MBS661: Global Business Plan for Zott in the Chinese Market

This report provides a comprehensive analysis of Zott's potential business expansion into the Chinese market. It begins with a country analysis, assessing China's economic and political landscape, including trade openness, economic growth forecasts, and government interference. The report then delves into a business model analysis, recommending a manufacturing model and utilizing the business model canvas to identify key partners (retailers and suppliers), activities (production and promotion), resources (financial, human, and technological), cost structures, value propositions (diverse dairy products), channels (omni-channel), customer relationships, customer segments (mass market), and revenue streams (product sales). A SWOT analysis is conducted to evaluate Zott's strengths (dairy expertise, international experience, financial resources, diverse product portfolio) and weaknesses (lack of Asian market presence, private company status, limited supplier access). Strategic issues are identified, focusing on the dilemma between market adaptability and standardization. The report recommends a joint venture strategy for market entry and addresses key management issues in marketing, production, logistics, and human resource management, including cultural factors and staffing. Recommendations include a polycentric staffing process and outsourcing logistics. The report concludes by emphasizing the importance of effective implementation to maximize return on investment in the Chinese market.

Running head: GLOBAL BUSINESS
Global business
Name of the student
Name of the university
Author note

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Executive summary
The aim of this report is to discuss about the major challenges and opportunities to be faced by
Zott in doing business in China. In doing so, analysis of the market situation and factors of China
was done and different factors are identified. In addition, the recommended business model of
Zott in China is evaluated and each of the elements was discussed. It is expected that effective
implementation of this business model will help Zott to have the maximum return on investment
from the Chinese market. This report identified that Zott will face the issue of dilemma between
the market adaptability and standardization and alignment with the changes in the market. These
issues will have impacts in the long term business viability of Zott. This report recommended
that joint venture strategy will be most effective choice of entry mode for Zott in China with low
sets of risks and higher potentiality of return. Moreover, there are multiple management issues
also to be faced by Zott in terms of marketing, production, logistics and human resource
management. These issues include cultural factors in the marketing activities, production process
and approach and recruitment process. On the basis of these challenges, there are multiple
recommendations identified in this report. It is recommended that polycentric process of staffing
should be initiated by Zott to have the proper blend of home and host country employees. In
addition, it is also recommended that logistics process should be outsourced to the external
partners to gain the specialized services and regulate cost structure.

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Table of Contents
Introduction......................................................................................................................................3
Country analysis..........................................................................................................................3
Business model analysis..................................................................................................................4
SWOT analysis................................................................................................................................7
Strengths......................................................................................................................................7
Weaknesses..................................................................................................................................8
Opportunities...............................................................................................................................8
Threats.........................................................................................................................................9
Identification of the strategic issues................................................................................................9
Determination of the entry modes strategy....................................................................................11
Directive exporting....................................................................................................................11
Foreign direct investment..........................................................................................................12
Joint venture...............................................................................................................................12
Identification of the key management issues.................................................................................13
Marketing functions...................................................................................................................13
Production and logistic function................................................................................................14
Human resource management functions....................................................................................15
Recommendations..........................................................................................................................16
Conclusion.....................................................................................................................................17

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Reference.......................................................................................................................................19

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Introduction
In the previous assignment, it is identified that Zott should enter the Chinese market for
their business expansion strategies. This is due to the reason that there are different opportunities
in terms of extensive market segments and positive growth rate are identified as the motivations
for entering the Chinese market. Zott is basically originated in Germany and is having their
operations across different countries but they are having less presence in the Asian region. On
the other hand, it was also identified in the previous assignment China is going to be the largest
market dairy market in the world in the coming years, which possess business opportunities for
Zott (Yang et al., 2013). However, it should be noted that there are multiple challenges also to be
faced by Zott in entering and operating in the Chinese market. In addition, it is also important for
Zott to have the proper internal effectiveness in gaining the maximum from the foreign market.
This report will discuss about the major issues to be faced by Zott in doing business in
the Chinese market and the business model to be followed by them. In addition, the strategic and
management issues to be faced by Zott will also be identified. The most effective and potential
market entry modes will be discussed for Zott and the strategies that they should be follow in
mitigating the same.
Country analysis
It is already identified that China will be majorly having extensive market opportunities
for Zott but there are some other factors also to be determined. According to the global economy,
it is identified that openness in trade is reducing in the case of China and when compared for the
last few years, it is identified that it is steadily going down. This might be challenging for Zott
because the lower will be the trade openness, the more will be barriers for them in trading

