Introduction

This report identifies key concepts of international business and the conjectures that
differentiate it from globalisation. This will have a prior understanding of globalisation's key
concepts and conjectures and global political economy. Since then, it has assessed the impact
of globalisation on key dynamics and organisations. The trade association selected for this
report is Dilmah Tea Company Plc, a recognised professional organisation in the trade
market. This report analyses the concept of globalization and its application to Dilmah's
business situation (Markets, 2016).

Dilmah is the leading tire manufacturer in Sri Lanka. Dilmah revolves around a great
combination of quality and innovative technology. The market leader is Sri Lanka's tea
industry(Anon, 2015). The Dilmah team understands that every owner has a different driving
style, so it's essential to consider how the tea will perform in other conditions when choosing
a new set of tea. To meet the unique needs of the customer base, Dilmah stocks a wide range
of special tea types that are exported to more countries/regions.

China and Brazil are one of the largest countries in the world and attract people from all over
the world. Most of the China and Brazils are regular tea users. Gradually, Dilmah became a
universal brand for Asian countries and South American supermarkets, forming a strong
brand awareness. With its strong brand recognition, the company expects to launch this new
Dilmah Green Tea tablet product in the Asian and South American markets. This study will
cover internationalism (Gov.UK, 2019). It will also highlight the trade barriers faced by
Brazil’s SMEs as they expand into the Chinese market (Milkbusiness, 2019). The report also
highlights the ethical and social issues organisations may face as they evolve. Ratings also
indicate cultural priorities that companies should consider. It will also reveal how Dilmah can
be used to develop it by small businesses in China and Brazil (Statista, 2019).

Question 1

Dilmah macro environment analysis of the Asian country and South American market

In the past decade, the traditional food industry, the tea industry, has developed progressively
worldwide (Tetrapak, 2019). Meanwhile, China’s and Brazil’s tea industry changed
production technology and scale during the same period. Changes in consumer demand have
played an essential role in this process. Especially the younger generation (3-11 years) has a
significant impact on these needs. Although there is a gap between urban and rural demand
patterns, the most significant future consumer market will still be in city areas. The PEST
analysis details the operational challenges facing Dilmah in the current competitive and
macro environment.

1.1. Political and Legal factors

Political

China

In the long run, a change in breeding policies will help China's statistics, but it will also affect
the tea economy. Today, China represents the growing wheat and milk market (Friedberg,
2014). The policy is to increase the demand for tea products. China continues to invest in the
tea industry.

Brazil

Brazil is a federal republic with stable government institutions. The stability of government
agencies reflects the consistent implementation of corporate policies. It shows the suitability
of the trade positions of these countries. Brazil signed a new trade deal to strengthen
economic integration and be more active in helping Brazil with trade, finance, and economic
health. It reflects the positive relations between the two countries, which have traditionally
enjoyed friendly and positive relations, encompassing broad political and economic agendas
(Jordan, 2020).

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Legal

There are many laws governing trade and employment policies in China(China - Population
distribution, 2020). Some countries/regions have strict rules to ensure workers' safety, so it
must comply with China's Workers' Health and Safety Law. Providing a safe work
environment for the employees is an ethical commitment of tea farming in China. Similarly,
anti-discrimination laws (such as equal employment opportunities) should be carefully
studied to attract and retain tea technologies that influence employers' image when
developing anti-human behavior (Geromel, 2012).

Brazil

The Brazilian economy from 1875 to 1913 is related to the development of South American
tea and the relatively unusual number of trademark registrations for this product in Brazil
during this period. It also discusses the importance of South America's leading tea companies
in the long-term growth of international trade and industry. Compared with the "original
brand", the "modern brand" has two distinguishing characteristics. First, in addition to
providing information about their quality, it deeply differentiates products and services. It is
part of a company's marketing strategy aimed at setting barriers to entry for competitors.
Second, it is protected by law, allowing law enforcement to fight counterfeiting and allowing
brands to have "eternal life" by renewing their trademark registrations.

