Economy And Tea Industry Of Sri Lanka Economics Essay

Each country has its own natural resources, natural endowments and its benefits. Also countries are having limited resources and unlimited needs and wants. Different Country has different resources at different limit to satisfy their needs and wants. Therefore counties do try to overcome from these problems and do businesses with other countries through international trade and economical integration.

Tea industry in Sri Lanka is one of the key business where the country gets foreign currency which is also the main drink of ordinary Sri Lankans. The demand for tea products are increasing on the planet market.

So this article is about the Sri Lankan tea products, and the existing economy of the united states. Because the country is having mixed economy as well as the financial system is playing essential role in the growth of the country. Also government intervention available is also included in the article. Government also has policies to accomplish its objectives.

Moreover this includes the market structure and market force as well as international trade and economic integration.

Tea Products

Our country Sri Lanka is one of the developing countries in Asia. The main businesses of our own country include tourism, tea export, apparel, textile, rice production and other agricultural products. The main industries that our country gains forex are Tea business and Tourism industry. Recently, our country has become one of the countries exporting fair trade tea to the united kingdom and other countries. Tea is one of the primary drinks of ordinary people. Along with the demands for tea products are increasing daily. There are many different tea products in market.

Current Economy of Sri Lanka

Our country has most strong growth rate of economy lately. Inflation has been high but declining, averaging 9. 2 percent between 2007 and 2009. The government influences prices through regulations, state-owned enterprises, and subsidies for several goods.

The inflation rate of consumer prices has been reduced in 2010. And the united states is having high growth following the end of civil war.


Figure 1 : Inflation rate (consumer prices) http://www. indexmundi. com/sri_lanka/inflation_rate_%28consumer_prices%29. html

Our government is trying to reduce the unemployment and boost the foreign investment for the monetary growth of the united states. Our Sri Lanka's tea plantation provides lots of job opportunity to Sri Lankan's. Tea plantations contain approximately 220, 000 workers and dependent population. So it shows the tea industry consist the huge number of job opportunity and have reduced the unemployment for a few extent. According to the GDP real growth rate it implies that 2002 the GDP of the united states was declined and after that the economy is continuing to grow.

http://www. indexmundi. com/g/g. aspx?c=ce&v=66

Economic system and government intervention

We are having mixed monetary system where in fact the government allows and helps privet businesses to grow on the market and also to open new businesses. Mixed economy is one of the primary reasons for the proper use of resource available in the country and the government rules and regulation plays vital role. Since Economic policy has been a key topic of debate on the list of folks who are enthusiastic about growth and development, the country have economical policies which consists distinct sections such as development strategy and, macroeconomic policy, agriculture, industry and technology development, employment and labour, institutional and governance issues, and social welfare and many more polices are for the benefit of the country or for the development of the united states. And these policies help the country to possess clear notion of the united states position and are plans to achieve the aims of the country.

Last year government has promised to provide loans for the Agricultural development of country. In addition, it includes improvement and profitability to marginal tea land. And expect new land will come under Tea aided by these loan facilities. The primary aim is to encourage small business entrepreneurship. As result households and people will be benefited and and yes it will improve the living standard and employment can be increased.

The main aim in our government is to raising the standards of living and ingest a higher standard of living by increasing income, employment level, and through the increase of total production of country, thereby actively contributing to the overall monetary growth of our country.

http://lankagazette. com/topstories/us-25mn-loan-for-tea-small-holders-to-develop-3500-hectares-of-new-land/

The policies decide about the budget of the country and how they are going achieve the objective. The governmental organization and institution helped to market of tea industry in our country Sri Lanka to be able to judge their role and contribution to the economic development of the country. During down fall of the industry, various government institutions were established to help and developed the industry,

Also our government has considered the problem of a lack of skilled employees in the tea industry, and plans are underway to begin a program to train the workers in necessary job categories. Based on the discussion held with the minister of professional and technical training, who said that under this program, skilled workers would learn in the categories such as field officers, production officers, technical officers, electricians and tea plantation workers. It demonstrates government helps the businesses to overcome from market failure through stability of the economy and through promotion of positive externalities, provision of public goods and services (financed through taxation) and through efficient resource allocation.

http://goliath. ecnext. com/coms2/gi_0199-7072587/Sri-Lanka-government-to-train. html

our government has selection of policies at its disposal to be able to attain its objectives of low inflation, high economical growth, high employment level and so a great many other goals. Therefore there are policies such as fiscal policy, monetary policy, exchange rate policy, income policy and offer side policy which make a difference the businesses in lots of ways.

