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University Name: UNIVERSITY OF WEST LONDON

Name of Module: International business

Unit number: level 6

Module Code: MS6LS48O, MS6LB48O, MS6LL48O

Student Name: SUHEL AHMED CHOWDHURY

Student ID: 21411703

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Executive summary
International business is a process of gaining foreign market based on the domestic market
reputation or expand the business. In the assignment, the chinses market has been described what
types of business trends in the market. It shows that there are many products in the market which
is increasing the revenue of the Chinese. It also provides the Chinese market business policy
where other countries export their business. UK SME industry has developed the business
operation in the Chinese market. In the statistics of the UK, the market trend shows that SME
business is increasing day by day. SME company has used to direct export method for going to
the foreign market which is suitable because of reducing cost and limitation. Here also knows
that international business can be ensured to profit to the organisation. It also helps to understand
the business policy of the foreign country. Cultural effects also describe in the international
business where nation culture, people culture and so on are attending the market. Corporate
social responsibility is the ethical issues and social issues which are considered by the UK SME.
For this, people are encouraged to the SME industry where they do it to engaging the customer,
employees, cost saving, and so on.

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Table of Contents
Executive summary ....................................................................................................................... ii

Introduction ................................................................................................................................... 1

Question 1: Business drivers behind company expansion in China ......................................... 2

Porters Five forces factors: .......................................................................................................... 2

Trade theories: ............................................................................................................................. 3

Question 2: Trade barriers .......................................................................................................... 4

Question 3: Ethical and social issues to be considered by the UK SME .................................. 6

Corporate social responsibility: ................................................................................................... 6

Question 4: Cultural preferences to be considered by the business:........................................ 8

Question 5: Expansion method to be chosen by the company: ................................................. 9

Methods of Internationalisation: ................................................................................................. 9

Strategic evaluation framework: ............................................................................................... 11

Conclusion ................................................................................................................................... 13

References .................................................................................................................................... 14

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Introduction
Industry trends mean to make predictions in the market conditions and the country position. It
includes consumer behaviour, employment, new product development, technology development,
government norms, competition and so on which impacts on the industry (Daniels, Radebaugh
and Sullivan, 2010.). The industry trends of the UK are establishing the business all over the
world. in the figures show that protein drink and milk has increased from before the year to after
the year. In 2016, it was 3000 RMB approximately and often 28000 RMB was in 2015. In the
trends of the Chinese market are showing that the user of the product is increasing day by day
which increases the revenue in the organisation. UK market

Figure 2: Chinese market trends


Figure 1: UK Market Trend
Sources: (Daniels, Radebaugh and Sullivan,
2010.) Sources: (INTERNATIONAL BUSINESS
TRANSACTIONS, 2019)

In the UK market trend shows that business is increasing day by day. Most of the people are
involving in business. The figure shows that the percentage of business is 99.3 where most
organisation is small and employment is high in the large organisation. UK and China market is
increasing rapidly all over the world.

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Question 1: Business drivers behind company expansion in China
International business is very much important to know the environment because it helps to
expand the business effectively. UK SME business has expanded the business in China so that
the business has needed to know the trade theories which brings to key business drivers.

Porters Five forces factors:

Porters have given five forces for knowing the business environment where the UK SME milk
company can know the business trend of China country.

Figure 3: Porter five forces

Sources: (Rugman, Collinson and Narula, 2012.)

The threat of new entry: In the factors express the condition of the countries where new
company expand the business. If there are low barriers in the market, then it will profitable for
the company (INTERNATIONAL BUSINESS TRANSACTIONS, 2019). In the process, UK
SME has needed to know how to enter the market easily. The more existing organisation creates
barriers for the new entrant because of low competition. In the country of China, a threat of new
entrants is the high low amount of capital required for the market, existing companies do not

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possess trademarks, patens, and so on, there is no government regulation, the customer switching
cost is low, customer loyalty is not high and so on.