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between China and other countries. It is also identified that according to the International
Monetary Fund, the economic growth forecast of China will get down in the coming years. This
is another factor that should be considered by Zott in expanding their foreign business
(Douphrate et al., 2013). The strategic location of China in the Asian region will be beneficial for
Zott because they can tap the emerging markets in the South East Asian regions and the Indian
subcontinent countries from their Chinese operations. China is already having number of
competitors operating in the dairy sector including both the domestic and global brands. Thus, it
should be noted by Zott that they should initiate the differentiated approach in gaining the
competitive advantages in the Chinese business. The political scenario of China is another
important area that should be considered due to the reason that they are following communist
type of government with higher government interference in the private business affairs. For
example, Google was forced to stop their business in China due to this higher government
interference. This will also be another challenging factor for Zott in their Chinese business and
they should be competitive enough in the dealing with these (Guo, Wang & Chen, 2016).
Currently, China got indulged in the trade war with the United States and is having number of
trade related issues with the European countries. This might be challenging for Zott because the
more will be the issues like trade war, the more Zott will face the risks in investing in the
Chinese market. The risks on gaining the positive return on investment will get increased for
them (Qian et al., 2013). Hence, it can be concluded that China as a country is posing both
challenges and opportunities for the investing companies such as Zott.
Business model analysis
Business model analysis will be beneficial for Zott to design the best and most effective
business model, which will be beneficial in gaining the maximum from the Chinese market. It is

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recommended that Zott should have manufacturing model of business where they will
manufacture the products and will sell the end products in the market. In this case, business
model canvas will be used to identify each of the different elements important in the case of
business success of Zott. The following sections will discuss each of the elements of business
model canvas of Zott.
Key partners The key partners of Zott will include the end retailers and the suppliers
due to the reason that Zott will not have the forward and backward
integration. The third party retailers will be involved by through whom
the products will be sold to the end customers. In addition, the milk will
be sourced directly from the dairy farmers for the production process.
Thus, partnerships with both the retailers and the suppliers will ensure
the best business process for Zott.
Key activities Key activities of Zott will include only the production of the dairy
items and the promotion of the same. This is due to the reason that lack
of forward and backward integration will relive Zott from having
responsibilities related to the retailing and distribution of the products.
The key activities of Zott will stick to the core activities of Zott, which
will further ensure the regulated cost structure.
Key resources Key resources for Zott include financial, human resources and
technological resources. This is due to the reason that access to the
financial resources will help Zott to extensively invest in the Chinese
market. Human resources will help to enhance the productivity and
effectiveness of Zott in their foreign business operation. Lastly,

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technological resources will help Zott to gain the maximum from the
investments by increasing the efficiency and ensuring the safety and
health standards of the products.
Cost structure Major costs areas will include the potential expenditure areas for Zott
and this will include expenses for promotion and marketing activities,
production process and human resource management. It is
recommended that Zott should follow the cost driven approach. This is
due to the reason that with the initiation of the cost driven approach,
cost leadership can be gained and will be have higher profit margin.
Value propositions Value propositions of Zott will include the diverse range of dairy
products for different taste and preference pattern of the customers.
This includes the cheese variants, desserts and yoghurts. Thus, with the
presence of diverse value propositions, Zott is having the effectiveness
of meeting different needs of the customers.
Channels Channels for Zott will include Omni Channel mediums including both
offline and online mediums. This is due to the reason that online and
offline mediums will help to cover the maximum of the market. It is
recommended that Zott should follow the direct distribution channel
involving the distributors and retailers. This is due to the reason that the
more will be the involvement of the distributors and retailers, the more
will be market presence and coverage of the products of Zott.
Customer relationships Zott will have dedicated customer management and relationship
program for the Chinese customers due to the reason that Chinese

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customers are culturally different to that of the global customers.
Cultural factors including the language will be personalized according
to the local cultural backgrounds. Customers will be provided with
automated grievance system where their issues will get mitigated and
managed properly.
Customer segments Products of Zott will be targeted for the mass market customers due to
the fact that dairy products are volume drivers. The pricing will also be
dome accordingly to target the mass market customers. In addition, the
customers from the tier I and II cities of China will be targeted because
at the initial stage, penetration in the tier III cities cannot be achieved.
Revenue streams Revenue stream for Zott is only the sales of their products as they are
following manufacturing model of business. Thus, the more will be the
sales of their products, the more will be the generation of revenue. This
will also ensure that Zott will have sales driven approach in their
business.
SWOT analysis
SWOT analysis will be done because it is important to identify the internal effectiveness
of Zott and the extent to which they are effective enough to operate and gain profit from the
Chinese market. The following section will discuss about the four elements of SWOT analysis
from the perspective of Zott.
Strengths

