International Business Report: Chinese Economy
International business is a method of acquiring or expanding the international market dependent on a reputation in the domestic market. The report represented the Chinese economy, what kind of company dynamics on the market. It reveals that several products on the market boost Chinese sales. It also provides the Chinese market business policy where other countries are exporting their businesses. The UK SME sector established the Chinese consumer company process. The industry pattern is seen, in United Kingdom figures, to be growing daily for SMEs. The SME business used the direct approach of export to the foreign market that is appropriate to reduce costs and cap. It is often known here that foreign company may be guaranteed to benefit the organisation. It also helps consider the foreign country’s corporate stance. In an international sector, cultural effects are often defined, where the market is attended by national culture, people culture, etc. The legal and social problems of the UK SMEs are a corporate social responsibility. For this reason, the people are urged to engage the SME industry to save customers, employees, etc.
Trends in the industry imply forecasting the business conditions and location of the region. It covers customer behaviour, wages, the introduction of innovative products, technological development, national rules, competitiveness, etc. (Daniels, 2010). Britain’s marketplace dynamics build the market worldwide. Protein drinks and milk have risen from before to after the year, as the statistics indicate. It was around RMB 3000 in 2016 and mostly RMB 28000 in 2015. The patterns in the Chinese industry suggest that the purchaser of the commodity raises the organisation’s revenues day by day (UKMarket, 2020).
Fig.1: Chinese Market Trends
Fig.2: UK Market Trends
The pattern in the UK sector suggests that everyday business is growing. Most citizens have a corporate involvement. The statistic indicates that businesses in big organisations are 99.3 while most organisations are limited, and jobs are vital. There is rapid growth in the United Kingdom and China markets worldwide.
International businesses are critical to understanding the world since they enable the company to grow successfully. UK SMEs also extended their market in China to know the industry hypotheses that lead to core drivers of the business.
Porters have given five forces for knowing the business environment where the UK SME milk company will understand China’s market pattern.
Fig.3: Porter Five Forces (Simon Collinson, 2017)
Threats of new entrants: The variables state the conditions under which new companies grow their market. If there are low market barriers, the business will profit (Folsom, 2019). The UK SME had to know how to reach the industry quickly. The other developed organisations, because of low competitiveness, build obstacles for the potential entrant. In the country of China, the risk of potential entrants is high capital requirements for the industry; established firms do not have trademarks or patents, etc., no regulatory control exists, cost of changing customers is poor, loyalty to customers is not high, etc.
Bargaining power of Suppliers: Suppliers are the essential suppliers for the firm to produce or sell a commodity in another nation or organisation. They will raise commodity prices but provide poor product quality (Simon Collinson, 2017). There are big buyers on the market, but lower customers are the cause. The UK SME corporation decided to supply children between 3 and 11 years old with UHT milk. Suppliers are required to guarantee the raw material to be concentrated in the Chinese sector. Suppliers are influential on the market because they are few suppliers but big customers, broad suppliers for integration, no replacement raw materials, high cost of shifting raw materials, etc. (Simon Collinson, 2017).
Bargaining power of buyers: Buyers are given the authority to pay the low price for the high products (John D. Daniels, 2015). Because of insufficient revenues, the organisation is hostile. A high-quality product is a high expense, but low prices are not enough to cover the costs. Therefore, the buyer cannot build influence on the market in China; foreign trade was developed from various countries. When the consumer buys a significant amount, the negotiation force is on the market (John D. Daniels, 2015). The customer is increasing the barging pressure, including only a few current sellers, reverse convergence, multiple replacements, prices responsive etc.
Substitutes Threats: If the buyers can sell a replacement product, then every organisation is faced with challenges (Simon Collinson, 2017). Several milk products on the market challenge businesses by changing their choice from UHT milk to another milk brand. It must then take account of whether to extend on the foreign sector.
Rivalry among existing competitors: The organisation has completed an exclusive commodity, operation, price sensitivity, efficiency, discount, promotion of the product, etc., within the industry. They are rivals in the sector (Daniels, 2010). There are several rivals in the Chinese industry, but the United Kingdom SME milk corporation will deal with the competitors who may take account of foreign activities.
Trade ideas exchange individuals or services somewhere (S. Tamer Cavusgil, 2013). In foreign markets, it pushes industry. Many commercial philosophies, including mercantilism, total benefit, competitive advantages, etc., exist. We may then choose Absolute Advantage exchange theories to drive the company to study competitive factors efficiently.
