Explain the role of international business manager for a medium-sized firm located in Australia. The firm is looking to expand manufacturing of its new products into a lower cost country. After an initial scan of all potential countries, your firm has narrowed your choice to two countries, and now needs to identify only one country first before attempting to expand its manufacturing internationally. You have been asked to analyse the political, economic, legal, technological, social-cultural and business environments of the two countries and write a report justifying which is a better choice for the company.
This study is aimed to explore the macro-environment analysis of India and China industries of food processing. The case study is based on an Australian food company that deals in snacks and food processing items that wished to expand their business in a new international market focused to cut the cost of the manufacturing. Thus, this study is to determine the factors that support the manufacturing low cost and less distribution price with the potential market to flourish the business. The company is developing a new range of production of corn chips and wants to explore China and India market for the consumption purpose that will be beneficial as a lower cost markets in this context. Furthermore a pestle analysis is being made to analyse and compare the conditions and situations that will be suitable for the organisation. Along with this, recommendation is being illustrated to clear the strategic method to deal with the common problems and issues.
PESTLE analysis of food industry in India and china
In this case study, the pestle analysis comprising of the factors that is political, economic, legal, technological, social-culture and environmental of Indian and Chinese food processing industry has been described. This pestle analysis will help the company in managing the issues viably (Yüksel, 2012). The analysis is based on a view of being the countries suitable for the manufacturing purpose as lower cost countries as well as with a large market potential. Moreover, the theoretical framework has also been created to make presentation clearer and productive for the purpose. It has also been considered that pestle analysis will explain the comparison of two countries industry analysis pertinently.
Indian food industry analysis
It has been analysed that the Indian food industry is flourishing and becoming highly competitive intense as behaviour and taste of the people are evolving significantly (Mukherjee, 2017). As a theoretical framework of analysis, there have been addition of various international brands in the organic food processing industries and they are operating successfully due to fast and busy life of working people and getting less time to prepare food at home which eventually encourages the readymade and fast food industry immensely. Hence, here is the Indian food industries analysis given below for the Australian food company outlining the highlights of Indian economy:
- Political – there is an enormous pressure of political surrounding inn the food industry of India as government is highly variable and all the rules and regulation are being managed by the current government. Along with this, at present Indian government is enlightening the public about the significance and encouraging the agriculture sector by forming various schemes and policies regarding it (NPCS board, 2012). Not only, people are being acknowledging about the healthier lifestyle and food habits, but also concerned about the changing trends and comparatives on organic food industry. It has also changed the overall outlook and procurement of the policies and legislations on organic as well as food processing industries substantially. On the other hand, low labour standards and free trade policies and agreements make it easier for the FDI’s and multinational companies to invest in manufacturing units in India.
- Economical- economic factor is a crucial aspect that influences the development and growth of any industry along with the effects can be shown relating to the retail industry of India (Mukherjee, 2017). The fluctuation occurs in this industry because of several reasons such as consumer spending, monetary issues, interest rates, economic recession in the world, disposable income, inflation and unemployment. Channels like specialised shops, mail orders, direct sale and super markets are the effective distribution medium for the sale of organic food. The trade liberalisation and subordinate prices on import duties as enhanced the competition on the food industry market with low price products with good quality. Decrease in inflation as well as gain in the greater market share is another opportunity in the Indian market (Mukherjee, 2017). Increased practices of export and import with the effective policies associated with the trade and distribution network have extensively helped the sector to grow positively.
- Social/cultural- the promotion of healthier lifestyle and lower tendency to buy the street food in Indian people is now creating space for the organic food industry to mature and offer some unique flavour and healthier products in the market (NPCS Team, 2014). In the near future, with the suitable policies and standards packaged food will be the next boom in the organic and food processing industry. It has also been notices that there are various schemes and projects powered by private as well as government to encourage people for employment and improve their social status which also gives labour requirement to manufacturing units.
- Technological- the technological advancement in India is low than any other country in manufacturing industry (Samnani, 2014). Along with this raw and final products are mostly imported from other third country which actually less costly in comparison to setting up here and start a business. Strategic management and methods are the only reason some of the industry giants are having strong hold in the market like Unilever Company and P& G and many more (NPCS Team, 2014). Along with this, it will be also difficult for the MNC or any new firm form outside to set an effective and small cost facility of distribution with reliable sources.
- Environmental- the Indian government is very much concerned with the agricultural activities and effort in preventing and protecting the environment (Samnani, 2014). The government has also made policies related to the environment protection like supporting rag bags instead of polythene use, use of herbal wastes, development of green building and green houses along with this fresh and clean water should be used while making any food products for the industries. Biogas is also being used to discourage comical and high energy resources in this context too. Anti dumping law to prevent the water flow as neat and clean is also there to look out.
- Legal – direct tax law is very much encouraged in India rather than indirect tax in the new government rules. The impose of GST law has changed the tax scenario and lowered the cost of products due to single tax applicability under central and state government (NPCS board, 2012). The encouraging policies of agricultural sector and consumer privacy protection policies are the crucial legal obligation which restricts and forbids the food processing industry to take advantage of the market.
