In this report, the stress has been put over the challenges or the issues which a company has to face while expanding its business into other countries. The report has been divided into two different sections where the focus has been given into diverse perspective of international business. In the first section, the report carries out a discussion on the strategic issues confronted by the Arla Food. Then, in section two, different advantages and disadvantages for a global giant in the food industry has been discussed. Then, the international strategy of the Arla food industry has been reviewed and all this procedure will help to obtain certain recommendations for accomplishing improved international business strategy. Here Arla Food industry is facing various issues while expanding their business in other countries. The strategic issues facing by the Arla foods have been discussed in order to understand the challenges and the different steps to deal with the challenges while expanding business into other countries.

1. 1
INTERNATIONAL BUSINESS STRATEGY

2. 2
Contents
Introduction................................................................................................................................3
Section A....................................................................................................................................3
1. Critical Analysis of the strategic Issues confronted by Arla Food ........................................3
Section B..................................................................................................................................12
2. Advantages and Disadvantages of Denmark and Sweden as the home bases for a global
giant in the food industry.........................................................................................................12
5. Reviewing Arla’s International Strategy and providing recommendations.........................14
Conclusion ...............................................................................................................................16
References list..........................................................................................................................17

3. 3
Introduction
In this report, the stress has been put over the challenges or the issues which a company has
to face while expanding its business into other countries. The report has been divided into
two different sections where the focus has been given into diverse perspective of international
business. In the first section, the report carries out a discussion on the strategic issues
confronted by the Arla Food. Then, in section two, different advantages and disadvantages
for a global giant in the food industry has been discussed. Then, the international strategy of
the Arla food industry has been reviewed and all this procedure will help to obtain certain
recommendations for accomplishing improved international business strategy. Here Arla
Food industry is facing various issues while expanding their business in other countries. The
strategic issues facing by the Arla foods have been discussed in order to understand the
challenges and the different steps to deal with the challenges while expanding business into
other countries.
Section A
1. Critical Analysis of the strategic Issues confronted by Arla Food
Expanding business into other countries can be demonstrated as an international movement
towards financial, trade, economic as well as communication incorporation. According to
the Bhaskaran, (2010, p.80), it has been noticed that, there various difficulties or issues which
the Arla Food has been confronted in expanding business such as;
Communication problem: The Arla food industry has confronted the communication issues
as it is a common and obvious issue that will arise for each company those are expanding
their business in other countries. The strategies of the management must look over this issue
as it is not possible to understand every language of every country for individuals.
Measurement problems: While expanding business in international business the company
develops new competencies as well as new market sections. At this point of time, it can
create difficulties for the Arla foods to measure the involvement of a product to its entire
profitability. Therefore, the Arla foods can turn out certain unbeneficial products with no
reorganization of the loss as well as can also take poor decisions regarding distribution of
resources (Cravens, 2015, p.65).

4. 4
Customer Problems: Understanding the diverse culture and preferences of the customers of
the other countries can create problems for the Arla foods. It becomes extremely complex to
co-operate the actions of the value chain operations crosswise the increasing of the product
range. The capability of recognizing and satisfying the consumers is not an easy task for the
strategic management of the company.
At Macro Level
CAGE Distance framework
The cage distance framework can be the effective tool to recognize the cultural,
Administrative, Geographic and Economic differentiation or distances among the countries
where the companies are expanding their business. While expanding the business in other
countries, it is important for Arla foods to analyze all these factors as these are factors which
can cause issues or challenges while expanding the business (Egan, 2012, p.60).
Country Cultural Distances Administrative
Distances
Geographic
Distances
Economic
Distances
Banglades
h
 Diverse
languages
 Lack of trust
 Political
aggression
 Absence of
colonial ties
 Lack of
commo
n
borders
 Size of
the
country
 Diverse
cost of
natural
resources
 Diverse
quality of
natural
resources
 Different
currency

5. 5
Sweden  Traditionalism
 Diverse values
 Home vs.
foreign bias
 Government
policies
Different
climate
Weak
communicatio
n skill
 Different
allocation
or
business
methods
 Size of
Economic
Table: 1 Cage Distance Framework
(Source: created by the author)
CAGE distance framework analyzes the different factors which affect the business of every
organization while international business (King, 2013, p.480). Here, Arla also has to undergo
with these factors while expanding business in other countries. There are different language
different size of the country all this may generate the challenges for the Arla foods. Different
culture, diverse economy system as well as administrative system and also the geographical
distance are the factor which has created issues for Arla while expanding business in other
countries like Bangladesh and Sweden.
PESTLE
With PESTLE analysis the company Arla will able to assess the political, economical, social,
as well as technological approach of different countries for expanding business. In order to
determine the influence of the environment on Arla PESTLE is one of the most useful tools.