Fiscal policy

Fiscal policy is the policy of central government to influence the economy of the country. Therefore fiscal policy can help our government to attain its macro objectives. And there are two types of fiscal policy Expansionary and Contractionary fiscal policy. Our country government is wanting to acquire full employment and also the spending of the government is high so that our standard of living will be high at exactly the same time economy will grow. So we can say our government is towards Expansionary since taxation have been reduced and the spending of government is saturated in modern times. (Appendix 1)

Monitory policy

Through monitory policy the government controls the supply of money, the option of money, and interest in order to attain a couple of objectives oriented into the growth and sustainability of the economy. Among the core objectives of your country is economical and price stability. For 2011 country have decided to lessen the tax and tax reduction are targeted at boosting economical growth as it increase consumption which will help increase revenue. Our country Sri Lanka is one of the most significant tea exporters through which the country gains income. The income through this export can help the government allocate the budget in the monitory and fiscal policy. We can say there is absolutely no wide fluctuation in the overall price level in the economy which is helping to achieve sustainable financial growth as well as the price fluctuation at low rate would not have any major influence on our economical decision regarding what to produce and how to produce, therefore enabling efficient allocation of resources in the financial leading to economic stability. (Appendix 2)

Market Structure

The tea industry in the Sri Lanka market is creating a monopolistic market since there are several tea businesses involved in buying and selling. Sri Lanka is having large numbers of relatively competing businesses in tea industry. You will discover fewer barriers to entry, such that it is fairly possible for firms to set up and also to leave these markets. Each firm is having different products which is highly differentiated from others.

In tea industry in Sri Lanka is not really a monopoly market, as there are many organizations and not just one business has total control over market and isn't only one seller on the market. Also we can't say it is perfect competition since there are lots of competitors in the Sri Lankan market.

Our Government and tea board provides full support and help many people to start out their business in tea industry since it is one of the main export of country where country gains forex as well as the demand for tea product is inelastic and demand is increasing.

Considering the world market, Sri Lanka comes with an oligopolistic competition due to the tea producers being of less number. The entry barriers for tea are saturated in the entire world market because of the insufficient natural endowment in different countries. Tight competition exists on the list of tea producers on the planet and this makes Sri Lanka own an oligopoly in tea globally. And the products are highly differentiated one product to some other.

Market force

The demand for our tea on the globe market has increased. Based on the Minister of Plantation Industries says that there surely is a special demand for local tea in Russia. Our country exported the most significant quantity of tea in 2010 2010 and highest quantity have been exported to Russia. Also now there are high demands for tea on the globe market. Therefore the country should prepare yourself to create sufficient tea to meet this demand. The primary goal of our country is to be the world's leading supplier of tea. http://www. itnnews. lk/?p=22477


Bulk Tea

Packeted Tea

Tea Bags

Green Tea

Instant Tea

Other Tea

-Silver Tips Tea

- Golden Tips Tea

Sri Lankan praised as the best tea in the world.

Considering the entire world market our company is practice investment strategies since the tea industry in Sri Lanka is having high market attractiveness and high business strength compare to international rivals on the globe market. Therefore the country was practicing differentiation strategies. Also the tea products of Sri Lanka are experiencing high differentiation. Moreover the majority of the tea products inside our country are in the star stage of BCG matrix. Which means industry is towards product development as it'll increase core competitiveness and high competitive features of the business enterprise in the international market and also increase the foreign currency inflow as well.

