INDIAN TEA INDUSTRY AN ANALYSIS USING CONCEPT OF FORWARD ENGINEERING

Shweta Jain, ABES-IT Group of Institutions, Campus-2, NH-24, Vijay Nagar, Ghaziabad- 201008, U.P., India sjainshweta@gmail.com

ABSTRACT Tea is one of the most popular and widely consumed hot beverages worldwide. More than 30 countries grow tea. Tea Industry has seen a lot of changes in the past few years, the worlds largest tea producer, India, lost its position to China for the first time, in the last 110 years. Despite its fluctuating position in the world market, India is a key source for tea as well as the largest market. There is a need to understand the factors which influence the demand and supply scenario in the Indian Tea Industry, in order to facilitate, practitioners ability to modify and adapt to the changing environment. This paper seeks to address this issue. This paper aims at studying the Indian Tea Industry by applying the concept of Forward Engineering. This paper examines this concept through qualitative analysis of data and information gathered through interviews with Tea Board Officials, public documents (e.g. annual reports), and related research literature. The study tends to reveal the strategies and action plans for Indian Tea Industry based on mind pooling, METRIC analysis and other forward engineering tools. Keywords: Tea Industry, India, Forward Engineering. INTRODUCTION: Global Tea Scenario: Tea is one of the most popular and widely consumed hot beverages all over the world. Today cultivation of tea is spread over all the continents wherein more than 30 countries are into tea production. The estimated global production is 3800 million kg, out of which 43% is exported and the world consumption being 3700 million kg approx., the global production and consumption are finely balanced with production little ahead of demand. Tea, being an agricultural commodity, its production is bound to fluctuate due to vagaries of nature; the prevailing difference between production and demand is well below any reasonable limits. Amongst all tea producing countries, the major producers are India, China, Sri Lanka, Kenya and Indonesia. These five countries contribute 77% of the total world

production and 80% of global exports. In the past few decades, many new entrants have joined the tea family; notable among them are African countries like Kenya, Malawi and Turkey etc. In the international market, the Vietnam and China have emerged as the prominent forces to reckon with, during the last decade. Across various countries, the average per head consumption of tea varies widely, from more than 2 kg in Ireland and the U.K. and around 1 kg in Sri Lanka and Pakistan to only 800 grams in India. Still despite having one of the lowest per head consumption in the world, the total consumption in India is the largest due to its population size. This distinct position is in sharp contrast with other producing countries, which hardly have any domestic demand. In the last decade, there has been a relative decline in the production of black teas and an increase in the production of green tea which has more than doubled 692 m.kgs in1998 to 1490 m.kg in 2007; this is mainly due to a huge expansion in China. Over the past ten years, the entire increase in global production is accounted by the Green Tea since the black tea production remained static around 2300 million which could be attributed to the scientific studies linking green tea drinking with reduced cancer risk whilst the latest studies have proved that black teas too have the same healthy properties as that of green tea. Since 2001 Chinas production has grown by 464 m.kgs i.e. 8.8% cumulative annual growth and because of this steady growth, Indias position has been pushed to 2nd place since 2006 when Chinas production exceeded Indias for the first time in 110 years and has continued to be higher since then. Indian Tea Scenario: In India, tea cultivation on commercial scale was first started in Assam in 1839 and then it was extended to other parts of the country between 50s and 60s of the 19th century. However, due to certain specific soil and climatic requirements its cultivation was confined to only certain parts of the country. Major tea producing states in the country are Assam, West Bengal, Tamil Nadu and Kerala. 75% of the total tea produced in India is accounted by Assam and West Bengal together. Some of the worlds finest teas are produced in India. While Assam teas are famous for their strong, brisk and full bodied liquor; Nilgiri teas are well known for their delicate flavor, strength and brightness; and the production of the famous Darjeeling tea is aided by the low temperature in the hills of Darjeeling. With their own diverse agro-climatic conditions, other areas produce medley of tea which suits many different tastes. The distinct characteristics of each region set them apart from one another in many different ways.

