Floriculture Industry in Sri Lanka

Introduction

Floriculture is started as an Industry after 1970s.Before 1970s flowers and other related

plants are cultivated for various religious and Cultural occasions and mainly as a hobby for

pleasure. When we consider about the present situation of the Industry, Westen, North Western,

Central Provinces in Sri Lanka are the major areas where cut flowers are grown commercially.

The Floriculture Sector in Sri Lanka employees over 5000 people in the corporate trade and

more than 10,000 families are involved directly as out growers and Suppliers in the Semi Urban

and rural Sector.

Main categories included in Floriculture Industry

Cut flowers Cut foliage Plotted plants Bedded plants Seeds

Sri Lanka's floriculture industry consists of three categories of producers or growers

a) Large commercial ventures for export.

b) Middle level growers targeting the local market.

c) Village level producers who may sell their products to above two categories.

Total land utilization in Floriculture Industry (Present utilization of land in Sri Lanka 500

hectares -2009)

Westen55%

North Western

25%

Central 15%

Other5%

Total land utilization

Source: Export Development Board, Sri Lanka

Current Technology used in Floriculture Industry

Export products are cultivated under fully controlled green house conditions. The bulk of

floriculture planting materials exported from the countries like China and Japan. Tissue Culture

units are very few in Sri Lankan Floriculture Industry. Few middle level growers who own mini-

laboratories for their production.

Dominant Economic Traits of the Floriculture Industry

Sri Lanka has not been able to create Auction Centers as many other countries have done.

Retail outlets scattered through the production areas are the popular centers where cut flowers

and other floricultural products are sold. There are few growers who have created cooperative

systems to sell their products. Exporting of Floriculture products is done by a few societies

which have a selected group of partners and farmers. In many cases the agents are sent to

villages to collect flowers from farmers directly.

Current Export Situation in the Agricultural Sector in Sri Lanka

The Floriculture export Industry Sector had a new foreign exchange earning around 90% and it

achieved a significant growth in Floriculture industry during last few years.

Product Code Value Of Export (US$ mn )

2001 2002 2003 2004 2005 2006 2007 2008 2009

Live Plants 3.28 3.16 3.3 3.84 4.09 5.01 4.87 4.76 4.12

Cut Flowers 1.64 1.57 2.74 1.22 1.24 0.66 0.8 1.23 1.73

Cut Foliage 3.16 3.38 3.54 3.98 4.55 5.61 6.32 6.54 6.78

Seeds 0.98 0.93 1.12 1.43 0.68 0.39 0.27 0.33 0.22

Total 9.06 9.04 10.7 10.47 10.56 11.67 12.26 12.86 12.85

Source: Trade information Service-SLEDB

2001 2002 2003 2004 2005 2006 2007 2008 20090

2

4

6

8

10

12

14

Live PlantsCut FlowersCut FoliageSeedsTotal

Year

Value of Export (US $ mn)

Projected Export Performance From 2011-2020

Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Target export

(US $ Mn)

14.76 18.45 23.06 36.03 45.04 54.05 62.16 71.48 82.2 94.53

25% 25% 25% 25% 20% 15% 15% 15%

Source: Floriculture Produce Exporters Association-2009

Composition of Exports Agriculture and Agro based Industries-2009

Source: Export Development Board, Sri Lanka

Main Export Market in Sri Lanka

Sri Lanka is mainly export to Europe their Floricultural products. Especially countries like

Germany, Netherland, USA and UK.

Europe 72%

East13%

Middle East15%

Source: Export Development Board, Sri Lanka

Local Competitors

Omega Green

Omega green is producing and exporting young plants and decorative leaves. Their main

markets are Europe, Japan, and Korea & Middle-East Countries. Their main nursery is situated

very close to the international Airport. 

This is owned by a group of qualified experts with experience spanning over 25 years in the field

of floriculture. They take pride in their ten hectare nursery situated in a climatically ideal

location which enables them to produce health luxuriant plants of superior quality.

In addition they are backed by about twenty more sub growers with nurseries comprising fifteen

hectares in extent.

