Course: Bachelor of Science (BSc) Hons in Management(UCD)

(Batch 23-Sri Lanka)

Module: International Business (BMGT2002L)

Assignment: Group Assignment

Submitted by:
Y.Randulee Sooriarachchi - 19208641
B.A.L.Madhubhashini Abeysekara - 19208598
U.K.Harshi Prabha - 19208627
G.D.E.Imesha Jayawardhana - 19208625
M.W.Samadhi Dulshani - 19208672
J.M.H.Piyumika Jayasundara - 19208714

Lecturer: Dr.John F. Cassidy

Submission Date: 19.05.2020

Word Count:10171

We declare that all materials included in this essay/report/project/dissertation is the

end result of our own work and that due acknowledgement have been given in the
bibliography and references to ALL sources be they printed, electronic or personal.

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 PROJECT CHECKLIST

Yes No
Does the Title of the Project Relate to International Business? √
Have all sections of the project been considered and developed? √
Is there an introduction and conclusion to the project? √
Is there a Table of Contents √
Is there a reference section at the end of the project and are sources referenced
in the text-Suggested format(Quinn,1999) √

Project Group Names and Signatures

Student Name Signature

Y,Randulee Sooriarachchi

B.A.L.Madhubhashini Abeysekara

U.K.Harshi Prabha

G.D.E.Imesha Jayawardhana

M.W.Samadhi Dulshani

J.M.H.Piyumika Jayasundara

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 TABLE OF CONTENTS

1. Introduction ............................................................................................................... 5
2. Identifying the global business opportunities
2.1. What is globalization and effect of globalization ................................................ 6
2.2. History of Ceylon tea.......................................................................................... 8
2.3. Opportunities for Sri Lankan tea in the export market ......................................... 9
2.4. Choosing the company ....................................................................................... 9
2.5. Introducing our new product and its special features ......................................... 12
2.6. Marketing analysis for ginger flavored tea using 4 P’s ...................................... 14
3. Environmental Scanning and market selection
3.1. PESTEL Analysis
3.1.1 Political factors ...................................................................................... 17
3.1.2 Economic factors ................................................................................... 17
3.1.3 Social factors ........................................................................................ 18
3.1.4 Technological factors ............................................................................. 18
3.1.4 Environmental factors ............................................................................ 19
3.1.5 Legal factors .......................................................................................... 19
3.2 Strengths and opportunities of the product ....................................................... 20
3.3 Market selection .............................................................................................. 20
4 Economic and geographic environment
4.1 Economic environment .................................................................................... 24
4.2 Geographic environment .................................................................................. 26
5 Socio cultural environment
5.1 Introduction to socio cultural environment ....................................................... 29
5.2 Determinants of culture.................................................................................... 31
5.3 Socio culture and country specific characteristics-USA.................................... 31
5.4 Tea culture in USA .......................................................................................... 33

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6 Political and legal environment
6.1 Impact of political environment on international business ................................ 35
6.2 Political environment of USA .......................................................................... 35
6.3 Impact of legal environment on international business ..................................... 37
6.4 Legal environment of USA .............................................................................. 37
7 International competitors and strategies
7.1 Competitors in US beverage industry ............................................................... 38
7.2 Industry analysis using Porter’s five forces ...................................................... 38
7.3 Strategies ......................................................................................................... 42
8 Entry Strategy
8.1 Basic entry decisions ....................................................................................... 44
8.2 Market entry strategies ..................................................................................... 45
8.3 Registration as an exporter ............................................................................... 47
8.4 Procedure for issuing export certificate ............................................................ 48
8.5 Labelling and food safety ................................................................................. 48
8.6 Shipping strategies ........................................................................................... 49
9 Conclusion ............................................................................................................ 50
10 Reference ............................................................................................................. 51

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 INTRODUCTION

New product introduction in today’s technology-driven markets carries significant risks.

According to Levitt (1983) pioneered the concept of globalization, asserting that in an era of global
competition, the marketing strategy of successful companies is evolving from offering customized
marketing mixes to each individual country market towards that of offering a single standard
market mix on a global basis.

Globalization is the key factor which paves the way for International Business. Pillars of
international trade include various environmental conditions, country specific characteristics,
company global strategies and entry strategies etc. Declining of trade and investment barriers,
knowledge society and trade agreements, technological advancement etc. are the main the drivers
of globalization.

We decide to obtain an opportunity to export various types of ginger flavored George Steuart tea
to the western coast of U.S.A in order to attract more customers towards the product. The history
of George Steuart Company is closely intervened with the fortunes of Sri Lanka’s tea industry.
Today George Steuart Company is one of the country’s foremost exporters of Ceylon tea, with a
suite of exclusive tea-based products and value added packaging. George Steuart Tea Pvt Ltd has
ISO 22 000-2005, ISO 9001, HACCP, GMP, USDA Organic, Organic EU certificates.

Identification of global business opportunities, environmental scanning and market selection,

assessing the economic,geographic,socio cultural, political and legal environment, analyzing the
international competitors, company global strategies and entry strategies are taken into
consideration when deciding a suitable market for the product to be exported in order to achieve
the product and company targets.

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 A PROJECT PROPOSAL TO GEORGE STEUART COMPANY FOR
EXPORTING A READY TO DRINK TEA TO USA

IDENTIFYING THE GLOBAL BUSINESS OPPORTUNITIES

2.1 What is globalization and effect of globalization?

Globalization is the portray the developing association of the world’s economies, societies and
populaces, realized by cross-outskirt exchange products and enterprises innovation and stream
speculation, individuals and data. According to Prof.Athapaththu (2011:280), globalization tends
to interconnect a nation-state that is bounded by boundaries, economically through trade, capital
and financial flows. Nations have constructed monetary associations to encourage these
developments over numerous hundreds of years. Declining of trade and investment barriers,
knowledge society and trade agreements, technological advancement etc. are the main drivers of
globalization.

In other words, globalization is the spread of items, innovation, data and employment across
national fringes and societies. In monetary terms, it portrays a reliance of countries around the
world encouraged through facilitated commerce. Also globalization has opened wide areas for new
jobs and economic growth. But all new jobs are not for the whole world. They are for certain
countries as well. Specific industries for specified countries. Mostly the advantage of globalization
goes to western world. Globalization gives more opportunities to all sectors.

Through globalization the business entities can get a competitive advantage by accessing new
resources and new markets to settle. Globalization is a socio cultural, political and legal
phenomenon which includes sharing of new ideas, values etc. This new global platform has created
opportunity to find new markets for the business organizations. Markets are more attractive to
international business when they are rich with democratic regimes, market based economic
policies, strong property right protection, well established contract laws etc. Mostly it has become
easier to buy and sell products worldwide and to gain more profits while enlarging the business.

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Globalization has dominated the world in market wise where it has fallen barriers to cross border
trade and investments, for an example – multinational companies operate around the world by
producing products which satisfy the global needs. Globalization of production takes advantage of
differences in cost and quality of factors of production by sourcing goods. A very good example
can be stated as, the Japanese Television i.e. the Japanese televisions are assembled with the parts
from all around the world. Consider the products like Coca cola, Pepsi cola, Sprite and franchises
like McDonalds, KFC, Pizza Hut, Domino’s pizza which are globally standardized products that
are sold all around the world and preferred by everyone.