In India, tea industry is one of the oldest agro-based well organized industries. More than a million workers get direct employment from this industry of which a sizeable number are women. A large number of temporary workers are also engaged during the plucking season. The labor cost is the largest cost overhead accounting for about 60% of the total cost of production of Indian tea because the tea plantations are not just economic production units, but rather social institutions, which controls the lives of their resident work force to a large extent. Apart from employment, the plantations are also responsible for providing house, water, welfare and many other facilities that affect the daily lives of the workers. This is because most of the employees come from socially and economically weaker sections of the society and majority of employees are women who work and reside in an ideal industrial community. Their livelihood is directly linked with the prosperity of the tea industry. Therefore, the tea industry must grow, not only to fulfill its primary function of producing a wholesome beverage for domestic and overseas consumer, but also to fulfill its social obligations in sustaining and improving the well being of all those who are dependent on its fortunes. India has been a dominant player in the global tea industry. Despite its fluctuating situation in the share of world exports, still India is a key source for tea as well as the largest market. The industry faced steep decline in prices during 1999 to 2006, which brought out the vulnerable areas that need to be addressed for guarding against reoccurrence of such eventualities and also achieve sustainable global competitiveness and sustainable livelihood to millions of workers employed in the industry. Around 130 gardens were closed, abandoned or suspended their operations for some time due to this recession of which majority of tea gardens have reopened with the gradual improvement in tea prices from 2008 onwards. The decline in the prices has mainly been due to strong growth in supply in the face of sluggish demand. The tea industry sees fluctuating trends due to agricultural nature of the operations, long gestation periods and unstable prices of tea which are not likely to undergo any changes in the future. In the past, tea prices have shown brief periods of boom followed by longer periods of depression. During recession, the root causes for the closure of tea gardens in several parts of the country, as reported by the experts, are that these gardens were inherently weak and suffered from low productivity and lack of investment on developmental activities. Therefore, it becomes very important that suitable packages for raising the productivity with cost effectiveness suiting to the conditions of under/less developed sectors are devised and put into place quickly. The problem of ageing and senile bushes is a major problem for the Indian Tea

Industry. More than 21.2 Million hectares constituting a substantial chunk of Indian Tea gardens are in the end of economic life age category at present, because of which the industry is running down gradually in vitality and productivity and faces a high cost of production. This situation can endanger the prospects of keeping the plantations in a state of maximum vigor if not countered effectively now. Renovation of the field assets and R&D on a sound footing- financially, organizationally and managerially would help succeed in meeting the challenges of the future. The research institutes are expected to continuously develop appropriate technology suiting to the demands of the industry and disseminate the same. Therefore, research requires backing from well spread, fine tuned, efficient extension services, covering different regions and all segments of the industry. Adequate technical support is not available to the small and medium size producers. Thus, it becomes necessary for the research institutes to set up a dedicated extension service exclusive for the benefit of small and medium producers. Over the past 10-15 years, the emergence of small sector had assumed a form of a socio-economic movement and served as a vehicle for social transformation in the N.E. region as well as in North Bengal and Bihar state which has also opened up avenues for setting up of new tea factories in the small scale industry sector leading to generation of employment in the tea industry. 26% of the total production of India is accounted for by this tiny sector. This sector has its strength in the young and most productive age of the plantations of the reasonably high clonal composition, low cost of production and the youth segment of the entrepreneurs with receptiveness to a new and improved agro-technique. In both Kenya and Sri Lanka too, most of the success of the tea industry is linked to the growth of the small holder sector over past few decades. The size of production from the small sector in Kenya and Sri Lanka are interestingly at par with the volume of tea produced by the small growers in India. Because of the scattered nature of holdings, the major problem faced by the small growers in India is the inadequacy of the technical guidance. 2009-10 witnessed international prices bouncing back even surpassing the highs attained in 2008 which was primarily driven by almost unprecedented drop in production due to unfavorable weather in India, Sri Lanka and Kenya proving once again that climate related swings are the key determinants of the global demandsupply balance. Despite economic downturn, the facts that demand for tea has remained relatively robust have strengthened the belief that the prices will remain firm even when production returns to normal levels. Even though the stock has depleted in the major importing countries and consumption growth in India and China, it is optimistically expected that the prices will not sink back to the previously depressed levels.

Therefore, there arises a need to understand the factors which influence the demand and supply scenario and the price fluctuations in the Indian Tea Industry so that the practitioners can modify their strategies and adapt to the changing environment for their own benefits as well as aim at induction of professionalism in plantation management and improve labor productivity. This paper seeks to address this issue and find out the ways to combat this situation. This paper aims at studying the Indian Tea Industry by applying the concept of Forward Engineering which is based on a new paradigm of a fusion between rationality and creativity, and it combines the rational-analytic and the intuitive creative approaches to find unique solutions (Sharma, 2009). This paper examines this concept through qualitative analysis of data and information gathered through interviews with Tea Board Officials, Tea Garden owners, Intermediaries, Auction houses, Suppliers etc. , public documents (e.g. annual reports), and related research literature. The study using Forward engineering tries to provide a foundational premise for the strategic gearing of Indian Tea Industry keeping in view its existing and new capabilities with respected to current and anticipated challenges in a competitive environment. Thus, it tends to reveal the strategies and action plans for Indian Tea Industry based on mind pooling, METRIC analysis and other forward engineering tools. LITERATURE REVIEW: Tea Industries in the developing countries of Asia are facing huge competition due to inefficiency in the value chain management especially related to land management, plucking efficiency and manufacturing cost (Huque, 2007). Further, Asopa (2007) had implied that virtually, Indian tea has lost all global markets since it continues to be traded as a commodity besides the value addition is limited or can be said, late. It is only being sold in the markets of consumers with shallow pockets who still buy it as a commodity, but this share is fast depleting. Thus, the industry needs to be competitive in production, marketing, logistics and product forms. Despite being one of the largest producers of tea, India lacks properly organized production systems where small tea producers could manage to find a respectable place. The industry desperately needs capital at globally competitive rates and not subsidies in any form. So, the Indian Tea Industry needs to face the market realities, redefine its business strategies and reposition its products to gain a competitive edge over its competitors in the global market. For this, the first step that needs to be taken in this direction is the complete restructuring of the tea industry, redefining the roles of various agencies like the Tea Board and the producers organizations, and developing a healthy partnership with the labor. Despite all these facts, major global tea companies such as Unilever and Tata Tea are reaping large profits but are failing to take sufficient responsibility to