Bargaining power of suppliers: Suppliers are the most important for the company when
producing a product or supply into another country or the organisation. They can increase the
price of the product but they provide low quality of the product (Rugman, Collinson and Narula,
2012.). In the market, there are huge buyers but lower customer which creates this situation. UK
SME company has wanted to provide UHT milk for the children aged from 3 to 11 years. For
this, suppliers are needed to ensure raw material for focusing on the Chinese market. Suppliers
have strong bargaining power in the market when they are few suppliers but high buyers, large
suppliers to forward integration, few substitute raw materials, cost of switching raw materials
high cost and so on (Rugman, Collinson and Narula, 2012.).

Bargaining power of buyers: Buyer powers have been done when they want to the high product
but pay the low-price (Daniels, 2015). It is harmful for the organisation because of low revenue.
A high-quality product is a high cost but the low price cannot overcome the cost. In the China
market, international trade has been established from different countries as a result buyer cannot
create power in the market. Buyer bargaining power is in the market when the buyer is buying a
large quantity (Daniels, 2015). Buyer barging power increases such as only a few existing
buyers, backward integration, many substitutes, price sensitive and so on.

The threat of substitutes: When the buyers can get a substitute product in the market then it is
threatened for any organisation (Rugman, Collinson and Narula, 2012). In the market has many
milk brands, when the buyers change their preference from UHT milk to another brand company
milk then it is threatening to the companies. So, it needs to consider when to expand in the
international market.

Rivalry among existing competitors: The organisation has completed within the market for
giving the unique product, service, price sensitive, quality product, discount, promoting the
product and so on. It is rivalry competitors in the market (Daniels, Radebaugh and Sullivan,
2010). In the Chinese market has many existed competitors but, in the market, the UK SME milk
company can sustain to compete with them which needs to consider for international business.

Trade theories:

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Trade theories are exchanging people entities or service to other places (Cavusgil, Ghauri,
Knight and Riesenberger, 2013). It drives the business in international markets. There are many
trade theories such as mercantilism, absolute advantage, comparative advantage and so on. In the
analysis of competitive factors then we can choose Absolute Advantage trade theories for driving
business effectively.

Absolute Advantage trade theories: Theory of absolute advantage is effective when it produces
a product efficiently places (Cavusgil, Ghauri, Knight, and Riesenberger, 2013). In the process,
an organisation can easily get revenue by giving a particular product. Climate condition, labour,
resources are considered to produce a particular product that absolute advantage in the
organisation. UHT milk has been attracted for children, as a result, UK SME company can
provide an advantage for getting the internal market. The Chinese market is provided to Milk
which is selected for particular age children. In the process, UHT milk is produced more
efficiently than other countries which will bring to absolute advantage.

Question 2: Trade barriers


Trade barriers are restricted by the government on international trade. In the process, the
government has included the cost and limits of the industry (Griffin and Pustay, 2010). There are
some trade barriers such as tariffs, quotas, regulation, ethical issues, legal issues, cross-cultural
preference, competitors and so on.

Tariffs: Tariffs are one of the import restrictions on international business which is being done
by based on the import product or service. In the process, product or service cost are increased
by the government (Griffin and Pustay 2010). Trade barriers are used to protect domestic
employment by limiting the import of foreign employees. Foreign labours and production cost
are cheaper than own countries then the organisation are imported to foreign employees, as a
result, it increases the unemployment in the country. For this reason, the government restricts to
control the situation (Griffin and Pustay, 2010).

Another trade restriction has been done to low foreign wages. Domestic employees are needed to
high pay and taxes paid to the government. To get a comparative advantage, the company import
from other countries to pay low wages. Unfair trade performance of the international market has
been restricted by the government (Griffin and Pustay, 2010). Domestic products compare to

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foreign products where foreign products are low price than domestic that is restricted in the
countries.