Another strong contributory factor behind their immense success in the field of floriculture is

their staff and labour force. Their employees are dedicated themselves to the task and perform a

truly satisfactory job of work. With their expertise and the use of appropriate technology, they

have been able to ensure the plants that they produce are of superior quality second to none.

Their mission is to given tremendous satisfaction to their customer throughout the world.

Mike Flora

Mike Flora was established in 1980 at Rabukkana, a tropical paradaise 80Km away from

Colombo city. Today it has grown to 3 nurseries located at Rabukkana, Madawala and Nawala

covering over 100 acres. They maintain parent stocks for more than 70 tropical plant varieties

which are under different levels of shading.

Their core business is exporting tropical plants, cut flowers and foliage to destinations all over

the world. Mike Flora being GLOBALGAP certified company believes in delighting their

customers with best quality products with timely delivery.

Organizational values:

Contributing towards the wellbeing of their employees in particular and society in general.

Continuing a sustainable business relationship with their partners and stakeholders. Accountability Cooperate social responsibility

Ramya Horticulture

Ramya Horticulture is a reputed producer and exporter of tropical foliage based in Sri

Lanka. Established in 1998, the company exports a range of high quality tropical plants; un

rooted cuttings, cut foliage, cut flowers and floral decorations to discerning markets in Europe,

the Far East and the Middle East.

They have over the years earned much respect due to their unwavering commitment to produce

only the best. Today, there is a growing demand for their products around the world. They

completely satisfy the demands of this competitive business, and move with emerging trends.

Their cultivation sites are located in areas of different climatic conditions in Sri Lanka, namely

Walpita, Wellawa and Ambewela. All these sites are equipped with the best infrastructure for

very high quality production and processing for export. Their produce adheres to the stringent

phytosanitary standards of the importing country. They certainly have the expertise to meet all

their specifications and deadlines.

Greenet Plants & Flowers

"Greenet Plants and Flowers" is totally a Sri Lankan business establishment engaged in

growing and exporting cut greens to the world around. Plants are grown totally, in order to obtain

leaves or top cutting. "Greenet" has been in business for nearly 10 years with a nursary of 30

hectares situated at Matale, five kilometers away from the center of Sri Lanka at "Nawala"

backed by 150 employees with packing facility and a Colombo head office also with a packing

station close to the Airport. The best quality Greens are processed with an annual production

turnover of nearly 80-100 tons of greens.

Decor foliage

It was established in 1995 as a grower and exporter of cut foliage in Sri Lanka, Tropical

Foliage in Sri Lanka, where Tropical Climatic Conditions prevail. The company started its

exported oriented business in January 1996 with the first consignment of cut foliage shipped to

Holland. Since then it has developed business with buyers in Europe and the Middle East.

Market C

overage

LowDegree of TechnologyHigh

GD

M

R

O

Strategic Group Map

Considering the above analysis and the data, competitive factors which affect for a cut

flowers and foliage industry in their long term sustainability we have identified factors such as

the Market Coverage, Brand Image, Product Differentiation, Number of Exports per Year,

Degree of Technology. Analyzing the data we can put companies who are in the cut flowers and

foliage industry in the strategic group map as follows;

Company

O = Omega GreenM = Mike FloraR = Ramya HorticultureG = Greenest Plants & FlowersD = Decor foliage

G

D

O

M

R

G

D

Product D

ifferentiation

Degree of Technology

M

R

O

Bra

nd I

mag

e

Number of Exports per Year

Foreign Competitors

The total size of the floriculture industry is at least US$ 140 billion with the Netherland

accounting for 54% of the exports. Other top exporting Countries are

Colombia(16%),Ecuador(6%),Kenya(6%) ,Italy(1.6%),Israel(1.4%) and other 15%.Floriculture

has a great potential in Sri Lanka even though the existing market share is less than 0.2% of the

world market at present.

