
report covers preference of cultural and methods of expansion need by Neal's Yard Dairy.
MAIN BODY
a) Introduction
Neal's Yard Dairy Limited is considered as London artisanal that deals in cheese retailer
and known as London's foremost cheese store. It was established in 1979 and founded by
Randolph Hodgson and Nick Saunders as cheesemaker shop. There are 11-50 number of

employees working for this organisation. The first customer of Neal's Yard Dairy who purchased
cheese was Monty Python's John Cheese. This company sell 500 tonnes of cheese every year in
their shorts Gardens (Brohé, Eyre and Howarth, 2012). The registered office of Neal's Yard
Dairy is London, England, United Kingdom. It also deals in dairy products, edible oils, eggs and
fats for consumers. This is private limited company where there are 11 officers out of which 3
has resigned from organisation. Neal's Yard Dairy is improving their Irish and British Farmhouse
Cheese where they select and mature best cheese, selling them at delicious, protection of raw
milk cheese future, engagement of scientific and technical community and championing
farmhouse cheesemaker. They have various shops such as Covent Garden, Bermondsey and
Borough Market. It offers soft, hard, and various types of cheese made from sheep's, goat's,
cow's milk. It also serves different retail shops as well as restaurants in market of United
Kingdom. Neal's Yard Dairy work with 40 cheesemakers and visiting them on regular basis in
order to taste cheese and select best batches for selling and maturing. It has various subsidiaries
dealing in same products and goods.
Neal's Yard Dairy is planning to expand their UHT milk in Chines market for children
between 3-11 years of age. Their objective is to tap China market by 2020-21 in order to provide
high quality milk to children. UHT is also known as Ultra High Temperature Processing (UHT),
Ultra Pasteurization, Ultra Heat Treatment which is food processing technology that sterilize
liquid food mainly milk with help of heating above 135 degree Celsius that is 275 degree
feherent for killing spores in milk within 2 to 5 seconds (Clarke, Tamaschke and Liesch, 2013).
UHT is mainly used for milk production but can be used for cream, fruit juice, yogurt, soups,
honey, soy milk, stews. This concept was developed in 1960s and used in 1970s. This UHT milk
is very high in quality which provide protein, vitamins and fat to children which is necessary for
them. Though china has many production of milk but their quality is not as per set standard. The
main objective for expansion is to make reputation of UK business in china market in terms of
quality, transparency and reliability.
b) Business drivers behind company’s expansion into the given country
In order to expand company in foreign market, it is very essential for firm to do proper
analysis and research for expansion. Whenever there is thought in mind of business for
internationalisation then various factors need to be considered. This elements plays an effective
role in growth and success of enterprise in foreign market if proper research and analysis is done.

Here, organisation is planning to expand their business in Chinese market, so proper analysis is
done with help of PESTLE. As china is regarded as most attractive location for performing their
business and getting success and growth in competitive market. There are main three reasons for
which foreign investors seek into China market such as size of market, growth of potential and
low cost of labour. Here, PESTLE is explained in context of China that is mentioned below:
PESTLE Analysis
It is defined as framework of macro environmental factors that is used in environmental
scanning elements of strategic management (Cuervo-Cazurra, 2016). This is part of external
analysis which provide market research for analysing various components. This is tool that is
used for monitoring and analysing macro environmental factors which can impact performance
of organisation. Such type of tool is used especially when company enters into foreign market or
start new business. There are six elements of PESTLE analysis that is mentioned below:
Political Factors- The intervenes of political in business and impact it is called political
factors. This includes government law, interest rate, inflation rate and others. Political factors has
impact China in terms of government regulations and legal issues. Neal's Yard Dairy Limited
need to understand both formal as well as informal rules which can impact country. As this is
unsettled and impact country and their business suddenly. Neal's Yard Dairy Limited should
study about policies of government regarding milk production, supplying and other before
expanding business in China market (PEST Analysis of China, 2019).
Economic Factors- It means impact of economic on performance of business and its
activities. It includes gross domestic product, interest rate, inflation and more. The dairy
industry has become more important because of rapidly increasing demand of consumer and
support from government. Neal's Yard Dairy Limited can expand business in China as it is
providing high quality UHT milk to children aged between 3-11. Though there are many
companies dealing in milk production but their quality is not up to the level. It is great
opportunity for UK market to enter into Chinese by providing high quality products and fulfilling
needs and demand.
Social Factors- The social value, belief, traditions and more are part of social factors.
This includes taste, preference, religious and value of consumers for buying of goods and
services. This factors plays an important role in demographic change constantly (Dunning,
2013). For example, there are large number of population living in China who prefer high quality