Regulation: Regulation is another trade barrier to international business. The government has set
some rules and regulation for expanding business in the international market (Cavusgil, Ghauri,
Knight, and Riesenberger, 2013). Regulation has created for trade barriers so that it can be
ensured no discrimination, transparency, protection of the company and so on. The common
instrument of import and export regulation needs to licence where it limits the organisation
whereas they cannot import as a particular quantity (Hill, 2012). To control laws discrimination,
the regulation is applied in the countries. The license systems permit to foreign trade otherwise
they cannot import any product or service.

Ethical issues: Ethics is so much essential for any country which is expressing the country
image. Ethical issues are included in the expansion of international business because of
organisational goals, mission, policies, strategies and so on. When the organisation wants to
expand the business then they should maintain their moral and ethical issues (Hill, 2012). There
are many ethical issues such as working standard condition, outsourcing, human rights, trust and
integrity, the political arena and so on. Ethical issues create barriers to a diverse organisation.
Culture also facts of the organisation to restrict the business where they should consider the own
countries culture and the establish areas culture (Kirkman, 2006).

SME company should follow those trade barriers so that they can operate the business without
any interruption. If the company ignore it then they will fail to operate the business. Those
barriers are created by the government. If the companies are ignoring these then they can reduce
cost. It helps to achieve the target market.

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Figure 4: Trade policy of the national government of China

Sources: (Hill, 2012)

In the figure show that trade defence measurement is the highest which expresses that UK SME
launch the business in the Chinese market will not be more effective but tariff increases in the
market that makes a more competitive market. Trade policy of the government can create an
opportunity for the organisation when it is low applicable in the market.

Question 3: Ethical and social issues to be considered by the UK SME

Corporate social responsibility:

Corporate social responsibility is a sustainable and ethical way where the organisation is
operating in the market effectively (Hofstede, 2010). It considers human rights, environment, the
community, society and so on when the company operates the international market. Corporate
social responsibility is so much important in the international market because it brings to success
in the market. UK SME company wants to expand the business in the Chinese market. As a
result, they should maintain corporate social responsibility and practice in the market.

For the benefits, corporate social responsibility is so much important. Following benefits are in
the corporate social responsibility-

Improved public image: Public image is indispensable to attract the organisational product for
buying. UK SME wants to profit in the Chinese market. So, the organisation should enhance
corporate social work based on the product (Hafford-Letchfield, 2010). Milk has such as protein,

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healthy to the child that needs to express in the market. They can campaign in the local markets
for giving free milk service which increases the brand of the company.

Increased brand awareness and recognition: When the UK SME company spreads the
commitment such as ethical and social values product, then the company is increased the brand
awareness through this corporate social responsibility.

Cost savings: UK SME operate international market the business with targeted Chinese market
of children. When the organisation has used to the sustainable way such as less packaging, then it
reduces the production cost (French, 2012). It is also important to consider operating the
international market. UK SME milk company has saved cost through targeting and fixed the
customer.

An advantage over competitors: Corporate social responsibility in the international market has
defined to unique from another organisation. it helps to enhance the social value that brings to
competitive advantage in the market (Hafford-Letchfield, 2010). UK SME company gives
different seminars in the market which enhance the image of the company, as a result, it brings to
competitive advantage in the market. The company has expressed to the product as a unique,
quality, and so on.

Increased customer engagement: Customer engagement is another important issue for


corporate social responsibility. The organisation can create a story of the company in the social
media which are followed by the customer (Kirkman, 2006). Another way, customers are as a
seller where they can choose their own responsibility. UK SME has increased customer
engagement through corporate social responsibility. In the engagement of customer can bring to
loyal to the organisation as a result customer never cut off the company.

Greater employee engagement: In the corporate social responsibility needs to engage


employees so that employee can enjoy the work. To engage the employees, they can take
decision making in the organisation. UK SME company comprises the employee to take strategy
in the local area as they are encouraged to the organisation (Kirkman, 2006).

