Introduction

In the past, skimmed, semi-skimmed, and full fat were the only type of milk. However, many options have emerged in the present days. There is a baffling range of classes, which consumers can choose from. These types include whole milk, standardized milk, organic, unhomogenized, A2 milk, Jersey and Guernsey milk as well as UHT and sterilized milk. Ultra Heat Treated milk is heated at very high temperatures to increase its longevity of storage at room temperature. The process of pasteurization kills harmful bacteria that causes milk spoilage. The minimum temperature subjected to milk during the pasteurization is 72°C taking approximately 15 seconds. This temperature is the least treatment needed in the destruction of spoilage organisms and pathogenic microorganisms. Nevertheless, pasteurized milk still contains some bacteria that can grow in warm temperature. Therefore, refrigeration is still necessary for pasteurized milk.

UHT sales in the UK are expected to increase significantly. Flavored and skimmed milk is gaining popularity and more promotion in the UK. The replacement of sterilized milk by UHT is on the rise. The establishment of ice cream, desserts, custards, and cream encourages the sales of UHT products. UHT production is beneficial to the shops as well as caterers. It is useful to the reduction of waste and in increasing shop sales (Leonard, 1977). The production of UHT milk is estimated at 120 million liters per year in the UK.

On the other hand, the annual consumption of UHT milk in the UK is above 240 million liters. This product faces intense competition from flavored products produced outside the UK. However, Britain continues to encourage food service providers and retailers to source from the country while paying sustainable prices for these goods.

There has been a growing appetite for UK’s dairy in the Chinese market. This ever-increasing demand has offered opportunities for farmers in Britain who produce safe and quality milk. The increasingly wealthy and well-traveled population who are picking up the tastes overseas fuels the demand. Additionally, China is seeking to enhance the health benefits of dairy products to its citizens. Moreover, there is growing access to dairy products in online platforms. UHT is the highest imported milk in China. An increasing number of China’s population with families consume high-end products. These families are especially sourcing these products for their kids. The reason is that the country is heavily polluted. According to the UK’s International Trade Secretary, the demand for UHT milk is growing at an annual rate of 20%.

Global value chains set to determine that UHT milk production is a competitive, well developed, and a significant industry in the worldwide market. The London-based Dairy Crest targets the domestic market especially children between the age of 3 to 11 years of age. However, there has been a gradual increase in the demand for UHT milk in outside countries. In 2018, the melamine crisis hit China’s dairy industry. This incident prompted the Chinese to draw UHT milk from abroad. Since then, there are many opportunities for UK dairy firms. Most global consumers prefer fresh milk compared to UHT. The milk is packed from reconstituted powder or raw milk. There are low barriers to international markets, and hence, the firm can place itself in the global market.

Business Drivers

As mentioned earlier, there are increasing opportunities for global dairies in China. Researchers have revealed that the demand for UHT milk from the UK is high among young people and children. Mothers in the country are interested in UHT milk as it presents a lot of nutritional benefits for their children. These studies show that families with children consumed approximately 61.7 liters each year as compared with adult families who consumed 57 liters yearly. PESTLE and Porter’s five forces analysis are tools of study, which help companies to determine their competitiveness in a business environment. While Porter’s five forces analysis examines the competitive position of a firm, PESTEL analysis scrutinizes macro-environmental features that affect an organization. These tools help determine the elements that help Dairy Crest establish stability in UHT business in the Chinese market.

Dairy Crest PESTLE Analysis in the Chinese Market

This analysis evaluates the macro-environmental issues affecting Dairy Crest in the Chinese market. PESTLE is a concept that donates Political, Economic, Social, Technological, and Environmental as well as Legal forces that affect the convenience of the firm in creating a UHT milk business in China.

Political Forces Affecting Dairy Crest in China

China is among the most powerful nations in the globe. It has a stable political environment. Recently, affluent societies have been measured with its ability to feed its people with milk. The Chinese Communist Party has used this thought as a strategic tool. The party believe in socialism as well as enabling the capitalist system in the country. The capitalist requires that citizens create material wealth. The party has achieved its promises because it can afford animal produce. Studies show that around one in every five children in China is short for their age or have stunted growth. Additionally, the UK and China shares an intellectual relationship that attempts to build sustainable environmental and food security issues.

Economic Issues that Influence Dairy Crest in the Chinese Market

China urbanization growth is on the rise. Consequently, the middle class is expanding and the demand for dairy products is increasing. The National Bureau of Statistics of China reported an increase in disposable income per head recording 4,165 dollars in 2018. The Bureau predicts a continued rise in China’s family income levels. The affluence of the middle class in the country brings a knowledgeable understanding of the significance of UHT milk to their children. These families recognize the need for protein for a quality diet. China and the U.K. enjoy good economic relations. These countries have platforms that facilitate the intensification of investment ties and bilateral trade. The adjustment of Europe’s milk quota system and one-child policy creates a positive business environment.

Social Forces Impacting Dairy Crest in China

The adjustment in the one-child policy is a significant change in the Chinese government. The nation is expected to become a consumer-driven society. The reason is that both parents and children will be seeking to satisfy their basic wants. Therefore, the target market for Dairy Crest is a good business strategy. By allowing many children to be born, the government creates a demand for dairy produce. The country is a growing market for UHT milk. China is one of the largest countries in the world. It has a cumulation of over one billion. With limited water resources and arable land for agriculture, China accepts the import of dairy products from the U.K. and other countries.

Technological Factors that Influence Dairy Crest in China

The use of the latest technology for the production of UHT milk is a plus for Dairy Crest. Modern innovations in the dairy sector ensure efficient productivity in the foreign market. Domestic competitors will not be able to manage the speed and quality of production. The advanced technology in China lowers the cost of production. China has the best milk processes systems, which will enable Dairy Crest to establish itself in the market quickly. The development of mobile technology creates a favorable environment for conducting business. Internet services and online marketing and buying platforms are rampant in China.