milk in which UK market has high opportunity to serve them in better manner. Also with the
fluctuation in age and population growth, need and demand of consumer changes frequently.
They can modify cultural values and social trends. China is collectivism culture where lifestyle,
religious, education and emigration of each and every people surviving are different. The literacy
rate of China is over 90% which is more than other and literacy is also high as compared to
others.
Technological Factors- This factors includes new product developed, use of production
technology, methods for distribution mechanism, purchasing mechanism for goods and services
production. UHT milk produced by Neal's Yard Dairy Limited is high in quality which is
produced with help of new method of production. This can leads organisation to survive as
Chinese market believes in new innovations, ideas and technology.
Environmental Factors- The factors which can impact environment and its working style
is called environmental factors. This includes change in climate, weather, nature etc. (Folsom
and et. al ., 2012). Neal's Yard Dairy Limited can first understand taste and preferences of
consumers and accordingly produce products. All the environmental factors should be kept in
mind while manufacturing. As UK market is planning to tap milk market of China by 2020-21.
Each and every factors should be evaluated properly for best outcome.
Legal Factors- There are some legal laws such as environmental, health and safety,
consumer's right which need to be followed by organisation while manufacturing products. The
people of China are very health conscious and prefer hygiene quality products. It is big
opportunity for Neal's Yard Dairy Limited to provide high quality UHT milk for children aged
between 3-11.
The main drivers for business expansion in internationalisation are because of growth,
network or stoical ties, knowledge related and domestic or general market. Due to this factors,
expansion of business took place. As Neal's Yard Dairy Limited has good knowledge of such
components and planned for business expansion in China market.
c) Trade Barriers
Trade barriers are considered as a government imposed restraints on the international
product and services flow. This is usually classified as import policies that shows in tariffs and
another import charges, testing, labelling and so on (Hamilton and Webster, 2018). Neal's Yard

Dairy Limited which is planning to expand their business into the Chinese Market so it have to
face some trade barriers that are mentioned below:
Tariff of China- Tariff is crucially a tax or duty which have been imposed on specific
categories of imports or exports. Internationally its imposing is enhancing against products from
China. China is imposing tariffs initiating from 0 to 100% upon imported products. This is
categorised as Value added Tax, general custom duties as well s consumption tax. As Neal's
Yard Dairy Limited is planning to expand their business into Chinese Market so it is an
opportunities for them as this is national security for them through this they can produce their
products and sell them freely into target market. So, the uncertainties is that respective company
may have to pay high tax on their products that us UHT milk.
Exchange rate controls- Exchange rate controls generally included the accomplished
control over whole transactions that are connected to international payment as well as receipts.
Self imposed exchange rate control is another trade barriers in China. Country have many
restriction regarding international investments, foreign direct investment level is limited in
Chinese firms. This act as a barriers as this limit the engagement of international organisation
into certain sectors. As Neal's Yard Dairy expanding their business into Chinese market this
trade barriers are the opportunities for them as due to this number of competitors many be less.
The uncertainties for selected firm as it can restricts their level of investment and involvement.
Subsidies- Subsidies are considered as a incentives for national producers to as it benefits
in reducing costs. It is the policy that which is a china trade barriers to global market since
international companies can not able to compete price wise into similar market (Jenkins, 2013).
Neal's Yard Dairy is planning to extent its firm into the market of china so it may be the
opportunities as through this it can sell their product in whole country. The uncertainties is it
many not compete the target market price and also can reduce its profitability as price of Chinese
is too less as comparison to others.
Voluntary Export Restraints- This is the government imposed restriction upon amount of
specified products category which can be exported to a nation in decided time duration. As it
does not facilitates such benefits for nation imposing those limits to themselves. It main purpose
is to prevent counter measures of different nation countries which is suffering under inexpensive
imports. FOR Neal's Yard Dairy this trade barriers many be the opportunities of them as
through this policies of china they are allowed into target market. As this is considered a export

