International Market Analyses with Watawala Plantation PLC

Prepared by

Jeyachandrika Piragalathan (MBA-PIM- University of Sri Jayawardenepura)

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Table of Contents
Introduction......................................................................................................................................3

1. Overview of the company........................................................................................................3

2. Growth of market for the product.........................................................................................4

2.1 Porter’s Diamond...................................................................................................................7

2.2 Micro and Macro Environment..............................................................................................8

2.2.1 Micro with Watawala Plantation PLC.............................................................................8

3. Ease of entry – entry barriers...................................................................................................9

4. Dominance by single/ few competitors..................................................................................10

5. Price and price stability..........................................................................................................10

6. Political stability (FTA)..........................................................................................................11

7. Economic stability..................................................................................................................12

8. Possibility of exporting small quantities................................................................................12

9. Cost of marketing...................................................................................................................13

Conclusion.....................................................................................................................................14

References......................................................................................................................................14

Figure 1............................................................................................................................................6
Figure 2............................................................................................................................................7

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Introduction
The aim of the assignment focuses to analyze the specific tea manufacturing as Watawala
Plantation PLC. In the local market in Sri Lanka their specific branded products are Zesta and
Watawala Kahata. These two brands are highly appreciated by the Sri Lankan consumers. The
Pure Ceylon Tea under the brand name as Tetley which is packaging and exporting by the
Watawala Plantations. The Tetley is the first quantity of tea distributes to an overseas market.
Annually there are 100 million tea bags expected in the Watawala PLC.

Accordingly the assignment will evaluate the tea growth of market with past and present
situation, when enter the market there are many barriers facing by the every products, in this
scenario, the barriers will be explained with the exporting concepts.

There are competitors in the market place. It will discuss in the report. Price and price stability,
political stability, economic stability, possibility of exporting small quantities, cost of marketing
will discuss with the appropriate way.

1. Overview of the company

Watawala PLC is one of the leading players within the branded tea industry commanding 30% of
the total branded market. The company provides a standard range of tea related beverages and
also provides a range of value added tea centering on middle and upper market segments
covering an estimated consumer base of six and a half million inclusive of corporate and private
user segments.

Watawala Plantations desires to attain value adding at all periods of its operations and in all its
products. The company has embraced a marketing-oriented method as its core strategy and
emphases on value addition over branding.

Vision of Watawala Plantation PLC is “We will take a path no one has walked before and many
would want to follow.” Through that can understand the company’s innovative approaches with
their business. The company achieved an unmet need of Sri Lanka’s tea drinkers by offering
them a value cup of tea. Zesta set the tone for the way the tea industry should take and ever since
its launch; there has been a noticeable development in the total quality of tea accessible by other
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local tea producers. The company has been qualified with numerous awards in gratitude of
supreme quality standards that are severely sustained in all parts of its operations. The company
has HACCP and ISO certifications and also international quality standards.

The Watawala Plantation PLC has the process of relating to be audited for Ethical Tea
Partnership and Fair Trade Certification, and it is assertive of meeting the requirements of this
certification.

Assessing the export dimension of the Watawala Plantation is packing and exporting tea brand
name as Tetley which is under Pure Ceylon Tea. It is the world-renowned tea brand. This brand
name tea is supplying to the overseas market. The specific export tea expected volume as 100
million tea bags per annum (Watawala Plantations, 2010).

2. Growth of market for the product

In generally the growth of the market, evaluate the present practices and afterward highlight
areas for improvement the function of the market. The growth of the current markets of the
product will achieve the improvement of the future concept as well. Assessing that marketing
strategy is somewhat that marks every part of an organization. It is about consuming everything
that a business does to make value for others. Market strategy comprises customers but it also
aids employees and shareholders. The aim of the marketing strategy is to set out the means by
which decided marketing objectives are to be achieved (Porter, 1985).

Watawala Plantation PLC had best growth of ended 2012. The net profit was Rs.418 Million
which is an 85% increase over the same period previous year. Overall the Watawala Plantation
recorded a profit after tax of Rs.332 Million. Considering the tea performance was encouraging
the better performances bottom line by 44% in 2008.

