International Business: Sodiaal's Strategic Expansion into China

This report provides an analysis of Sodiaal's potential expansion into the Chinese market. It uses PESTLE analysis to highlight key business drivers and examines trade barriers that Sodiaal may encounter during imports. The report also addresses ethical and social issues, emphasizing the importance of Corporate Social Responsibility (CSR) for adapting business operations in China. Cultural differences between China and the UK are explored using Hofstede's cultural dimensions. The significance of an international expansion strategy is analyzed, focusing on how it facilitates business setup and enhances overall performance. Furthermore, the report examines the business model canvas as a tool for representing various factors and establishing sustainable development in the global marketplace, considering aspects like political and economic factors, social trends, technological advancements, legal frameworks, and environmental concerns in China.

Individual International
Business

Executive Summary
This report discusses about the organizational latest trends, and drivers of the china
market with the help of PESTLE analysis that highlights the business drivers to internationalize
the brand. Analyze various trade barriers are coming during the imports in the China. Social and
ethical issues are analyzed with the help of corporate social responsibility that is important for
the organization to adapt in their operations. Culture in china and UK was identified with the
help of Hofstede culture of dimension. This report has been analysed the importance of
International expansion strategy because it helps to setup business and enhanced the overall
business performance. Moreover, it has been examined the business model canvas which become
represent the different factors and help to establish a sustainable development in global
marketplace.

TABLE OF CONTENTS
Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Business drivers behind the company’s expansion into the given country.................................1
Trade Barriers in the China market.............................................................................................3
Ethical and social issues to be considered by the Sodiaal...........................................................4
Cultural preferences considered by the Sodiaal...........................................................................6
Expansion method chosen by the Sodiaal...................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
International business refers to import or exports of goods, services, capital, technology
across the boundaries of nation and at a global scale (Gaur, Schalk, and Anema, 2018). Ultra
high temperature milk (UHT ) is first developed in 1960s and available in the market for the
consumption in 1970s. UHT milk is packaged in 7 to 9 layers of packaging which is used within
5-6 months. It contains same number of calories and calcium as of pasteurized milk. Sodiaal is a
multinational company of the dairy products founded in 1989. David Chevance is a board
member of the Sodiaal. China is a third largest country in the world for the consumption of the
dairy products. According to the research in China over 60 percent of its population are prefer
UHT milk. The demand of the UHT milk in the China rapidly growing over the decade. The
most leading brand of the UHT milk in the China are Yili, Mengniu, Bright Dairy, Guangming,
Wangzai and Chenguang.
MAIN BODY
Business drivers behind the company’s expansion into the given country.
Different business drivers which affect the Sodiaal to enter in the china market is analysing
with the help of PESTLE analysis of the market.
Political
One of the political factors that interfere in the Chinese market is government regulations.
Chinese socialist government make unsettled changes in policies overnight which affects both to
the Chinese and global traders (Christodoulou, and Cullinane, 2019). Because of these creating a
long term marketing plan is impossible in the china market. Business always has to consider the
strong presence of the communist party in the china. If any organisation going against the
communist Party its services or products are strictly banned in the country
Economic
China is the 2 leading economy by nominal GDP in the world. On the basis of the
purchasing power it has the world’s largest economy (Perera, 2017). Its economic growth in the
last four decades is incredible. This growth leads to increase in the standard of living in the
country. Covid 19 has also given negative impact on the economic development of the country in
2020. But china is the only country that manages to grow economically during 2020. Recently
china involves in the trade war with the United States and announced trade tariffs on the import
of each other goods by both the countries. For the Chinese government, made in China is a
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Strategic initiative, which is 10 year plan started in 2015 aims to reduces the dependency of
foreign technology in the China market.
Social
Social trends in the China dictate its large portion on its cultural values. 60 percent of the
Chinese people live in the urban areas. China’s populations are growing rapidly. It has one child
policy from the 1980 to 2015 which leads better control on the population growth. With the
extreme influencing of the population changed to two child policy in 2015 which leads to growth
in the economy and standard of living (Christodoulou, and Cullinane, 2019). This also gave
positive impact towards the life expectancy rate. Marriage between the same sex couple is still
now allowed in the China. China is the first one to hit with the covid 19 and significant impact
on the country. China is the only country who controls the virus much faster than other countries.