Globalization gives new business chances to organizations everywhere throughout the world and,
simultaneously, puts before them new difficulties they have to adjust to so as to make progress in
the market. Likewise, worldwide patterns force on the organizations necessities for upgrade of
seriousness as key determinant of their achievements in both nearby and global market. Emergence
of institutions such as World Trade Organization, International Monetary Fund, World Bank,
United Nations can be considered as a significant aspect of globalization as it helps to maintain
the order in the international monetary system, promote economic development, maintain
international peace and security, develop friendly relations among nations etc.

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2.2 History of Ceylon tea

Everybody knows Sri Lankan tea as Ceylon tea. Ceylon tea is rumored for its taste and smell world
over. Sri Lanka is the biggest maker of customary tea on the planet. As of now Sri Lanka positions
as the fourth biggest tea maker of the world. In the worldwide fare front, the nation holds the
situation of second biggest exporter of tea. According to TEA, Sri Lanka applies ISO 3720 as the
base principles for tea. Sri Lanka tea cultivators and manufacturers embrace good agricultural
practices (GAP) and good manufacturing practices (GMP) and produce tea under the most elevated
social and natural guidelines. The tea manufacturing plants for sends out consistently improve and
move up to meet the required specialized and clean norms to adjust to the global sanitation
prerequisites. Most Sri Lankan tea makers have additionally reliably advanced the appropriation
of the most tough horticultural measures and practices especially through the selection of universal
quality accreditations including HACCP, ISO 22000, fair trade, forest stewardship certification
(FSC) ISO 9000, CQC, Ethical Tea Partnership (ETP) , UTZ, Rainforest Alliance (RA), Global
GAP, SA and so forth accordingly guaranteeing the upkeep of very severe creation and handling
gauges that guarantee the security of buyers, laborers and the more extensive condition.

Ozone friendly Ceylon tea, this is another achievement that Sri Lankan tea grabbed. In early 70’s
scientist found that ozone was vanishing from upper level. The reason for this damage was found
as CFC. CFC is commonly used in refrigerators, air conditioners. Other than this there was another
issue found. That is methyl bromide. Pesticide is used to treat soil and numerous farming items.
At that time this was found, methyl bromide pesticides were broadly utilized in the Sri Lankan
industry. On estates as well as in distribution centers, on board dispatches in and different spots
where tea was put away and shipped. So Ceylon tea also helps to protect the planet of earth.

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2.3 Opportunities for Sri Lankan tea in the export market

Sri Lankan tea industry has over 150 years of old history. And also Sri Lanka reached second place
in global tea exporters passing China. The main destination of Sri Lankan tea are Russia, Turkey,
Middle East, Europe African region, United States, Japan, Australia and China.

Sri Lanka sends out around half (50%) of its tea in esteem included structure. The item run
remembers dark and green tea for tea sacks, purchaser packets, endowments boxes, ready to drink
(RTD) structure, instant tea and enhanced tea(flavored tea) and so forth tea based cleansers, soap,
shower gel, corrective items have as of late been added to the item go.

Sri Lankan tea exporters earn highest amount of foreign exchange by exporting to the single export
markets such as Japan (3.1%) Australia (2%) USA (2.0%) and China (1.6%).

2.4 Choosing the Company

GEORGE STUEART TEAS PVT LTD

The “Steuart tea” scope of tea incorporates black tea, green tea, herbal tea and flavored tea which
make up the greater part of the fare portfolio, bound key worldwide markets. In 2013 George
Steuart likewise left on another excursion to showcase the best of unadulterated Sri Lankan tea to
the joy of the Sri Lankan customer. George Steuart Company established in 1835 by brothers
James and George Steuart. So this company proudly keeps their name on Sri Lankan market and
international market.

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George Steuart tea has a noteworthy nearness across the world, giving the validness of Ceylon tea
to the worldwide market through our customers. George Steuart sends out their tea to more than
40 nations over the globe.

They are focused on greatness in each item they convey and put stock in a way of thinking to stay
consistent with item quality and security in each part of our business in the course of the most
recent 180 years in addition to. The whole chain of tea preparing which incorporates purchasing,
warehousing, mixing and bundling is firmly constrained by the organization, conveying on their
own assets, ex: best in class mixing offices, ultra current tea stowing and completely robotized
bundling. The organization’s accomplished tea testers produce a wide scope of value tea items
while holding fast to exacting global food quality and security principles. George Steuart Company
certified from those: CEYLON TEA, ISO 22000-2005, SGS (GMP), SGS (HACCP), ISO 9001,
ORGANIC EU, USDA, JAS, and OZONE. Today George Steuart tea in one of the nation’s
principal exporters of Ceylon tea.

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George Steuart tea is one of the largest tea export producer in Sri Lanka. They have an old tea
story in early 80’s. George Steuart Company gained huge reputation in Sri Lanka and they also
got remarkable customer range in Sri Lanka. They also have several group of companies under
George Steuart name. GS Finances, GS Travel, GS Health, Seri Naturals, GS Aviation are some
of them. George Steuart Company has 184 years of service excellence. And also they are the 1st
group of companies to be registered in Sri Lanka. They also have 50 offices worldwide and more
than 600 families benefitted through this company. Also they keep their place in Sri Lankan market
and global market. George Steuart tea is awarded by the ceremony organized by Export
Development Board and they are awarded with presidential export award as the HIGHEST
VALUE ADDED EXPORTER in tea sector. They significantly contributed to Sri Lankan exports.
Not only that, George Steuart Company has also won many awards several times.

So, we choose George Steuart Company is the best company to introduce our new tea based
product. Because they are a leading company in Sri Lanka. And also by considering previous
reasons we select George Steuart Company is the best to enter the global market with our new
product.

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2.5 Introducing our new product and its special features

In today’s developed economy, almost all the global business practices are adopting new trends
and try to capture a higher market portfolio through gaining a higher consumer satisfaction. In the
tea industry, special reference to Ceylon tea. It is far more developed than just normal plain tea.
Mainly, the top tea exporters of the country manufacture tea with different flavors and with unique
attractive packages.

Iced tea is a form of cold tea which is unique and is trending among the tea lovers. So, we are
aiming of building a business idea to develop a product of iced tea as a ready to drink type. Today
with the availability of various tea blends, it is easier to make interesting combinations of
ingredients for this product. The container for the iced tea would be an attractive unique stylish
weightless recycled plastic bottle. Since our tea drinks are very fresh and healthy, health conscious
people will create a demand for the product. Not only the health conscious people, we target
children, young and adults in the society. The strategy of this business is to create interesting
flavors by mixing in house blended tea mostly black or green tea with fruits and other ingredients to
attract more and more loyal customers in the global market.

So we introduce some unique flavored iced tea for the customers. For our product we use ginger
as the main ingredient. Ginger has surprising benefits. Ginger is a good herbal and sometimes used
as a spice too.

1. Ginger can reduce the risk of diabetes

2. Ginger is a natural way to relieve period pain
3. It’s an anti-inflammatory
4. It can settle an upset in stomach
5. Ginger can also curb morning sickness
6. It may lower your risk of cancer
7. It may prevent heart diseases
8. It helps to lose weight
Ginger contains a substance with powerful medicinal benefits. Also ginger may reduce muscle
pain and soreness, can help with osteoarthritis, Ginger may lower cholesterol levels and ginger
also improves brain function. These are some of the benefits of using ginger. Ginger has thousands
of benefits.
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We thought that producing mere ginger tea will not get more customer attraction. So, we made a
combination with fruit flavors by mixing the ginger flavor. Because it is easy to get customer
attention through fruit flavored tea. By mixing the taste of ginger, it gives a unique taste and
people love to taste unique beverages.