Source: Value chain analysis for the floriculture industry in world by Peter Maangi Mitiambo

Importing countries are mainly European and the USA though the Japan is increasing the

prominence as per 2009 figures. The major ones are follows;

Germany(18%),UK(17%),USA(16%),France(9%),Netherland(9%),Italy(4%),Japan(4%),Switzer

land(3%),Others(20%)

Source: Value chain analysis for the floriculture industry in world by Peter Maangi Mitiambo

Potential for Floricultural Production Development in Sri Lanka

Sri Lanka has a stable and various tropical climate conditions and other geographical

environment provide the good condition for floricultural Products. Sri Lanka has a favorable

location to serve different markets in the world. Availability of land and the high literacy rate of

the average person would be an added benefit to those who wish to invest in the industry. In

addition, the tax benefits and BOI incentives granted by the government would help bring in

more investors to the country and facilitate further development of the existing industry

The new policy framework prepared by the Ministry of Agriculture and Lands has clearly

identified the need to initiate a Floriculture Research and Development Programme. This

programme will cover many areas such as agronomy, pathology, entomology, mutation,

breeding, post harvest and mass propagation to support the industry.

PESTLE Analysis for the Floral Industry

Political Factors

In country like Sri Lanka, political factors play a huge role. This factor could give many

restrictions and freedom to the organization. Following areas in the current political environment

were identified in the floral industry.

Research support currently been given by the government is very low in Sri Lankan floral

industry. The new technologies to new fertilizers are all brought and learned by the

companies itself. This has created the difficulty in remaining and maintaining the rank in

world floral industry.

As current government shows more stability than before the industry will also going to be

in stable environment. Government regulations can be surely according to some

previously determined principle of the governing party. This has anyway reduces the risk

of investment.

Knowledge in government authorities regarding this sector is very low. So the support

given has many weaknesses. Even though there are many grants allowed for floral

industry development there is no set instructions on “what next”. For a small organization

this grants might help, but they have to figure out how to sell their products and etc.

Currently European Union (EU) posses many regulations on the floral exports. And the

transportation in side this trade block is almost free. This is beneficial for any floral

organization in their progress towards internationalization.

Current government is having some negative relationship with EU member countries.

This has negative impact on exporting the plants.

As current government is looking for more agricultural development the necessary

support can be taken with much ease.

Loan rates for this industry are much higher than the housing loans. This is badly

effecting the development of the industry.

Economical Factors

Due to many changes in the floral industry last year the whole industry was on a dangerous

stage. So at the moment industry is recovering from the negative economic condition they faced

last year.

Due to world economic crisis the whole industry had a very bad growth rate. And

currently it’s getting recovered. As EU was affected badly by this, the companies who

export the plants have also faced many economic problems.

Exchange rate fluctuation has is one of the biggest difficulties in the floral export market.

Due to this the profitability of many companies are unstable. So many major exporters

are now looking for developing a local customer base.

As cost of living is going high the products will be in lower priority list in the customers

mind. Their investment for floral decorations is going down due to the financial

problems.

Due to cost structure in the industry there is a problem in giving competitive prices.

China and India are also in the industry. So Chinese and Indian plants which are imported

could be a challenge to the local products from cost perspective.

Currently agricultural industry in Sri Lanka is in Tax-free nature. This is an opportunity

for any organization as this may be directly affecting the cost structure of their products.

Socio-Cultural Factors

This factor directly affects the floral industry because this is the factor which decides the

customer attitudes towards purchasing of goods and services.

Currently floral decoration is the growing social trend. Many are ready to invest on

exterior decorations and interior decorations using fresh green plants. This is an

opportunity to the floral organization.

Many are now prefer to start their own business. One of the main areas is floral industry.

This increases competition, yet this is a great way to grow the industry.

Rather than using ornaments and other artificial products, people are more attracted to

use live plants in their houses. This will help the organization to get more demand.

Currently it is the small scale organizations that serve higher percentage of customers.

This shows that for small grower this is an industry that could help them to gain more

profit.

Sales fluctuate according to different seasons

For a floral products exporter summer in EU is a less sales period. Such like that in the

special days and seasons such as Christmas, New Year, Mothers Day etc the demand will

be higher for the floral products.

Now there are attitude in the people to go in to floral and especially agricultural sector.

This means more attention from authorities.

Problem of skilled labor force is one big problem that the companies are facing. And

many are leaving the job and starting their own businesses.

Health risk is there due to higher use of Agro-chemicals. So it is important to use

necessary steps to reduce that risk and making it safer for the employees involved.

