International Business Report: Quam Milk's China Market Expansion

This report examines the potential for Quam Milk, a UK-based UHT milk producer, to enter the Chinese market. It begins with an executive summary outlining the report's focus on opportunities, challenges, and strategic recommendations. The report then delves into an industry analysis, highlighting the growth of the Chinese dairy market and the rising demand for UHT milk. A PESTLE analysis evaluates the political, economic, social, technological, environmental, and legal factors influencing Quam Milk's prospects in China. Further, the report employs Porter's Five Forces to assess the competitive landscape. It also identifies potential trade barriers and socio-cultural issues. Finally, the report recommends a multi-domestic approach and a joint venture entry strategy for Quam Milk to maximize benefits and returns in the Chinese market, concluding with a call for strategic implementation. The report leverages various sources and models to provide a comprehensive understanding of the international business context.

Running head: INTERNATIONAL BUSINESS
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Executive summary
The aim of this report is to discuss about the possibilities, opportunities and challenges to be
faced by Quam Milk in entering in the Chinese market. In doing so, different strategic
management models such as PESTLE and Porter five forces have been used. It is identified that
there are multiple opportunities can be tapped by Quam Milk in terms of the different external
market factors in China. However, challenges such as regulations and corruption will pose
challenges for them. Different trade barriers and social factors are also discussed from the
perspective of the Chinese operation of Quam Milk. This report concluded that they should
follow multi domestic approach of international business and joint venture entry strategy to
operate in the Chinese market. It will ensure the maximum benefits and return from the
international business of Quam Milk.

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Table of Contents
Introduction......................................................................................................................................3
Industry analysis..........................................................................................................................4
Determination of the external business drivers...............................................................................4
Political factors............................................................................................................................4
Economic factors.........................................................................................................................6
Social factors...............................................................................................................................7
Technological factors...................................................................................................................8
Environmental factors................................................................................................................10
Legal factors..............................................................................................................................10
Industry analysis............................................................................................................................11
Bargaining power of the buyers.................................................................................................11
Bargaining power of the suppliers.............................................................................................12
Threat of new entrants...............................................................................................................12
Threat of substitutes...................................................................................................................12
Competitive rivalry....................................................................................................................13
Identification of the potential trade barriers..................................................................................13
Identification of the socio cultural issues......................................................................................14
Identification of alternative expansion methods............................................................................15
Recommended expansion and entry modes...................................................................................16

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Conclusion.....................................................................................................................................17
Reference.......................................................................................................................................18

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Introduction
In the current business scenario, international expansion is one of the most important
factors to be considered by the contemporary entities. This is due to the reason that in the current
era of globalization, global market across different countries can be easily tapped and
competition is also growing on international basis. Hence, in order to deal with the growing
competition in the domestic market, expansion in the international market is one of the most
viable options available. In the recent time, it is identified that majority of the international
market expansion and business investment is going towards the developing countries such as
India, China and Brazil (Cavusgil et al. 2013). This is due to the reason that these countries are
witnessing higher growth of economy compared to the developed countries. Coupled with the
huge population in these countries, business opportunities are growing at leaps and bounds in
these countries.
Recently, UHT milk or Ultra High Temperature processed milk is witnessing popularity
in the marker due to its long lasting ability, ready to drink convenience and free of any bacterial
issues. It is also proved to be healthy for the children as well. Hence UHT milk market in the
global scenario is one of the most booming and potential business scopes available in the recent
time. Quam Milk is a new entity based in London. They are offering different varieties of milk
and milk based products in the domestic market of the United Kingdom and planning to market
their UHT milk in the Chinese market.
This report will discuss about the industry opportunities and potentialities for Quam Milk
in entering in the dairy sector of China. In addition, the external business factors to be considered

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by Quam Milk in doing business in the Chinese market will be discussed. The potential trade
barriers and market entry modes will be discussed and evaluated.
Industry analysis
It is reported that China will be the largest dairy market in the world with the booming
dairy industry by 2022. This is mainly due to the reason that China is the largest country in the
world in terms of population and hence, the level of consumption is higher. On the other hand,
the booming economy is further amplifying the demand for the dairy products (Griffin and
Pustay 2010). Moreover, Quam Milk will witness more opportunities due to the reason that
import of powdered milk is banned in China and preferences for UHT milk is growing with the
growing health consciousness. As of 2017, the industry revenue of the Chinese dairy sector
stands at 359 billion Yuan approximately. Thus, it can be concluded that industry opportunities
for Quam Milk are going to be high in operating in the Chinese market. Specifically for the UHT
milk, the market size grew from 19 million RMB in 2003 to 90 billion RMB by 2017. This
shows the opportunities that are waiting for Quam Milk in China (Zhong et al. 2014).
Determination of the external business drivers
It is important for Quam Milk to determine the external business factors relevant in the
Chinese scenario because it will help in identifying the potential opportunities and challenges.
PESTLE analysis will be done to identify each of the major elements in the following sections.
Political factors
As per the global economy.com, China can be considered as the country with low
political risk. This is due to the reason that China is a communist country with having stable