Assessing the growth of market of the Watawala PLC has launched a special pyramid tea-bag
range for Zesta including the ensuing mysterious products such as cinnamon, vanilla, masala
chai, honey lemon, caramel, ginger, peppermint, rosehip and camomile. The company also
markets the world-renowned Kenilworth OP Tea packed in pyramid tea bags, in a special caddy.
Watawala is also familiarized a designer range of teas under an ultra-premium brand, Artea. The

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uniqueness of this variety of products is improved by its designer-range packaging and its
glamorous blends. Watawala is also in the preliminary stages of expanding into the empire of
Ceylon spices.

Watawala PLC emphases on delivering high quality tea at reasonable prices the proposition
concept has been lengthily accepted by the target segment within the branded tea industry. Due
to the high level of prominence that Zesta processes, the art of tea concept has been skillfully
marketed to the desired segment. Further development is essential in marketing the Fair Trade
policies presently practiced by the company which settle morally sourced tea as well as the trade
partnerships presently established with international companies in this context. As ethically
sourced tea would appeal to larger corporations due to the reflection of compatible values this
would further carve out an exclusive space in the minds of potential customers both individual
and corporate.

Watawala Plantation is presently commands a strong position within the mental and social
dimensions. On careful appraisal though Zesta promotes ethically sourced tea, due notice is not
drawn either through advertisements or other methods. As a remedy to the current space a strong
plantation worker based marketing campaign is recommended to educate the domestic tea
consumer on the outlying benefits of purchasing Zesta tea products, specifically support for tea
industry employees and contribution to their development. This would lead to holistic brand
building as better awareness for the Zesta brand would develop whilst building the image of the
company across all product categories.

In 2001, Zesta takes the center phase and with innovative thoughtful and marketing being the
angle stones of a brands achievement and performances, the unique sales openings in the tea cup
comes into existence. In 2002, excellence enhanced with five plantations attaining the significant
Taiki Akimoto 5S awards- internationally standard by the corporate world as benchmark for high
quality and standards.

The Watawala Planation the export volume of the specific product as Tetley. It is the export
product and manufacturing and packaging by the Watawala PLC. This venture will certainly
carry excessive respect and a flow in trade revenue to the country. Further it is the successful
product in the foreign market as well (Watawala PLC, 2013).

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Figure 1: Ansoff Matrix

Source: Author’s view

Assessing the Growth of market for the product the Ansoff matrix which is defined certain
significant strategies for business growth. They are market penetration, new product
development, market development and diversification. Market penetration is increasing the
market share for current products in the market. New product development is increasing the new
product for the present market. Market development is identifying and developing new
opportunities for the market for current products. Diversification is developing new products in
the external market. In generally the company will follow these specific strategy to attractive the
specific product to the market.

Considering that Ansoff growth matrix analyses the interaction between products and market
categories. As Tetley is continuously targeting diversification strategies training and
empowerment of employee groups can be used to achieve this. Each group of innovators can be
designated projects under management supervision and innovation can be encouraged via new
method generation to achieve target results.

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2.1 Porter’s Diamond
The Porter Diamond is a model which supports to analyze and enhance the global competitive
field with the nation’s role. The model is proposed that competition and the company strategy. It
will guide the economies theory with the comparative advantages as well. The figure shows the
competition and the company strategy of the products.
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Figure 2: Porter’s Diamond

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As mentioned the above Porter’s Diamond model can relate to the Watawla Plantation tea
products. In generally Sri Lanka is aware of the requirement to bring about vertical integration in
its traditional tea exports and is now into adapting a main share of tea exports to consumer packs
and other procedures of value added exports, gathering the requirements of more refined
markets. Making a stable position in the market place and managing positively with the
competitive forces would define Sri Lanka’s competitive strategy in the global tea industry.
Competitive strategy focuses on the industry, while competitive advantage focuses on the firm.
A competitive advantage occurs when the firm is talented to distribute the same benefits as

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competitors but at a lower cost or provide diverse benefit of those rival products (differentiation
advantage). Thus a competitive advantage tolerates the firm to create greater value for its
consumers and greater profits for itself (Porter, 1985).