Technological
After the implementation of the Made in china 2025 which objective is to turn china from
low cost developer to produce high tech high end products. It gave high impact on the china’s
high tech capabilities. Many high tech and innovative companies became active in the china
market. Biggest technological factor that affects its market is internet usage. Over 450 million
people in the China are using Internet. The education sector of the china is getting better. China
is largest provider of the highly skilled provider every year. With the increase in the quality of
education it delivers many engineers and scientists every year which leads positive impact on the
development of technologies in the country.
Legal
The legislative organ in the country is of National people’s Congress. Recently china
restricts many foreign companies to operate in the China market. Country blocks social media
and also develop list of restriction and prohibited activities for the foreign companies. Trade
tariffs also exist for many foreign businesses. Country has strong IP protection system.
Environmental
China is the fourth largest county by the area. Fast development on the population and
economy leads to rapid industrialization (Song, Sun, and Jin, 2017). Air and water pollution is a
major concern for the country which affects the environment. Air pollution causes the bad health
of the public. Air pollution happens because of highly use of coal in the industries. Government
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has taken various steps to minimize the air pollution. Waste water in the industries leads to lot of
pollution. Even the fresh water scarcity is also come in the China.
Trade Barriers in the China market
There are different trade barriers set by the China for foreign countries to import or exports
of the goods. All the commodities of any country have to pay 3 types of tariffs.
Custom duties
Around 9000 items are taxed under the Custom tariff plan. Custom duty rates in China
consist of general duty rates, most favoured nation duty (MFN) rate, conventional duty rates,
special preferences duty rates, tariff rate quota (TRQ) duty rates and temporary duty rates.
General duty rates are applied on those imported goods which are not covered in any agreement
or treaties from which the goods are originated. MFN rates are imposed to goods which are
imported from the WTO member country; goods are from the country that has bilateral
agreement having provisions of MFN treatment with China and goods that are originated from
the China (Munemo, 2021). Conventional duty rates are for the for those countries goods which
have regional trade agreements having provisions duty rates with China. Tariff rate quota is
depending on the imported goods. Lower tariff rate is imposed to the goods that are imported
within a quota and high tariff rates is imposed for the goods that are imported beyond the quota.
Value added tax
Value added tax is for all the goods which are imported in the China either 13 percent or
17 percent. 13 percent tax is given by the firms which have importing the agricultural products
and utility items.
Packaging
For enter in the china market without facing the barriers, foreign companies has to
understand the packaging scheme of the country very carefully (Lawson, Dietrich and Murray,
2019). To protect from the delays or refuse from the Chinese customs company ship their
products through shipping agents by preparing documents like proof of origin, invoices of the
buyer in the China, full specifications, packing slips, detail of goods and description of the
product.
Import quotas
To control the imports in the country China imposed non tariff barriers. Recently, the
food industry of the china is recently known to impose the non tariff barriers. Country imposed
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strict sanitary rules which require administrative requirements of amounts of documents and
health certificates. It also includes strict labelling on the products consist of detailed information
of the nutritional components as well as Chinese language is necessary (Elliott, 2019). Many
countries are only focused in the tougher sanitary regulations and china only recognised issue of
certifications by the Chinese food and drug administration.
Voluntary export restraints
It is government imposed limit to define the category of the goods which are imported in
a country in a given set of time period. Its main aim is to prevent the counter measures of the
other countries that are suffering from the cheap imports. These imports are the part of trade
negotiations between the countries.
Subsidies
It is an incentive for the domestic producers to get benefit by reducing the costs. This
policy is a trade barrier for the foreign companies to enter the market and compete the domestic
firm in the context of price in the same market. Subsidies given by the Chinese government gave
their own manufacturer to compete globally on their price. This subsidy benefits the domestic
companies to be competitive in the economy of the world.