Corporate social responsibility is the ethical issues and social issues which are considered by the
UK SME. The business is operating in the international market to consider corporate social
value. Those important issues are needed to consider in corporate social responsibility which

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brings to profit for the organisation. in the Chinese market, the corporate social works are such as
increasing image, public awareness, employee engagement, customer involvement, and so on.
Those issues are considering in the operating Chinese market.

Question 4: Cultural preferences to be considered by the business:


Culture is defined as shared values, arts, beliefs, attitudes, and so on of a particular people or an
organisation. In the organisation has several cultural people where it represents cultural diversity
such as different background people, perspectives, experience and so on. In the organisation has
own culture that is following to operate the business (Hill, 2015). The business needs to the
cultural preference for the international business operation. In the Chinese market, the UK SME
company needs to understand multiple cultures such as nationality, ethnicity, religion, gender,
work organisation, age, profession, income level, and so on. The companies need to understand
where they operate-

National Cultures as a Point of Reference: The idea of a nation has provided the culture
because it is a cause and effect of national boundaries and the reference point is, “we” versus
“they” (Morrison, 2010). National identity is including such as rites, respect, symbols and so on
where the preservation of the national site, monument, document, museum and so on are the
perception of “we”. Nations have included subculture which needs to be flexible for the
business. In the country has also multiple people who have two or more culture. National culture
needs to know as a significant activity of the business because of a successful organisation. UK
SME organisation also analysis the culture of Chinese market where people need to be
understood what wants from the market. National cultural activities firstly consider in the
organisation so that country people are able to decide purchasing product (Hafford-Letchfield,
2010).

For example, the UK SME organisation should consider their own culture with the national
culture. When they are training to their employees as a local culture for attracting the customer
that is a strategy of notational culture. The organisation can share own and national value in the
Chinese market (Morrison, 2010).

The People Factor: Another important factor of culture is people factor to operate the business
in the international market. People are the most essential because of sustaining the business with

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revenue (INTERNATIONAL BUSINESS TRANSACTIONS, 2019). So, people behaviour
needs to consider the organisation. in the nation has a diversity of cultural people where it helps
to gain deeper knowledge and experience. Cultural diversity brings to competitive advantage in
business but it is difficult to successful cultivation of diversity. When the organisation considers
divergent culture, it creates cultural collision which brings to less effective after implementing in
the market. It enhances distress to adjust the behaviour abroad.

Chinese people have own culture that is very much strict to the culture (Hafford-Letchfield,
2010). For the reason, UK SME business should employ the local employee for providing
service so that people can interact with them. For example, UHT milk is containing good from
another brand but people are not interacted with the product because of unknown value. in the
situation, the UK SME organisation needs to consider customer behaviour. Milk is selected for 3
to 11 years aged children where business needs to set the product value to the parents.

Building Cultural Awareness: People are agreed with cross-culturally different but they
disagree with the impact. The organisation should perceive the cultural difference and impacts on
the people (Hill, 2015). Culturally different comprise such as daily routine and rules, language,
code of ethics, motivative expression, code of social relationships and so on. For example, the
UK SME milk company has expanded the business in the Chinese market, as a result, the
business needs to want to know the culture what is favourable for the customer. cultural
awareness is one of the processes of developing an organisation in a particular place.

Question 5: Expansion method to be chosen by the company:

Methods of Internationalisation:

When an organisation wants to operate its activities globally then internationalisation is the
primary sites of attention. It is a sequential process where the organisation stores economic
activities because internal and external factors motivate the organisation (Futao Huang., 2013).

UK SME company has decided to go international market, it takes place in a wide verity of ways
which divided into three such as Export based methods, Non- equity methods, Equity methods.

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Export-based methods:

It is a very common way where the organisation is becoming international because it produces
the product in the domestic market and exports in a foreign country. It is the oldest method of
internationalisation to the business (Welch, Benito and Petersen, 2007). UK SME industry has
wanted to grasp the Chinese market by gaining revenue. The export-based method is also both
direct exporting and indirect exporting method.

