International Business Report: Unicorn Grocery's China Entry Strategy

This report provides a comprehensive analysis of Unicorn Grocery's international business strategy, specifically focusing on its potential expansion into the Chinese market. The report begins with an introduction to international business and the significance of planning, followed by a background on Unicorn Grocery and its current operations. The core of the analysis involves a Five Forces analysis to assess the external factors impacting the company's entry into the Chinese market, including the threat of new entrants, substitutes, bargaining power of customers and suppliers, and competitive rivalry. The report also examines four key trade barriers Unicorn Grocery must consider, such as product standards, language barriers, anti-monopoly legislation, and complex business culture. Furthermore, it addresses ethical and social issues relevant to the UK SME, emphasizing the importance of cultural understanding and appropriate expansion methods. The conclusion summarizes the key findings and recommendations for Unicorn Grocery's successful entry into the Chinese market.

Final International
Business report

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Background on Unicorn Grocery...........................................................................................1
Five Force Analyses on Unicorn Grocery at the time of entering into Chinese Market........1
Four trade barriers that need to considered by Unicorn Grocery while exporting their business
to China..................................................................................................................................3
Ethical and social issues to be considered by the UK SME...................................................5
Significance of culture............................................................................................................6
Expansion methods to be chosen by organisation..................................................................7
CONCLUSION................................................................................................................................9
REFRENCES ................................................................................................................................10

INTRODUCTION
International business is defined as the process of buying and selling of product beyond
the geographical limits of a nation. It is also called trade relation between two or more than two
country. It is very important that how company do trading in international market as it can be
proved as the major source of earning for any organisation (Picciotto, 2017). Planning is one of
the major area which need to be focused more while doing foreign trade. In this report the major
discussion will be from Unicorn Grocery point of view as company wants to setup its business at
international platform and for that Five Forces analyses model will play key role to calculate
external factors. Their will be discussion on trade barriers, ethical and social issues. In the end,
detail information method will help to find the potential of company at international level.
MAIN BODY
Background on Unicorn Grocery
Unicorn Grocery is one of the co-operative grocery store which is located in Manchester,
England. The responsibility to manage its day to day activity is in the hands of owner himself. It
uses flat management structure system where every customers need to pay equal amount of
money in any of the condition. It mainly deals in those product which are organic in nature and
also company had recently started to deal in food and drinking product. It is the biggest and self-
directed wholefood grocery store in UK. While taking about earning and profit of business,
company do have the turnover of near around seven million pounds. There are lots of
achievements which have been handed to Unicorn Grocery at national level (Kolk, 2016). There
are near around 70 employees including co-members, who are working with Unicorn Grocery.
The inauguration date was September 21, 1996. The main reason behind the success of Unicorn
is secured employees where they loves to provide equal opportunity to every members. After
achieving lots of success with the boundary of England, company wants to earn more profit and
for that they want to trade at international level. By considering all this facts, company want
launch UHT (Ultra High Temerature) milk in Chinese market. The benefits of this facility can
only be given the children of age group of 3 to 11 years.
Five Force Analyses on Unicorn Grocery at the time of entering into Chinese Market.
Porter's five forces is a analytical tool which helps to determine all those eternal factors
through which company might suffer in future. The main area that is mainly focused in this
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model is related with competitors. At present, it is one of the broadly used model in business
organisation which tell about five different factors which can affect the growth of successful
organisation if preventive measure are not taken on time. It is helpful because it try to find out
the strength of a company and also tries to calculate that how opportunity can be created in
future (Zander, McDougall-Covin and Rose, 2015). In context of a Unicorn Grocery, it will help
them to find out that how they can enter into China market. This will be one of the way through
which they can see that how customers can be attracted towards their product as culture and
religions of particular location is totally different and new from companies point of view. There
are five different steps being followed in porter Five Forces Model and they are:
 Threat of new entrants: The condition where new investor are interested to invest their
money in market by incorporating a similar business which is said as threads of new
entrants. Once, new firm enter into the market it decreases the overall profit of a
company due to which the amount of abnormal profit will also drop. The main reasons
of new entrants is government policies which decrease the system of monopoly in the
market. Even attraction of consumers can also be one of the major reason. In context of
Unicorn Grocery, it is necessary that how they deal with the situation where they need to
focus on all the area that who can enter into the similar market in future and whether
UHT milk product will be successful or not in the Chinese market (Vernon, 2017) .