Absolute advantage trade theories: The theory of absolute advantage is effective when a good is effectively produced (S. Tamer Cavusgil, 2013). A company can effectively make money by the donation of a specific commodity. Climate, work, and energy are known to achieve the absolute benefit in an organisation of a single product. UHT milk has been attractive for children, which allows UK SMEs to benefit from the Internal Demand. Milk, which is chosen for children of a certain age, is available on the Chinese market. UHT milk is more effective than that provided in other countries, making the ultimate benefit.
Trade barriers are the Government’s international trade barriers restricted. The Government has taken account of the industry’s expense and limitations (Griffin, 2010). Any obstacles to exchange include tariffs, restrictions, legislation, ethics questions, legal problems, cross-cultural preference, rivals, among others.
Tariffs: Tariffs are one of the foreign trade import limits imposed on a commodity or service of importation. In this step, the Government increases reasonable or service costs (Griffin, 2010). Trade walls are used to secure domestic jobs by restricting international employee imports. International labour and output cost are lower than their nations, and therefore the organisation is imported into foreign workers. Thus, the Government limits its power to the situation (Griffin, 2010).
Another trade restriction has been done for poor international wages. To pay high wages and taxes to the Government, domestic workers are required. The business imports from other nations to compensate for reduced salaries to gain a competitive edge. The Government has limited unfair commercial success on the foreign market (Griffin, 2010). Domestic products correspond to international products where foreign products are cheaper than domestic products in the countries limited by domestic restrictions.
Regulations: Another trade barrier for international business is regulation. The Government has established several rules and regulations for foreign business growth (S. Tamer Cavusgil, 2013). It also showed a regulation for trade barriers such that no prejudice, fairness, business rights and so on can be guaranteed. The standard instrument for import and export control must be permitted if it restricts the organisation, while it cannot be imported as a specific amount (Hill, 2012). The regulations are enforced in the countries to regulate segregation in legislation. Otherwise, they cannot manufacture any goods or service; the license systems authorise an external exchange.
Ethical Issues: The ethics of every country that expresses the picture of the country is so important. Ethics was used in international market expansion due to organisational objectives, mandate, practices, tactics, etc. If the company continues to grow, it should preserve its moral and ethical concerns (Hill, 2012). Such ethical questions, including working standards, privatisation, civil rights, faith and dignity, the democratic arena, etc. Ethical problems build challenges for a diverse group. The organisation’s cultural facts often limit the business, where the own country’s culture and culture defined fields should be regarded (Bradley L Kirkman, 2006).
SMEs should follow these trading barriers to function without disruption. Whether the corporation ignores it, they will not run the company. The Government creates such obstacles. If firms ignore them, they will lower costs. It helps to achieve the target market.
Fig.4: Trade policy of China (Hill, 2012)
This figure demonstrates that trade defence calculation is the highest for UK SMEs to start their company on the Chinese market. Still, those tariff changes are not more successful on the market, making their business more efficient. The Government’s trade plan will provide the organisation with a chance to apply it on the market.
4. Ethical and social issues to be considered by the UK SME:
Companies’ corporate social responsibility a competitive and responsible way the organisation functions efficiently on the market (Hofstede, 2011). It considers human rights, the climate, the community, the culture, and so on, as it runs the foreign sector. In foreign markets, corporate social responsibility is so essential, as it brings business growth. UK SME company needs the Chinese market to grow its industry. As such, corporate social accountability and market practice can be maintained.
Improved public image: Public image is essential to draw the organisational purchasing commodity. In the Chinese industry, the UK SME needs to benefit. The company should improve social work based on the product (Hafford-Letchfield, 2010). Milk is safe for the infant, such as calcium, and must be expressed in the industry. In the local markets, they will advertise to provide a free milk service that improves its name.
Increased brand awareness and recognition: As the UK SME spreads its contribution to the product with ethical and social ideals, it increases the brand awareness by this social obligation of the corporation.
Cost savings: UK SMEs sell the targeted Chinese children’s Chinese industry worldwide. When the organisation uses sustainable methods, such as fewer wrapping, manufacturing costs are reduced. The operation of the foreign market should also be considered. UK SME milk corporation saved costs and fixed the consumer by targeting.
