1.

Background of the study

The plantation Industry of Sri Lanka composites with main three plantations where they are
mainly Tea, Rubber and it is continuing further as prominent plantation crops according to the
figures as well. Tea, being the most the prominent plantation crop of the sector, has been spread
in several parts of the wet zone, and especially in the hill country of central of the country.
Usually Sri Lanka is very famous around the world for its high quality black tea as well as it is
the largest supplier in the world for tea being the supplier for more than 95% of the total world
demand for tea making an earning of average US$621 million in foreign exchange to the country
for an annum. Further usual major markets are United Kingdom, Russia, and the Middle East for
Sri Lankan tea. More importantly this is one of the most important sources of employment for a
greater percentage of workforces in the country who are living in those areas where tea is grown.

The second main plantation of the country is rubber where it is grown in wet zone of the country
especially in ridge and valley areas. The total area of cultivation is about 159,000 hectares where
more than 80 percent of the cultivated rubber is being harvested and in 1999, 96.6 million
kilograms of rubber is produced within the country per annum. But a major proportion of total
rubber production of the country is used for the domestic manufacturing purposes itself which is
56% of the total production and remaining proportion is exported where it brings more than
US$33 million of foreign exchange to the country. China is usually the main buyer of rubber
from Sri Lanka. But based on the frequent fluctuations of the prices of the world market the
income from this sector is highly volatile. Also the competition coming from synthetic rubber
producers also highly affects to the prices of the natural rubber in the country.

The other commercial crop is coconuts where it is grown especially in the western sea border
hinterlands. When it comes to the production, it composites with 2,828 million of nuts per year.
Coconut (mainly coconut milk) is one of the major ingredients which are used in food
preparation in Sri Lanka, and therefore around 65 percent of the total production is consumed
within the country itself. The excess is exported after converting them to kernel products
(desiccated coconut, coconut oil, copra), coconut cream, and coconut milk powder where it
usually generates US$129 million of foreign exchange to the country.
Talking about the current situation of the industry, when it comes to tea plantation it faces many
issues in terms of internal and external factors. It is a critical internal issue where the industry
faces a huge cash flow issue in terms of the labor. The other trending issue of the industry is
reducing the number of workers who are willing to engage with tasks related to the industry such
as plucking tea and fertilizing. Due to this reason the owners of tea lands have to pay a high rate
of wage to them to bring to work where ultimately it is around 60% of the price of one Kg of tea
should be paid as the wage to the labour. This would impact on the profitability of the tea
plantation as well as this issue is one of the major reasons to give up the harvesting of tea by
most of tea land owners in the prevailing economy. At the same time several other issues are
there which affect to the productivity of the industry where some of them are different weather
conditions of the country which is not suitable for the harvest in some periods, Soil erosions,
different diseases, lower technical knowledge about the plantation by owners of the lands as well
as the management of the plantation

When it comes to rubber, though Sri Lanka is a comparatively small natural rubber producer,
approximately 60% of the annual production is consumed within the country itself where the
remaining 40% only is being exported. So the impact for the overall industry from rubber is
comparatively low, but still the crop is important commercial crop. Today nearly 75% of world
natural and synthetic rubber production are used for automobile industry and so the demand for
the rubber products are highly based on the demand coming to the automobile sector where there
is another factor which is the price of crude oil to the entire rubber industry of the country.
However for the last few decades the cost of production for rubber products were significantly
low compared with other industries in the plantation sector where currently economic condition
of the market is almost positive

Current market for Sri Lankan rubber industry composites of two sectors that is the plantation
industry, including smallholders, which grows rubber trees and harvests latex that is converted
into stable concentrates and raw rubbers and (2) the rubber products manufacturing industry,
which converts raw rubber into value added finished rubber goods. Sri Lanka should pursue the
opportunities presented by small-volume runs, niche markets, and product launches. Product
development and prototyping, however, are expensive and require a significant resource base. A
few, large private sector firms with research and development facilities have developed
innovative and profitable products.

2. Significance of the study

Through intensive analysis of the industry, it is very clear that there is long way to go to Sri
Lankan economy with the plantation industry by making certain developments in order to bring
it up to accepted standards and increase the efficiency to expand it further to compete with the
global suppliers. So the study is focused on identifying possible improvements in the industry in
terms of crops wise that is Tea, Rubber, Coconut and palm, and strategies to be adopted by the
economy to bring up in to the required level and upgrade the standards of the final products
which can be used to give a great competition in the world market and bring a considerable high
foreign currency inflow in to the country.