Exchange rate control
As china is intercede with the Yuan exchange rate in the terms of dollar that creates the
barrier in international trade among western countries. With the self imposed of the exchange
rate control placed another trade barrier. China also imposed variety of foreign investment
restrictions and foreign direct investment in Chinese companies is also restricted by the country.
It gave barrier to trade in the country because it gave negative impacts on the other countries
where how much involvement of the companies is set in every sector by the China.
According to the test of theory related strategically trade barriers, this can impose trade
barriers in china marketplace. Including quotes, tariffs and also measured the suitable restricted
free trade. Generally, it has been identified the current business level in Chinese marketplace. it
impose a quota system and permits only 34% imported entry into global marketplace.
On the basis of absolute advantage theory, company has been applied this theory when
expanding business in china marketplace. The ability of nation in order to produce an items
which become consider as more efficient than any other country. Whenever, it will be used the
same amount of resources and trade should not be banned or restricted. It allows the enterprise to
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maintain a flow of information or data with proper manner. on the basis of market demand, it
continuously achieve desirable goal or objective of enterprise.
Ethical and social issues to be considered by the Sodiaal.
Corporate social responsibility is a self regulated model of the business to helps the
company to be accountable socially to itself, stakeholders and to the public. It is also known as
corporate citizenship. Theirs is no one way for the companies to practice the CSR, many great
initiatives are taken by the company to positively affect to the public, environment and to the
economy (Ajina, and et.al., 2019). With the increases in the social conscious environment,
employees and customers have a premium place for the working and spending their money with
the business to prioritize CSR. The highly motivated ethical and social causes influenced the
company to enter in the foreign market. With the increase in the industrialization in the china the
environment of the china is not good as it creates lots of air and water pollution, where people
are not safe as they are inhaling the hazardous air in their body which is not good for the people
heath and there is also getting shortage of the water and the wastage of water in the
industrialization is so high (Cyfert, Glabiszewski, and Zastempowski, 2021). The corruption is
very significant problem in the china as it impacts to every aspects healthcare, education sector
of the country, it’s a social issue faced by the country. In china everyone has an equal
opportunity in the society; there is no discrimination on the bases on the gender. Men and
women both have an equal right and pay equal for the equal work. All theses aspects came under
the corporate social responsibility which is necessary for all the organization or country to adapt
so that all the social and ethical aspects of the societies are fulfilled.
There are various importance of the corporate social responsibility so that Sodiaal has to
adopt the in the company.
Creates reputation
Well developed CSR program in the company helps to create brand awareness, equity,
creates good reputation in the global market and create deep strong values. People appreciate the
company that they not only offering good quality products but also did the activities which are
good for the people.
Loyal customers
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Having the Corporate social responsibilities in the company and be regular with the
activities helps to increase the chance that customers wanted to work with the company and also
keep working with them.
Increased sales
Sodiaal can lead with the purpose to perceive positively by the customers. Positive
impact towards the customers helps them to spend more on the Sodiaal and it consequently
increases the sales of the Sodiaal.
Motivated employees
Employees prefer working with the companies having positive public image. CSR
incorporates various volunteering programs which gives values like empathy and loyalty to the
employees (Pelau, and Pop, 2018). CSR leads to bring better team work and trust among the
employees. This leads to motivate employees to work in the organisation environment which is
contributed in the betterment for the society. This led to employee satisfaction and gave positive
image of the company.
Cost saving
Cost saving is one of the factor that is importance of the corporate social responsibility.
By implementing the CSR in the company used the technology for the production which reduced
the operating cost.
Advantage over competitors
By implementing corporate social responsibility company can out from the competitors
in the industry (Minkov, and et.al., 2019). By considering the social and environmental factors
company can get one step forward from their competitors.
Risk management
By implementing the corporate social responsibility in the organisation company can
minimise their risk by less affecting the environment by adapting sustainable operations with
lead to improve in the growth of the company.