A benefit over competitors: Corporate social accountability is a unique factor for any global market. It helps improve the social importance of sustainable business advantage (Hafford-Letchfield, 2010). To enhance the business’s reputation, the company UK SME offers various workshops on the industry and provides a competitive benefit in the sector. The organisation has expressed to the product as exclusive, consistent, etc.
Increased consumer engagement: Another important topic for corporate social responsibility is customer involvement. The organisation should build a social networking history of the business followed by the consumer (Bradley L Kirkman, 2006). Or another context, buyers will choose their liability as a vendor. UK SME’s social accountability has strengthened consumer loyalty. Therefore, customers will never break off the business if the consumer is committed to the organisation.
Greater employee involvement: employees ought to be involved with corporate social responsibilities to appreciate their jobs. They will make decisions in the organisation to include workers. The UK SME business employs the local approach, as the organisation is encouraged the (Bradley L Kirkman, 2006).
The legal and social problems of the UK SMEs are a corporate social responsibility. To take societal importance into account, the company is involved in the foreign sector. These critical topics must be considered of corporate social responsibility, which benefits the company. Corporate social work in the Chinese market includes increasing images, knowledge of the public, commitment to employees, consumer participation. In the Chinese working industry, these problems are addressed.
Culture is characterised by a specific individual or an organisation’s common principles, opinions, beliefs, behaviours, etc. Many cultural individuals in the organisation reflect cultural diversity, such as diverse backgrounds, viewpoints, experiences, etc. There is a tradition inside the organisation that follows the company operation (Hill, 2012). For the foreign company, the firm wants a cultural choice. The UK SME Business must consider various cultures on the Chinese market: nationhood, race, faith, sex, working organisation, size, occupation, income, etc. The firms need to know where they are performing.
National culture as a point of reference: The idea of a nation has given the culture since this is a cause and effect of domestic borders, and the point of reference is “us” vs “them” (Morrison, 2011). National identification includes, for instance, rituals, respects, icons etc., where national site restoration, the memorial, documents, and the museum are mostly seen as ‘we.’ Nations also included subcultures who must be market versatile. Many individuals in the world have two or three cultures. A good organisation requires knowledge of national culture as an essential business practice. The UK SME organisation is now analysing Chinese business culture where citizens need to understand what the market needs. The organisation considers national cultural activities first so that countries may vote to buy the products (Hafford-Letchfield, 2010).
The UK SME organisation, for example, should look at its own culture and national culture. When they teach workers as a local consumer community, that is a notational culture approach. The organisation should express the Chinese market’s own and national values (Morrison, 2011).
The People Factor: Another significant cultural element is people’s role in the foreign operation of the company. People are the most important since they support company with income (Folsom, 2019). The behaviour, however, must take the organisation into account. There are diverse cultural people in the nation where it contributes to greater understanding and knowledge. The comparative benefit of cultural diversity inside the industry, however, the influential culture of diversity is challenging to achieve. Given a diverse society, the organisation produces a cultural collision and becomes ineffective after business implementation. The adjustment to behaviour outside the country increases anxiety.
The Chinese have a society of their own that is strictly cultural (Hafford-Letchfield, 2010). HOWEVER, the UK SME company can hire the local staff to provide service for customers to communicate with them. For instance, UHT milk is suitable for another brand; however, people do not engage with the commodity because of its unknown value. The UK SME organisation must take consumer comportment into account in this case. Milk is chosen for children aged 3 to 11 years, as companies must value the food for parents.
Building cultural awareness: People accept that they are distinct from one another but disagree with the effect. The organisation should understand the cultural variation and impact on the citizens (Hill, 2012). Cultural differences include everyday routine and laws, grammar, code of ethics, the expression of motive, code of social relations, etc. E.g., the UK small and medium-sized milk company has expanded on the Chinese sector, so it must know what is beneficial for the consumer in culture. One process to establish an organisation in a specific location is cultural sensitivity.
Collectivism: British SMEs must consider China’s collectivist ethos (Feenstra, 2015). Chinese people tend to operate in clubs, not individuals. They believe that teamwork leads to consensus decisions and that knowledge is helpful to share more obediently. The UK SME will make citizens feel obligated to do their job correctly by participating in the community. The UK SME benefits from the fact that China is so cooperative to improve competitiveness.
