Competitive - Michael Porter 5 Forces

Topics: Tea, Green tea, Black tea Pages: 9 (2287 words) Published: April 20, 2011
Executive Summary
Economic development of Sri Lanka is mainly based on agriculture and tea industry is a major contributor. For the past three decades tea industry intermittently faced with drastic issues resulting downward trend in economic and social development. Previously held dominated no one position of tea export is recently over taken by Kenya. Country economic policy to compete rigorously in world tea market is vital necessity for the growth, as the challengers with new producing countries, technology and consumer changing demands escalating the current situation.

Tea exports income denotes a significant amount of international currency for islands total revenue for more than a century. (Bandara J.S 1999) Few main producers dominate the export tea market and shape the industry while smallholders presence is paramount for the society well being and development of cottage industry. This article explore the strategic assessment of the industry structure for the growth of tea industry in Sri Lanka and prevailing obstacles for achieving the goals.

Sri Lanka Tea Scene

Tea plantation in Sri Lanka was introduced in 1867 by James Taylor a British Planter (Wikipedia) and under British control, many tea estates were planted by British entrepreneurs at that time. Sri Lanka’s long standing image for producing the best quality tea entrenched the plantation as a commercial industry and many other related business emerged creating more than one million direct and indirect employment.(Wijeratne, 1996)

Tea plantation is vastly spread over the highland and midland amounting 56% and 23% respectively of non forest plantation (Bandara,J.S ) however the tea area decline due to soil erosion and degrading of land cause serious threats. Low land tea plantation recently shows massive decline as many non performing plantations are used to alternative usage.

Tea Plantation Geographical spread.
Source :

World tea market was dominated by 3 Asian countries Sri Lanka, China, India for more than a century. However during late 80s in initiatives to develop African countries cultivation of tea and the enticing results encouraged to grow tea plantation as a commercial industry and compete in the world market. And its worth noting here that tea industry in Africa is dominated by multinational large scale organizations. Sri Lanka, Kenya, China and India accounted more than 70% of global exports.(SLTB Annual report 2007)

Market environment and growth trend and rate

Diamond model of Michael Porter introduced in competitive advantage of nation offer the credibility to appropriately explain the four interlinked advanced factors affecting the competitive advantage. And further he proclaimed that there clusters can be influenced by the government. Diamond analysis can be understood better by comparing with the other competing nations.

Factor condition - Innovation, Skilled labour resources and technology base and relative speed of deployment of necessary development is key importance for the competitiveness of an industry. Innovation and technology at the factory and in developing new techniques to improve harvest is at relatively slow comparatively to other tea producing countries. Kenya and India use many novel methods of production and techniques and cheaper labour. Skilled labour resource in Sri Lanka demands higher wages and demands affecting the competitiveness.

Demand Condition - Porter Suggest that more demanding local markets leads to national advantage. Sri Lankan tea production is predominantly targeted at the foreign markets. From the total production 92% is exported. In India on contrary more than ………of tea production is consumed locally. This endow benefits to identify the latest trends faster and adjust rapidly.

Related and supporting Industries – Relative proximity of all the related and upstream downstream partners are with enormous...

References: Ali, R. Choudhry,Y. Lister,D.W., (1997) Sri Lanka’s Tea Industry : Succeeding in Global Market World Bank Discussion papers 368
Bandara, J.S and Coxhead, I.(1999) Can Trade Liberalization Have Environmental Benefits in Developing Country Agriculture? A Sri Lankan Case Study. Journal of Policy Modeling 21(3):349-374
Wijerathna,M.A (1996) Vulnerability of Sri Lanka tea production to global climate change Water , Air and Soil pollution, Kluwer Academic Publishers , Netherlands.92 : 87-94
Annual Report (2007) Sri Lanka Tea Board. Accessed 05.07.09)
Following sites are with some importance to explore more on the industry.
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