 Threads of Substitutes: It is one of the area of threads where company faces serious
problem when alternative solution are found. The problem arises when any new
company come up with similar product which is also effective for consumer then it can
create problem for any well established organisation. In terms of Unicorn Grocery, they
need to check while entering into Chinese market, does any company exist in the market
whose intention are also similar to UHT milk. They need to check whether any
substitution are available or not.
 Bargaining Power of Customer: It is totally dependent upon the number of supplier
because major role in this field is being played by the them. It is necessary that customer
wants to buy any product. If there are more number of suppliers then it will create
negative impact on company. While taking about Unicorn Grocery, they need to find out
that how many number of suppliers are there and whether they work in similar fashion or
not because that is the most important part (Cantwell, 2017) .
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 Bargaining Power of Supplier: The area which need to be checked in bargaining power
of supplier is that how many number of suppliers are present in the market. Can new
supplier join in future to reduce the overall profit of a company (Beamish and Lupton,
2016) . In context of a Unicorn Grocery, they need to make sure that number of UTH
milk supplier are less in market so that profit can be maximised. It is the responsibilities
of top level management that how they deal in the market while dealing with consumers.
 Competitive rivalry: It is defined as the level of competition when large number of
firms are providing same quality of products or services in specific market. Therefore, in
this situation it can be said that rivalry of competitors are very high which can provide a
huge threat to the profitability or productivity of organisation. In terms of Unicorn
Grocery, they need to being all those strategies so that they can overcome from
competitive rivalry to achieve their goal within Chinese Market.
This are five important point which need to be covered by Unicorn Grocery because it
will help them to compete in the market. Even if they will focus on all this area then it will be
easy for them to sustain against their rivalries.
Four trade barriers that need to considered by Unicorn Grocery while exporting their business to
China.
Trade Barriers can be explained as the restriction which have been imposed on the
companies while trading into international market. The main reason behind implementing trade
barriers is just to provide flexibility to investors of local market (Yao, 2019). It includes tariff
and non tariff barriers. In context of Unicorn Grocery, it is necessary for them to have a detail
knowledge regarding trade barriers in China as it will have direct effect to organisation. The four
barriers that need to be considered by Unicorn Grocery while working in china are:
Maintaining the standard of a Product is one the major thing which need to be focused
the most as Chinese market doesn't allow to sell any product which is not beneficial for
consumers. If they any fault is found in this field then they impose a penalty due to which
company have to suffer. While taking about Unicorn Grocery, they just need to focus that UTH
milk will not be harmful for children from age group of 3 to 11 years. And for that they need
take permission from the department of Standard and Regulation of Chinese Market (Rohlfer and
Zhang, 2016).
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Language Barriers is also one of the problem for trading any in any country. It can be
seen that Chinese people only prefer local language so that, it will not be easy for any other
country to conduct business activity in China. In context of a Unicorn Grocery, they will have to
face challenges related to language. It will not be a task for them to sell their product in the
market.
Anti-monopoly Legislation for foreign Firm is the most problematic trade barrier in
China where people doesn't want to adopt any product which have be manufactured by
international company. Even local authorities also doesn't allow general public to buy any
foreign product as they have a mindset that it will harm local market. When taking about
Unicorn Grocery, they need to check all the possible way through which they sell their product
in local market which will not be a easy task for them (Buckley, Doh and Benischke, 2017).
Complex business culture says that the people of China have different rules and
regulation which creates various types of problem at the time of doing business. Their are many
community who doesn't support many of the business cultural activities which can be one of the
major cons for any international company. In terms of Unicorn Grocery, it will never be a easy
task for them to expand their business within China. As, it can be seen that there are various
community who works for not letting foreign to expand their business in China.