China food industry analysis
Today, Chinese markets are gradually growing and leading the world in manufacturing industry. It has a strong economy and several segments in industry. Especially in food industry china is making a thriving business around the world (Zhou et al., 2014). The theoretical framework is mainly associated with the affordable costing in the manufacturing industry and various legal conveniences is improving the FDI’s to invest and establish new business in the market. The low cost of labour and huge market size give sterling possibility for the companies to grow and expand their business in the market, but with elevated competition subsequently (Zhou et al., 2014). In this context, the exploration of food process industry is being examined to make the market potential observation for the Australian company to expand its business in china market as below:
- Political- political system of china is very stable that maintains persistently growing and stable economy. The industrial sectors have impressive and competent support from the current government favouring several rules that enhances the business standards and development of e- commerce as well (He, 2013). The government has firm commitment to food processing industry and various strategies that keep the success of the industries in china with a strong political support.
- Economical- the GDP rate of china is continuously growing and development is also in its peak. It is contributing the best elements to progress the economy by embracing highly skilled labour in a large number, by colossal export of goods to developed economy countries and by achieving huge saving rate (China-Britain Business Council, 2015). The SME’s of china is enhancing because if increase in urbanisation that also effective positive impact in infrastructure of China. Although, cheaper labour cost and high purchasing power of economy is the biggest advantage yet there potential trend of the market like increasing and high prices of property plus inflation rate.
- Social/cultural- china has a good connectivity overall in rural and urban areas that facilitates high quality of facility as well as excellent technological support (McCarthy, 2015). E-commerce is really boosting the retailing market and has a strong impact of social and cultural habits in the purchasing goods. The values and trends influence the choice of people highly along with the fact that china has the highest literacy rate which actually has a great impact on economy of the country.
- Technological- the manufacturing technology in china is outstanding and with a potential to create goods in a large scale. Fast payment methods are very convenient with the local suppliers and other stakeholders (Dai, 2011). Internet and mobile technology is very broad and advanced which enhances the ability of communication and commutation in whole of the china.
- Environmental- Less vehicle use to concentrate on the emission of air pollution and damage in the environment is prime concern of the government (Shin, 2014). Strict rule and regulations for environment protection that controls the pollution in the atmosphere are being made and impacts the manufacturing industry.
- Legal- several legislations and laws that regulates the intellectual property rights protection and tax along with the e-commerce legislations (Dai, 2011). However, there are no effective or hard and fast rules for privacy of the product, validation of e-contacts, recognition of digital signature and consumer rights protection. The cheaper rate products are highly based on the legal liberalisation in the rules and regulation in china, which is the only success in the Chinese market. Indian and Chinese market PESTEL analysis theoretical framework is provided in the appendix below.
It has been analysed that from the above discussion both the countries are suitable for the expansion of the business unit. The Australian company wants to sell their corn chips as snacks item in a market where market potential is high and cheap labour is allocated. From this point of view, both the countries are well appropriate but china is more liberal than India in the legal issues. The legal rights of consumer are high in India and there are regulations for privacy concerns as well. On the other hand, china is only known for its cheap price market and it doesn’t matter how it has been introduced in the market (Shin, 2014). There is also more communication and commutation flexibility in the Chinese market that will eventually expand the area of coverage of new product in the whole market. The manufacturing industries are also impressively and highly supported by the political parties. Thus, it has been concluded that china market is more suitable for the new product range production and establishing new set up there.
China-Britain Business Council. 2015. The food and beverage market in china. [Online] Available at: https://www.ccilc.pt/sites/default/files/eu_sme_centre_report_-_the_food_and_beverage_market_in_china_update_-_july_2015.pdf [Retrived on: 08 June 2017].
Dai, M. 2011. Innovative Computing and Information: International Conference, ICCIC 2011, Wuhan, China, September 17-18, 2011. Proceedings. Springer Science & Business Media.
He, J. 2013. Creative Industry Districts: An Analysis of Dynamics, Networks and Implications on Creative Clusters in Shanghai. Springer Science & Business Media.
McCarthy, B. L. 2015. Trends in Organic and Green Food Consumption in China: Opportunities and Challenges for Regional Australian Exporters. Journal of Economic and Social Policy 17(1), pp. 1-24.
Mukherjee, B. 2017. From Local to Global- Indian Organic Produce an Overview. Journal of Business and Management 19(2), pp. 34-39.
NPCS board. 2012. Manufacture of Food & Beverages. 2nd ed. Niir Project Consultancy Services.
NPCS Team. 2014. Bakery Industry in India (Bread, Biscuits and Other Products) Present & Future Prospects, Market Size, Statistics, Trends, SWOT Analysis and Forecasts (Upto 2017). Niir Project Consultancy Services.
Samnani, A. 2014. Macro- Environmental Factors Effecting Fast Food Industry. Food Science and Quality Management 31, pp. 31-40.
Shin, K. Y. 2014. Corporate Social Responsibility Reporting in China. Springer Science & Business Media.
Way2wealth. 2008. Indian processed food industry in sectors. [Online] Available at: https://www.way2wealth.com/reports/RR150420084.PDF [Retrieved on: 08 June 2017].
Yüksel, ?. 2012. Developing a Multi-Criteria Decision Making Model for PESTEL Analysis. International Journal of Business and Management 7(24), pp. 52- 66.
Zhou, Z. Y., et al. 2014. Food Consumption in China: The Revolution Continues. Edward Elgar Publishing.
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