New flavors of iced tea

 Green tea ginger flavor

 Strawberry flavored ginger tea
 Lemon flavored ginger Tea
 Raspberry flavored ginger Tea
 Peach flavored ginger Tea

We select these flavors by considering some reasons.

 Usually people love to drink sweet tea. And this is also a ready to drink tea product. So,
the flavors need to be attractive.
 We aim to introduce this tea to kids. Kids love strawberry and raspberry flavors normally.
 We target young and adults to be attracted towards our new product by using these flavors
while giving them health benefits as single ginger flavor may be rejected by young
generation.
 Green tea is also good to young and people between the age 30-40. So, in order to attract
that market we use green tea with ginger flavor.
 Ginger mostly help on relieve period pain. It’s a huge benefit to us in order to attract female
towards our product.
 Normally foreigners love to taste peach flavor and also lemon flavored ginger is a good
combination to attract the customers.
We introduce this ready to drink tea bottles with a recycling mode. So our product will not be
harmful to the environment. And we design our iced tea bottles using some attractive shapes and
colors that all people fell in love. The specialty of our product is people can use our bottled tea by
putting in refrigerators as iced tea and also people can use it as hot tea. Just like fresh milk. People
can drink our tea bottles as their preference.

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Our bottle is low weight and people can carry our bottles anywhere that they want, to the office or
school or anywhere as they wish. We mainly choose ready to drink tea bottles because everyone
export tea as packets and paper tins. So we think this will be a revolution in the tea industry of Sri
Lanka. Also we introduce tea bottles to the foreign market. So, by introducing a product in an
innovative manner, we target to establish a strong brand recognition and product loyalty.

2.6 Marketing analysis for ginger flavored tea using 4 P’s

Product

We are going to cater the product under the following categories by taken into consideration of
preference of customers and their health conditions.

 Green tea ginger flavor

 Strawberry flavored ginger tea
 Lemon flavored ginger Tea
 Raspberry flavored ginger Tea
 Peach flavored ginger Tea

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We target the customers belonging to each age group such as kids, young, adults including health
conscious people. Quality of the product is the most significant feature that helps to attract more
customers. So, we cater the quality tea under the brand name “George Steuart”.So, the branding
of the product can be ensured as the product offerings are from a renowned tea exporting company
in Sri Lanka. We design our tea bottles using recycle plastic and attractive colors that eyes get
touched, different shapes that kids love and add nice aroma. Easy to carry. Ready to drink anytime.

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Price

We choose to cater the product to middle income level customers. And this is a new product .So,
we can’t launch this product to the market in a high price. Because people will not accept a new
product at an expensive level. It’s hard to enter market with expensive price tag. On the other hand,
the brand will experience competition when entering the market both locally and internationally.
So, the pricing of the product would be able to retain the competitive advantage.

In order to attract more customers towards the product, we need to cater the quality tea along with
quality packaging and at an affordable price. Customers can also enjoy 5% discount on our
product, if they buy at least 2 bottles of tea of any flavor.

Place

When deciding a suitable location to where the product can be distributed, the western coast of
USA is preferable as it has the highest GDP of USA.Apart from that the location should be easily
accessible to the customers. So, customers can purchase our product at Wal-Mart and through
other retail and wholesale dealers of USA.Product is also available at tea shops in USA where the
customers can either enjoy our product on the spot or they can take away.

Promotion

We need to create a huge customer attraction in the market and need to enhance the specialty of
our product. We get more advantages because we enter the market with a leading tea exporter that
will help to make people believe in our product. Because GEORGE STUEART TEAS has good
brand name around the world with the slogan “THE ORIGINAL CEYLON TEA PEOPLE”.

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ENVIRONMENTAL SCANNING AND MARKET SELECTION

3.1 Environmental scanning through PESTEL Analysis

3.1.1 Political factors

The USA is considered as the second largest democracy in the world where the President is the
head of the country. Elections that are held for a four year term is generally considered as fair and
transparent. It is a country with a stable political environment. So, it can have a positive impact on
international trade. It impacts the political dynamics of many countries around the world. The USA
positions itself as a great destination for foreign direct investment due to the stable political
environment, technology, developed infrastructure etc. It is also considered as the first choice for
the establishment of multinational companies for a long period of time. Political stability can be
considered as one of the factors which influence the country to be chosen for international trading.
Sri Lanka has less rules and regulations when exporting goods to foreign countries. So, the tea can
be exported to the western coast of America without facing much hardships.

3.1.2 Economic factors

When considering about the economic factors, USA is the largest economy in the world in terms
of nominal GDP. It is the country from where the companies such as Subway, Microsoft, Apple
etc. are shaping and leading the socio economic discussions of the world. However the labor is not
cheap in USA when compared with China, India and Mexico. The USA is the country with the
leading economic superpower. However the changes in the global economic landscape is a
challenge for the country. According to TEA, USA is among the leading buyers of Sri Lankan tea.
And also according to Export Development Board, the average growth of Sri Lankan green tea
exported to United States of America is 31.84% from 2014 to 2018.By considering these facts,
there is a high chance for the exporting of the product to be successful in the American market.

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3.1.3 Social factors

The USA is considered as the third populous country in the world. Although it is not in the top 20
list of aging population in the world, still the country suffers a lot due to its population,
significantly in the supply of labor. The USA is very diverse as almost 1 in 3 Americans will have
Asian, Latino, African or Native American ancestry.US healthcare and education system can be
considered as best sectors in the country.

Due to the food culture of Americans, obesity and other illnesses could be found although the
people are health conscious. So, by introducing a product that has many health benefits is useful
to the Americans. In this context, iced tea with different flavors mixed with ginger helps to attract
more customers towards the product. Since ginger provides many surprising benefits such as
helping to lose weight, reducing the risk of diabetes, lowering the risk of cancer etc. According to
a research conducted by the tea council of USA, Americans show an increasing preference for
green tea due to its health benefits although America may be a nation of black tea drinkers. Reason
for choosing green tea is due to the higher health benefits of green tea rather than the black, white
or any other category of tea. Apart from that, usually Americans are seeking new flavors. So, by
entering to the American market the product can achieve its targets.

3.1.4 Technological factors

The USA is the global leader in Science and technology. Companies such as Google, Facebook,
Apple and many others have catered to the needs of Americans. Although the rate of technological
innovation and change are extremely rapid in USA, still the country faces challenges from a
number of other countries such as China, India, and South Korea etc. Most of the Americans
engage in online purchases using their cellphones.

Most of the countries in the world use machines to pluck tea. But in Sri Lanka, usually tea is
plucked by hand. So, it helps to increase the quality of Sri Lankan tea compared to other nations.
Apart from that Sri Lankan tea industry is carried out using the quality standards and quality
packaging facilities. So, the quality of tea has a great impact on the purchasing behavior of
customers. Since Sri Lankan tea is enriched with these features, it is easy to cater to the needs of
Americans in an efficient and effective manner.

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3.1.5 Environmental factors

It is a country with extreme diversification in terms of geography, climate and wildlife. It also acts
as a driving force to attract millions of tourists to the country. Most of the tourists are from Canada,
Mexico, United Kingdom, Japan, Brazil and China. However the USA faces some of the toughest
weather conditions. Wildfires in California in 2019 have also been devastating. Some such
disasters could be experienced by USA although it is the most technologically developed country
in the world. Climate of USA has a great impact on the tea cultivation as the country has seasons
such as winter and summer. West coast of USA is ideal for tea plantation due to the moderate
temperature of the region. Although there is a low rate of tea production, USA is a major producer
of herbal tea. Many of the herbal tea grown in US never cater to the marketplace as they are
consumed often fresh by the people who have grown them in their gardens. So, by catering our
product to the USA market, we can attract more consumers in the context of such reasons.