safeguard the rights and livelihoods of the millions of tea growers and workers who contribute to their profits (Goddard, 2005). Later, Nagoor (2009) examined the performance of Indias tea exports and figured out that tea, which was a major exportable commodity in Indias agricultural exports, is declining steadily. The export performance over the last three decades shows that the percentage share of Indias tea export in total world tea exports has declined drastically. During 1981-90, the share was 21.91%, which declined to 13.35% in 2001-2004. The decade of the nineties and beginning of the twenty first century has been quite depressing for the tea industry in India. As far as the exports are concerned, Indian Tea Industry still faces diminishing trends. In 2009, tea exports decreased by 11.6 million kgs, that is by 5.7% as compared to 2008. In 2009, India exported 191.5 million kgs of tea whereas it exported 203.1 million kgs in the previous year. Tea exports to Iraq increased significantly in 2009 but tea export to UK, Iran, UAE and Egypt saw the same diminishing trend (Hussain & Hazarika, 2010). Almost 20% of the tea produced in 2009, 973 million kg, was exported. Over the years, Indian Tea Industry has experienced a shift in the proportion of export to domestic consumption of the total tea produced in the country, with domestic consumption far more than exports. Changing consumer tastes and preferences in the export market has led to the drop in exports for which the main reason is the increasing popularity of green tea as well as orthodox tea (Ramakrishnan, 2010). Further, Ramakrishnan emphasized that there is a need to work out suitable strategies for both domestic as well as international market expansion and penetration. SCP Model, structure-conduct-performance, stems the fundamental paradigm for competitive strategy (Bain, 1956). Sharma (2000) presented a conceptual framework of forward engineering for strategic gearing of organizations which undertakes Rationality + Creativity paradigm to enable them to sustain and perform in the highly competitive environment. Further, the author had mentioned that in forward engineering exercise, analytical tools and techniques such as METRIC Analysis, BOW Analysis, CINE Matrix, FATE Analysis, SPOT Analysis, Anti-Benchmarking, are used. These all tools and techniques used together are a refinement to the conventional and widely used SWOT Analysis framework of strategic management and could be considered innovations in the entire stock of skills, techniques and devices used in the industry. These tools combined together will help in articulating the Indian Tea Industrys ViSA (Vision- Strategies and Action Plan) document. By forward engineering, the author implied creative, proactive and responsive actions in the context of dynamic competitive environment. The same approach has been used in this paper to gear up Indian Tea Industry with some analytical tools to bounce back in the global tea market.

METHODOLOGY: This paper examines the concept of Forward Engineering through qualitative analysis of data and information gathered through interviews with company executives, public documents (e.g. annual reports), and related research literature. Type of data: The type of data taken in the study is primary as well as secondary. The primary data are collected through interview with 46 personnel from the Tea Board of India, Bhupender Tea Co., Dalmia Tea Marketing (P) Ltd., JFK International, Occidental Trading and others. And the secondary data are collected from newspaper, reports, handouts, and journals. In addition to this, relevant materials are also collected through the internet as well. Tool of data collection: Schedules have been used to take in-depth interviews of the various personnel so as to get their views on the topic in detail. Locale: The study was conducted to gain an insight into the Indian Tea Industry, so Kolkata and Delhi were taken as the research areas form where the various personnel were taken. Tools for data analysis: The various analytical tools which come under Forward Engineering had been used for a qualitative analysis of data, namely ViSA: Vision, Strategies and Action Plans METRIC Analysis: Market, Economic, Technological, Resources, Institutional Capacity FATE Analysis: An analysis of future anticipated trends and events BOW Analysis: An analysis of the barriers, obstacles and weaknesses CINE Matrix: A matrix of controllable and non-controllable internal and external factors influencing a decision situation SO-SO Window: An analytical window to compare Indian Tea Industrys strengths and weaknesses with that of the other tea producing countries SPOT Analysis: Space and Pace of Opportunities and Threats Mind Pooling: A method for pooling collective intuitional wisdom leading to institutional visioning

