International business refers to process in which an organization conduct its business functions and operations at cross borders. It can be done among between government of an other country or company. If a company wants to operate their business at international level they have to conduct many things such as market evaluation to know as well as understand customer in effective manner (Dunning, 2013). Along with this they have to analysis legal issues and requirement that is required while conduct or expanding at international level. An organization which is taken for this assignment is Meadow Dairy, that is a UK SME who operates its business at London, United Kingdom.
The major objective of this company is to expand its market bases at Chinese market by year 2020- 2021, by offering UHT milk for children aged between 3 to 11 years. Respective company decide to make brand ambassadors to pre school age children with whom they can related the products and children likes and dislikes. Topics which are covered in this report are analysis of market to expand business in anther country that is China. Along with this it explain trade barriers, ethical and social issues which can be face by this company when they expand its business. Cultural which is preferred by company and method which is adopt by respective company in order to expand business.
1. Business drivers behind company’s expansion into the given country
To expand a business operations and functions in effective manner an organisation needs to conduct market analysis by which they can analysis and understand need and demand of customers in effective manner in order to satisfy them. By this they can also analysis various factors which may affect their operations as well as functions (Shenkar, Luo and Chi, 2014). In context of Meadow Dairy which is going to expand its business functions in Chinese market by product UHT milk. This particular milk is mainly for children whose age is between 3 to 11 years. For this they conduct PESTEL analysis in order to conduct functions in effective manner. Explanation which is given below:-
It refers to a framework which is used by respective company in order to evaluate and analysis macro environmental factors which may affect business operations as well as functions. It mainly focuses on the macro level of a business in an economy. It deals with the economy as a whole, national income of a country, demand and supply on country level and many more. It controls all the aspect on country level which maintain the country growth in an appropriate direction. Pestle analysis on China, which focuses on the business which enters newly in the country and cross borders with many aspects keeping in mind (Killing, 2013). By analysing this International business consultant of Meadow Dairy able to develop appropriate and effective strategies and process for expanding business at China market.:-
- Political factor:- Government of china gets more strict on its rule of law as “The people's republic of china” plays a role of the dictatorship which regulates by business class and the people in the alliance. Political forces are unsettled as it changes policies with the change in government and China has aimed to focus on improving its e-commerce rather than framing policies for welcoming FDI in its country. In context with the Meadow Dairy which deals in UHT milk, China encourages unique policies to improve agriculture and focus on self-sufficiency.
- Economical factor :-Talking about economic factor, China's economy is on the peak as it experienced high growth in GDP rate which will definitely cross the US GDP soon. Many factors which involve in china growth are skilled and active labour, export more import less, better technology, which grows urban areas potentially etc. SME s get motivated while focusing on growth of country as it suggest that every single company add value. Due to the increase in population, labour in China is low which gives benefit to a company in many ways. In context with the Meadow dairy China high inflation rate and high property prices may affect the company's stability in country for future.
- Social factor :- China has a vast population and it took change in a rapid manner on the basis of demographics constantly change. It fluctuates in many ways as the growth of population, age distribution, size of family, change in behaviour, trends in market, values, etc. Taking Meadow dairy in mind, then china has more focused on Taobao e-commerce website which provides every facility to its citizen (Picciotto, 2017). Population change is beneficial for the company as it can open many opportunities to stable in the market.
- Technological factor :-China spends on research and development and work on improving every aspect related to development of new product, way of purchasing mechanism such as intranet and extranet, , new technology in manufacturing process, etc. Taking Meadow dairy in mind, China faces a problem while in development of market B2C industry. It has weak technology instability of its online payment system.
- Environmental factor :-When it talks about the environment, then, water and air pollution are growing day to day as china focusing on rapid increase in industry and manufacturing sector. Waste in industries, cutting of trees, change in climate, etc are some of the major effect which china is facing due to increase in pollution. China is focusing on spreading awareness to focus on country's welfare and protect the environment (Clarke, Tamaschke and Liesch, 2013). Meadow dairy may also increase the pollution due to rapid increase in packaging and installing plant for better technology etc. This may lead a problem in extending business for the future.