3.1.6 Legal factors

Each state in the USA has its own government structure and legal system. The country has equal
treatment towards nationals and foreigners. Judicial system is also unbiased. So, expatriate
employees also can enjoy the legal benefits. Apart from that the USA offers a strong legal system
in order to protect the Intellectual Property Rights. When considering about the protection of
Intellectual Property, TRIPS agreement is considered as a trade related Intellectual Property
agreement. When considering on the laws applicable for import of tea by USA, Food and Drug
administration plays a vital role. The responsibity of reviewing the import of tea, coffee and spices
and their admissibility is carried out by the Food and Drug Administration (FDA).Apart from that
the instruction on how to label the products is also given by FDA. All the commercial imports of
the food products require the filing of prior notice with FDA. No restrictions or quotas on tea
whether they are bottled, brewed or packaged is a significant feature as it helps to engage in free
trade without the influence of trade barriers.

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3.2 Strengths and Opportunities of the product when catering to USA market

Strengths

 Being an innovative product that has many health benefits

 Introducing by a leading tea exporting company in Sri Lanka
 Environmental friendly product with quality standards and quality packaging

Opportunities

 Trying to enter to a new market which is suitable to attract more customers

 Catering to the customers with diverse needs and wants
 Can achieve the product and company targets as the new market is showing an increasing
interest towards the product category

3.3 Market Selection

We seek the best country to export our product. Ceylon tea is exported to many countries in the
world. There is a good performance of tea export during last year. Turkey has developed as the
biggest merchant of Sri Lankan tea in 2019 followed by Iraq and Russia with Iran possessing the
fourth position. Other vital merchants are Libya, China, Azerbaijan, Syria and the UAE. Then
goals for example USA, Saudi Arabia India and Germany have demonstrated a development in
imports in 2019 contrasted with the relating time of 2018.

So, we choose USA from other tea exporting countries. First we take China, Chile, Iraq and USA.
So, we take a look on economic growth (GDP growth) and sector growth of that selected countries.
We try to find the growth in the imports under beverage category and tea for selecting a country.
So, we found USA has both economic growth and industry growth by considering the years from
2009 to 2019. USA is called as one of the world richest and powerful country. And by 2019 USA
is the leading buyer of Sri Lankan tea.

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United States import of coffee tea, mate and spices was US $8.06 billion during 2019.

 USA imports beverages, sprits and vinegar.(Graph 1) USA imports Tea, Coffee and
mate(grp2)

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 Leading buyers of Sri Lankan tea

Hong Kong
USA
Japan
Country

Chile
China
Turkey
Iraq

0 5000 10000 15000 20000 25000 30000 35000 40000 45000

Tea in MT

2018 2017

Data obtained from TEA

Export of tea

Chile
Country

USA

China

Iraq

0 20 40 60 80 100 120 140 160

Value in US $ Millions

2018 2017 2016 2015 2014

The above chart shows that the export of Sri Lankan tea is high in Iraq as it has a growing trend.
When considering about China and Chile, they show a fluctuating behavior towards the export of
Sri Lankan tea from 2014 to 2018.However USA shows an increasing behavior although there’s a
slight decline in 2015.Although Iraq has the highest sectorial growth, when considering about the
economic growth of the country it is below the United States of America. So, when considering
the economic growth and sectorial growth, United States of America is better than other countries.

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When entering a new market the above two factors should be taken into consideration while paying
attention to more other variables .Sri Lankan tea exporters earn highest foreign exchange rate by
exporting to USA. So, according to TEA, USA is among the leading buyers of Sri Lankan tea.

The USA is an economic political superpower .In relation to the nominal GDP, it is the country
with the largest economy in the world. It is also renowned for its infrastructural and technological
advancement. Apart from that according to the TEA, it is among the leading buyers of Sri Lankan
tea. According to Export Development Board, the average growth of Sri Lankan green tea exported
to United States of America is 31.84% from 2014 to 2018.On the other hand USA is the world’s
largest single importer with a 13.4% share of global imports equal to $2.6 trillion of goods. But as
USA is a large country, we decide to cater the product to the western coast considering the highest
GDP of the region.

Usually Americans are health conscious. But they suffer from various diseases such as obesity due
to their food culture.So, As our product is enriched with ginger, it is most suitable to the people
living in America as they can enjoy many health benefits such as losing of body weight, reducing
the risk of diabetes, lowering the risk of cancer, preventing heart diseases etc. Current Covid-19
situation also has a high impact on Americans. So, our product can have a significant impact on
their health conditions.

According to a research conducted by the tea council of USA, Americans show an increasing
preference for green tea due to its health benefits although America may be a nation of black tea
drinkers. Reason for choosing green tea is due to the higher health benefits of green tea rather than
the black, white or any other category of tea. So, by introducing our green tea with ginger flavor
to the American market, the product can attract more customers. Apart from that usually
Americans are seeking new flavors. As we have different flavors such as lemon, raspberry,
strawberry and peach we can target more customers. So, by entering to the American market the
product can achieve its targets.

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ECONOMIC & GEOGRAPHIC ENVIRONMENT

4.1 Economic Environment

United States is having the large population, which is about 328.2million for last year (2019).
According to the population ranking, United States is having the 3rd largest population in the world.
The United States of America is the largest economy in the world and also it is a mixed economy.
According to the World Bank, United States has a 2.9% growing rate of Gross Domestic Product
(GDP) in 2018, it is 0.64 increase from 2017. Gross Domestic Product of United States is 20.5
trillion USD in 2018 according to the World Bank data. When comparing with the other countries,
which rank as the largest economy in the world and also according to the World Bank data, Gross
Domestic Production per capita of USA is around 62.8 ($ US) as of 2018. The unemployment rate
of United States is declining compared to last years. In 2018, rate of unemployment according to
the World Bank data is 3.9%

Human Development Index (HDI) of USA is 0.924 in 2017(According to the World Bank data).
It is based on the life expectancy at birth, education attainment and etc. Both male and female life
expectancy value is 79 in 2017. When comparing with the past year, USA life expectancy value
has been increased. Apart from that when comparing the education attainment of the past years,
United States of America can be identified an increment. Because of that, exporting ginger tea to
USA will be advantage.

The United States have regions. Among the regions western coast region’s GDP growth is
significantly exceeded that of 32.1% in 8 years. The United States of America is the world's top
importer in 2018. Apart from that, it is a developed country but it continues to thrive.

Tea market of USA also develops as it is strengthening and raising the health consciousness of
consumers. The demand for tea is at an increasing rate of 1.4% in the market. Therefore, the
demand for high quality George Steuart tea also will increase among the USA people. So,
exporting ginger flavored tea to United State of America will be advantageous.

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 Diagram: Current GDR (US$) – USA

Diagram: GDP growth(annual%) – United sates

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 Diagram: Unemployment Rate – United States

The economy of United States and the wealth of the people is also rising. Therefore, in United
States people always shows interest in the tea production. On the other hand, purchasing power of
them will increase. Because of that people spend money on different kinds of products such as tea,
herbal tea, coffee and etc. Also, the United States of America has a seasonal culture, such as winter,
summer, etc. Especially in winter people who live in United States spend money on beverages due
to the hunger and thirst in the context of cold weather. Also, in other seasons the people who live
in USA spend money on tea products. As George Steuart tea is famous for its high quality it can
be said that people who live in United States will spend money on this product because it has a
new flavor. Especially ginger is a Sri Lankan Ayurvedic medicine for Covid-19 disease. Because
of that, the drink is very beneficial to United States, where there is a high impact of Covid-19.
Therefore, people who live in United States will spend money on this product.