Technological Factors

As the competition is growing and customer expectations in quality is growing the need for

much sophisticated technological support is going high. Yet the Sri Lankan environment which

is friendly to many plants, have helped the farmers even to operate successfully without the

technology.

The floriculture industry in the world is applying advanced technology. Floriculture

products are cultivated in poly houses or shade houses according to the shade

requirement of the plant/flower type under necessary micro climatic conditions. In the cut

flower production, high quality new hybrid varieties imported from overseas countries

are used as mother plants. Both native and exotic mother plants are used for the

production of foliage plants and decorative leaves.

Currently in Sri Lanka many companies don’t even use fundamental technologies in

modern agriculture. This means they are not reducing their cost to maximum level.

Some bigger companies are currently using sprinklers, drip irrigation and tissue culture.

But that is rarely found because it will be additional cost to them. Maintaining a lab for

tissue culture is seen as a low profitable factor by many companies.

In South America and in India the introduction of new technological developments to the

industry is high. This had given them a competitive advantage by reducing labor cost and

finally reducing the price of plants.

As Sri Lanka’s technological improvement is low currently Sri Lanka’s rank in the world

market is going down.

Royal Botanic Garden, Peradeniya has been involved in providing assistance by and large

to the middle and village level growers about new technologies and their finding s on the

researches, but this is negligible when compared to the ever increasing demands of the

industry.

Transportation is another technology lacking area. Due to the perishable nature of the

products it’s important to have enough air transportation facilities. Yet this is not into

adequate level in Sri Lanka.

Due to the development of information technology, companies are now moving on to

online sales and marketing. This reduces cost and may help to remove the middle man

from the business.

Legal Factors

At the moment there are no specific legal actions regarding the floral industry. So the industry is

currently behaving using self-discipline.

There are many regulations that a company has to conform if they are to do exporting.

This may include receiving certification from Quarantine Dept and getting certificates

and permissions from institutions like forest dept etc.

Growing and trading indigenous plants had to be permitted by the Forest department.

There are many legal constraints on exporting imported plants. For example if we import

patented plants from Australia, a commission had to be paid from every plant we sell, to

the patent owner. And we cannot multiply the plants. This means, if 100 plants are

imported, only 100 can be exported from us.

MPS standards given by the EU is directly effecting the exporting of Sri Lankan plants.

Yet this is a costly action, many companies currently do not use these standards. Because

of this their ranking in Europe is going down.

Environmental Factors

There are no environmental regulations for the Sri Lankan floral industry. So the industry is

behaving with self regulations.

Unlike other industries the pressure from the environmental authority and pressure

groups are zero to this industry. This is because they are also involved in multiplying the

greenery.

Polluting is less in this industry. Only polluting factors are chemicals and polytine used in

the nurseries.

The use of indigenous plants has some restrictions. The organizations have to show

environmental authority that they are not getting plants from natural forests, but growing

them inside their nurseries.

Summary of PESTLE

PESTLE Factor Sub Factor Rating

Political

Government support for agriculture +4Governments relationship with international -2Knowledge of Authorities -2Tendency for future support +3

EconomicalExchange Rates stability +2Improvement from Recession +1Initial investment -1

Socio Cultural

Safety +2Attitudes towards the industry +4Skilled Labor force +1Customer tendency +5

Technological

Research Support -1Use of new Technology -1Potential technologies available +4Sources to identify new technologies +4

LegalDirect regulations +4Indirect Regulations +2

EnvironmentalPollution prone -4Pressure from environmental groups -5

As for above table we can see that whether there are many negative areas in the industry there is

positive and hopefully prosperous future also. Use of new technology and using society’s

attitudes an organization could reach a better future in this industry.

New Entrance

Internal RivalrySuppliers Buyers

Substitutes

Micro environment analysis

Porters’ five forces model

This will provide some important insight for analyzing an organizations industry

structure and as strategic group project members of envisaging the potential to enter to totally

new industry like Floriculture we decided to consider this model in our strategic decision

making.  

It is based on the insight that a corporate strategy should meet the opportunities and threats in the

organizations external environment. Especially, competitive strategy should base on and

understanding of industry structures and the way they change.