DATA ANALYSIS: Keeping in view the existing and new capabilities of Indian Tea Industry with respect to the current and anticipated challenges in the domestic and world tea market, this paper provides a foundational premise for the strategic gearing of the Indian Tea Industry using the concepts of Forward Engineering. It involves creative imaging, envisioning, anticipatory witnessing and mind pooling for creative solutions to help

the Indian Tea Industry face the new challenges of fast paced dynamic environment. The various analytical tools progress as described below: Backbone Analysis BOW Analysis METRIC Analysis CINE Matrix SO-SO Window FATE Analysis SPOT Framework Mind-Pooling Anti-Benchmarking ViSA In backbone analysis; the strengths, capabilities and competencies of the Indian tea industry have been analyzed in the following exhibit. Exhibit 1: Backbone Analysis:
STRENGTHS: Production base is very strong Strong research backed by well established research institutions Labor welfare laws protecting workforce Availability of modernized and upgraded manufacturing facilities Strong domestic market Second consistent supplier of tea after China CAPABILITIES: Production of wide range of teas- black, (ctc, orthodox), organic teas, green teas High quality specialty teas- Assam, Darjeeling, high range Nilgiris, orthodox etc. COMPETENCIES: Competent managerial power

The strong production base and the high domestic demand are the major strengths, production of wide range and high quality specialty teas are the capabilities and the efficient managerial power is the key competency of the Indian Tea Industry. Despite such robust backbone, Indian Tea is facing a challenging phase in the global scenario

because of the old age of the bushes, unskilled labor, and lack of infrastructure, poor price realization, legal problems, outdated machinery, high fixed and labor cost, inefficient Tea Board, and other various factors mentioned in the BOW analysis further. Exhibit 2: BOW Analysis
BARRIERS: Inadequate Land Different Climatic conditions Unskilled labor Lack of mechanization Inadequate R & D Inadequate HRD Lack of infrastructural facilities in terms of power Erratic supply of inputs such as fertilizers, gas etc. No control over price realization OBSTACLES: Terrorism Government Interference Poor communication facilities Trade Unionism Low level of Professionalism Export Bottlenecks Plantation Labor Acts Environmental degradation- floods and soil erosion WEAKNESSES: Antiquated Market system Antiquated Machines Lack of vision Low level of motivation of staff Inadequacy of health care Poor health of work force High fixed cost Debility of soil after use of 100 years or so Low productivity levels High cost of production R&D transfer too slow Poor operations of Tea Board Declining prices Disregard in quality Social fronts Trade front issues Inefficient auction system Poor infrastructure for transportation Sales and taxation No effective cost management system Slow increase in yield Incompetent products High selling price

High amount of Surplus Unawareness about the domestic demand

Modified from Sharma, Subhash, 2009, New mantras in Corporate Corridors, New Age International Publishers

All the above mentioned factors are making Indian Tea incompetent in the global market, since it is currently being dominated by other players like China, Sri Lanka, Kenya and others who have better operating systems in terms of infrastructure, labor, age of bushes, Tea Board, and most importantly very low internal demand except China which posses a high internal demand like India. Indian Tea is declining on its quality aspect, as it still considers tea as a commodity, whereas the other tea producing nations are working hard towards improving the quality aspect and converting tea into a specialty product as per the demand of the consumers. Other factors in the market, economic, technological, resources and institutional capacity are mentioned in the METRIC analysis below. Exhibit 3: METRIC Analysis
MARKET: Over supplies Slow growth in demand Fierce competition Changing customer preferences Shift towards branding Demand for quality teas Niche markets for good quality teas Identify USP (Unique Strategic Positioning) of tea ECONOMIC: Social cost High Cost of production Excessive Supply Marginally increasing demand High price TECHNOLOGICAL: Introduction of e-auction Technological up gradation Modernization of tea factories Information Technology RESOURCES: Low productivity of land Low productivity of labor Low productivity of capital Knowledge levels of workforce not up to the mark INDUSTRIAL CAPACITY: Managerial capacity Capacity building of small and tiny growers HRD Initiatives Strengthening grass root institutions
Modified from Sharma, Subhash, 2009, New mantras in Corporate Corridors, New Age International Publishers

It is evident from the above classification that the changing consumer preferences,

marginally increasing demand (Refer to appendix 2), fierce competition and the tea surplus combined are shifting the market from production driven to consumer driven. Social cost as per the Labor Laws and high production cost have made the Indian Tea quite expensive in the world market as compared to other countries i.e. $2.45/kg for India as against $1.99/kg for Kenya, $2.10/kg for China and $3.26/kg for Sri Lanka (Refer to Appendix 5), keeping in mind that Sri Lanka mainly deals in orthodox tea leaves and is not much into the black tea segment, it can be clearly concluded that Indian tea is the costliest in the world market. To overcome the communication barriers as well as to ensure proper price realization, Tea Board of India, introduced e-auctioning of tea in the year 2009 which is expected to bring transparency in the entire process as well as ensure good prices for the sellers (http://www.assamtribune.com/oct3109/horizon.html). To add to the difficulties, the resources i.e. land, labor, capital and knowledge are also very low on productivity, which is being tried to overcome by enhancing the industrial capacity in terms of manpower training and HRD initiatives. To help out in the decision situation, the various factors that need to be considered have been classified on the basis of internal and external, as controllable and non-controllable, in the CINE Matrix. Exhibit 4: CINE Matrix
C INTERNAL Productivity Auctions Transportation Tea Board Operations Assam teas- high price No cost management system Fertilizer application Labor deployment ratio Wages Labor health Soil erosion High labor ratio High cost of production Ineffective spraying Cattle trespass Labor welfare Habitual absenteeism Production and quality Use of stores/ machines Working team spirit Proper communication instructions Proper planning Sanitation and hygiene Land encroachment by labor EXTERNAL Weak case in countries with high purchasing power Wage fixation Extremist menace Telephone & Roads Communication Power crisis Land purchase Cattle trespass Damage/destruction of properties Destruction of water supply Land encroachment Financial stringency Menace of wild animals Housing finance Forest degradation Political interference Alcoholism Problem of residence of non-workers Borrowings Head office expenses Input/material purchasing