Innovation and market opportunities
Demand of the sustainable products or services is increased among the customers with
the increase towards the impact on environment by the society. Company can innovate the
product by adapting the technologies that are suitable for the sustainable products and gain the
market opportunities.
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Cultural preferences considered by the Sodiaal.
To assess the cultural dimensions in UK and China that helps the Sodiaal to understand the
cultural differences in both countries. This can be analysed with the help of Hofstede’s cultural
dimensions of both countries.
Power distance
It refers to the extent by which the inequality and the power in the society are tolerated.
Less powerful members in the organisations or institutions in a country is accept and except that
distribution of power is unequally (Taras, 2017). From the view point of china superior
subordinate relationship tend to be continued and there is no defence against the power used by
the superiors. While in the UK society believe that inequalities among the people of the country
should be minimised. Fair drive plays believe that people can be treated as same as equals.
Individualism VS Collectivism
It a degree by which people can integrate into groups and their obligations and
dependence on the groups. It is a interdependence among the members maintain by the society.
In UK individualism score is high. The people in the UK are highly individualist and have
privacy. From the early age children are taught to think for themselves and find their purpose for
life and how they contribute to the society (Pruthi, Basu, and Wright, 2018). While in China
collectivism culture is accepted where people work for the interest of the group instead of
thinking for themselves. Every major decision to consider the groups.
Masculinity VS. Femininity
It refers to tough vs. tender. High score masculine means achievement, success and
driven by the completion while low score feminine means dominant values towards society by
caring for others and by giving quality of life. China is a masculine society that has success
oriented and driven. Their success can be measured with the fact that Chinese people will
sacrifices to their family and gave priorities to the work. UK is also has Masculine society which
live in order to work and have ambitions to perform clear work.
Uncertainty avoidance
It considered in the extent by which the uncertainty and ambiguity is tolerated. China has
low scores in avoidance of the uncertainty. The laws and the rules are flexible which suits the
situations in the fact of the life. Chinese language is full of ambiguous meaning and they are
comfortable with it and this is difficult for the foreign companies to understand it (Concept,
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Meaning and Definition of International Business, 2021). While in UK the planning of the work
is not detailed oriented, the end goal is clear but how to achieve the goal is not clear. Planning
horizons are always shorter.
Long Term Orientation vs. Sort Term Orientation
It is an extent by which the society views its time horizons. It describes how society
maintains its link with their past and deals with the challenges in present and future. China has
very pragmatic culture. In this culture people believes that truth is depend on the situation,
context and time (Kwilinski, Dzwigol, and Dementyev, 2020). They have an ability to easily
adapt traditions to change conditions, propensity to invest and change and achieving results.
While in UK dominant preference culture cannot be determined.
Indulgence vs. Restraint
This dimension states about how society control their impulses and their desires, through
the way they were raised. In UK British culture is classified as indulgent. People in this society
generally have willingness to realise that their impulses and desires are for enjoying life and have
fun. They have positive attitude and have inclination towards success. They gave higher
importance to their leisure time and have spent money on this as they wish. While China is a
restrained society that have tendency to scepticism and cynicism. They have great control on
their desires and they do not put much emphasis on their leisure time. People in this society
believe that they are restrained with some social norms.
Expansion method chosen by the Sodiaal.
International expansion strategies are the formal and multi level strategic plan used by the
business to enter in the global market to grow and achieve instant profit. From these strategies it
makes firms growth more structured and sustainable. There are various strategies used by the
company to expand internationally. For company like Sodiaal that want to enter in the China
market has to adopt transnational business strategy in the firm. Transnational strategy is one of
the detailed methods that company can adopt when expanding internationally and it is a
combination of both global and multi-domestic strategies (Carter, and Carter, 2020). Through
this strategy Sodiaal keeps their headquarters and core technologies in the origin country, full
scale operations are established in the foreign markets. Decision making, sales, productions are
distributed to individual markets which allow company to have separate marketing, research and
development to meet the needs of the local markets. To adopt this strategy company has to
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identify the best management tactics to increase the efficiency and achieving positive economies
of scale. This strategy is complex in context to reduce the cost and by combining all the possible
values to do adjustments that are necessary to gain and be competitive in the local market. To
establish the research and development, production, sales, marketing divisions in individual
region so that necessary quickly changes is done according to the needs and preferences of the
local customers and sustain in the market place in the long run.