Although there are various problems with in the boundary of China to conduct business
activity but, it is necessary that how this issues can be solved in future. National Level
government is helping in this department by conducting various kind of awareness program (di
Giovanni, Levchenko and Mejean, 2017). It is important to provide relevant information to every
people that foreign trade is beneficial in the economic growth of a country through which
problems of various can be solved. In context of a Unicorn Grocery, if they want to minimise
these trade barriers they need to interact with local markets. Even they should provide free
sample of UHT milk to that it will be easy to influence public in future. At present there are lots
of ways through which foreign language can be learn easily and by considering this Unicorn
Grocery need to work on Chinese language else they can hire those employees who are from
China. Also, company need to create believe in between local people of China that quality of
UHT milk is above the standard and it will be the best choice for customer when they will
purchase it for children. At the end, company need to adopt all those method through which they
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can enter into Chines market easily just to increase their daily sale of UHT milk which is
beneficial for children of age group of 3 to 11 years.
Ethical and social issues to be considered by the UK SME.
There are lots of area that need to be considered by the Small and Medium Enterprises
through benefits can be provided to consumers. At present, it is found that there are lots of issue
which have to be faced by companies and to overcome all those problems it is necessary to
understand the problem of local society. But, it compulsory that company is considering all the
ethical codes of conduct which conducting business activities (Buckley, Burton and Mirza,
2016). One is allowed to solve any social issues without maintaining codes of ethics. Here, ethics
can be explained as the set of rules and regulation which need to be followed while working on
particular topic which is the most important thing. If it is found that any one is not following the
terms and condition of ethics then penalties are to be imposed. It is necessary that how they
adopt all those rules just to solve social issues which arises on regular basis. Various ethical
issues which should be considered by Unicorn Grocery is explained below,
 China ministry has recently changed minimum salary provided to the workers as
company needs to provide at least 2300 Yuan to the workers. So UK based company
should provide them this amount of salary so that company would avoid legal issues
which could be imposed by the authorities (Minimum salaries on the rise in China, 2019)
 According to the labour rules of China, workers should not work more than 8 hours a day
and 44 hours a week in which Saturday and Sunday would be off for them. So Unicorn
grocery should considered this while making schedules of their productions of milk as it
is mandatory of every domestic as well as international company to comply with it
(Business Hours in China, 2019).
Apart from the ethical issues, organisation should also considered social issues of the company
where they are going as it has a direct impact on the working operations of Unicorn Grocery
which is mentioned below,
 Corruption is a way of earning money through illegal means without paying taxes. In the
recent survey, China has secured 87th rank in the corruption perception index (CPI) which
depicts that there is high frequency of corruption in the country due to which company
capital investment in the starting automatically increases to a certain level. So Unicorn
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company should considered this aspect and try to avoid it as it is unethical in nature
(China falls in corruption rankings despite Xi's anti-graft campaign, 2019)
Corporate Social Responsibilities is simply defined as the responsibility which need to be
fulfilled by every companies which falls under its criteria. It is necessary that amount of CSR
should be used of the welfare of solving social issue. It is helpful in creating positive impact on
the society. Even it is the commitment which is done by company at the time of commencement
that they will behave ethically and contribute equally for the economic development of a local
families and community (Francis, Owyang and Savascin, 2017). In context of Unicorn Grocery,
they need to fulfil all the basis requirement of Corporate Social Responsibilities to run business
successfully. There are no such basis requirement of CSR for SME in the premisses of UK, still
they are not allowed to work according to the their basis needs. They must try to work as per the
demand of public by providing all those basis needs so that they can be satisfied easily. But, as
they are planning to expand their business in China so it necessary to fulfil the CSR
responsibility of both country as per the amount of profit generated. Different importance which
company can attain from CSR activities is explained below,
 Public image: Brand equity or image of the company is important as it assist companies
to enhance their sales and profitability to a certain level. For instance, if Unicorn grocery
is donating some amount of money to a charity then their brand awareness in the market
would increase thus chances of getting high sales in the future are also high (Benefits of
Corporate Social Responsibility, 2019)
 Cost savings: If company reduces usage of electricity or makes their process effective
then cost incur in the starting would also decrease thus better profitability of Unicorn
Grocery in future.