2.2 Micro and Macro Environment

2.2.1 Micro with Watawala Plantation PLC

When exporting the Watawala Plantation tea product to international market, there are following
marketing strategy has to consider by the specific company. Specifically Porter’s Five Forces
analyses the level of competition within the specific industry as tea industry and business
strategy development.

Porter’s Five Forces

1. Potential entrants:

Watawala Plantation has many threats from large number of other tea manufacturer in the world.
Assessing the tea industry in generally gets the result of high profits. But the strong brand image
as Sri Lankan Tea gets the advantage for the international customers as well.

2. Bargaining power of customers

When it comes to bargain power of consumer an organization created a price which has
exaggerated the profession from one of the two important forces customers’ power. The role of
this force covers the customer’s attentiveness laterally with the size. Considering that Watawala
Plantation achieved their customers as an outcome of letting the company to increase customer
loyalty.

3. Threat of substitutes:

There are many substitutes’ products in the international market. Therefore Watawala Plantation
has to make the different kind of tea products in the market. In this kind of threats give the
chance to create product differentiation strategy for their products in the international business
concept.

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 4. Bargaining power of suppliers:

Customer power reflects to supplier power. It has two significant aspects such as important size
and attractiveness. The first one is the important size and attentiveness of suppliers and the
second one the differentiation in the resources being supplied. Those two aspects should consider
by the Watawala Plantation (Porter, 1980).

3. Ease of entry – entry barriers

In the economic theories, the competition will make the barriers to entry. In common, there are
many barriers facing by the company. The main barrier is the competition in the market.
Considering that new competitors to enter may appreciate periods of good profitability and
limited rivalry between competitors. Equally, industries that are calm to enter entice new
companies into the industry throughout periods of profitability.

When considering the economies of scale of the tea manufacturing specifically Watawala
Plantation, mixed economic systems are applicable to the Sri Lankan economic system. In this
scenario the Sri Lankan government helps to increase the private business and give the chance to
new business as well. In this kind of chance will lead to launch the product to the international
market too. Economic policy has been a key theme of dialog among the people who are
attending in advance and growth, the country have economic policies which covers diverse
sections such as development strategy in agriculture, and the technology development, therefore
the barriers are less for the tea product in Sri Lanka when launch the international market.

Considering the international market, an oligopolistic competition is applicable to the Sri Lanka
tea producers being of fewer numbers. The entry barriers for tea are high in the world market due
to the deficiency of natural talent in diverse countries. Tight competition occurs among the tea
producers in the world and this creates Sri Lanka have an oligopoly in tea internationally
(Watawala Plantations, 2012).

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 4. Dominance by single/ few competitors
Though Watawala Plantation is currently maintains several key points of difference in
comparison to primary competitors, the degree to which this advantage has been utilized is low.
With their large distributor network Watawala Plantation is in a position to focus on two unique
selling points before launching a marketing campaign to gain market share within the branded
tea industry. For example Zesta’s ethical tea processes are verified by Fairtrade and the Ethical
Tea Partnership, as Sri Lanka develops the percentage of socially responsible citizens will
continue to grow, tapping into this segment through advertising of their ethical tea processing
methodologies Zesta can further capitalize with regard to increase of sales as well as increasing
market share across several segments of the branded tea industry.

Assessing the competitors in global in the tea industry, the recent trends show that outside of
China, tea demand is regulated in two directions. In tea-dominant markets, bagged black tea
endures its continued growth between daily drinkers, particularly in those developing markets. In
non-tea markets, fruit/herbal tea is achievement interest between consumers as a healthier option.
This latter group presents a high value opportunity, but also demonstrates the difficulty that
global tea manufacturers face in endorsing the product.

World tea drinking is still largely concentrated in Asia and the Middle East with India, China and
Pakistan accounting for over two thirds of the consumption projected growth. Over 50% of
global tea exports are to Middle East, North Africa and the former Soviet Union countries
(Choudhry, Lister, and Ali, 1997).