6. 6
Figure1: PESTLE analysis of Arla Food
(Source: Created by author)
Political: Political environment of the country can help the business to accomplish its goal
and obtain success as well as this factor can also generate the circumstances which may lead
the company in the direction of failure. The constant change in the regulation of the
government policies for business can affect the Arla in their services and in profit. While
expanding in other countries, the organization is highly affected by the regulation of that
particular company as well by ESFA and FDA (King, 2009, p.55).
Economical: If the company finds strength in the growth of the economy of the country, then
the Arla foods will be able to expand their business by opening new organization in the
country. On the other hand, if the country is going through from the recessions then this can
cause to the close of the newly opened stores of Arla foods. The organization encountered
huge competition due to the development new products like sport nutrition and children
nutrition food.
Social: The social structure of the country is changing overtime. The population is increasing
and people are becoming more conscious about health. All this factors will have impact on
the production process of the organization. It is a common fact that every country is different
Political
ESFA
FDA
Legislation in
foreign countires
Economical
Consolidation
Development of
sport nutirtion
Development of
children nutrituion
Raw material supply
Sociologocal
Increasing
population
Ageing population
Functional food
Sustainibilty
Obesity
Difference in taste
Technological
Strategic
Collaboration
IP and protection
Research
New programfor
sustainibility
Legal
Established laws of
the country
legal regulation
Environmental
Enviroenmental
policy
Enviroenment
protection

7. 7
from another and so the taste and choices of the country’s people are different. The company
Arla Foods must have to be determined for the products they are providing to the customers
of other countries.
Technology: The advancement of the technology is a factor which not merely helps the
country and the company, but also can create various issues for the company. Thus, setting
advance technology is expensive as well as it took time to understand those advance systems.
Apart from this making every employees skilled enough to operate these technologies is time
consuming and risky in another country while opening a new branch of Arla Foods.
Legal: The legal factor put a great impact over the performance and setup of the company.
For Arla it is important to understand the legal regulation of working in other countries as
every country has different legal aspects. There are various laws for operating a business in
Sweden or in Bangladesh for foreign organizations. Arla has to look for those legal
regulations accurately (Trompenaars, 2015, p.60).
Environment: Environment of the each country is different from another, Arla is a company
of Denmark, which is expanding their business in other countries, so it is essential to observe
the environment of the other countries as it is over the environment that whether the business
will give profit or not.
These factors are very much important to make the business successful as well as these
factors can also cause for the failure of the business, so Arla Foods industry must focus on the
these factors while expanding business in different countries.
Porter’s Diamond
The porter Diamond is an analytical tool to measure the possibilities of the country to
generate new advanced factors like strong base of technology, skilled staff, and knowledge,
support of the government and the culture of the country.

8. 8
Figure 2: Porter’s Diamond
(Source: created by the author)
With the different factors challenges faced by the Arla Company in another country can be
illustrated more accurately. As per the factor of Conditions a country generates its own
essential factors like trained or capable employees and technology. Therefore, while entering
into new international markets the company Arla has to be dependent on the base of the other
country’s skilled labour and technological advancement where they are expanding their
business. Along with this, according to the Vermeulen, (2011, p.30), the demand condition
factor explains that local products are more demanding in comparison to the foreign products
due to the costs of the product and lack of trust over the new brand. The Strategy, structure
and Rivalry of the international business is very much important for the Arla while
introducing new stores for their business.
At Industry Level
Porter’s five forces
While conducting the analysis on industrial level Porter’s five forces will be the useful
analytical tool.
Company Strategy,
Structure and
Rivalry
Demand
Conditions
Related and
Supporting
industries
Factor conditions

9. 9
Threat of new entrants: While obtaining a profit in international market the business may
face losses, if any new organization with better quality and cost enters into the market. The
Arla Company must have to deal with this issue as it is itself a new company in the other
country and if more company will take place so; this competition will affect the business in a
negative way.
Threats of substitute product or services: Here, as the Arla Company will be a new
company in the country where the company is expanding its business. Therefore, due to lack
of trust over the product as well as the costs of the product of Arla the customers may choose
to buy the other substitute product from another brand (Arla, 2015).
Bargaining power: As per the demand of the customers and according to the reactions of the
users the price of the product gets influence. The customers possess the power to influence
the price of the product and this may cause issues for Arla as it in the new market.
Bargaining power of suppliers: The power of suppliers may create issues or challenges for the
Arla Foods as the company needs strong supplier while beginning with the international
market. Hence, the suppliers may take advantage of this as the company is new in the
particular country.
Rivalry among the firms: In international business the competition among the companies are
extremely high and advance. However, it is important for the company Arla to observe their
competitors and to perform market analysis and to prepare appropriate strategies to make a
successful business.