of

Quality control Seasonal nature of Assam teas Taxation Power & fuel consumption Cattle trespass Medical expenditure Low productivity of labor Absenteeism Location of tea gardens Transportation of green leaf/other inputs Geological conditions Topographical imbalance Trade union activities Population increase Semi-literacy of workers Attitude of workers

Declining sales volume Imports of tea in domestic market Stagnant demand for tea Changing preference of consumers Power & fuel supply Climatic changes Blockage of drain outlets Wild elephant menace Bundhs/strikes- local & outside Riots/extremist activities Fire hazards Social and political disturbances Cost increase of inputs Price fluctuations Auctions price realizations Natural calamities Taxation

Modified from Sharma, Subhash, 2009, New mantras in Corporate Corridors, New Age International Publishers

Of all the adversities, low productivity, high cost of production, financial stringency, quality control, declining sales volume and changing preference of consumers need to be addressed and can be taken care of with the existing capabilities of the Indian Tea industry. Huge domestic market and wide range of teas is the area where Indian tea market has an extra edge over its competitors, whereas, Kenya has taken over in terms of export quantities and is the highest exporter of tea (Refer to appendix 4), Sri Lanka owes the best quality orthodox teas and China enjoys the market leader position in terms of production (Refer to appendix 1). Apart of all other weaknesses, Indian Tea Industry lacks visions which has helped other players in making their mark and subsequently lose India its position in the world trade in terms of exports as well as production. Other strengths, weaknesses and natural strategic advantages of the major tea producing nations are mentioned in the SO-SO Window. Exhibit 5: SO-SO Window
STRENGTHS NATURAL STRATEGIC ADVANTAGES High quality products Lack of vision Enjoyed leadership Global market exporter High fixed cost position for very Competent managerial Debility of soil after use long period power of 100 years or so Strong production Strong research Low productivity levels base Very strong domestic High cost of production Production of wide market Poor operations of Tea range of teas Board Declining prices Disregard in quality WEAKNESSES

INDIA

Social fronts Trade front issues Inefficient auction system Poor infrastructure for transportation Sales and taxation Incompetent products High selling price High amount of Surplus Unawareness about the domestic demand KENYA Continuous production Low domestic Offset rising labor consumption Pakistan exports Less exposure to global Exports to Egypt market Quality tea bags Restricted entry to specific markets Decline in domestic consumption SRI LANKA Global market player Under cultivation area Rules tea bag segment Low market share High production Overall poor export performance CHINA Expansion in domestic Large domestic market consumption Utilization of cultivation Under-cultivation area area Social problems Increased production Removal of export quota Increased share of exports High export growth rate Consistent supplier Biggest employer

Black tea production Good quality teas

Very good quality orthodox teas

Largest producer of tea Huge domestic market

FATE Analysis: Future Anticipated Trends and events: Seeing the todays global tea scenario, it can be clearly stated that tea would not be sold further as a commodity but rather as a specialty product. And thus, anticipating the same trend, tea growing nations are now watching the production of good quality teas and ensuring the export of such teas only, as Sri Lanka, ensured that only good quality teas were exported to bounce back into tea trade when once it was losing on its market share due to poor quality teas. The share of nations and buyers who used to buy tea as a commodity is decreasing day by day. The tea surplus is another problem which is not allowing price realization of tea in an appropriate manner. Disposing off 16million kg of surplus tea is a major issue (Asopa, 2007). Still, there are many nations who are in process of expanding their tea cultivation area which would further add to the problem. So either of the two solutions needs to be applied- cut on supply or enlarge the markets.