4.2 Geographic environment

The United States of America is the world's third largest country in size. It is located in North
America and it is boarded on the east by the Atlantic and west by Pacific Ocean and also northern
and southern are bordered by Canada and Mexico. Its coastline is about 12,383 miles. It has various
weather conditions, such as spring, autumn and generally has a cool climate. Therefore, this
climate is suitable for the consumption of ginger flavored tea.

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The west coast of the United States has an Oceanic climate and also bordered by the North Pacific
Ocean. Therefore, this climate is suitable for the consumption of ginger flavored tea.

The United States of America has a best maritime transportation. So, it will help to deliver tea
across the borders. Also, the USA has a good air transportation. It will help to deliver these
products to United States of America and also it has an air transportation from region to region.
Therefore, it will be more helpful to deliver the product to western coast of USA. The Western
coast of USA is situated near by the ocean. So, it will be helpful to transport the product through
the maritime transportations.

United States of America is a European Country. Tea is not widely grown in European countries.
Therefore, it is advantageous to export tea from Sri Lanka to the United States of America. Since
the company offer George Steuart ginger flavored tea to western coast of United States, it is very
important to assess the geography. Western coast of United States of America is more
advantageous in exporting various types of ginger tea.

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Overall attractiveness of a potential market to International Business depends on the balance of
benefits, costs and risks associated with doing business in that country. So, benefit-cost-risk trade-
off is most favorable in USA as it is a politically stabled developed nation that has free market
systems.

Benefits Costs
 USA has a 20.5 trillion USD in 2018.  Loopholes in ethics and open
 USA is the largest economy in the record laws in USA
world  Cost of legal structure
 It has a 2.9% growing rate of GDP.

Overall
Attractiveness

Risk
 Political risk: USA faces international criticism for some of its intervention
policies in some parts of the world
 Economic Risk: The recession in the USA in 2009 had a negative impact on
the economy. Because of that most of companies collapsed.
 Legal risk: Complex intellectual property laws

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THE SOCIO-CULTURAL ENVIRONMENT

5.1 Introduction to the social cultural environment

Socio- cultural environment simply means a set of beliefs, values, customs, practices and also a
different behavior within a population in the country. There are some factors in socio-cultural
environment. The key socio - cultural factors are;

1) Culture
2) Language
3) Religion
4) Level of education
5) Customer preference

Culture is a set of ideas, laws, arts, knowledge and social behavior of people who live in a country.
Values means the ideals, beliefs shared by people, what is to be good and bad. Norms are social
rules and guidelines for people. Therefore a society is a group of people sharing a common set of
values and norms.

When it comes to International trade, evaluating socio- cultural factors gives many advantages and
can gain more profits when entering a new market in the selected location. The reason is
organizations can do market analysis (SWOT analysis, PESTEL analysis) of the social-cultural
environment of any specific country. Because all countries are different from each other. Every
country has its own, unique socio- cultural environment factors. Therefore, analyzing cultural
environment, companies can gain more profitable strategic decisions and give more ideas, strategic
goals when entering a new and foreign market.

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Social factors affecting when entering a foreign market (Iced tea)

• Social classes in society

• Income level / Average income level and wealth of the population
• Level of education
• Awareness of health-care
• Buying habits in the target market and consumer preferences
• Sex (Male or Female)
• Reputation
• Social organizations

Cultural factors affecting when entering the foreign market (Iced tea)
 Lifestyle
 Social media influence (Facebook, Instagram etc.)
 Participation in cultural events.
 Popular characters (Celebrities).
 The creativity of people.

Demographic factors affecting when entering a foreign market (Iced tea)

• Population growth rate in the country.

• Age distribution (child/young/adult)
• Sex distribution (male/ female)
• Average family size and family structure.
• Immigration and emigration rate.

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5.2 The Determinants of Culture

There are six determinants of culture. They are economic philosophy, political philosophy,
religion, education, language and social structure. The social structure explains to the social
organization in a country. The social structure includes many different aspects. The first is the
basic unit of social organization and the second one is to which a society is stratified into classes.
Religion can be defined as a system of shared beliefs. Ethical systems refer to a set of moral
principles, or values, that are used to guide and shape behavior. An education plays a key role in a
society. Proper education is the medium through which learners can learn a different language,
theoretical knowledge, and mathematical skills that are essential for modern society.

5.3 Socio-culture and country specific characteristics- USA

Culture
The culture of the United States of America is mostly western origin, but influenced by many
multicultural ethos. They are African ,native American ,Asian Pacific island and Latin American
people and their own culture.( White American 72.4% , African American 12.6% ,native
American 0.9% ,Asian American 4.8% -2010 census) The population of the USA is more than
328 million and it is the largest country in the world. Their population growth rate is 0.75%.And
also USA is the most culturally diverse country in the world. Most Americans are Christians and
also there are many religions in the USA. United States has regional variations. They are Northeast,
South, Midwest, Southeast and Western. All these regions have unique traditions and customs.

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Values
The United States of America has very specific values.
 Independence - Americans like the concept of individualism .They believe they can
control their own lives by themselves.
 Equality - Americans believe all people should treat equally and all people are equal.
 Informality -Americans really like to talk with strangers and informal in their behavior
towards others.
 Directness -Americans are really open up with people when they are dealing. They
believe many problems can be solved by talking directly and very clearly.

Language
Out of 50 states of America, official language of 30 states is English while others have mixed
languages. English is the most commonly used language and Americans also speak other
languages such as Spanish, Chinese, German and French .The census bureau estimates there are
300+ languages speaking in USA.

Age groups
0-14 years - 18.62% children
15- 24 years - 13.12% early working age
25-54 years - 39.29% prime working age
55 - 64 years - 12.94% mature working age
65 and over - 16.03% elderly

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Food
Americans normally eat a lot of foods. They eat and drink a lot of processed, instant food like
hotdogs, hamburgers, submarines, cokes and so on. Because of that many Americans are
overweight and its 60% percent of Americans. Their cuisines are different from region to region.

5.4 Tea culture in USA

History
In 1600s, Peter Stuyvesant brought the first tea to America, to the colonists in the Dutch settlement
of New Amsterdam (now-New York).At that time, tea became a very famous drink among
colonies and tea ceremonies were very common. In 1949 Nestle (USA) introduced their first
instant tea to the world. It was 'Nestea’. Instant tea are made by using black tea.

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American-style tea
European settlers brought the tea to America and now they drink more than 3 billion gallons each
year. Drinking tea has become a very simple and common thing in the USA now. Americans like
to have black tea, green tea and herbal tea as well as sweet tea. In 2016, Americans consumed
more than 3.8 billion gallons of tea. Apart from that USA was the only western country that showed
a growth in both tea imports and consumption in 2016.Export of tea from Sri Lanka during 2016
was 5458 MT of which the value is approximately 35 million USD.And in 2015, a quantity of
4941 MT of tea with a value of USD 33 million was exported from Sri Lanka.

Iced tea
In USA 85% of the tea used is cold or iced. During hot weather in USA people like to drink iced
tea. And also iced tea is popular than hot tea in USA.Preparing hot tea and chilling it, that’s how
Americans make their iced tea. The ingredients also same as hot tea; tea, water, sugar (if want)
and can add some ice cubes.

Sweet tea
In the South America, sweetened iced tea is very popular and commonly used. These sweet tea
can be offered to any kind of gathering in southern America, like picnics, day outs, wedding and
so on. During the preparation of this sweet tea, any kind of sugar syrup or granulated sugar added
to the cold tea.