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Strengths of Zott include their expertise in the dairy sector. This is due to the reason that
they are founded in 1926 and that reflects the years of experiences for Zott. In addition, they are
having presence in more than 75 countries and thus already having immense experience and
expertise in international business. The probability of gaining maximum from China is more for
Zott. Access to financial resources can also be considered as strength for Zott because; extensive
investment and infrastructural development can be done with the help of the proper funding
sources. Zott is having this strength and this is creating competitiveness for them to gain the
maximum from the Chinese market. Diverse product portfolio is strength for Zott because larger
customer segments can be gained by them in the Chinese market.
Weaknesses
One of the major weaknesses of Zott is the lack of presence in the Asian market. This is
due to the reason that Asian taste and preference pattern is different to that of the European
market. Thus, the existing products of Zott might not be able to match with the taste and
preference pattern of the Asian customers. It is also identified that Zott is not a limited company
rather they are private company, which is restricting their funding sources. There are number of
public limited dairy companies operating in China and it will be difficult for Zott to match their
funding sources (Dai & Wang, 2014). Being a completely new entity in the Chinese market, Zott
is not having the access to the dairy suppliers and this will restrict their long term potentiality.
Matching the economies of scale will also be challenging for Zott compared to their existing
competitors in China.
Opportunities

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One of the major opportunities for Zott is the increasing trend of dairy consumption in
China. This refers to the fact that with time, consumption level of dairy among the Chinese
customers will get further increased. The more will be the consumption, the more will be the
demand for dairy products and the more will be the business opportunities for Zott (Fuller &
Beghin, 2015). It is also identified that increasing health consciousness among the average
Chinese customers will also contribute in the business opportunities for Zott. The higher will be
the health consciousness, the more will be the preferences for the dairy products in the market.
Threats
Zott is facing the threat of increasing competition in the Chinese market. This is due to
the reason that the more will the market potentiality of China is attracting higher extent of global
and local competitors and this will create the competitive intensity for Zott. In addition, another
major threat for Zott is the increasing cost of milk supplies. As they are dependent on the
external suppliers for the milk, their pricing will affect the cost of production of Zott and the end
product pricing.
Identification of the strategic issues
In doing business in China, there are multiple strategic issues to be addressed by Zott in
order to have their long term viability. One of the major strategic issues will be the management
of business growth. This is due to the reason that in the intensely competitive scenario of
Chinese market, it will be challenging for Zott to manage their growth approaches. There might
be the situations when business stabilization will be recommended over the business growth
strategy (Atikiya et al., 2015). For instance, Zott is following cost leadership strategy in their
growing their business but their few competitors are also following the same. Hence, profit

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margin is going down as well as the sales volume. In this case, Zott should initiate the product
differentiation strategy for creating competitive advantages. This will be a major strategies issue
for Zott in doing business in the Chinese market.
Another probable strategic issue to be faced by Zott in doing business in China is
managing the cost structure. This refers to the fact that improving the cost structure will help
Zott to gain higher profitability from their internal management and will enable them to offer
their products in more competitive price points (Yung, Jung & Chen, 2013). In this case, the
major strategic issue for Zott will be achieving the most viable and suitable cost structure for the
long term business viability. It is important for Zott to manage the rising cost of supplies even
after offering the finished products at competitive price points.
The next strategic issue that will be faced by Zott is the alignment between their business
process and the market conditions and trends. This is due to the reason that China is a leading
country in the world in terms of economical growth and they are considered as leading
developing countries. Hence, the market trends and conditions are changing rapidly in the
Chinese market, which should be considered by Zott (Walters, 2014). The business approach of
Zott should also align with the changing market scenario in order to gain the long term viability.
For instance, if the products of Zott can meet the current market trends and expectations, then
only it will help them to gain the long term business sustainability.
Initiating the innovation process in the business is another strategic issue for Zott because
without the innovation, competitive advantages cannot be gained while it will increase the cost
structure for Zott. This is due to the reason that in the competitive market scenario of China, Zott
should introduce innovative value propositions in the market, which can further help them in