Also, with latest studies depicting health benefits of tea, consumption of tea worldwide is expected to rise significantly. Exhibit 6: SPOT Frame work:
OPPORTUNITIES THREATS Expansion in US and USSR markets Major producers like China, Kenya, Sri Lanka etc. Brand building Other global players Geographical diversification Other emerging competitors Niche market segmentation Declining share in global market Re-alignment of product mix (Refer to Appendix 3) Home market opening Imports of tea in domestic market Global market Changing demands of consumers Kenyas market share Declining exports to UK and Ireland Export quality tea to Germany, Iraq, Increasing demand of other Pakistan etc. beverages like cold drinks etc. Losing market share to competitors Low demand for Indian Tea in international market Increasing area under tea by China and Kenya

By analyzing the above mentioned opportunities and threats for Indian Tea, it can be placed in the SPOT framework as follows:
OPPORTUNITIES THREATS

SPACE

PACE

As it can be pointed out from the above framework, Slot 1 defines that the opportunities are high but the space for the Indian Tea is very low in the current scenario because most of the market has been captured by one or the other player in the market. Kenya took 66% share in Pakistan imports in 2003 (Asopa, 2007). Russian market is being taken away by Kenya and Sri Lanka. India in itself has a huge demand in the domestic market, which if taken care of properly, would yield high profits. Plus, with health benefits of black tea being much talked about, the demand for black tea is expected to grow heavily in the coming years.

With so many new entrants in the Tea Industry, the second slot signifies that the threats are very high and space is almost occupied since the industry is already facing a huge surplus disposal problem. The third slot depicts that the pace at which the industry is growing with the opportunities is very low since the demand for tea has increased almost negligibly over the past few years (Refer to appendix 2). And the last slot clearly describes that the threats and the pace at which they are growing is very high, since many new entrants have and are entering the market. Along with this, the perspective of Indian producers and marketers to still trade tea as a commodity in the scenario where it is being considered as a specialty product is quite disappointing, which makes the situation of Indian Tea in the global scene even worse. Mind pooling: Indian Tea holds a strong position in terms of brand name, being the largest source and the largest market for tea, wide range of teas, large production base as it is the second consistent supplier of tea after China and a first mover to launch e-auctioning of tea. After having studied all the tools in the forward engineering framework, it can be pointed out that the major problems being faced by the Indian Tea Industry in the present are the declining sales volume in the international market, despite being the second largest producer of tea, India is facing imports of tea from other nations, which is further expected to increase in the coming years; the quality of exported Indian Tea has declined which spoiled its brand image in the global market, very high production costs, lack of infrastructure and communication facilities. The situation is being further depleted by the old age of bushes and unskilled labor, due to which the quality is further declining. If proper attention is not paid to the changing market, Indian Tea will lose its hold, not only in the international market, but in the domestic market as well. Therefore, this issue needs to be addressed with full alacrity and Indian Tea Industry should move in the direction that generates desirable results. Anti-Benchmarking: Contrary to the notion of benchmarking wherein the market leader is followed, Forward Engineering believes in the concept of anti-benchmarking i.e. creating own unique path for excellence, wherein after studying all the above tools, the path for Indian Tea Industry takes it back to its domestic market and concentrate on the same. As for the international market, it needs to be captured back with perseverance with exporting good quality teas at competitive prices to the international consumers.

Domestic Market

Anti-benchmarking

India Benchmarking

China (International Market)

Since, Indian Teas are very costly in the global market due to various reasons discussed earlier and there are many other factors which make it uncompetitive in the global scenario, Indian players should put their main focus on the domestic consumers and try to capture that will full alacrity and leave no space for foreign players to enter. To bounce back into the international markets, Indian Tea Industry should keep its focus on the quality aspect and then trade it as a specialty product rather than as a commodity as done till date. ViSA: Vision: To achieve sustainable domestic as well as global competitiveness. Strategies: It is now that India needs to focus towards a competitive tea strategy, which will help to keep a check on the quantity of tea produced and enhance the quality of tea which is produced. Indeed, it is a highly appropriate time to elaborate the strategy at this time because it shows exactly what type of consumer segment should the Indian Tea Industry caters in the coming period. To become a globally competitive tea player, the main success factor would be driven by strong focus on quality and less attention being paid to the production levels. Therefore, a strong commitment is required from both the government sector and private sector in order to realize significant improvements in terms of quality, market share in tea exports and most importantly in the domestic market. The government should restrict imports of tea and the private players should try to explore the domestic market with further efforts directed towards increasing the per capita consumption of tea in the domestic market. The major strategic goals can be listed as: 1. To improve the quality of black tea. 2. To expand the domestic market by converting non-drinkers of tea to drinkers and increase the consumption levels of the existing consumers. 3. To diversify the product portfolio i.e. introduce other varieties of tea, for example green teas and flavored teas. 4. To add value in Packaged and Blended teas by paying proper attention to processing and improving the quality by proper blending and marketingfor higher price realization of their products.