Hot tea
Hot tea is popular when the weather is cold and Americans use it as a morning drink.

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 POLITICAL AND LEGAL ENVIRONMENT

6.1 Impact of political system on International Business

A political system is mainly the system of politics and government in a country. It is a vital factor
which impacts international business as it differs from one country to another. Political systems
can be categorized as democratic vs. totalitarian, individualism vs. collectivism. International
business is usually more attracted towards the countries with democratic political system. Tax code
of a country also has an impact on international business. Free trade is a significant aspect of
international trade as it allows free flow of goods and services between the countries without the
impact of quotas or duties. Government should play a major role on international business by
providing the necessary facilities such as reducing the tax on the business, supplying the
subsidiaries etc. Apart from that the political system of a country impacts its legal and economic
system. Usually the companies pay more attention towards the political system of the country
when entering to a new market. So, political system of a country is a key factor in international
business. It is essential to improve the regulatory outcomes when engaging in international
business.

6.2 Political environment of USA

Political system in United States of America is a representative democracy where the citizens select
representatives to the government. So, it is a vital factor which attracts international business
towards the country as the democratic regimes are usually more conducive to long term economic
growth. USA remained the top destination for FDI due to the large consumer base, a highly
developed infrastructure, innovative business environment etc. USA is one of the countries with
the best regulatory performance in terms of paying taxes.

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From the beginning of American history China has been a significant partner in trading. American
revolution has arisen due to the monopoly of East India Company that made illegal for USA to
trade with China direcly.Throughout American history, there has been no tariff on tea. But a tax
on tea supplied to USA by the East India Company sparked the revolution. For the first time, a tax
on tea has been influenced by Trump administration. Tea market is very small and it can be divided
into two main categories as legal importers and pirates and smugglers. However there is a different
impact on both supply chains due to tariff. In the context of quality tea, both parties are trying to
cater to the needs of the consumer by providing better tea to consumers. The difference between
the two is significant, but there is a quick breakdown in relation to how tariffs will impact both.

Tariffs

USA tariffs are not unusually high by world standards. When considering about the international
business, the goods imported to USA are regulated by the US Customs Service and number of
government agencies. Noncompliance may result in delays, extra costs etc. The US Customs and
Border Protection is helpful in providing the basic importing and exporting information that are
valuable for new exporters to the market.

All the imported goods are categorized according to the Harmonized Tariff Schedule.
Classification which is a complicated process that requires the application of General Rules of
Interpretation determines how much duty will be collected. However the importer is responsible
for properly classifying merchandise before entry. When the trader is not sure on how to classify
an item, a request for a binding rule can be made to US Customs.

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 LEGAL ENVIRONMENT

6.3 Impact of Legal environment on International Business

Legal system of a country has a significant impact on international business. Differences in legal
systems can impact the attractiveness of a country as a market. Laws of a country help to regulate
business practices, define business policies, rights and obligations etc. Legal systems can be
mainly categorized into three as common law, civil law and theocratic law.

6.4 Legal environment of USA

Legal system of USA is common law. When considering about the laws on the food and drugs,
they have been implemented in order to ensure the quality and safety of the products. Food and
drug regulations of United States had its roots in the late nineteenth century. Federal regulation of
the industry started when Congress enacted the Pure Food and Drugs Act of 1906.

The US FDA (Food and Drug Administration) regulations on food (human and animal) exports to
the USA have changed. It is responsible for regulating the categories such as food, drugs, medical
advices, radiation emitting products, cosmetics etc. No special duty on tea can be taken as a great
advantage when importing by USA.But the importers should register with the FDA as the tea is
fallen under the category of food. However the importers will have to file prior notice with FDA
as it is a standard process for any food that enter the market of United States in order to ensure the
safety for the consumers.

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INTERNATIONAL COMPETITORS AND STRATEGIES
7.1 Competitors in US beverage industry

Tea is the fastest growing hot beverage in the U.S. on account of the rising awareness among the
population regarding the health benefits offered by the beverage in place of the substitutes. Major
tea players are likely to capitalize on the health benefits offered by the product enhancing the U.S.
hot drinks market growth.

Herbal/fruit based tea is presumed to be the fastest growing segment on account of growing
number of investments and research recorded. The natural offerings such as fruit teas are fueled
by the demand of the consumers for variations in flavors and crossovers improving the market
growth of the product over the forecast period.

Green tea is estimated to be the second largest market in the tea segment driven by the rising
popularity of green tea among youth. Green tea offers large number of medicinal benefits including
balancing of blood sugar, reduction of cardiovascular diseases, prevention of prostate cancer and
boost in immunity. The antioxidants and polyphenols present in the green tea provide the health
benefits which are presumed to drive the U.S. hot drinks market growth over the forecast period.

7.2 Industry Analysis using Porter’s five forces

In order to maintain the market position for the company, it has to respond to the market forces
efficiently. For that professor, Michael E. Porter has introduced his model which has five main
factors that every business should consider in order to maintain the stable market position and it
can be used to guide business strategy to increase competitive advantage.

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 Bargaining Power Of Bargaining Power Of
Industry Revalry
The Customers Suppliers

Threat Of New
Threat Of Substitution
Entrants

1. Industry rivalry of Gorge Stuart’s innovative flavored tea (Strong force)

The Coca-Cola Company, Starbucks Corporation, the J. M. Smucker Company, Cargill Inc.,
Nescafe USA and PepsiCo Inc. companies are the biggest competitors of Gorge Stuart’s innovative
flavored tea. However, this component of the five forces analysis shows that there are other factors
that determine the influence of competitive rivalry. The following are the most notable external
factors that create the strong force of competition against our product:

 High aggressiveness of firms (strong force)

 Low switching costs (strong force)
 High number of firms (moderate force)
Most firms in the food and beverage industry are aggressive, such as in product innovation and
marketing, thereby exerting a strong force on George Steuart tea. Competitive rivalry is also
strengthened because consumers can easily shift from one provider to another (low switching
costs). In addition, Gorge Stuart’s innovative flavored tea competes with many other firms,
including big ones like the Coca-Cola Company and a multitude of small and medium ones.

According to the above factors, there’s a strong competition and challenges that Gorge Stuart’s
innovative flavored tea business will have to face in the US market.

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2. Bargaining power of the customers (Strong force)

The effects of customers on the firm’s industry environment are determined in this component of
the five forces analysis. The external factors that lead to the strong bargaining power of Gorge
Stuart’s innovative flavored product consumers/buyers are as follows:

 Low switching costs (strong force)

 High access to product information (strong force)
 High availability of substitutes (strong force)
As noted, consumers can easily shift from one firm to another. This condition strengthens
customers’ ability to influence Gorge Stuart. And also, consumers have extensive information for
them to easily make choices on Gorge Stuart products and competing products. Additionally,
substitutes give buyers even more reasons to stay away from Gorge Stuart. Based on this
component, Gorge Stuart must ensure customer satisfaction to maximize its revenues.

As per those things determined on how customers influence the business by their bargaining
power. So, for the Gorge Stuart’s innovative flavored product, the above factors contribute to a
strong bargaining power of customers.