visa. the uncertainties may the product quantity that respective firm is planning to launch may
get restricted.
d) Ethical and social issues to be considered by the UK SME
While expanding business in foreign market, it is very essential to follow ethic and social
responsibility. In case of non following, issues can be created which are harmful for business and
its activities. The issues can be related with decision making, violation of rights and
responsibility, compliance, governance, diversity workplace (Killing, 2013). Here, Neal's Yard
Dairy Limited need to highlight importance of corporate social responsibility when operating in
Chinese Market. It is described below:
Corporate Social Responsibility (CSR)
In order to over social and ethical issues, CSR should be followed by Neal's Yard Dairy
Limited. It is the business approach which contribute to sustainable development through
delivering social, economic and environmental benefits for all stakeholders. This concept carry
many practices and benefits for carrying out business and its activities. The top CSR statistics are
$17.8 billion amount was given by corporations for charity, 55% of consumers pay more from
socially responsible companies for product. There are 65% of fortune 500 companies offering
matching gift programmes and 93% of world largest 250 companies publish their annual CSR
reports. The social and ethical practices leads vital success to organisation. As per 2015 Cone
Communications study found that 91% of global customers expect firm operating to address
environmental issues and address social. More ever, 84% seeks responsible products whenever
required (Why Corporate Social Responsibility is Important, 2019). Neal's Yard Dairy Limited is
UK based diary organisation which need to follow CSR in their business as it is planning to
operate business in Chinese market and providing UHT milk to consumers. Some of the
importance of CSR which are as follows:
Nowadays, consumers are highly aware of importance of CSR and purchase products
from businesses which operate ethically. CSR helps Neal's Yard Dairy Limited to take interest in
social issues than impact of profit margins that can attract individuals who share same values.
The importance of CSR helps in improving public image if organisation provide high quality
goods and services then their value can be increased in market. Neal's Yard Dairy Limited can
increase brand recognition and awareness through ethical practices in their business. Neal's Yard

Dairy Limited can save cost through use of CSR as it favours for sustainability by using less
packaging and decrease production cost. This also leads in increasing customer engagement and
providing lots of benefits to consumers. Through use of CSR in organisation, provide benefits to
employees in terms of positive workplace environment, increasing creativity, promoting
individual philanthropy and encouraging professional and personal growth. Neal's Yard Dairy
Limited is planning to expand their business in Chinese market so it need to follow CSR so that
it can attract large number of customers for their products that is UTH milk in competitive
market along with quality and hygiene. The target consumers is children that is aged between 3-
11 years of age (The Importance of Corporate Social Responsibility for Your Business, 2019).
e) Cultural preferences to be Considered by the business
The culture of every country differ from one another. In order to expand business in
Chinese market, it is very important to consider different factors and get success. There are
various activities associated with international business which has significant for UK market.
The activities should be conducted very effectively and efficiently in order to get success. There
are various cultural factors which need to be consider while doing business in China. They are
described below:
Guanxi- China carry relationship oriented society with them. Guanxi is type of network
or interaction for success of business. With developing of Guanxi, Neal's Yard Dairy Limited
can minimize failures, risks and setbacks. As Chinese belief in dealing with those people whom
they know and trust and buy products. It is very important for partners to established
interpersonal relationship before they begin their work (Majaro, 2013).
Face- For business interaction, it is very important to follow concept of face or Mianzi. It
is collection of pride, dignity, public reputation. Here, Chinese belief in giving face which means
showing respect to someone, doing things for increment of self pride and giving compliments.
Neal's Yard Dairy Limited should treat each and every consumers in better and effective manner
so that they can survive in market. If they are served in better then they cannot forget way served
to them. This is the important culture of China so it need to be followed by Neal's Yard Dairy
Limited as it is expanding business in that market only.
Meeting and Greeting- Whenever any other country people meeting in China then they
should display respect and sincerity. The handshaking has to be in light manner and should
follow exchange business cards either in English or Chinese language preferable by them