We have identified that five competitive forces that shape every industry and every market is

common to the Floriculture industry too. These forces determine the intensity of competition and

hence the profitability and attractiveness of an industry. The objective of corporate strategy

should be to modify these competitive forces in a way that improves the position of the

organization through analyzing the driving forces of the industry. Based on the information

derived from the Five Forces Analysis, we can decide how to influence or to exploit particular

characteristics of their industry.

Internal Rivalry

We can measure rivalry by indicators of industry concentration. The Concentration Ratio (CR)

is one such measure. The Floriculture Produce exports association (FPEA) reports the

Concentration Ratio for exporters.

The Concentration Ratio indicates the percent of market share held by the number of

largest firms namely My Flora (pvt) ltd, Green Farms (pvt) ltd, Mac loran Nursery (pvt) ltd and

Omega Green (pvt) ltd, Serendib Floriculture (pvt) ltd , Ramya Floriculture (pvt) ltd etc.

A high concentration ratio indicates that a high concentration of market share is held

by the largest firms – and the industry is concentrated. With only a few firms holding a large

market share closer to a monopoly.

A low concentration ratio indicates that the industry is composed by many rivals, none

of which has a significant market share. These fragmented markets are said to be competitive.

If rivalry among firms in an industry is low, the industry is considered to be

disciplined. But In Floriculture industry the rivalry is not that much of intensive due to the

demand is more than what Sri Lankan producers can supply and in other hand product life time

is short and order lead time will be around one week and every exporter gets an opportunity

export their products if they are up the quality standards.

In pursuing an advantage over its rivals, exporters can choose from several competitive moves:

One is changing price but it is not long run or even medium run solutions and just only

to grab the order. Time matters a lot to the any organic based business like Floriculture, quality

condition of the products, required height level may change over the time and May unable to sell

to buyers and rejection levels may increased. Orders are frequently come to the Export

Development Board (EDB) and any firm that is registered under floriculture export category is

informed about the opportunity and whoever first to meet the requirements will get the

opportunity.

Another one is improving product differentiation - improving features, implementing

innovations in the Value adding process. But it is not easy to differentiate Floriculture products

and they have to be uniform in terms of the height of the products, number of branches of the

product and mainly the color combination of the product. With the order agreement buyers send

a product specification according to the customer preferences of the importing country. And the

other fact is producers are not much emphasis to product differentiation because developing new

market for innovative products takes time and resources like new technology, knowledge and

customer requirements since they are mostly working with middlemen. Sri Lankan producers are

severely lacking in those two components and currently adhering to marker following strategy.

Quality and the quantity is what matters to the producers and in quality aspect Sri Lankan

Floriculture has established light dignity and failed to conform to the quantity. Therefore

producers are highly emphasis to increase the production and minimize the wastage levels.

Therefore it is emerging industry for Sri Lanka with lucrative outcomes.

Supply Chain Management - using vertical integration, horizontal integration or

using a outsourcings that is novel to the Floriculture industry. Most of the time vertical

integration is not possible; most of the time suppliers are household based growers who grow the

Floriculture as hobby and as an extra income generating source. Therefore backward integration

is not viable and outsourcing the production to certain level with providing seeds, plant,

fertilizers and buy back for processing for export.

Raw material procurement is a challenge and every producer is competing with

each other for roots and cut foliages. Any of the producers is not invested for tissue culture for

breeding their plants and it is currently not facilitated or encourage by the government

authorities. Therefore floriculture industry is competing on raw material procurement.

The main problem to increase quantity is the limited landscape with suitable

infrastructure facilities like water supply. Using the water supply of national drainage board will

raise the production cost and free supply like river, stream or Agri Well will dramatically reduce

the production cost.

The intensity of rivalry is influenced by the following industry characteristics:

A larger number of firms increase rivalry because more firms must compete for the

same customers who are introduced by the EDB and resources. Most of the rooted and cut

foliage producers are concentrated around our national airport to take advantage of quick freight

reduce the transportation cost and mitigate the damages when transporting.

High market growth ensure the opportunities but limited number of buyer contacts in

Europe Union mainly in Holland, Japan, Korea and middle east has intensified the rivalry.

High fixed costs result in an economy of scale effect that increases rivalry. When total

costs are mostly fixed costs, the firm must produce near capacity to attain the lowest unit costs.

