Nerada Tea's Expansion into China: A PESTEL Analysis

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MARKT20057
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Executive summary
In this report, the growth opportunities for business expansion of Nerada Tea, Australia to a new
market of China will be discussed as well. The main purpose of this report is to identify the
available opportunities or threats for this business expansion of the company to China in terms of
conducting PESTEL analysis. In PESTEL analysis, all the political, economic, social-cultural,
legal and technological aspects will be described in this report. The approach or methodology for
this investigation will be qualitative as required because China has huge possibilities for Tea
business over there. This report helps to analysis that China would be considered as the right fit
for business expansion for the tea company so far. China runs a favourable foreign investment
law, people are welcoming, tea consumption is high and economy of China is high as well, all of
these factors will be helping elements for business expansion to the company in China. Few
differences among both countries cultural are the only thing that the company would consider
before expanding there because effective R&D is required as well for the company in terms of
successful explanation in China. Few recommendations will be included in this report as well.
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Table of Contents
Executive summary.........................................................................................................................1
Introduction......................................................................................................................................3
PESTEL Analysis............................................................................................................................4
Economical Environment.............................................................................................................4
Political Environment..................................................................................................................7
Social-cultural Environment........................................................................................................8
Legal Environment.......................................................................................................................9
Technological Environment.......................................................................................................10
Conclusion.....................................................................................................................................13
References......................................................................................................................................14
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Introduction
Nerada black tea business in Australia wants to expand the business in another country which is
China. This business mission is to produce Australian products such as; fresh and suitable tea
and satisfying to the customers. It is the purest tea which focuses on time, harvests the tea, dried
and packaging it with a different style. This product fastest grow in all over the Australian
country and want plans to expand business in the china country. Its team members support the
company and make it special. There are around many employees who worked in it which is 30
years. However, this business focuses on a tea plantation and protects the eco-systems.
In this assessment, it provides information about the actual-world experience through the help of
innovative and creative tasks. It is challenging for the company business to spread the business in
another country. In this report, it explains the Nerada black tea business which is a famous
Australian famous black tea brand and wants to extend the business in china country. However,
the company makes plans; strategies for it but it also face difficulties to extend the business. For
it, company CEO investigates the market opportunities towards the potential international
promotion and launching of the business. It also focuses on promoting business products and
services in china country.
The report explains that company use PESTLE analysis for investigation of the business of
another country and wants to extend it. It also explains market position, Australian market
structure, market segmentation and targeted strategy. The report explains evaluating the threats
and opportunities which influence the market entry of the Australian tea business. The report
also explains the PESTLE analysis and its all factors which affect the company business. It
describes the depth information of this analysis and also explains the positives and negatives
both the aspects regarding environmental factors which include social analysis, technological
analysis, and economic and financial environment analysis, legal and cultural analysis. It also
explains some opportunities and threats to the company. It also explains some recommendations
to improve the business structure, another country culture, and adaptation qualities. The report
explains that it is essential for the company to follow all the rules, legislations, market
segmentation of the china country so it will provide various types of aspects for expanding the
business.
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PESTEL Analysis
Economical Environment
Nerada Tea is one of the largest tea producers in Australia. in 15 years back, Nerada Tea which
was started from five basic tea types, currently the company has been expanding its product
range only from black tea, green tea, different range of infusion tea along with white tea as well.
The company has awarded by Rainforest Alliance certification in 2018 which will be helpful to
understand that the company has been making an immense growth in the last few years so far.
Nerada Tea wants to expand its business to the new market of China as well because China is
considered to be the biggest market for expansion business as well (Nandonde, 2019). China is a
growing country and there are many possibilities available there in China. The economy of
China is well grown and by each passing day it will be growing rapidly as well. The following
graph will be helpful to identify the GDP per capita in China from 2012 to 2024.
China: gross domestic product (GDP) per capita in current prices from 2012 to 2024 (in
U.S. dollars)
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Source: Statista
The graph will help to show the gross domestic product in China till 2018 and forecasts for 2024
as well. In 2017 the overall GDP of the country was approx $12.06trilllions which will be helpful
to understand that China has positive possibilities for Nerada Tea expansion (Alava, et. al.,
2018).
The inflation rate of China is not impacted on a high level with the things running all around the
world. In China, 2018 the inflation rate was approx 2.1% which was lower in comparison to the
previous years. It helps to increase the sustainability of the economy which requires for new
businesses. The following graph will be helpful to identify the inflation rates of China as well.
China: inflation rate from 2012 to 2024
Source: Statista
The trade market of China will be one of the helping factors for the company in order to achieve
the successful expansion of the Nerada Tea in the country as well. China has been running a high
growth of the trade market which will be helpful to the company so far in order to expand its
business over there. The following graph will represent the trade balance in China.