With the help of the business model of canvas that is a strategic management which is
used to develop the new business model to identify the different factors which are used by the
company to be successfully internationalise. From the business model 9 basic factors are
analysed from which company can effectively make their strategies.
Customer segment
Sodiaal like to enter in the China market for their UHT milk and their target customers
are the pre-school aged children between the age group of 3-11 years children who prefer the
UHT milk in their consumption.
Value propositions
Value propositions based on those customers who prefer the UHT milk in their
consumption and have know about their health and wellness and want their children to fit.
Channels
The channel used by the Sodiaal to deliver the milk by direct, establishing retail stores
and by doing agreement with the supermarkets (Ladd, 2018).
Customer relationships
Relationship can be made by giving samples, sponsorship at the key events, relationship
with the frequently used retailers and service providers.
Revenue stream
Revenue generated by directly from the customers, wholesale retailers and distributors.
Key resources
Key resources used by Sodiaal are milk collection, production plant, warehouse, assistant
agents etc.
Key Activities
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Hygiene practices, quality management assistance, marketing the brand with a consistent
in its growing healthy professional culture, inventory management are some of the key activities
of the Sodiaal.
Key partnership
Partnership with the distributors, retail stores, supermarkets.
Cost structure
Cost structure is based on the ingredients, packaging, production facility, distribution
process and marketing.
By identifying the internationalise strategies used by the sodiaal for the expansion by the
transnational strategies. This helps to sustain in the market with the effective growth and make
profits in the China by altering in the change according to the need and wants of the local
customers (Gaur, Schalk, and Anema, 2018). To adopt the transnational strategies it helps to gain
the market share easily in the China market by setting the production, research and development
and marketing department in the China market. From business model canvas all the factors
which are necessary for the Sodiaal to analyse before expanding in the China market is analysed
so that no hurdles can be come and easily achieves the market share.
Business expansion method is important part of organization in order to find the actual
growth through acquisition of another existing enterprise. Generally, it offers a franchises
ownership to the enterprise where they can easily establish a business in Chinese marketplace.
Licensing of intellectual property and approval from government authority to establish a business
in area or place. At certain point, it is an essential aspect to follow a proper agreement with
dealership and distributorships in context of export or import.
CONCLUSION
From this report it inferred that international business is a trade of the goods, services,
technology and capital across the national boundaries at a global scale. To enter in the china
market to the UK based company Sodiaal from the pestle analysis the business drivers of the
china market is analysed. Different cultural aspects of UK and China is analysed with the
different factors of the Hofstede’s cultural dimension framework, so that Sodiaal understand the
different culture of the China market and accordingly it made the strategies to expand in the
china market. From the emerging of the China products and many international companies want
to enter in the market, many trade barriers are imposed by the countries to easily import their
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products in the market such as import quotas, packaging, labelling, Voluntary export restraints
and subsidies. The Corporate social responsibility is the importance element for the organisation
to adapt in the company. For the Sodiaal transnational strategy is best fit to internationalize the
business.
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Elliott, G., 2019. Tariff Procedures and Trade Barriers. University of Toronto Press.
Gaur, V., Schalk, J. and Anema, S.G., 2018. Sedimentation in UHT milk. International Dairy
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Munemo, J., 2021. The effect of regulation‐driven trade barriers and governance quality on
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energies. Energy Policy. 118. pp.160-168.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
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Song, J., Sun, Y. and Jin, L., 2017. PESTEL analysis of the development of the waste-to-energy
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Concept, Meaning and Definition of International Business, 2021. [Online]. Available through <
https://www.brainkart.com/article/Concept,-Meaning-and-Definition-of-
International-Business_34995/>. [Accessed on 29 April, 2021].
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