But in Floriculture industry variable cost is what more matters specially determining the final

price of the product due to air fright fees. Aviation Prices are determined for commercial

carriages due to weight and volume. Though most of foliages are less in weight but large in

volume still the price is high and 40% of cost incur for air freight itself.

High storage costs or highly perishable products cause a producer to sell goods as

soon as possible. If other producers are attempting to unload at the same time, competition for

customers intensifies.

Low switching costs increases rivalry. When a customer can freely switch from one

product to another there is a greater struggle to capture customers. But the trend is good for

Floriculture products people are greener conscious and organic conscious specially develop

counties where there are limited greenery scenes. Psychologists, doctors are recommending

floriculture products to mitigate mental stress.

Low levels of product differentiation associated with higher levels of rivalry. Since

as I explained earlier still Sri Lankan producers are struggling to meet quantity demand

therefore Global competition is diminishing through new innovations of structures like Bonsai

miniatures color combinations ,designs while local competition is intensifying for conventional

products.

High exit barriers place a high cost on abandoning the product. The firm must

compete. High exit barriers cause a firm to remain in an industry, even when the venture is not

profitable. A common exit barrier is asset specificity. When the plant and equipment required for

manufacturing a product is highly specialized, these assets cannot easily be sold to other buyers

in another industry. But In Floriculture industry there are law exit barriers and main asset is the

land and land can be easily converted for other agricultural business like paddy farms, Vegetable

farms and the soil condition of the landscape and the water availability helps to establish brick

manufacturing plants as well.

Threat of substitutes

Substitute products refer to products in other industries. According to the principals of

economics a threat of substitutes exists when a product's demand is affected by the price change

of a substitute product. A product's price elasticity is affected by substitute products - as more

substitutes become available, the demand becomes more elastic since customers have more

alternatives. A close substitute product constrains the ability of firms in an industry to raise

prices.

In floriculture industry the basic need that it full fills is the visual attractiveness, peace

to mind and eye. Though there are many alternatives to fulfill this need like toys, souvenirs,

ornaments, synthetic flowers and plants the trend is emerging towards organic green products in

all industries. Though the law cost Chinese substitute products are flooded in most of developing

countries developed countries are increasingly shifting to organic product like live flowers,

rooted and cut foliage decorations. Therefore impacts of the substitute products are diminishing

and therefore producer have the ability to set higher prices over synthetic products.

Buyer Power

Bargaining power of the buyer is determined by the various characteristic of the

product and many other factors which are discussed in related to floriculture industry. A market

in which there are many suppliers and one buyer is called monopsony . By default global

emerging industry like Floriculture is not a monopsony since there are many end customers who

love for floriculture based decorations. But the bottle neck is limited number of contacts to Sri

Lankan producers to export to their target markets. Under such market conditions, the buyer in

this scenario broker sets the price. Most of the developing country faces to this problem and

floriculture producers have to be cost effectively and should always conform to the expected

level of quality grab the orders. In most business are done based on the trust and normal payback

time is a month and Floriculture Produce Exporters Association (FPEA) has connection with

some Sri Lankan migrates who act like brokers and through them business is done. Except this

scenario compromising ability is minimal with foreign buyers.

As mentioned earlier demand is more than what Sri Lankan Producers can supply

and significant proposition of Floriculture production can be bought by one single foreign buyer

therefore buyer power is high and the standardized nature of Sri Lankan Production makes their

power more intensive.

Buyers possess a credible backward integration threat and they can invest here for

green field operation and with the latest technology like genetic technology and tissue culture

higher number of products can be produced easily with in very short time period. There are

already two Holland companies currently operating In Sri lank and this makes Buyers more

powerful.

Political corruption and lack of legal regulation in these sectors also make it difficult

to the local producers to fight back for justice.

Buyer power can be reduced if Producers can threaten buyers through forward

integration and producer can take over own distribution/retailing. But it is a separate difficult

business for local producers and still Sri Lankan Floriculture industry is not developed even to

cater to the required demand.

Producers’ supply of Floriculture is value added products and buyers’ ability to add

more value is limited and therefore buyer power can be reduced and since the short life time and

perishable nature of cut foliage makes suppliers powerful since time matters a lot to the buyers of

buyers.