3. Bargaining power of suppliers (Weak force)

Gorge Stuart must maintain profitable relationships with suppliers. This component of the five
forces analysis covers the impact of suppliers on the company’s industry environment. The weak
bargaining power of Gorge Stuart’s suppliers is based on the following external factors:

 High overall supply (weak force)

 Low forward integration of suppliers (weak force)
 Moderate size of individual suppliers (moderate force)
The high overall supply increases Gorge Stuart’s options in acquiring raw materials, thereby
reducing the bargaining power of suppliers. This power is also weakened because of the low
forward integration, which limits suppliers’ control of Gorge Stuart’s supply chain. These external
factors weaken suppliers’ influence on the company even though some of them are moderately
sized or large firms.

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Since the varieties of suppliers are higher and there is a larger overall supply, the power of a single
supplier is low which is favorable for the Gorge Stuart’s tea business.

4. Threat of substitution (Strong force)

Gorge Stuart’s tea products could be substituted based on consumer preferences and other
variables. The influence of substitution on the firm’s business and industry environment are
examined in this component of the five forces analysis. The following external factors contribute
to the strong threat of substitutes against Gorge Stuart’s tea:

 High performance of substitutes (strong force)

 Low switching costs (strong force)
 High availability of substitutes (strong force)
Most substitutes to Gorge Stuart’s tea products are satisfactory. For example, consumers easily
enjoy real fruit juices and brewed coffee products instead of drinking tea or flavored tea. In
addition, Gorge Stuart’s tea consumers can easily shift to these substitutes, which are generally
affordable. Also, most of these substitutes are widely available in grocery stores and other
providers. Based on this component of the five forces analysis, the external factors make the strong
threat of substitution on a priority issue facing Gorge Stuart’s innovative flavored tea.

5. Threat of new entrants (Moderate force)

Gorge Stuart must remain strong despite the possibility of new firms competing against it. This
component of the five forces analysis covers the influence of new entrants or new firms on the
food and beverage industry environment. The external factors that maintain the moderate threat of
new entry against Gorge Stuart are as follows:

 Low switching costs (strong force)

 Moderate customer loyalty (moderate force)
 High cost of brand development (weak force)

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New firms threaten Gorge Stuart because consumers can easily shift from one company to another
(low switching costs). However, through moderate customer loyalty, George Stuart has a
corresponding level of protection from new entrants. Also, the high cost of brand development
makes it difficult for new entrants to directly compete against Gorge Steuart which has one of the
strongest brands in the industry.

7.3 Strategies

Creating a defendable position in the market place and coping successfully in the industry should
define Sri Lanka's competitive strategy in the global tea industry. A combination of three generic
strategies, at the broadest level could help it create this defendable position and outperform its
competitors in the long-run. (Porter, 1988)

1. Overall cost leadership

2. Differentiation

3. Focus

The two main sources of competitive advantage in any industry are low cost and differentiation.
A combination of these two sources of competitive advantage with the scope of the target market
served (narrow or broad) results in four generic strategies .These are cost leadership, product
differentiation, cost focus and focus differentiation.

1. Cost leadership strategy

Minimal effort authority procedure requires creating tea item at lower cost and costs it at lower
level than the contenders' cost because of which the business will increase upper hand ;however
on account of Sri Lankan tea industry, accomplishing lower cost administration is unimaginable
because of the significant expense of creation. The purpose behind the greater expense of creation
due to the high compensation, lower efficiency and lower yields when contrast and other
significant makers (Outschoorn, 2000). Sri Lankan tea industry will have the option to persuade
the contenders not to contend on cost in the event that they have the cost administration
methodology.

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2. Differentiation strategy

Differentiation strategy involves offering products with different attributes which differentiate the
product from competitors’ offerings. Since Sri Lanka is having higher cost of production, it is
better for Sri Lankan tea industry to adopt differentiation strategy for gaining differential
advantage. Also the quality and other features of Ceylon tea are encouraging this type of strategy.
In Sri Lanka, tea is manufactured in six different agro climatic regions with varied specialty tea
suitable to different consumer tastes and lifestyle. This can also be used as a source of
differentiation strategies on which the competitive advantage is based.

3. Focus strategies

This is the third generic strategy. It targets narrow segment or regional markets for a product. Due
to this focus strategy firm can attract new customers or attract repeat purchases. Firms can pursue
this strategy either adopting a differentiation – based focus or adopting cost - based focus. As far
as Sri Lanka is concerned, the cost based focus strategy cannot be adopted due to the increasing
cost of production but it is possible to take up differentiation based focus. For this reason, Sri
Lanka tea industry can follow differentiation based focus strategy by identifying niche markets for
specialty tea.
Sri Lanka can maintain competitive advantage only when they are having value added tea products
with differentiation strategy. If not, it is extremely difficult for the industry to sustain competitive
advantage over other competitors like Kenya, India, China and Indonesia.

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ENTRY STRATEGY – ENTERING TO THE WESTERN COAST OF U.S.A.

8.1 Basic entry decisions

There are three main decisions that a firm contemplates when entering to international business.
They are,

 Which markets to enter?

 When to enter those markets?

 On what scale?

Which foreign market?

As an exporter we should consider about our foreign market. Before selecting a foreign market,
we should know about its political and economic factors and consider about how they influence
for international business. When we are entering a foreign market, we consider about size of
market, the cost, the wealth of the customers and long run economic growth of particular country.

According to these factors, western coast of USA is selected to expand the George Steuart ginger
flavored tea business. West coast of US is a marketplace with a large number of customers that
generally attracts investments. USA and Sri Lanka has a business bond for a long time due to the
tea export from Sri Lanka .As well as US has a growing economy. So, the purchasing power has
also increased. So, we can create a successful market for our George Steuart ginger flavored tea.

Time of Entry to western coast of USA

The second decision is when to enter the market. Before entering to the market, we should consider
about our competitors. There are mainly Lipton and Yogi tea. Strategies should be taken when
entering to western coast of USA.

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The scale of which George Steuart tea is going to operate in West US

The third decision, we are targeting the growing middle- class customers in specific geographical
location in USA.We mainly gather information on competitors and react it and operate our
business in West US market.

Accessing the market

To export, we need to first understand the terms on which we can access our target market. The
following information might be useful:

 The majority of CARICOM countries and the Dominican Republic can access the US
market on preferential terms for most goods- no customs traffic/duties are applied.

 We have the option of exporting directly to a buyer, selling through an

intermediary/distributor or establishing a subsidiary in the US or undertaking a joint
venture arrangement with a US firm.

It is important to understand how to access the US market as well as any potential barriers that
may exist. The mechanisms as an exporter uses to sell specialty food in the Caribbean may be
completely inappropriate to the target market in the US.

8.2 Market entry strategies

The means that market entry fall into three board categories. They are, direct exports, indirect
exports and partnerships/alliances.

1. Direct exports

It means, we market and sell to the client. It can give a higher return on our investment than selling
through an agent or distributor; allows us to set lower prices and be more competitive; and gives
us close contact with our customers.

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2. Indirect exports

We market and sell to an intermediary such as a foreign distributor. The US distributor is a

merchant who purchase goods from an exporter and resell it for a profit. As well as we can use an
agent or distributors to distribute our products. Companies wishing to use distribution, franchising,
and agency arrangements need to ensure that the agreements they put into place are in accordance
with US laws.

3. Partnerships/alliance

Another option is partnership at home or abroad or alternatively, establishing a commercial

presence in the overseas target market (FDI).

Some producers may prefer not to establish a production hub abroad and in such a case,
consideration could be given to setting up a marketing office in the US or entering into licensing
agreement with a US producer to manufacture our product.

From the above entry strategies, indirect export method can be used as the entry strategy of George
Steuart tea to the western coast of USA so that the beverage importer can make the product
available at supermarkets like Walmart, wholesale shops, retail shops and at tea shops.