1.2 Economic policies

China

Macroeconomic factors such as inflation, savings rate, interest rate, exchange rate and
business cycle determine economic GDP and total investment. China is working hard to
rebuild its economy (EW World Economy Team, 2015). General agricultural innovation and
disproportionate return on investment are low. Investors are often unaware of the mid-to-
long-term difficulties that can seriously damage the financial constraints for operations.

Brazil

Brazil's economy is reported to be strong. An economy that has gone through a deep
recession has slipped into recession and is now reinvigorated as a strong economy. This
success is due to recent reforms such as tight fiscal policy, volatile exchange rates and an
inflation-targeting system. This continued growth is due to rapid export growth, healthy

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external accounts, tame inflation, lower unemployment, and lower debt-to-GDP ratios.
Brazilian president and his economic team implemented prudent fiscal and monetary policies
and advanced necessary microeconomic reforms ("Brazil Religion", 2015).

1.3 Social and Cultural factors

The social culture and way of working influence the culture of environmental groups. The
income level of households in China is expected to increase rapidly over the next few years.
Especially in urban areas. As wealth increases, so does the knowledge of the value of money
that a high-quality protein diet can accomplish. As incomes increase, Chinese households will
immediately pay attention to food choices, and healthy and nutritious food, especially in
urban environments(Al, 2012). The monitor predicts that the gap between changes in diet and
tea consumption across cities will widen. Tea consumption will grow at a similar rate over
the next several years.

Brazil

Brazil lacks education, health and safety. However, as a fully democratic country, Brazil is
gradually improving some social indicators; the government is forced to pay more attention
to the social problems of its people. The government has enacted laws against this gender
discrimination in the form of the women's tea industry. Black people face racism in Brazil.
The government has been very proactive in this matter and has enacted laws to promote equal
rights for black Brazilians and end racism against them. This positive response and
implementation by the Brazilian government give Dilmah a natural and healthy picture that
Brazil is showing an upward trend towards becoming a developed country. Complementing
these issues, while Brazil is in a better position to analyse the gender gap, which may be
Dilmah’s point of view on recruitment, the polish government does not support its social
sector. It especially seems ignorant to allocate education, research and innovation.

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1.4 Technological factors
China

Technology is rapidly disrupting various industries. China's tea industry is expected to remain
unchanged from 2014 to 2017. Low prices pressure small businesses(Scientific and
Technological Development, 2015). The only way to achieve this is by introducing new mass
tea and investors to speed it up. The productivity of Chinese cows is to replace with unknown
genetics.

Brazil

In the case of Brazil, the technological environment is the most prominent area. Brazil is
heading into manufacturing with a 4.7% production growth rate, and things are now looking
up. Also, as mentioned earlier, there is significant positive interaction and access to Brazil for
economic development, depending on education and skill levels. Brazil has invested heavily
in Brazil's technology sector, which allows Brazil to account for 25% of the world's food
production. This is also evident in Brazil, which has the second-largest number of technicians
in South America ("Brazil Infrastructure", 2015).

PEST’s detailed analysis shows that Brazil has surpassed China in politics, economy,
technology, environment and law. The analysis shows that China outperforms Brazil on
social factors, but the Brazilian government's actions on social issues show positive signs of
considering Dilmah. Changes in the political and economic environment and institutions have
made Brazil's consumer food/beverage market extremely attractive for investment by
multinational corporations.

1.5 Ethical business practices that prevail in the market

Ethical issues are also increasing with the advancement of the global business environment.
With today's growing public awareness and complex business relationships, all businesses
must build ethical and ethical systems. All Indian and Brazilian small business members must
follow a moral system to achieve their goals. Basic ethical issues are trust and integrity.

- Governance and compliance

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Any business must comply with safety regulations, environmental laws, civil rights laws,
monetary policies, and national commercial laws. It provides incentives for companies to
formulate codes of business conduct (which the entire organisation must adhere to) to address
governance issues and formulate rules tailored to the organisation's internal issues.

- Fundamental ethical issues

Trust and integrity are the most important issues businesses must face. The core concept of
honesty is to do business with more dedication and honesty. This includes objective end-user
services. Maintaining the trust of customers is essential for a successful business. A company
can build a high level of trust in the market if it is committed to its work with integrity and a
strong ethical commitment. The success of the Dilmah depends on understanding and
customer relationships.