Supplier Power

A producing industry requires raw materials - labor, components, and other supplies. This

requirement leads to buyer-supplier relationships between the industry and the firms that provide

it the raw materials used to create products. Suppliers, if powerful, can exert an influence on the

producing industry.

For the Floriculture industry main raw material requirements is mother cut foliages to

breed new cut foliages and labor resources are more than adequate for the production. Since the

cut foliages are not grown by the producers in nursery suppliers normally the villager around the

farm are informed to supply and supplier power is less due standardized nature of the cut foliage.

Situation for the refuse of coir (Kohu Bath) is the same. Coir is use as a growing medium for the

plant.

Sometimes domestic households who conduct outsource growing can come to arena as

exporters if they can provide substantial production and the impact of forward integration is less

since the ordering time is generally around week and market is growing and demand is high.

Entry barriers/ Exit barriers

It is not only incumbent rivals that pose a threat to firms in an industry; the possibility

that new firms may enter the industry also affects competition. In theory, any firm should be able

to enter and exit a market, and if free entry and exit exists. In reality, however, industries possess

characteristics that protect the high profit levels of firms in the market and inhibit additional

rivals from entering the market. These are barriers to entry.

When industry profits increase, we would expect additional firms to enter the market

to take advantage of the high profit levels, over time driving down profits for all firms in the

industry. When profits decrease, we would expect some firms to exit the market thus restoring

market equilibrium. Falling prices, or the expectation that future prices will fall, deters rivals

from entering a market.

Firms also may be reluctant to enter markets that are extremely uncertain, especially

if entering involves expensive start-up costs. But for Floriculture industry consumer preferences

are not complex and it requires less startup cost. But if firms individually keep prices artificially

low as a strategy to prevent potential entrants from entering the market, such entry-deterring

pricing establishes a barrier. Here there is no need to restrict new comers to enter to the industry

to grab the opportunities which flow to other countries like India, Bangladesh, Pakistan,

Vietnam, china. Floriculture Produce Exports Association (FPEA) is well come new comers and

Export Development Board (EDB) is financing them to startup new business to get foreign

currency and strengthen our reservations.

EDB and FPEA are collaboratively lobbing the government to provide more business

opportunities with foreign buyers and to establish R&D center for Floricultural products. Grower

can easily enter to domestic market at the first step and grab some exposure and expand the

business to international level.

Barriers to entry are unique industry characteristics that define the industry. Barriers

reduce the rate of entry of new firms, thus maintaining a level of profits for those already in the

industry. From a strategic perspective, barriers can be created or exploited to enhance a firm's

competitive advantage. Barriers to entry arise from several sources:

Government creates/ reduces barriers.

Although the principal role of the government in a market is to preserve competition

through anti-trust actions, government also restricts competition through the granting of

monopolies and through regulation.

For floriculture products government try to minimize the barriers in terms of

required knowledge as Government has realized the potential of the business and EDB and banks

provide interest free loans for 1 year time period. Through the foreign agreements government

tries to reduce the entry barriers and losing the GSP Plus tax release is directly affect to the final

price.

Patents restrict entry into an industry.

Some most demanding plants are genetically developed and obtained patent so those

plants cannot be cultivated without paying royalties to proprietary owner s and it is prohibited

illegally multiply through tissue culture technology.

Asset specificity deters entry into an industry. Asset specificity is the extent to which

the firm's assets can be utilized to produce a different product. For the floriculture product there

is no asset specificity other than if producer has large number of plants which he cannot sell.