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China: trade balance from 2007 to 2017 (in billion U.S. dollars)
Source: Statista
China: Youth unemployment rate from 2008 to 2018
Source: Statista
Along with all those positive factors, Nerada Tea must have to understand that the youth
unemployment rates in China are high. The main reason behind the higher rates would be
considered as the high population as well but it will be helpful to the company because company
can easily get labor at cheap costs. The following graph represents the youth unemployment rates
from 2008 to 2018 in the country.
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Political Environment
China is one of the growing economies in the world. In terms of encouraging foreign companies
to invest in China, the government redesigns many of its rules, in order to attract new investors
in the country. When it comes to expand the business or run the business in the country, it will be
one of the most helpful factors for the companies which want to expand their business as well.
Along with economic factors, political factors are considered to be the major factors in the host
country because it includes all the government intervention in the economy as well. In the
political factors, it also includes laws & regulations about taxation policies, consumer protection
laws, trade laws, environmental laws, and labor laws as well. The foreign policies of China are
considered as the biggest favorable things for the Nerada tea company in terms of expanding
business over there. China government understands the importance of foreign investments to the
country in order to achieve the growth of the country. In this influence, China redesigns its
foreign investment policies, along with all the relevant rules and laws of the country which are
associated with the foreign business investment so far (Hassan, S., & Craft, 2016).
The company needs to analyze and follow the consumers’ protection law and labor law as well
because like every other country, China has specific rules for the safety of its people as
consumers and employees. In terms of success expansion, it will be one of the basic
requirements that the company must conduct effective research & development programs to
understand all the legislation requirements of the country to the Nerada Tea (Raza, & Turiac,
2016).
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Social-cultural Environment
China has been considered as few of those countries which are very much connected to their
culture as well. Along with that, the country also has a huge difference from western or
Australian cultural which would make it very important for the company that the Nerada Tea
will be able to understand the differences among the cultural and social environment of both the
countries as well (Budeva & Muller, 2016). Chinese culture is far more different than Australian
cultural and it would easily make a huge impact on the consumer behaviors, buying patterns,
population religion differences, ethnicity, beliefs, and value system of the consumers of the
country. The table will be helpful to identify the customer segmentation for the Nerada Tea
Company in a new market in China as well.
Market segmentation
Geographic Demographic Psychographic Behavioral
Urban cities of
China
25 to 45 years Upper middle class
Working adults
Well settled
High buying
patterns
Cultural connected
to their roots
High tea
consumption
Urban cities of
China
18 to 24 years Students (Including
part-time working)
Medium buying
patterns
Less income group
because of part-time
jobs
Wants to explore
new products
Low to medium tea
consumption
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Rural
Urban both areas of
China
46 to 60 years High class including
upper-middle-class
income group
High & settled
income
Regular shopping
patterns
Not much interested
in exploring new
products
High tea
consumption
The above table helps to represent that the prime target of the company will be consumers
belonging to 25 to 45 years which are working adults have strong income group. The second
target market would be students which are 18 to 24 years, has small income groups but able to
try new products. The third group will be older people from 46 to 60 years which have high or
regular income as well (Barbara, et. al., 2017).
Cultural differences are considered as the biggest issues for the tea company in order to expand
its business to China because there are several cultural differences which company needs to pay
attention as well. These differences make a huge impact on the success and failure of the
company so far (Brockhoff, et. al., 2016). The consumers of China like to have great products
along with great services as well. There in China, the company will go to face a lot of completion
because several companies have been operating their tea business there. The Chinese business
people give preferences to the social relationships and they value their business terms which
would make the competition more difficult for Nerada tea in China. Besides all those cultural
factors, the country has a unique mix of Chinese and other cultures (Gahebi, et. al., 2016) People
are welcoming and want to try and explore new products. It will be helpful to the Nerada Tea to
explore their business there because China has high tea consumption as well.
Legal Environment
Nerada Tea is one of the largest tea producers from Australia and the company has been
developed a strong market reputation in the international market as well. All the rules and
regulations including trade laws, taxation policies, and labor laws in the country will be
considered as helpful objects to the expansion plan of the company so far (Anderson, & Xie,
2016). China has important food & safety legislations which include Quality and Safety of
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Agricultural Products in 2006 and in 2009 the government released its implementing laws as
well. Along with that, in 2018, the National people’s congress successfully released State
administration for market regulation (SAMR) which governs under National Intellectual property
administration (CNIPA). Both of the rules are important for companies in order to expand its
business in China. All of the rules along with low corruption in the country will be helpful in
terms of reducing hurdles for Nerada tea in China.
China as an individual country has been running some environmental specific programs in the
country especially around the industrial areas because the government is far more concern about
the damage which different growing industries could easily make to the environment as well.
Nerada Tea must need to understand all the legislation related to the environmental policies and
make plans accordingly because it will be considered as the biggest requirement of the company
in terms of expansion of its business to China as well (Atighechian, et. al., 2016).
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