Indirect exporting: When an organisation is not directly international activity in the


international market by itself which is taking intermediaries for distributing product and service
in the foreign that is the indirect exporting method.

Direct exporting: When the firm is directly involved in distribution and selling product into the
foreign market that is called direct exporting. It is a particular commitment to choose the foreign
market.

Non-Equity Based Methods for Internationalization:

In the form of internationalisation, the organisation can do the business in the international
market in the form of patents, trademarks, copyrights and so on. the non-equity-based method is
such as licencing, franchising, and contractual agreement (Cavusgil, 2017).

Licensing: in a form of contract, an organisation is granted permission by the licensor to a


licensee in operating the activities in the foreign market (Rugman, Collinson and Narula, n.d.). In
the process, the licensor has gotten benefits where the licensee also opportunity to operate the
business in the country. This type of contract has agreed in the industries such as R&D, other
industries where the fixed cost is high.

Franchising: Franchisee purchases the right things of the business activity using the franchise
name, trademarks and so on (Wall, Rees and Minocha, 2010). there are a lot of firms which
internationalise through the form of franchising. It allows franchiser to control and enable to
local taste in the foreign country where the franchise gets the benefit of using the brand name,
product quality and so on.

Other contractual modes of internationalisation: Management contract is another non-equity


method to operate a business in the international market where the suppliers are contracted to the

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ongoing management function to provide the product with a client to another country (Wall,
Rees and Minocha, 2010).

Equity-Based Methods for Internationalization:

It is invested in another country physically for operating the business such as foreign direct
investment. There is greater control in the process because it has depended on the investment.
The organisation can use different ways to foreign direct investment such as acquiring the firms,
joint venture, merging with a firm.

Acquisition and Establishment of a firm by its own: Acquisition is a process of gaining rights
to combine with the foreign countries (Wall, Rees and Minocha, 2010). It has a greater
advantage of the new organisation because the organisation has no new licence, trademark and
patents. It has some problem associates such as cultural, legal, management issues.

Joint Ventures: A joint venture is a new identity where the organisation initiates partners to take
a decision and formulate a strategy (Towle, 2010). It shares the risks within the partners. Joint
venture makes an organisation as an economic scale operation because the individual risk is
reduced in the process. joint venture helps to go to the international market because the
organisation operation cost is gotten available from the partners.

Merging with a firm: In the process, the organisation can merge with the foreign company
through using FDI. It helps the organisation expand rapidly because of using another country
company knowledge, experience, and so on.

Above the method, the direct export method is the most suitable for SME company because it is
a small company which business needs to flexible business operation. In the direct export, the
method helps to invest the country directly where there is no other cost such as license cost,
franchise regulation cost and so on.

Strategic evaluation framework:

UK SME wants to establish its business in the Chinese market where the organisation can follow
those internationalism methods to enter into the Chinese market. Direct exporting should be good
for the UK SME company because they want to cover the Chinese market by providing UHT

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milk product. Direct exporting helps the organisation as a unique product, a new organisation,
quality service, and so on.

Figure 5: strategic evaluation framework of SME

Sources: self-design

In the framework has supported the international market where the UK SME company should
use to export based method for going to the Chinese market.

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Conclusion
The main objectives of the international business are gaining revenue to sell the product within
the countries. UK SME industry wants to do the business in the foreign market which has
selected its market in China. The firm has targeted to 3-11 years aged children as providing the
UHT milk. This is so popular milk which is also provided Tesco milk company. In the UK
market is covered UHT milk. For the popular, UK SME company has decided to expand in the
international market. To grasp the Chinese market, the company has exported the product so that
they can attain the profits from the business. Trade theories are exchanging people entities or
service to other places. It drives the business in international markets effectively. Corporate
social responsibility can increase the product and brand value in the market as well as it helps to
understand consumer behaviour. For considering the market, the UK SME company should use
to export based method for going to the Chinese market.

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