(Papadopoulos and Heslop, 2014). Neal's Yard Dairy Limited need to conduct proper meeting
and greet consumers of China in better and effective manner so that they can also represent their
own culture. Here, Yard Limited is planning to expand business in UHT Chinese market for
survival and growth so need to follow culture and ethics in business practices.
Confucianism- This can really affect business and its operations and all relationships are
considered as unequal. It is important for Neal's Yard Dairy Limited to show respect to all
senior, age, educational background. As organisation is providing goods to people of China so
need to treat each and every equally so that they believe in business and organisation.
Collectivism- China believe in collectivism culture for their business and their activities.
They believe in doing work in group rather than individuals. This leads to better outcomes for
work assignment. This culture can help Neal's Yard Dairy Limited to perform work in better and
effective manner so that they can achieve their goals and objectives. Here, it is planning to
expand business in Chinese market so all culture need to be followed by them for survival and
growth of business in competitive market (Picciotto and Mayne, 2016). In case of not following
culture, values in firm, then customers does not purchase from such organisation. The focus
group is between 3-11 years children for UHT milk to fulfils their need and requirements.
Giving Gifts- Chinese believe in giving gifts to their consumers. Here, Neal's Yard Dairy
Limited can use this culture while expanding their business in Chinese market as they can
provide gifts and coupons to loyal and regular consumers. As gift express friendship and
symbolise hopes for better future business. Thus, only present should be provided in case of
better relationship than absence of good witness or reason.
This are all challenges in terms of culture which need to be considered while expanding
business in Chinese market. The following of culture helps in growth, success and profitability of
Neal's Yard Dairy Limited. (CULTURAL FACTORS IN DOING BUSINESS IN CHINA, 2018)
f) Expansion Methods to be chosen by company
Expansion mode or participation strategies or foreign market entry mode is defined as
risk present in commitment and control of resources which is required and return on investment.
There are various methods for expansion which can be used by Neal's Yard Dairy Limited for
their business which are described below:
Exporting- This is the process of selling products and services produced in one country
to another. It can be of two types such as direct or indirect. In direct exporting, company can

capitalising economies of scale in terms of production that is concentrated in home country
through establishing proper system for export functioning and producing foreign sales (Picciotto,
2017). Similarly, indirect export involves domestically based export intermediaries which has no
control over goods in foreign market. This can provide lots of Neal's Yard Dairy Limited in
terms of distribution of surplus, less risky and costly. This can helps in fast market access for
providing goods in Chines Market. The respective organisation can easily expand business with
this mode I order to fulfils need and demand of consumers.
Joint Venture- It is entry mode where strategy is used by companies for entering into
foreign market through help of joining hands, sharing of ownership and management with
another company. This can be used by two or more organisations for achieving common
objectives and expanding operations of international market (Piekkari, Welch and Welch, 2014).
The common objectives can be risk and reward sharing, joint product development, foreign
entry, sharing of technology and conforming to governmental regulations. Neal's Yard Dairy
Limited can easily adopt this entry mode as it provide strategic advantages such as optimum use
of resource, partners can learn from each others and technological competence (Modes of
international business- modes of entry in foreign market, 2018).
Apart from above, there are other modes for expansion methods such as joint venture,
strategic alliance, merger and acquisitions and more. This mode helps in proper expansion of
business in other country for achievement of goal and objectives.
CONCLUSION
From above report, it can be concluded that organisation need to follow proper rules and
regulations for expansion in foreign market. China market is fast growing in the world which has
huge number of population, low cost of labour. For entering into foreign market, it is very
important to analyse PESTLE so that various factors can be known for better outcome. While
operating business, trade barriers can be found which need to be resolved properly. Corporate
Social Responsibility should be followed by all types of organisation in order to create value,
goodwill and loyalty of consumers toward firms. Through use of various mode such as
exporting, joint venture, organisation can expand their business in competitive market.

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