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8.3 Registration as an exporter

A person who intends exporting any articles of commercial value from Sri Lanka is required to
register with following institutions.

I. Sri Lanka Export Development Board (EDB Reg.Number)

II. Inland Revenue Department (Tax Identification Number/VAT Number)

III. Sri Lanka Customs

To register with the above institution, tea exporter is required to produce the original Business
Registration Certificate or certificate of Incorporation and other related documents along with duly
completed application forms. Application forms are available at the above institutions.

Tea exporters are required to register with the Sri Lanka Tea Board. For this purpose, they have to
fulfill the following requirements:

 Adequate organization (Business Registration Certificate or Certificate of incorporation)

 Sufficient Financial Resources

 At least 01 million Working Capital – A reference letter from the bank should be submitted)

 Adequate warehousing facilities for storing of tea

Duly completed application form. Application forms are available at the tea export division of tea
Sri Lanka Tea Board.

 The registration fees are as follows.

 Registration fee Rs: 58,650 – (All inclusive)

 Tea packers registration fee Rs: 58,650 – (All inclusive)

 Warehouse registration fee Rs: 25,000- (VAT+NBT)

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8.4 Procedure for issuing export certificate

When exporting tea, the import country requests for a health certificate from the food authority of
the exporting country, certifying that the product is suitable for human consumption. This is called
"export certificate "or "health certificate”. Export certificates for exporting food consignments are
issued by the Food Control Administration Unit (FCAU) of the Ministry of health certifying that
the food is fi for human consumption.

8.5 Labelling & food safety

Before exporting our product we should consider about labelling and food safety of our product.
Without proper labelling, our product would not be allowed to enter the US. Some important
details to include on our label include:

 Name of food/beverage/product

 Country of origin for the product

 Ingredients

 Nutrition information

 English language labelling

 Food allergens

 Any chemicals/food additive used

The US food and beverage industry is regulated by the US food and Drug Administration
(FDA).The FDA is responsible for assuring that foods sold in the United States are safe,
nutritional and properly labeled. The most of important players in the US market with respect to
food safety are the United States Department of Agriculture (USDA), the Food and Drug
Administration (FDA) and the Food Safety and Inspection Service (FSIS) which falls under the
USDA.

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In order to export to the US, it is important that producers are considered in implementing Hazards
Analysis and Critical Control Point (HACCP) system which agencies such as the FSIS consider to
be “optimal framework for building science-based process control to prevent food safety hazard
into food production systems “.Two important pieces of legislation governing food safety in the
US are the Public Health Security and Bioterrorism Preparedness and Response Act 2002
(Bioterrorism Act) and the Food Safety Modernization Act of 2011.According to the, Dr. Carmen
Booker of the FDA Regional Office, for Latin America and the Caribbean gave a presentation on
recent developments in relation to the implementation of the FDA Food safety Modernization Act
(FSMA).

8.6 Shipping strategies

The two options available to Caribbean producers in exporting to the US are air and sea
transportation. Air Transportation is fast, but it is expensive and not all goods are suited air
transport. Bulkier goods are more suited for sea transport; however this method is slower. No
matter which method is used however, all shipment require customs documentation. The following
is a summary of requirements:

 Commercial Invoice (minimum of 3 copies)

 Certificate of Origin (minimum of 3 copies)

 Bill of Lading or Air Waybill

 Packing List

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 Conclusion

Globalization has a great impact on the modern society. Globalization of markets and globalization
of production play a vital role in international business. The emergence of global franchises such
as KFC, Coca Cola, Pepsi Cola is a result of globalization. Globalization has paved the way for
international trade by creating many opportunities for nations to engage in trade across the world.
Global institutions such as WTO, IMF, World Bank and UN provide adequate support for
international business by executing trade agreements such as NAFTA, SAPTA and ASEAN
between emerging economies.

This report deals with the pillars of international business under various environment conditions,
country specific characteristics, company global strategies and entry strategies. The first half of
the report discusses about the global business opportunities and George Steuart Company which
is a leading tea exporter in Sri Lanka.We have decided to export a ready to drink tea to the western
coast of USA by considering the PESTEL factors. Mainly the product is introduced under various
flavors such as green tea ginger flavor, strawberry flavored, raspberry flavored, peach flavored and
lemon flavored by considering the customer preferences and health benefits of the product.
Economic, geographic, socio cultural, political and legal environment of USA are also discussed
in this report.

International competition is analyzed using Porter’s five forces in order to identify whether the
product would be successful in the USA market. Strong rivalry among the existing competitors,
strong threat of substitute products or services, moderate threat of new entrants, weak bargaining
power of suppliers and strong bargaining power of buyers are taken into consideration when
analyzing the industry competition. Finally the entry strategy for USA market is analyzed and
exporting is chosen as the mode of entry. These factors are taken into consideration when entering
the USA market.

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 The table of work undertaken by each group member

Name UCD Number Contribution to the group

Y. Randulee Sooriarachchi 19208641  Section 2- Environmental Scanning and

market selection.
 Section 5- Assessing the political and legal
environment
 Actively participated in group discussions.
 Conclusion
 Preparation of the final report

B.A.L. Madhubhashini 19208598  Section 3- Assessing the economic and

Abeysekara geographic environment of chosen market
 Actively participated in group discussions.
 Finding data for the report
 Designing the bottle labels for new flavors

U.K. Harshi Prabha 19208627  Section 7- Entry Strategy

 Actively participated in group discussions.
 Introduction
 Finding data for the report
G.D.E. Imesha Jayawardhana 19208625  Section 6- Analyzing International
competitors and company global strategy
 Actively participated in group discussions.

M.W. Samadhi Dulshani 19208672  Section 5 – Assessing the social cultural

environment and country specific
characteristics.
 Actively participated in group discussions.

J.M.H. Piyumika Jayasundara 19208714  Section 1 -Identifying global business

opportunities
 Actively participated in group discussions.

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 TEAM AGREEMENT

TEAM MEMBERS CONTACT DETAILS

MOBILE EMAIL
1)Y.Randulee Sooriarachchi 0775028128 yashogaganeerandul@gmail.com

2)B.A.L.Madhubhashini Abeysekara 0757074611 lakshiabeysekara@gmail.com

3)U.K.Harshi Prabha 0754618703 Kalyanadee98@gmail.com
4)G.D.E.Imesha Jayawardhana 0768915158 Imesha96721@gmail.com
5)M.W.Samadhi Dulshani 0764842903 Samadhidulshani1998@gmail.com
6)J.M.H.Piyumika Jayasundara 0766069313 Hansinipiyumik24@gmail.com
INFORMAL COMMUBNICATION
We have decided
1)to decide a topic for the assignment
2)to divide the tasks among ourselves
MAKING DECISIONS
We have agreed
1)to identify the skills of group members and allocate the tasks
2)to complete the task in an efficient manner
3)to come to the final decision after reviewing the ideas of group members
SANCTIONS
We hope to work in harmony together. We have different strengths. We accept that this is a
team piece of work and we are all responsible for doing our best. However we agree now that
 If individuals have difficulties in working with the team or on the task, we will try to
sort them out promptly by talking with each other.
 We will seek advice-as soon as is possible-from our tutor for those serious problems
which we cannot resolve ourselves.

SIGNED
Y.Randulee Sooriarachchi 19208641

B.A.L.Madhubhashini Abeysekara 19208598

U.K.Harshi Prabha 19208627

G.D.E.Imesha Jayawardhana 19208625

M.W.Samadhi Dulashani 19208672

J.M.H.Piyumika Jayasundara 19208714

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