5. Price and price stability

The objective of price stability denotes to the overall level of prices in the economy. Price
stability proposes the inflation and deflation of the economy. In generally price stability
contributes to reaching high levels of economic movement and occupation by purifying the
clearness of the price mechanism. Due to the price stability people can identify differences in
comparative prices with the goods.

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Assessing the price stability of the tea products in Sri Lanka is the world’s leader in tea exports
and is essentially strong as the main supplier of teas to the traditional tea-drinking markets of the
CIS and Middle East. However, international tea marketers exactly located Sri Lanka, like other
manufacturing countries, as a dealer of wholesale teas. In the global tea trade, accurately, Multi
National Countries have interceded between themselves, retailers, and consumers. Tea is
comparatively price in-elastic as most consumers are habitually addicted to the beverage which
has been growing in popularity in recent times in assessment to its competitor beverages as a
outcome of its health related benefits.

Watawala Plantaion export tea as Tetley emphasis on bulk tea functioning as contract packers
and contest on the base of price. The challenge is to minimize the impact of price swipes and
decline by differentiating and totaling value so as to profit from the extra price-stable wholesale
prices while continuing productivity in the planting sector.

6. Political stability (FTA)

Trade liberalization in recent decades has been transformed by Free Trade Agreements (FTAs).
Despite opposition from import-competing special interest groups, their number has
mushroomed (WTO, 2011).

When considering the political stability of the tea industry, the global tea business is always
concerned with the imbalances in tea markets, yet, there are also a number of issues at the
production level that need consideration. Looking at labour, social and ecological issues in the
global tea sector, a sad picture of large scale violation of internationally accepted standards
emerges. ILO core conventions on labour issues are not respected. Issues such as wages, health
and safety, working hours and regular employment paint a grim picture. To address the persistent
imbalance in production and consumption of tea, a number of initiatives have been undertaken.
The FAO in the early 1990s, launched a program to increase black tea consumption by
highlighting health aspects. The global tea industry has undertaken some initiatives in the field of
corporate social responsibility to address social and environmental issues. Critical analysis of
quality and effectiveness of these initiatives however indicates that labour rights, social issues,
environmental concerns and economic imbalances are not being adequately addressed. Although
there is a clear trend of growing interest in food safety issues - imposing higher standards of tea

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production for the sake of consumers, health and safety concerns of workers of the tea industry
are generally neglected (Ornelas, 2005).

7. Economic stability
Economic integration supports to decrease or remove duties inside the integrated area, so it
supports to decrease the prices for together distributor and the consumers. Considering that Sri
Lanka can raise profit by growing demand and can obtain services and goods at much low cost
payable to elimination of trade barriers and tariffs totally. It is also aids to have freedom and
supports to have market growth and more foreign investment into the country and boundless
dispersion of technology. It also will rise the opportunity of the employment in Sri Lanka.

In the global business context, Sri Lanka integration with World Trading Organization supports
to decrease customs duty or trade barriers and tariffs through in the joint area. There are 153
countries in the World Trading Organization (WTO) and obligate general contract on tariffs and
trade. Sri Lanka is one the country in WTO. Therefore the rules of this integration shields trade
in all goods and supports international trade flow as effortlessly and liberally as possible and
reduce risk in doing global businesses.

In this scenario, Sri Lanka can export products including tea with low price because Sri Lanka is
a part of WTO and through mixture the trade barriers everywhere the world are lower than they
have been before. So the cost of product can be cheap and sell our products much more less price
in the global market.

8. Possibility of exporting small quantities

The global business dealings are international trade and investment. International trade mentions
to an exchange of services and products across borders. Exchange can be over trading, importing
or countertrade. Exporting is an entry strategy relating the sale of products and services to
consumers situated overseas from the home base or third country. Importing is the buying of
products overseas and carrying them to the home market.