Action Plan: Undoubtedly, all the objectives would require significant investments to produce sophisticated and unique high quality tea products. Both government and the private sector need to commit financially and operationally to achieve the goals. The action plan required to be implemented can be divided into three main categories namely Product Development, Marketing & promotion and Institutionalization.
Product Development Marketing & Promotion Institutionalization Extensive research International Redefine Tea Board Promotional activities Training support for Campaign An inspection workers National Promotional agency to check the Road infrastructure campaign to quality of tea being Transportation stimulate domestic exported Power & Fuel consumption Introduction of Supply Highlight the stringent competition Appropriate benefits of black tea laws by Government Machinery to restrict price Improvement in Regulate supply and manipulation by supply chain using econcentrate on corporate houses auctions efficiently quality

The need for reducing the unit cost of production through productivity gains, capacity building of small growers, streamlining marketing channels, improving infrastructure, tailoring marketing activities to individual countrys demand, propagating health benefits of tea and promotion of organic tea using the tea mark was suggested by the United nations Food & Agriculture Organization (FAO,2001). And this is precisely what the Indian Tea companies need to do for their survival. Another step that needs to be taken is Zero duty on machine imports (Dasgupta, 2011) which would make Indian Tea standards acceptable in the global market by good quality products and packaging. CONCLUSION: This study examined the various factors responsible for low productivity, high prices and declining share on Indian Tea in the world market. The internal and the external factors contributing to the same have also been discussed. Comparison with other major global players has also been done. The study also looked at the demand and supply of tea in the global scenario along with Indias share in total world production and exports in the previous years. Tea Industry, where India took a lot of pride as the largest producer and exporter, has been facing a lot of glitches since the past two decades which has brought down Indias position in the world trade i.e. exports to #4 and in world production to #2. The major factors identified as being responsible for Indias poor performance are high input costs, the old age of the bushes, unskilled labor, and lack of infrastructure, poor price realization, legal problems, outdated machinery, high fixed and labor cost,

inefficient Tea Board , inability to compete with other tea producing nations in terms of price, quality, packaging, etc.; slow increase in world demand for tea as compared to the subsequent increase in its supply, losing traditional international buyers and more inclination towards domestic market in comparison to the international market. Analyzing all the aspects in the study responsible for Indias poor performance, it is clearly evident that Indian Tea prospects for bouncing back in the global tea market are very weak. Therefore, as of now, it should focus on the domestic market; try to simulate the demand in this market to ensure that it does not lose this portion to other players once the tea imports are open in India. Subsequently, Indian practitioners should improve their export strategy by producing good quality teas at competitive prices. To do the same, India needs to work in three directions namely product development, marketing & promotion and institutionalization. By improving the quality as per the consumers taste and preference, India should also look for other tea importing countries like Pakistan, US, USSR, Iraq, Germany, etc. RECOMMENDATIONS: Recommendations remain the same as mentioned in the action plan of ViSA and are as follows: Focus on quality improvement, proper blending and marketing for higher price realization of tea in comparison to the quantity produced. Revitalization of image of India Tea in the international market by aggressive promotional campaigns including India Tea logos trying to make Indian Tea acceptable in the global market. Tailor made marketing activities specific to individual countrys demand. Propagation of health benefits of black tea to simulate the demand in the national as well as international markets. Keeping a check on the quality of tea exported by appointing an inspection agency to ensure the same. Reduction in cost of production by improving supply chain, proper inputs, improving infrastructure, extensive research and appropriate machinery. Introduction of new laws to discourage the price movements by big players. Improving supply chain management by full utilization of e-auctioning. Redefining Tea Board activities and duties to ensure proper support and cooperation from Government to small plantations and players.

BIBLIOGRAPHY: Asopa, V.N (2007), Tea Industry of India: The cup that cheers has tears, Indian Institute of Management, Ahmedabad, India W.P.NO.2007-07-02, July

Bain, J.S. (1956), Barriers to new competition, Cambridge, MA: Harward University Press Barthakur, Ranjit & Kripalini Dipak Vision 2020 Reinventing the Indian Tea Industry to Achieve Sustainable Global Competitiveness and Sustainable Livelihood. Global Managed Service (GMS).. http://www.gmsworldnet.com/images/vision_2020_reinventing_indian_tea_in dustry.pdf Goddard, Samantha (2005), Tea Break: A crisis brewing in India, http://www.actionaid.org/docs/tea_break.pdf accessed on 4th April, 2011 Huque, S.M.R (2007), Strategic Cost Management of Tea Industry: Adoption of Japanese Tea Model in Developing Country Based on Value Chain Analysis Hussain, M.M. and Hazarika, S.D. (2010), Assam Tea Industry and its crisis, http://www.asthabharati.org/Dia_July%20010/moon.htm accessed on 28th February, 2011 Nagoor, B.H (2009), Performance of Indias Tea Exports: A Comparative Study of Major Tea Countries of the World, Quantitative Approaches to Public Policy, PP-062-21 Sharma, Subhash (2000), 'Forward Engineering for Strategic Gearing: A Conceptual Framework', Indian Journal of Public Administration, Vol.XLVI, No.4, pp.667-674 Tea Board of India official website http://teaboard.gov.in accessed on 10th April, 2011 http://www.assamtribune.com/oct3109/horizon.html accessed on 28th March, 2011 http://www.bloomberg.com/news/2011-02-25/india-must-extend-zero-dutyon-machine-imports-tea-group-says.html accessed on 30th March, 2011