International trade

International trade is vital for or country as it helps in lots of ways for country to overcome from different problems. Our country is not self-sufficient and international trade helps our county to import the resources or goods needed. Also helps to export the products to other country which is bringing foreign currency to the united states. International trade has contributed immensely development of our nation. International trade is a platform for globalization also it reduces inequalities and facilitated growth in economy of our country. International trade is helping the united states to introduce global competitiveness as the majority of the domestic sections tend to become very efficient being exposed international competition. Also the businesses can easily usage of technological innovation and will be able to utilize the latest technology to improve their productivity. You can find high price for Sri Lankan tea products from countries such as Turkey, Iran, Russia, UAE and Kuwait, therefore we can sell our products to the foreign counties through international trade and can increase country income. Also we can import the products which our country is need through international trade.

Benefits of economical integrations

Economic integration helps to reduce or deduct customs duty within the integrated area, so that it helps to decrease the charges for both distributor and the customers. Through this our country can increase profit by increasing demand as we can acquire goods and services at much low priced due to removal of trade barriers and tariffs completely. It also really helps to have freedom and helps to have market expansion and more foreign investment into the country and great diffusion of technology. In addition, it will improve the occupations in the country as well.

Our country integration with World Trading Organization helps to reduce customs duty or trade barriers and tariffs with in the integrated area. There are 153 countries on earth Trading Organization (WTO) and have general agreement on tariffs and trade. Our country Sri Lanka is one the united states in WTO. And the rules of the integration covers trade in all goods and helps international trade flow as smoothly and freely as you can and reduce risk in doing oversea businesses.

So our country can export products with good deal since our country is part of WTO and through integration the trade barriers surrounding the world are lower than they are before. So the price of product can be reduced and we can sell our products much more less price. And in addition imported products we can reach low price.


As I am planning to start out up a business in selling tea products to the ordinary Sri Lankans the facts spoken above could be taken under consideration.

As our county tea products are high quality and tastiest tea products due to the natural endowments or the climate and whether of the country allows the tea organizations to harvest the very best quality tea products. Also the demands for tea products are rapidly increasing, and due to increase in demand a high supply could be generated through starting a tea business.

Moreover countries economy is rapidly growing and lot of development projects are been done. Government also trying to reduce tax and the spending of government on infrastructure is increasing which shows the macroeconomic aims are to have economical growth, full employment, and also high living standard with the control of the balance of payment situation. This year 2010 the federal government pledged loan facilities for agricultural development and was created to the advantage of Tea small holders, small producers, women, landless householders and teenagers in rural area. These facts and natural endowments and government support therefore it initiated me to begin a tea business in Sri Lanka.

Our business vision

To be the leader in tea industry in Sri Lanka, and also spreading our presence in all key economical geographies in Sri Lanka

To be the best quality tea product producer to the nation and the most efficient and affordable price provider in tea product.

Our mission

We will lead just how through quality of our products and enthusiasm of your employees and customers. We will serve all our communities to the best of our ability, try always to hear their needs therefore build total customer confidence and satisfaction.

Key objectives

Get profit $ 20000 within 1 year through introducing a new product and increasing sales and also through cost cuts and providing with affordable price to customers

Increase customer perspective 10% or brand name 10% through increasing brand awareness, through promotions and value added services within 2 years.

Stakeholders of the business

Customers - Customers are one of the key stakeholders of the business enterprise as they are vital to the survival of the business. We will attempt to provide excellent services to its customers while selling the merchandise and has excellent relationship through respects, friendly services and so on.

Investors - We will attempt to give maximum benefits to investors and possess good relationship with them. Through website or through other communication method we provides information about the business enterprise performance.

Employees - Employees are the other key stake holders of the business enterprise. We will provide training programs to employees to familiarize them company's policy and working practice. Will provide many packages and development opportunity to its employees.

Government - Government can influence and affect business in number of ways. We must follow the rule and regulation that is manufactured by the government.

Competitive strategy

For the growth of our own business we can practice Diversification strategy since it is certainly going for new market with new product. Even though this involves high risk, because the marketplace is new where the business has no experience and also it will take a business outside its specialization. Also we can practice cost leadership as here our business can tries to lessen the purchase price or attempt to produce goods or service at less expensive than the rivals in the market. This is to charge lower prices than the rivals and to compete in price wars that may take place. This strategy high light passing on the cost advantages to the customer through cutting down cost atlanta divorce attorneys junction of the worthiness chain or emphasizing on economies of scale in order to provide customer cost benefits.


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