Giving Gifts: The UK SME needs to develop a habit of giving gifts for close relationships to individuals (Cateora, 2016). But it should also be said that the UK SME does not provide donations for any reasonable cause. A human may create some other stereotype. The Chinese give presents to make acquaintances and symbolise wishes for prosperous business in the future.
Methods of Internationalisation:
If an organisation wishes to compete internationally, internationalisation is the focus. The organisation maintains economic operations since internal and external elements encourage the organisation. It is a sequential mechanism (Huang, 2014).
UK SME corporation has decided to enter the foreign market in a broad range of different directions, categorised into three approaches such as export-based, non-equity methods, and equity methods.
Export Based Methods:
When it has the commodity on the domestic market and sells to other countries, typical of organisations multinational, the oldest form of industry internationalisation (Huang, 2014).UK SMEs had to raise sales to understand the Chinese demand. The system focused on exports is also a method of exporting directly and indirectly.
Indirect export: where an organisation is not the direct international operation in the global sector itself, and the intermediary is the indirect export process for the distribution of products and services abroad.
Direct export: whether the company actively participates in distributing and selling the goods to the international sector, the direct export. The choice of the global market is an extraordinary commitment.
Internationalisation methods based on non-equity:
The organisation will carry out foreign business in patents, trademarks, copyrights and so on in international markets. License, franchise, and contract arrangement are non-equity-based methods (S. Tamer Cavusgil, 2013).
Licensing: in the context of a deal, a licensee is authorised to operate its operations on the international market by a licensee (Simon Collinson, 2017). In the meantime, the licensee has benefited from the ability to run the enterprise in the region. In sectors such as R&D, where fixed costs are high, this form of contract has been negotiated.
Franchising: Franchisee buys the best stuff for the company using the branding of the franchise, trade names, etc. There are several companies that, by franchising, internationalise. This encourages franchisors in the alien world to inspect and allow local tastes where the franchisee benefits from using the market name, consistency of the goods, etc.
Other internationalisation modes: Management Contract is another non-equity approach for the operation of an international market sector, where vendors undertake the continuous management function to provide a customer to a foreign world (Simon Collinson, 2017)
Internationalization equity-based methodologies:
It is physically spent in other countries to operate the business, such as direct foreign investment. The method is more regulated since it depends on expenditure. The organisation can use various means of foreign direct investment, such as the purchase of companies, joint ventures, and mergers with a company.
Acquiring and becoming an independent company: Purchase is a method of acquiring rights combined with foreign countries (Hill, 2012). The current organisation is more advantageous, and there is no new license, copyright, and patent with this organisation. It has many problems, such as questions of culture, law, administration.
Joint Ventures: A joint venture constitutes a new identification under which a partnership is initiated to decide and shape a plan (Towle, 2010). In associates, it bears the costs. As an operation of economic size, the joint venture allows an organisation, so the personal danger in the process is minimised. Joint venture helps to reach the global sector since operational costs of the organisation are made possible by the investors.
Merger with an organisation: the organisation, through using FDI, can fuse with the foreign business. It lets the organisation increase with insight, expertise and so on from another country’s business.
In addition to the process, the direct export method is the most appropriate method for SMEs since it is a small organisation that requires a versatile market. The approach helps to spend the nation directly on direct exports, where there are no other costs, such as licensing costs, concession regulatory expense etc.
Strategic evaluation framework:
UK SMEs want to develop their business on the Chinese market, where they will adopt specific globalisation strategies to penetrate the Chinese market. The UK SME business should have direct export because they want to cover the Chinese market by delivering UHT milk. The company allows direct exports as a particular commodity, a modern organisation, a premium service, etc.
Fig.5: Strategic Evaluation Framework of SME
The framework has supported the international market where the UK SME organisation should use the export-based approach focused on selling products to the Chinese market.
The primary objectives of the international business are to generate sales to market the product in each country. The UK SME industry wishes to carry out the international consumer market that has chosen its Chinese market. The company has focused its efforts on UHT milk for 3-11 years old girls. This is such standard milk that Tesco milk company is still supplied. UHT milk is used in the UK sector. UK SME also agreed to focus on the foreign market for the famous business. The corporation has exported the commodity to understand the Chinese demand to make the business profit. Trade ideas exchange persons or services somewhere. It moves industry on the world markets. Corporate social responsibility may improve the product’s overall appeal and the brand and help explain customer behaviour. The UK SME corporation should use export-based methods for the Chinese industry to understand the market.