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political infrastructure. There are no backgrounds of army coups or any instability in the political
factors. Hence the business will have stable political environment in operating in the country. In
addition, the political stability indicator of China is also increasing since 2015, denoting the
positive factor for the businesses. Chinese government roles will also help Quam Milk in
enhancing their business opportunities. This is due to the reason that Chinese government
included the dairy consumption in their latest 13th five year plan. Hence, the political willingness
towards the dairy industry is largely positive, which will further act as the driving factor Quam
Milk in operating in the country. However, on the other hand, it should also be noted that Quam
Milk will face the challenge in terms of corruption in the business (Charles 2012). This is due to
the fact that as per transparency international, though China is improving their ranking in the
global corruption index, still they are standing at 41 as of 2019 (TheGlobalEconomy.com 2020).
Hence, this is one of the major political challenges to be faced by Quam Milk in operating in
China.

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Fig: 1
Corruption ranking of China
Source: (TheGlobalEconomy.com 2020)
Economic factors
In terms of the economical factors, the major driving force in doing business in China is
their national economy growth. This is due to the reason that China is the leading country in the
world in terms of economical growth. Hence, the business opportunities are also growing
because the more will be the growth of the economy, the more will be the purchasing power and
affordability of the consumers. The premium positioning of Quam Milk will thus get justified. In
terms of the global economic forum, the business competitiveness is also increasing the country.
This shows that Quam Milk will face more competitive environment in operating in China,
which will further be beneficial in developing and improving their efficiencies. On the other
hand it should be noted that China was long accused for lack of economic freedom in the
country, which is also getting reduced. This is due to the reason that as per the global economy
index, the ranking of China in terms of economic freedom is improving, which refers to the fact
that Quam Milk will gain the access to higher economic and business freedom in doing business
in China (TheGlobalEconomy.com 2020). However, the major challenge that will be faced by
Quam Milk in terms of the economic factors is the increasing rate of inflation. This is due to the
reason that since the last few years, China is witnessing growing rate of inflation, which is
increasing the commodity and goods price. It might be challenging for Quam Milk to meet the
market expectations with the increasing rate of commodity prices.

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Fig: 2
Economic freedom index of China
Source: (TheGlobalEconomy.com 2020)
Social factors
Social factors are also relevant for Quam Milk due to the reason that changes in the tastes
and preference pattern of the customers will determine the extent to which, the products of them
will get accepted in the market. One of the major social driving factors for Quam Milk in
operating in the Chinese market is the upward trend of social globalization
(TheGlobalEconomy.com 2020). This refers to the fact that average Chinese customers are more
getting accustomed with the global trends and practices. In view to the UHT milk products of
Quam Milk, Chinese culture is getting accustomed with this trend and the health benefits
associated with it. Thus, expanding in the Chinese market will be beneficial for Quam Milk in

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terms of the favorable social trends as well. As of now, Quam Milk is only based and operating
in the United Kingdom. Cultural and social diversity in China is low compared to that in the
United Kingdom. Hence, Quam Milk will have to face lower challenges diversity in their product
offerings. The huge population in China will further drive the business there for Quam Milk.
Fig: 3
Social globalization index of China
Source: (TheGlobalEconomy.com 2020)
Technological factors
Technological factors are also important to consider by Quam Milk because and it will
determine the extent to which, the products getting offered in the market are compatible to the
local trends. In addition, the cost factor is also associated with the technological prowess. China

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is considered as a leading country in terms of technological development and in much affordable
form. Thus, Quam Milk will find it easy to gain the access of developed and advanced
technologies for their operations in China. The average costs will also be low due to the low
costs of resources in the country. As per the data of the global economy, China is currently
standing at 54 in terms of global innovation index and is showing upward trend. This is a major
driving force for Quam Milk in operating in the Chinese market. However, on the other hand, it
should also be noted that Quam Milk might face challenges in terms of patent and copyright.
This is due to the fact that China is having stricter rules and policies in terms of transferring of
technologies especially to the foreign companies.
Fig: 4
Innovation index of China
Source: (TheGlobalEconomy.com 2020)

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Environmental factors
Quam Milk should adhere to the environmental factors because business processes of the
dairy industry are having direct impact on the environment such as the animal rearing facilities.
In the United Kingdom, they are already adhering to the local rules and standards, which will be
lower in the Chinese operation. However, as per the recent data, China is the most polluted
country in the world and thus newer environmental rules and regulations are coming up.
Considering the adherence of the current practices of Quam Milk with the environmental
standards in the United Kingdom, it is predictable that fewer challenges will get originated in the
Chinese operation.
Legal factors
Currently, China is one of the most businesses friendly countries in the world with their
government are coming up with more convenient policies in attracting the foreign investors.
However, it should also be considered that legal structure in China is different to that of the
western countries. According to the reports of the global economy, legal effectiveness in China is
increasing and it is surely a major positive factor for Quam Milk. On the other hand, there are
few legal issues that might also to be faced by them. For example, the interference of the
government in the private business is a major challenge.