- Legal factor :- There are several legal frames under which china companies or FDI works such as standardized labour, employee benefits, wages, issue amongst labour and company, etc. these facilitates by The PRC labour law 1995 and other laws framed by government of china in the favour of people working in companies. Meadow which focuses on cheap labour may not benefit the company on a larger scale as it has standard maintained by government. The country divides FDI in four categories, i.e. encouraged, restricted, prohibited, and permitted.
2. Trade Barriers
Trade barriers refers to factors or elements which may affect an organisation business operations and functions when they expand business at international level. This will include various factors such as fluctuation in price, subsidies, rules and regulation of respective country, customers need and demand, local business owners and many more. These trade barriers affects operations and function of an organization that will directly and indirectly affect their profitability ratio (Papadopoulos and Heslop, 2014). So it is consider as responsibilities and role of manger to plan or develop strategies through which they can overcome barriers that occur in future and in uncertain manner. Their are various trade barriers which can be face by Meadow Dairy while expanding its business at Chinese marketplace. Some major of them are explain below:-
- Identify market: The Meadow Dairy company is operating its business operations and function London, UK whose population is comparability high in respect of China where they are going to expand its business. Which can consider as barriers for respective company in deciding target audiences or market for their product UHT milk. Population of this country are attracted towards foreign manufactured goods and services. But it is consider as one of major barriers which can be face by this company in selecting appropriate market to launch their UHT milk. Along with this they also face issues in different ways while identifying market such as per capita GDP, lifestyle, literacy rate, eduction level, consumers behaviour and many more.
- Government policies and regulations:Government of China develop various rules and regulations for opening and expanding business at their market. They also develop rules for manufacturing products and services in order to protect their citizens and environments (6 CHALLENGES OF DOING BUSINESS IN CHINA AND HOW TO OVERCOME THEM, 2019). They also develop food and safety law so that their will be only healthy and safety foods will be consumed by peoples. So when Meadow Dairy company expand its business at china market they have to follow this act which help in operating business functions in effective and appropriate manner. For which they have to produce UHT Milk by considering all necessary laws that leads to smooth functioning of business and also enhance profitability.
- Cultural Difference:Culture which is followed by china public is different from other western countries such as United Kingdom. That will develop difficulties for Meadow Dairy when they launch their product UHT Milk at respective country market. So that its manager and leader must prepare strategies and policies in order to operate effective at respective market (Piekkari, Welch and Welch, 2014). Some strategies which can be adopt by respective company mangers and leader are like they can provide training and development to employees so that they can understand culture of China in proper manner that leads to effective working and attaining of objective in proper manner. They must also do effective analysis of market in order to understand culture in efficient way. For this respective company is will create awareness about UHT milk which is effective for child growth in proper manner.
- Moving too quickly:China is one of the famous and fastest growing country in all aspects. Due to this reason some American companies get failed at China market because they are not able to change or adopt new techniques in quick basis. So it is consider as role and responsibility of manger as well as leaders at Meadow Dairy to conduct market analysis on regular basis. That will help them in developing and designing policies and strategies in effective and appropriate manner in order to attract as well as retain consumers for long run. By this they able to enhance their profitability and customers bases. The respective company must adopt laws and new technology in order to launch UHT milk for children at respective marketplace.
3. Ethical and social issues to be considered by the United Kingdom SME
Ethical and social issues refers to problems which is face by an organization when they are operating their business. This will various terms such as discrimination at workplace, personal information leakage, discrimination in health insurance, problems related to race and ethics and many more (Brohé, Eyre and Howarth, 2012). For this an organisation develop various strategies and laws for employees so that they can develop positive and effective working environmental at workplace. Along with this they also conduct various activities for the welfare of society such as establishing hospitals and schools, donating money to charity or trust, plan trees and many more. These activities are know as Corporate social responsibilities and it is also know as corporate sustainable, corporate citizenship, responsible business and many more.