Environmental Factors Affecting Dairy Crest in China

China is among the most polluted nations in the globe. The rapid population and industrialization in the country are attributed to this pollution. Furthermore, the notorious air pollution results from millions of motor vehicles and the industrial base in China. Additionally, the state is dealing with soil pollution. This degradation on the soil has contributed to poor agricultural performance. Hence, families in urban centers demand a high amount of organic UHT milk to feed their children. Dairy Crest will have to oblige to the environmental policies in China. These approaches are set to improve air quality in the country. Firms have to obey regulations on water release and air emissions.

Legal Factors that Impact the Dairy Crest in China

Dairy Crest management need to evaluate and understand China’s legal framework for foreign firms. There are several issues to consider; data protection, employment law, discrimination law, consumer protection, and others. Cybersecurity laws in China protect information that is exchanged, transmitted, stored, and collected by organizations. Foreign firms will have to respect employment laws to avoid legal problems in China. Dairy Crest will need to engage in written agreements when hiring employees. These contracts should spell out various aspects in the work environment including working hours, remuneration, vacation rules among others.

Dairy Crest Porter’s Five Forces Analysis

This analysis is set to help evaluate the five competitive factors that will affect Dairy Crest’s intentions to establishing a UHT business targeting young children in China. These forces include rivalry among existing players, a threat from substitute products, bargaining power of buyers, bargaining power of suppliers, and risk of new entrants.

Rivalry among Existing Players

The intensity of competition among the rival firms determines the profitability of the business. If the contention is intense, prices will have to reduce, and the firm’s profitability will go down. There is an intense rivalry in the dairy sector in China. Many companies in the food and beverage industry have set base in the country. The fierce competition can threaten Dairy Crest in the short run, but the long-term success of the company is guaranteed. By targeting children between the age of 3 and 11, the firm is set to overcome foreign market competition. The reason is that families demand long life milk to complement their diets.

The threat from Substitute Products

There are various substitutes to UHT milk. These include whole milk and cream. However, Dairy Crest can tackle the issue of substitution by providing excellent services along with UHT milk production. The firm needs to focus on giving the children the best experience with the milk. Children love exciting moments, and Dairy Crest can offer free deliveries with the creation of a natural environment with kids. Selling fresh milk cannot be substituted for any product. The firm should produce pure and quality milk to avoid the threat of substitution from local and foreign firms.

Bargaining Power of Buyers

Consumers demand various things from businesses. While paying the lowest prices, they want the best deals available. A small customer base can put pressure on Dairy Crest. Hence, the firm needs to set businesses in many locations to reach for its targeted consumers. Many families in China require organic milk, and accordingly Dairy Crest should tap to these opportunities. When the company creates a large customer base, the buyer’s bargaining power reduces. Studies and reports claim that there is a low buyer bargaining power for UHT milk in China. Moreover, the high demand for milk accept imports from dairy firms.

Bargaining Power of Suppliers

Raw materials for UHT milk processing include fresh cow milk and powder milk. Numerous suppliers provide these materials. The presence of powerful and dominant suppliers can reduce the profitability of a company in the business. Hence, Dairy Crest needs to create a reliable supply chain before entering the Chinese market.

Additionally, to reduce the supplier’s bargaining power, the firm can liaise with suppliers whose businesses can depend on Dairy Crest. Besides, the company can experiment with numerous products to have various alternatives in case prices increases. The bargaining power of suppliers is low since dairy farms with pure milk are multiple.

The threat of New Entrants

New entrants engage reduction of costs, low pricing strategies, giving new value propositions, and innovations that put pressure on Dairy Crest. To safeguard its competitive edge, Dairy Crest must come up with better strategies to manage these challenges. New entrants dealing with UHT milk include the online platform Alibaba and Italian suppliers, which provide online services. Dairy Crest can innovate its UHT milk to fit the tastes and preferences of its target market.

Additionally, the firm can invest in setting economies of scale to build its stability. The company should spend money on development and research to perfect its skill in the provision of UHT milk to young children. These researches can set standards in the industry making it hard for new firms to take over. Additionally, Dairy Crest should be involved in online technologies for trading and marketing purposes.

Trade Barriers

China has administrative requirements for its foreign trading system. The country has trade barriers and requires that all foreign companies seeking to work in China can comply with regulations and other conditions. All types of enterprises including public and private businesses are needed to file the correct records before engaging in the Chineses market. The countries have rules for foreign investments. China categorizes restrictions according to the Encouraged, Restricted, and Prohibited firms. The encouraged industries include vegetable and fruit drink industry. Dairy Crest, therefore, has stood a chance in the Chinese market. The Chinese government gives special permits to foreign firms. Businesses cannot establish itself without scrutiny and permit registration by the state.

Additionally, China operates the quality control measures to the products produced in the country. Quality audits and skilled quality control officers inspect various services and goods countrywide. All firms must experience great exercise to thrive in the market. Foreign firms are scrutinized against workmanship, packaging integrity, applicable functionality, appearance, and significance of the product. Once the inspection has been done, permits are given, and the firm can conduct business in the country.

Ethical and Social Issues

Ethical issues cover various issues such as the morality of capitalism, equality of opportunity, product liability, occupational safety and health, individual rights, privacy, environmental protection, and social responsibility including others.

References

30. LEONARD, M. (1977). PROGRESS AND DEVELOPMENT OF UHT MILK AND MILK PRODUCTS in the UK DAIRY INDUSTRY. International Journal of Dairy Technology – INT J DAIRY TECHNOL. 30. 160-163. 10.1111/j.1471-0307.1977.tb01200.x.