10. 10
Figure 3: Porters five forces
(Source: created by the author)
Industry Life cycle
In Industry life cycle certain phase has been demonstrated through which the Arla Foods will
able to carry out the establishment of the new business in other countries in an appropriate
way. The different phase of the life cycle illustrates the different steps of establishing the
business into new place which will help Arla to produce a proper strategy for their new
marketing plans (Cbs-global.com, 2015).
Rivalry
Among
exisiting
Firms
Threats of
new
entrants
Threats of
subsitute
products
or services
Barginig
power of
buyers
Barginig
power of
suppliers

11. 11
Figure: 4 Industry Life cycles
(Source: created by the author)
Firm’s Level
VRIO framework
This framework is based on the firm’s level consists wider scope for the company. While
expanding business Arla will have to formulate certain processes of strategies that start with a
vision statement and proceed with internal and external analysis, strategic choices and its
implementation. VRIO falls into the internal analysis of Arla, which helped the company to
evaluate regarding the resources and capabilities of the organization. The VRIO focuses over
the question of value, rarity, imitability and Organization regarding the capabilities of its.
Core Competency
The Core competency of the Arla is about the outcome of the set of competence or
production techniques which are delivering extra value to the consumers. The company Arla
Foods must determine for their core competency by fulfilling certain aspects of international
market such as, they must be able to supply potential access to a wide diversity of markets.
Along with this, they must formulate an important involvement to the alleged consumers
profit of the end product. Also, the company must, understand the process of generating
difficulties to imitate through competitors (Cbs-global.com, 2015).
Growth
Phase
Mature
Growth
Phase
Stabilization
Phase
Decline
Phase
Pioneering
Phase

12. 12
Section B
2. Advantages and Disadvantages of Denmark and Sweden as the home bases for a
global giant in the food industry
In order to conduct the analysis to identify the Advantages and disadvantages of placing a
giant food industry in Denmark and Sweden Porter’s five forces will be the most effective
and useful tool (Jones, 2012, p.99). As, in the analysis based on an industrial level porter five
will give the accurate outcome of the analysis through which the advantages and
disadvantages can be easily observed.
Figure: 5 Denmark level of porter’s five
(Source: created by the author)
0
10
20
30
40
50
60
70
80
90
100
Threat of new
entrants
Threats of
substitute
product or
services
Bargaining
power
Bargaining
power of
suppliers
Rivalry
among the
firms
Denmark
Series1

13. 13
Figure: 6 Sweden level of porter’s five
(Source: created by the author)
With the above mentioned figure the level of porter’s five forces has been illustrated that will
help to observe which of the factor possess high level and which of the factor is consist of
low level.
Advantages of basing a global giant food industry in Denmark
Denmark can prove to be a successful place for the global giant food industry, as Denmark is
a technologically advanced free-market economy, mostly concerned with the high value-
added production like processing and finishing products, considerably than taking out and
manufacturing raw materials (Holtfrerich, 2013, p.145). Denmark is also a high tech
agriculture sector, which will help the company to develop their products more correctly.
Apart from these, the main fact is that the Denmark is the domestic country for the Arla so it
is advantageous for the company to acquire customer loyalty. Also, no distance challenges
will faced by the company in domestic market.
Disadvantages of basing a global giant food industry in Denmark
On the other hand, the company will be restricted to the customers and this will not increase
the profit. Also, in the domestic country the company Arla foods will not able to explore
with their business and product. In Denmark the competition is increasing day by day,
0
20
40
60
80
100
Threat of
new entrants
Threats of
substitute
product or
services
Bargaining
power
Bargaining
power of
suppliers
Rivalry
among the
firms
Sweden
Level