Exporting is gradually seen as a chance for business growth and improved profitability between
small-to medium-sized businesses in several industries. Numerous companies also expression to

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foreign markets because of deepened competition at home, limited domestic market
opportunities, maturing domestic markets, o better serve consumers who have relocated abroad,
to grow economies of scale in obtaining, production, marketing and research and development
confront international competitors or escape the development of competition in the home market.

When look the international market, Watawala Plantation tea has to focus on consistent and
quality product, which the customer can trust, and that is fundamentally the secret of their
achievement. They have to constantly distribute a product of actual high quality to the customer,
which they trust. When considering the global perspective people are attractive more conscious
of tea because it is linked to health. People trust that tea is healthy, as it does not shield as much
caffeine as in other snacks. It is now gratifying fashionable to have flavoured tea such as ginger
and lime, which are healthy. Internationally people are consuming tea made using tea bags as
different to bulk tea. Tea cafes, tea bars and tea outlets can be seen regularly around the world,
so, the global trend is refining. Therefore Watawala Plantation focuses on the exporting tea to the
global market (Wanninyake, and Dissanayake, 2006).

9. Cost of marketing
Sri Lanka had an unexpected year, with prices for Ceylon Tea affecting on their own and
apparently out-of-sync with the rest of the world. Sri Lanka’s exclusive range of orthodox black
teas fascinated strong demand through the year; even as some of the county’s key markets such
as Iran, Syria and Libya were in confusion. Additionally Egypt, a major buyer of African Black
Teas, went through a bad patch politically and economically.

Considering the Global tea prices are fixed to stay strong through 2012, with demand firm by
development in Asia, substantial to the United Nations Food and Agriculture Organization
(FAO).

Considering the tea production Sri Lanka in 2011 fell 0.9% to 328.37 million kilograms from
329 million kilogram in 2010. Sri Lanka now overcomes the fourth place in total production
volume and is still one of the leading exporters, after Kenya. However, its decreasing importance

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has been empirical. Its share of world trade has dropped from 40 percent in 1970 to 27.9 percent
in 2000 and to 21.6 percent in 2011.

In January to July, 2012 Sri Lanka’s tea production has been stated to be less by 4.4%, from
195.8 million kilogram in 2011 to 187.3 million kilogram in 2012, throughout the same period.

Conclusion
The assignment analyzed the specific tea manufacturing as Watawala Plantation PLC.
Specifically there were several global business concept related to the specific assignment. There
were concept related as Past and present growth of the market, entry barriers when launch the
product in the international market, exporting concepts. In generally when export the products to
international market marketing strategy and the competitive advantage has to focus by the
particular company or organization. In this statement was discussed in the assignment.

Further price and price stability, political stability, economic stability, possibility of exporting
small quantities, cost of marketing discussed with the Watawala Plantation when export their
product in internationally.

References
Choudhry, Y., Lister, D.W. and Ali, R. (1997). Sri Lanka’s tea industry: succeeding in the
global market. World Bank Discussion Paper No 360.

Fonseka, D.C. (2009). Visionary leadership and the case of Dilmah, Sri Lankan J. Mgt. 14 (2), 1-
16.

Modder,W.D. and Amarakoon, A.M.T. (2002). Tea and health, Tea Research Institute,
Thalawakele, Sri Lanka.

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Organization for Economic Co-operation and Development (1997). OSLO manual: Proposed
guidelines for collecting and interpreting technological innovation data, 2nd edition. OECD

Ornelas, E., (2005). “Rent Destruction and the Political Viability of Free Trade Agreements.”
Quarterly Journal of Economics 120(4), 1475-1506.

Porter, M. (1985).Competitive advantage; creating and sustaining superior performance, The

Free Press, USA.

Porter, M. (1980).Competitive strategy; The Free Press, USA

Symposium of Japan Society of Business Administration, September. Kyushu University,

Fukuoka, Japan. pp. 283-286.

Wanninyake, W.M.C.B. and Dissanayake, D.M.R. (2006). Future prospects of value added tea
sector of Sri Lanka, comparative study, proceedings of the annual research symposium 2006,
Faculty of Graduate Studies, University of Kelaniya, Sri Lanka

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