APPENDICES: Appendix 1: Indias share in World Production

Country 2008(P) In M.Kgs. 1160.00 980.82 317.70 345.82 155.00 148.31 144.00 58.75 41.64 42.75 31.61 % of total production 30.94 26.16 8.47 9.22 4.13 3.96 3.84 1.57 1.11 1.14 0.84 2007 In M.Kgs. 1140.00 986.43 304.61 369.61 178.00 149.51 148.27 57.96 48.14 44.91 34.86 % of total production 29.98 25.94 8.01 9.72 4.68 3.93 3.89 1.52 1.27 1.18 0.92 2006 In M.Kgs. 1028.06 981.81 310.82 310.58 142.00 140.05 142.50 53.27 45.01 36.73 31.35 % of total production 28.78 27.48 8.69 8.69 3.97 3.92 3.98 1.49 1.26 1.03 0.88 2005 In M.Kgs. 934.86 945.97 317.20 323.50 135.00 156.27 133.35 60.60 37.98 37.73 30.36 % of total production 27.03 27.36 9.17 9.36 3.90 4.52 3.86 1.75 1.09 1.09 0.88

China India Sri Lanka Kenya Turkey Indonesia Vietnam Bangladesh Malawi Uganda Tanzania

Others Total

323.38 3749.78

8.62 100

340.64 3802.94

8.95 100

350.48 3572.66

9.81 100

344.77 3457.59

9.97 100

Source: Tea Board of India official website www.teaboard.gov.in Note: (P) Provisional and subject to revision Calculated from "Supplement to ITC Annual Bulletin 2008"

Appendix 2: World Demand and Supply of tea

Year 2004 2005 2006 2007 2008 (P) World supply 3334.53 3457.59 3572.66 3802.94 3749.78 World Demand 3192.93 3348.52 3466.99 3710.84 3596.17 (+) or (-) (+) 141.60 (+) 109.07 (+) 105.67 (+) 92.10 (+) 153.61

Source: Tea Board of India official website www.teaboard.gov.in

Appendix 3: Region wise Import of Tea for Consumption from India (in %)
Region E.E.C. Other West Europe CIS Other East Europe North America Latin America WANA Asia other than West** Africa other than North Oceania Grand Total 2006 16.62 0.81 20.63 10.21 7.74 0.16 17.93 10.38 9.74 23.41 14.76 2007 14.45 2.84 21.4 12.24 8.34 0.12 11.99 7.37 3.55 25.86 11.99 2008 (P) 14.13 1.48 21.89 8.57 8.38 0.53 16.01 0.09 2.17 26.95 13.47

** Includes the figures of import for re-export by India and Sri Lanka. Source: Tea Board of India official website www.teaboard.gov.in (P) Provisional and subject to revision Calculated from "Supplement to ITC Annual Bulletin 2008"

Appendix 4: Indias share in World Export

Country 2008(P) In M.Kgs. 383.44 298.79 296.94 203.12 115.00 95.00 75.50 40.06 42.39 24.77 8.39 5.50 % of total exports 23.19 18.07 17.96 12.28 6.96 5.75 4.57 2.42 2.56 1.49 0.51 0.33 2007 In M.Kgs. 343.70 294.25 289.43 178.75 110.93 83.66 74.23 46.59 43.64 29.13 10.56 7.60 % of total exports 21.82 18.68 18.38 11.35 7.04 5.31 4.71 2.96 2.77 1.85 0.67 0.48 2006 In M.Kgs. 312.16 314.92 286.59 218.73 105.12 95.34 70.72 41.96 32.70 24.13 4.79 11.38 % of total exports 19.74 19.91 18.13 13.83 6.65 6.03 4.47 2.65 2.07 1.53 0.30 0.72 2005 In M.Kgs. 348.28 298.77 286.56 199.05 87.92 102.29 66.39 42.98 33.07 22.50 9.01 8.45 % of total exports 22.18 19.02 18.25 12.67 5.59 6.51 4.23 2.74 2.11 1.43 0.57 0.54

Kenya Sri Lanka China India Vietnam Indonesia Argentina Malawi Uganda Tanzania Bangladesh Zimbabwe

Others Total

64.39 1653.29

3.89 100

62.52 1574.99

3.97 100

62.47 1581.01

3.95 100

64.84 1570.11

4.13 100

Source: Tea Board of India official website www.teaboard.gov.in (P) Provisional and subject to revision Calculated from "Supplement to ITC Annual Bulletin 2008"

Appendix 5: Unit Export Prices of Tea of Major Producing Exporting Countries (in US $ per kg.)
Country India Sri Lanka Kenya China 2004 2.06 2.41 1.61 1.56 2005 2.09 2.58 1.59 2.06 2006 2.03 2.64 2.07 1.88 2007 2.45 3.26 1.99 2.10

Source: Tea Board of India official website www.teaboard.gov.in, Annual Bulletin of Statistics-2008, ITC London.