14. 14
which is affecting the business, and also the company is not able to accomplish the set
objectives for the Arla due to increase of rivalry. Here, the changes of government policies
are also affecting the business.
Advantages of basing a global giant food industry in Sweden
In new country the company will possess new opportunities for expanding business
(Hibbert, 2010, p.891). In Sweden, the company will posses various advantages like this will
help the Arla to establish the company in the international market. Through entering into
the Sweden market the company will develop the product according to the customers choices
this will improve the productivity of the company. Also, with this the company Arla will
find the path to introduce their product in the global market.
Disadvantages of basing a global giant food industry in Sweden
However, while basing a business in Sweden the company has to undergo with certain
disadvantages such as difficulties of language this communication difficulties can create
biggest disadvantages (Harris, and McDonald, 2014, p.156). Along with communication
difficulties, for Arla the market of the Sweden will be new and thus this will create an issue
or disadvantage of understanding the taste and preferences of customers. People of
different places possess different taste and preferences as per their culture and choice; it is
hard to understand these differences of culture and preferences of people.
5. Reviewing Arla’s International Strategy and providing recommendations
Developing international strategy is very significant for any organization. This is also the
case with Arla Food. The organization has framed some international strategy that would help
make their expansion more successful and efficient. The present section will discuss about
the strategies that the organization has framed in order to enhance its business internationally.
Focus on Russia, China, Middle East and Africa
The organization has recently announced that for the next five years Arla Foods will increase
their focus on Russia, China, Middle East and Africa. This strategy has been framed with the
aim to enhance sale of ingredients in the food industry (Ellis, and Williams, 2015, p.78).
According to Peder Tuborgh, the CEO of Arla Food, the export of their products to the above
mentions is increasing day by day. Hence, the organization has decided to work more hard to

15. 15
for the next five years to create a significant potential that all the above mentioned market
hold for products of Arla. Furthermore, the organization has decided to augment their
investment in marketing, network distribution as well as integration with the local partners of
Russia, China, Middle East and Africa till 2017. It should be noted that removal of the EU
milk quotas in the year 2015 is the main driver behind Arla to expand its international
strategy.
Increased focus on profitability and innovation
The management of Arla has decided that, for the Northern Europe core market, they will
emphasize on the concept of profitability and innovation. The organization has find a
significant opportunity to attain a long term profitable position in EU market as well as
outside EU market and hence it has become vital that the strategy deliver a proper signal for
developing and improving the sales channels. For implementing this strategy, the
organization has reinforced its position in the core market UK, Sweden, Germany, Finland
and Netherland. As per the strategy 2017, these selected markets must be developed.
However, the significant stress should be on the refining activities and not only on the merger
and acquisitions. For addressing the strategy of profitability, the organization has decided to
advance their relation with the customers by offering them attractive products and inspiring
them in a significant way, (Czinkota et al.2011, p.189)
Operating and Sound and effective business
The management of Arla has decided to carry out a sound and efficient business operation by
strengthening cost efficiency, sustainability and new ways of working. The organization has
launched a large number of programs that would help the organization to carry out their
activities faster as well as in a simpler manner. The organization has also decided to invest in
a large number of dairy expansion and other new facilities for enhancing the global
production. In addition to this, the organization decided to focus on their Close to Nature
position with the aim to work as the most sustainable global diary company, Alfaro, and
Chen, (2009, p.90). For addressing the strategy of new way of working, the organization has
resolved to produce highly-processed whey-base lactose products in Denmark. These
products can be used for providing child nutrition and will also be available globally. Their
new ways of working will also help in generating employment.
Recommendation

16. 16
After analyzing the complete strategies of the Arla it can be illustrateted that the company
Arla must focus on their innovation and profitability in order to achieve the aims of the
organizations in international market. The company must resolve the communication issues
to conduct the business in other countries accurately as well as the company also they must
have to prepare a strong strategy to understand the taste and preferences of the people in other
countries to fulfil their expectations.
Conclusion
The report is based over the challenges or the issues which a company has to face while
expanding its business into other countries. In this report, it has been understood that when a
company is entering into an international market, then the company must carry out certain
analysis with the use of some of the effective tools. The report has been divided into different
sections where the focus has been given into diverse perspective of international business.
With this report the strategic issues confronted by the Arla Food has been carried out. Then
also, different advantages and disadvantages for a global giant in the food industry have been
discussed to understand the subject of the report.

17. 17
References list
Book
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National Bureau of Economic Research.
Czinkota, M., Ronkainen, I. and Moffett, M. (2011). International business. Fort Worth:
Dryden Press.
Ellis, J. and Williams, D. (2015). International business strategy. London [England]: Pitman
Pub.
Harris, P. and McDonald, F. (2014). European business and marketing. London: Paul
Chapman Pub.
Hibbert, E. (2010). International business. Houndmills, Basingstoke, Hampshire: Macmillan
Business.
Holtfrerich, C. (2013). Economic and strategic issues in U.S. foreign policy. Berlin: W. de
Gruyter.
Jones, C., White, M. and Dunse, N. (2012). The challenges of the housing economy.
Hoboken, N.J.: Wiley-Blackwell.
Journal
Bhaskaran, P. (2010). Strategic Firm Response to Developing Economy Challenges. Global
Business Review, 12(1), pp.71-86.
Cravens, D. (2015). Strategic marketing’s global challenges and opportunities. Handbook
of Business Strategy, 7(1), pp.63-70.

18. 18
Egan, M. (2012). Setting Standards: Strategic Advantages in International Trade. Business
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