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CSR is consider as a variety of international private business self regulation and it is also consider as an internal policy which can be adopted by an organisation. That will help an organisation to be accountable for society that are, employees, stakeholders, consumers as well as other public. In an organisation is engage in Corporate social responsibilities activities, then it consider as its norms and values that they will operate business business in a manner is beneficial for society as well as environments. Respective term is very beneficial for an organization because by this they can attract and enhance their brand image as well as name, by which they able to attract more and more investors and customers (Chidlow, Plakoyiannaki and Welch, 2014). That leads to enhancement in profitability ratio and customers base. There are various other Corporate social responsibilities which help Meadow Dairy in expanding their business at Chinese marketplace in effective manner, some major of them are explain below:-
- Improve public image:By conducting corporate social responsibilities an organisation able to enhance as well as improve their public image and name. By which they able to attract more customers and stakeholders. In context of respective company, they must support non profit organization of china by donating money, products and services to them. Through this they able to attract peoples of china and government that help this company in operation business in smooth manner.
- Enhance Media coverage:If a company is doing corporate social responsibilities then it is necessary that everyone know it because by it they able to attract customers and media. If media is supporting an organisation they will promote it in positive manner. So it is essential for Meadow Dairy company to maintain good relation to local media of China. Media will highlight and promote business of a company in effective and appropriate manner.
- Enhance engagement of employees:Staff of an organisation like to work work with company which has a good image of brand at market place. If employees feel happy and satisfied they conduct work in effective manner for accomplishing work and attaining goal as well as objectives (The Importance of Corporate Social Responsibility for Your Business, 2019). In context of respective company if they do CSR activities then media promote them positively which enhance goodwill of company due to which employees want to work in respective company. This will also helpful in reducing in employees turnover ratio.
- Attract and retain investors or stakeholders: When an organisation conduct corporate social responsibilities they able to attract investors and stakeholders on huge basis which is beneficial for a company. This is so because these are the one who pour money into business operation by which company able to conduct their activities and process in effective and appropriate manner. In context of Meadow Dairy when they do effective CSR activities then media promote them by which they able to attract more and more investors and stakeholders. By which they get more money for conducting work process in appropriate and effective manner in order to attain goal.
4. Cultural preferences to be Considered by the business
Culture refers to values and beliefs which is followed by an organisation and other peoples which are directly and indirectly related to a company. Through this management able to conduct work in effective and appropriate manner in order to accomplish work and attaining goal (Richter and et.al., 2016). In an organization adopt effective culture they able to conduct work and satisfy employees in smooth as well as efficient ways. Culture at workplace include various factors such as working environment, mission and vision of company, values, ethics, goal and many more. Adopting effective culture at workplace helps or beneficial for an organisation in various ways, some major of them in context of Meadow Dairy are explain below:-
- Help in developing identify at marketplace: When an organisation adopt an effective as well as unique organization culture they able to create identity at marketplace. That will help them in conduct and expanding business in effective and appropriate manner (Why is Company Work Culture So Important,2016). In context of respective company when they adopt unique and appropriate culture they able to satisfy employees in high rate and attract customers at China market. That leads to increase in staff productivity and company's profitability. Along with this employees retention and goodwill of Meadow Dairy both get increased.
- Work culture avoid havoc:If an organisation adopt effective work culture they able to avoid disturbance in work process. By it company also able to develop team sprite among employees which leads to accomplishing of work in effective and appropriate manner. In context of Meadow Dairy by adopting effective culture at workplace they able to develop and maintain effective working environment at work place. Moreover by this quality of employees performance also get increased by working in team that help respective company in conduct its work in China market in proper ways.
- Help in employees retention:By adopting and maintaining effective working culture at workplace company able to retain their employees at long run. That also leads to enhancement in productivity and profitability for an organisation. When old employees retain for long run company also save money of recruitment, which can be used in other useful activities (Derudder and Witlox, 2016). In context of respective company by developing proper culture at workplace they able to satisfy employees in effective manner that leads to employees retention of long term and they also provide innovative ideas that leads to expansion of this company at china market in efficient manner.