As discussed in the background of the study every crop of the industry has its own potential to go
up with the harvest and the quality of the harvest by getting required precautions to the problems
they have faced in the industry. For an example when it comes to the Tea industry it is a huge
problem they have faced the lack of labour supply as well as the high cost of existing labours. At
the same time small and medium scale tea planters are hit by the high cost of fertilizers and
pesticides. With the price they receive for a one Kilogram of tea, it is unbearable the high cost of
labour as well as high cost for fertilizers and pesticides.

At the same time tea industry of Sri Lanka should pay their attention on finding new means of
tea by going for innovations to compete with the new trending substitute products where the
market is slowly moving towards that is bubble tea, cappuccino, ice tea and all. So it is clear that
without diversification of the product varieties of tea as well as without innovative value
additions, the tea industry of Sri Lanka cannot be survived for a long future under these
conditions.

When it comes to the Rubber industry, it has also hit by several critical issues such as the
frequent fluctuating oil prices in the world market which is the main input used to the rubber
manufacturing process. At the same time the biggest challenge of the industry is the competition
coming from synthetic rubber which is lower in price and the market has severely affected from
that existence. So as an industry should research on how to reduce the cost of natural rubber
production in order to compete the price of synthetic rubber, as well as the industry should come
up with strategies to enhance the quality of rubber production where then the consumers for
rubber productions will seek for the right quality not the price as the quality of natural is not
comparable with the synthetic rubber. So the Industry continuously should come up with quality
improvement strategies to protect the market which exists right now and expand it further in
future.

Therefore the study would actively seeks for the existing issues of the entire industry in terms of
each and every crop, as well as it will research possible future markets for the industry in terms
of locally and internationally with enhanced production from quality and attributes aspects. Then
the study would find the strategies to be adopted to reach the goal of the industry after providing
solution and implementing suitable strategies for existing issues within the industry. So the study
is timely important where the industry can make a considerable contribution to the foreign
currency generation towards the country through implementing necessary actions to take the
maximum possible output from the industry.

3. Objective of the Study

The objective of this research is to contribute towards a contemporary issue of economy where
the study concern is a timely important. So the main objective of the study is to evaluate the
current condition of the plantation industry in Sri Lanka and identify possible marketing
strategies to enhance the quality and the quantity of those crops and to make the plantation
industry of Sri Lanka is the one of the best foreign currency generator of the country. The study
objective is to come up with a generalized statement regarding the current condition of the
plantation industry and its market to identify possible developments and innovations to bring up
with strategies to make it happen in the future plantation industry. So after narrowing down the
above given broad objectives following are intended from the study?

1. To identify possible future developments to the industry.

2. To identify innovative products could be produced from each crop.
3. To investigate the strategies to be adopted to minimize the cost of production of the
industry.

4. Research Questions
On the basis of pervious researches of the same concern and the extensive analysis of the current
condition of the market for the plantation industry, as well as based on the intended objectives of
the study, the following research questions are formulated to the study.

1. What are the possible future developments to the industry?

2. What are the innovative products could be produced from each crop?
3. What are the strategies to be adopted to minimize the cost of production of the industry?

5. Data requirement

Mainly the study is expected to base on primary data which are collected through
questionnaire and the unstructured interviews. Mainly the questionnaire will include
questions to collect details about the current condition of those crops in the industry through
planters as well as those questions will focus on identifying issues they face in terms of
internal factors as well as to identify the local and global competition they face currently.
Through the questioner survey further the study would focus on getting information
regarding the difficulties they face due to lack of technology and technical knowledge as well
as different issues coming from cost of production such as high wastage, high labour cost,
high prices of fertilizers and some different other issues such as sudden climate changes and
other policy and government rule changes in the economy and their impact on the industry
according to their point of view.

The unstructured interview will focus on getting more details which cannot be collected
through the questionnaire survey where it is very much useful to do a qualitative analysis. So
through this interviews the researcher would intend to grab a practical understanding about
the experience they have faced due to different changes in the internal marketing
environment such as increased cost of inputs and due to external environmental factors such
as increased global competition, policy changes of the government and reduction of rations
given by the government time to time. So those all qualitative aspects of the problem will be
used to come up with an effective qualitative analysis for the study through data analysis
section.

Those primary data researcher would get the assistance from secondary data as well to make
the study more rational and prove the findings in a very logical way. So for this some of
quantitative data to be used to do a quantitative analysis as well in order to provide the same
findings through available statistics in the industry. Mainly for this purpose those statistics
are taken from the web site of Sri Lanka tea board and Ministry of Plantation Industries. In
those web sites those statistics are freely available where they are up to date for the analysis.
Mainly the annual production, annual revenue, annual total cost as well as the statistics
regarding main competitors to each industry are taken and will use to provide more
meaningful qualitative analysis with the support of those statistics getting from statistical
analysis of quantitative data.