- Decision-making ethics

The general standards of society determine it. It is an invisible implementation of best

practices in the corporate world. It is important to consider business ethics when conducting
business. However, the potential challenges of creating cross-cultural, effective production
standards and institutional value for businesses are serious.

Some critics believe that if corporate social responsibility introduces social and
environmental trends, prohibiting background protection, imposing unfair cultural norms, or
requiring bureaucratic oversight of businesses, it will have a net effect on welfare. Corporate
social responsibility represents a change in the business environment in which individuals
operate and their net impact on society. Corporate social responsibility provides SMEs with
wider opportunities for greater market access, cost savings, productivity and innovation
capabilities, and social benefits such as education and community development.

The topic of business ethics and business ethics is widely discussed in India and Brazil. To
successfully implement business ethics, companies must build on their strengths to
compensate for their weaknesses, leverage them, and face all threats to their organisation.

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 Question 2
2.1Market entry, exit strategies that can be perused by the Dilmah and potential risks
that can be envisaged?
The current business context is very competitive, and organisations are looking in that
direction. Global market to gain competitive advantage. Market research is the organisation's
identified customer needs and desires, purchase behaviour of the desired product, details of
related product competitors, domestic market development and other external environmental
constraints required by the market. These factors are essential for overcoming investments in
foreign markets and identifying the market risks.

Entry Strategy

Figure 1 - International market entry methods

Source: Root (1994), Entry strategies for international markets.

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Table 1 - Market entry strategies

Market Direct Franchising Joint Venture Strategic Alliance

entry Exporting
strategy
How it The company The Dilmah The two This is achieved
works sells its products grants third companies through cooperation
directly to parties the right to agreed to agreements between
specialised use the trademark. cooperate in two or more
international foreign markets, companies.
markets. becoming the
third company to
enter foreign
markets.
Why should The company This includes Companies can Companies are
the can companies with not only share transforming
company independently the lowest technology and technology so that
use this determine the transaction costs develop products smaller companies
strategy? exporting and access to but also take can compete globally.
country and specific markets risks and losses
have a better that government in foreign
relationship policies may markets.
with the buyer. restrict.
When is the When a When a company When two Where two or more
strategy company draws has a distinctive companies use companies can jointly
appropriate up a sales plan business model or convergence develop new products
with a foreign strong brand goals, they can or technologies and
agent or agent to knowledge. reach a mutually enter into mutually
act as an agent beneficial beneficial contracts.
in a foreign agreement.
market.

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Source: Developed by author

Other points of the market access strategy mentioned above include:

 Direct export

This strategy is most effective when exports are low. It has better control over the foreign
market. Some companies directly use the internet for export.

 Franchising

This strategy works best for companies that have redesigned their business models, such as
food stores. This strategy reduces Dilmah’s control over the brand. The license agreement is
long-term, and the licensor provides a comprehensive eligibility package.

 Joint Venture

Dilmah needs to find local Asian & South American partners to enter the China & Brazil
market. Some organisations use this strategy to acquire bare, technical or other management
skills. Some people use it as a way to access distribution channels.

Benefits of franchising hybrid strategy

- Provide the ability to share risks and losses

- Provide skills and basic skills
- Able to jointly develop new products in overseas markets

Challenges of franchising hybrid strategy

- It also eases control over the Dilmah brand and operations.

- Operation and maintenance are complicated. This will take more time and develop a
cost strategy.
- Operation and maintenance are complicated.

Market entry strategy will depend on the commitments required, resource management, risk,
and return on investment. Although various market access strategies exist, no market strategy
applies to all international markets. A strategy that works for one market may not work for

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another. The market-friendly approach strategy is based on tariff rates, marketing costs,
product customisation and shipping costs.

Dilmah is expected to enter the Asian country and South American market. It can enter the
international market using a direct export or franchise strategy. Direct exports retain
employees and give companies more control over their brands and operations. Franchising
reduces brand and operational management and reduces administrative costs. Dilmah may
choose dairy franchising as an entry strategy.