- Helps in gaining financial benefits:When an organization adopt and develop effective culture they able to conduct work in effective manner which reduce in wastage and employees turnover ratio in effective as well as efficient manner. In respect of Meadow Dairy by adopting effective working culture they able to gain financial benefits, which they can use for growing their business at China market. Along with this by gaining benefits of finance company able to do expand their business in effective manner in appropriate and effective manner.
Above mentioned importance of culture, that can be gain by Meadow Dairy when they adopt effective working culture at their workplace. So it is essential for respective company manger and leaders to adopt and develop effective culture at workplace.
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5. Expansion Methods to be chosen by company
There are various methods which can be selected by an organisation in order to expand their business at local or internation market. Such as joint venture, partnership, licensing, franchise and many others. By this they can enlarge its customers based and profitability at huge ratio. Some major of them which can be analysis by Meadow Dairy's international business counsellor are given below:-
- Joint Venture: It refers to written agreement which is take place between two or more business entity for a specific project or business activities. In this both parties share ownership, profit and risk (Preston and Windsor, 2013). By this companies able to identify and excess new channel for distributing products and services at huge market base. In context of Meadow Dairy if they adopt joint venture technique in order to expand business at market place of china they able to operate business activities some large group company. Along with this their customers base and profitability ration both get increase.
- Licensing: It refers to a method in which an organisation provide licence to another company to use their logo, name, design and property to sell as well as manufacture products and services in effective and appropriate manner. Their is a written agreement which include who another can use there things in effective and appropriate manner. In context of Meadow Dairy when they adopt this they give license to another company at China to manufacture product on their name and sale in effective manner.
- Franchise:This is consider as one of the best marketing method which can be adopted by an organization in order to expand their business at internation market (Ueda, 2012). By this company able to attract more customers of international market which leads to increase in profitability in effective and appropriate manner. In context of respective company they will provide franchise to some other company of China to sue their name, brand and logo to sale their products and services in effective manner. It is consider one of the best method for SME's to expand their business internationally.
By analysing all the above methods of expanding business international business counsellor of respective company analysis that joint venture as well as franchise both are essential for them when they are planing to expand its products at marketplace of China.
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From above discusses point it can be conclude and analysis that every organization want to expand there business at internation level for which they conduct various activities and analysis. That will help them in operating and conducting business operations and functions in effective and appropriate manner. For this an organisation needs to do activities like analysis of market in order understand needs and demands of customers in proper manner. So that they can develop plans, strategies, policies, rules and regulation accordingly, which leads to attaining of goal and objectives in effective manner. For conducting market analysis in order to expand business in another country an organisation can conduct PESTEL analysis or Porter's five force analysis. Company also go though various trade barriers while expanding business at global level.
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To reduce its effect an organisation must conduct corporate social responsibilities activities which help in attracting and retaining customers, employees and investors. Company must also identify plans to identify appropriate culture to operate their business operations and functions in effective manner. Along with this it is also necessary to adopt appropriate and efficient methods of expanding that help in retaining and attracting potential customers in large basis in order to expand business.
- Dunning, J.H., 2013. International production and the multinational Enterprise (RLE international business). Routledge.
- Shenkar, O., Luo, Y. and Chi, T., 2014. International business. Routledge.
- Killing, P., 2013. Strategies for joint venture success (RLE International Business). Routledge.
- Picciotto, S., 2017. Rights, responsibilities and regulation of international business. In Globalization and International Investment (pp. 177-198). Routledge.
- Clarke, J.E., Tamaschke, R. and Liesch, P.W., 2013. International experience in international business research: A conceptualization and exploration of key themes. International Journal of Management Reviews. 15(3). pp.265-279.
- Papadopoulos, N. and Heslop, L.A., 2014. Product-country images: Impact and role in international marketing. Routledge.