Significance of culture
Culture consideration is essential as it influences the working of company in foreign
country. For instance, if any country does not prefer to eat chilly as its not in their culture but on
the other hand, chilly making company enter in to their territory then they would guaranteed fail
short period of time as their product is against their culture. According to survey, Chinese market
is hostile for foreign countries as citizen of china prefers to buy product from their native country
instead of foreign one (Is China making life difficult for foreign companies, 2019)
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In the recent time, Chinese culture is attracted towards the usage of milk and it has been
found that Chinese consumption in the milk would be threefold in 2050 which is huge in
number. But they prefers to use packed or bottled milk as people living their does not have time
to boil the milk before consuming it. Besides this, many Chinese are lactose intolerant in nature
which could be helpful for companies as they can modify their product accordingly (China’s
thirst for milk is bad news for the planet, 2019).
Packaging plays an essential role in the success of an organisation as it should be
attracted in nature as then only customers would feel motivated to buy it. According to Chinese
culture, yellow colour is most prestigious and lucky in nature as it depicts wealth and royalty. On
the opposite side, White colour is considered unlucky in china as it spills death and mourning.
So Unicorn Grocery should try to use yellow and avoid white colour as it will affect their
profitability in a negative way if product launched in the market is opposite to the culture
possessed by the people (Lucky Colors in China, 2019).
Expansion methods to be chosen by organisation
There are different types of ways through which company can enter in to international
market but organisation have to take decision according to the strengths and weakness of it.
Various ways which could be opt by Unicorn Grocery is explained below with functional
examples of it,
 Franchise: It refers to business strategy in which owner of the company sell their
products rights to the franchisor in exchange of royalty amounts of some amount of
shares. There is high success rate of franchise strategy as seller is well educated and
informed about the local market and wont find hard to settle their business in the
competitive market (Narula and Verbeke, 2015). Unicorn Grocery should not opt this
way of entering into china as franchise requires high brand awareness in the new market
but on the other hand, company only have high brand image in the UK market which
wont create any favourable environment for them. So they must be try to avoid it as
chances of bearing losses are high in nature (Franchising – Meaning | Advantages and
Disadvantages, 2019)
 Joint venture: It is a strategic decision taken by the company in which alliance is made
with other parties to sell their product in the market. It is a kind of general partnership in
which ownership of the product is based on the capital invested by the parties in the
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starting (Cheng and Yiu, 2016). There are various advantage of it as technology of both
the companies are shared due to which overall enhancement of productivity and
efficiency of workers increases to a certain level. Apart from this, liabilities, losses, assets
etc are divided according to the investment due to which whole burden is not put in to a
single company. For this report, Unicorn Grocery should choose this approach as it
would be favourable according to their balance sheet as they does not have to invest more
in the China market. Besides this, after UK based company settle their brand image in
the Chinese market, they can quit the partnership and opens their personal business
operations as brand leveraging could assist them to increase their sales (Advantages and
Disadvantages of a Joint Venture, 2019)
 Merger and Acquisition: It is process in which company merge with other company to
run their business operations with the aim of increasing profitability and market position
in the market. On the other hand, acquisition refers to strategy in which one company
buys another part in exchange of money (Mergers and Acquisitions, 2019). Unicorn
company can not conduct acquisition in the Chinese market as they have to invest high
amount of funds in the market in which chances of uncertainties are high.
It can be summarise after explaining above mentioned information that Unicorn Grocery should
opt Joint venture as their business strategy as low investment is requires in it and chances of
getting success are also high in nature.
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CONCLUSION
From the above mentioned information it can be summarised that company should opt
international strategy according to their capabilities and resources as if they did not then chances
of getting failed in the market are high. While entering in to new foreign countries, company
should considered various factors like entry mode, marketing techniques etc as it is directly
connected with the performance of an organisation. Apart from this, it should be essential for
company to identify their industry where they are working and various variables which could
affect their performance with the help of porters five forces model. By finding it, organisation
can prepare themselves for future unseen obstacles so that sustainable business performance
would be attain.
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