PART B

i.) David Ricardo’s theory of comparative advantage

David Ricardo developed the classical theory of comparative advantage to explain why states
engage in international trade even though workers in one country are more skilled in
producing each good than workers in another. The Ricardian model emphasises that factors
(labour and capital) increase. Increasing productivity internationally or per capita compete.
The standard model emphasises the relative world. World relative supply and demand in
international trade ("David Ricardo", 2015).

ii.) Raymond Vernon’s product lifecycle

In the 1970s, Raymond Vernon introduced using the product lifecycle to describe global
business patterns. In theory, the country of origin starts when demand for a newly invented
product increases—export to other countries. When demand rises, Dilmah opens local
manufacturing plants to meet the demand. And that scenario sometimes standardises products
across the globe(Markgraf, n.d.).

iii.) John Dunning’s eclectic theory

Since then, John Dunning’s eclectic theory yet meticulous simplicity of the paradigm has
united international business theory and enabled researchers in various disciplines to account
for the development of multinational activities systematically. It helps to explain the initial
process of overseas production and its evolution. The liberal paradigm transcends the limits

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of international quasi-production theory and provides a holistic framework in which existing
alternatives and complementary theories of the international output coexist (Kuiper, 2011).

iv.) Porters Diamond Model

Figure 2 - Porter diamond model

Source: Marketing insider

International technology and innovation approach competitiveness focused on intense

industrial competition. Michael Porter is a major proponent of this aspect. This shows the role
of the Dilmah is to import the technology, learn this skill, improve and innovate later. In
macroeconomics and business, however, a strategic perspective provides a pragmatic view of
competitiveness. It does not provide a complete framework for designing an appropriate
public ("ProvenModels - diamond model - competitive advantage of nations - Michael E.
Porter", 2015).

Dilmah needs to analyse the soft drink and other beverage industries. This is part of the
marketing environment through Porter's Diamond, as it will provide a competitive overview
of Brazil for Dilmah ‘s investments and operations.

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Factor Condition

It involves the availability and availability of land, labour and capital. It is easy to conclude
from PEST’s analysis that Brazil has no shortage of manpower, available land and, of course,
the capital. Not only does Brazil have an abundant workforce, but it also has a skilled
workforce.

Demand Condition:

If the marketing plan is followed correctly, Dilmah will receive this percentage share during
its first year of operation. In the Brazilian beverage industry, Dilmah can easily gain a
competitive advantage.

Related and Supporting Industries

Analysis shows that Brazilian beverages and side businesses, such as Guarana, Dolly and
Brahma, are big players, well established and globalised. This competitive advantage in
Brazil provides Dilmah with a solid operational foundation and opportunities to be
competitive, highly innovative and efficient.

Strategy, Structure and Rivalry:

This industrial structure in Brazil is a very traditional and correct hierarchical structure. This
means that these companies' control remains in top management's hands. This is not
surprising given the intense competition among local Brazilian companies and international
beverage operators. A hierarchical structure will keep the company precise and in control.

Porter Diamond has succeeded in revealing the essence of the Brazilian interior environment.
As seen from the above discussion, Brazil has a competitive advantage in the food and
beverage industry because of its strategic capabilities in terms of resources (both physical and
human), financial resources, trade relations with the United States, government, etc. Highly
identified and analysed as one of the countries in Brazil looking to acquire intellectual
capital, namely foreign direct investment, especially in the food and beverage sector.

v.) Heckscher-Ohlin Model

The Heckscher-Ohlin model is an economic model that focuses on the dynamics of

international trade. It was developed by Eli Heckscher and Bertil Ohlin at the Stockholm of

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Economics. The model suggests that countries rich in certain factors of production will export
products with a comparative advantage and import products produced using more restrictive
factors. It explains the principle of profit in trade between two countries. The concept of a
Dilmah based on comparative advantage is to produce what is particularly good at and buy
from others less skilled at producing. The theory (H - O) explains the reasons for comparative
advantage. H-O principle distinguish the abundance of factors as the primary determinant of
comparison benefits (Leamer, 2016).

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