Force Determinant Rating Evaluation

SUPPLIER POWER

Supplier concentration -3

Law

Importance of volume to supplier +5Differentiation of inputs -4Impact of inputs on cost or differentiation -3Switching costs of firms in the industry +2Presence of substitute inputs +5Threat of forward integration +3Cost relative to total purchases in industry -1

BUYER POWER

Bargaining leverage +2

High

Buyer volume +5Buyer information -4Brand identity +2Price sensitivity +2Threat of backward integration +4Product differentiation +1Buyer concentration vs. industry +5Substitutes available -4Buyers' incentives +2

BARRIERSTO ENTRY

Absolute cost advantages +2

Medium

Proprietary learning curve +4Access to inputs +3Government policy +2Economies of scale -3Capital requirements +3Brand identity -2Switching costs +3Access to distribution +2

THREAT OF SUBSTITUTES

Switching costs -2

LawBuyer inclination to substitute -3Price-performance +2Trade-off of substitutes. -2

DEGREE OF RIVALRY

Exit barriers -4

Emerging

Industry concentration -5Fixed costs/Value added -4Industry growth +5Intermittent overcapacity -5Product differences -4Switching costs -3Brand identity +1Diversity of rivals +2

SWOT analysis

SWOT analysis plays a major role when doing an industrial analysis. Strengths and

weaknesses define the current internal conditions of the business while opportunities and threats

define the future external conditions which are related to the business. For a business, it is very

important to consider the current conditions and future conditions to have a sustainable

development for a long period of time. Here we are concerning the SWOT factors of our new

business unit in the floriculture industry.

Strengths

Ideal climate for floriculture industry

Management knowledge of board of directors.

Contacts with existing giant producers.(e.g. Omega Green)

Labours from the village at lower cost.

IT knowledge of stakeholders helps to develop a company web site and allow the

company to make online relationships with foreign customers.

Weaknesses

Lack of knowledge of board of directors about the floriculture sector.

Do not have proper vehicles to transport flora.

Lack of international market knowledge.

Opportunities

Political stability of the country.

Local agriculture industry is in a tax free nature now.

Opportunities with green market concept.

Floriculture producers’ associations and exhibitions.

Royal Botanic Garden, Peradeniya assists middle and village level growers in many

ways.

Threats

Lack of government support and the knowledge of government towards floriculture

industry is very low.

Government has a negative relationship with EU member countries.

Loan rates which are set by local financial institutes are relatively high when comparing

the other loans for SMEs.

Global economic crisis impact in import countries.

Exchange rate fluctuations

Competition is becoming high day by day.

Sales fluctuate according to different seasons (especially at foreign markets)

Risk with using Agro chemicals

International competitors use advance technologies.

Natural disasters. (Tsunami, earthquakes, etc)

Artificial substitutes.

Threat of pests and perils.

Driving Forces

Key Internal Forces

Knowledge –

In any industry the knowledge about the area which is going to play is one of main

driving force. Because, that can be shape the future of an organization. When we consider the

Floral Industry agricultural knowledge may determine the success or failure of the business.

Because, agricultural knowledge is the core need for the floral business.

If we think on buyers mind, they will expect new plant innovations, new plant designs with the

time change. When we consider about the European market segment and there buyers main

concern is to buy small pots with plants and keep them on their computers or tables and after few

days they will throw them away. So plant’s life span might be one their main concern. So if some

can use their agricultural knowledge to create new plant varieties and/or new plant designs, then

they can achieve competitive advantage against their competitors. Again that knowledge will

help them to create an image or a good will toward their business. The one of powerful and

effective marketing strategy for international floral business might be high quality products. So

that can only be achieved with the good agricultural knowledge relevant to the floral.

Workforce –

The workforce is also a significantly important factor for the success of international

floral industry. Through our industry analysis, we have realized that one of main reason for

European countries tend to buy Sri Lankan Plants and Flowers is the low production cost. Since

Sri Lanka is a Asian country and also a developing country, labour cost is very low comparing to

the Europe. So, that is the one of main reason for Sri Lanka to have low production cost in floral

production.

In terms of labor cost, china, India, Bangladesh, Nepal, Pakistan, are the other country

that we can consider as a competitor for the Sri Lanka in international floral industry in Asian

region apart from the other African and Middle east countries. In our industry research, we have

found that Sri Lanka has been differentiated and has been achieved competitive advantage with

the high quality products even though china is providing mass scale of floral products with

cheaper price. The main reason for that is our workforces are more quality conscious and careful

when consider to other competitive countries.

Key External Forces

Technology –

The future of the floral industry in Sri Lanka can be changed by embedding the new

technologies. In country like Sri Lanka, most of the companies in floral industry cannot spend

more on R&D projects. So that disadvantage can be incurred in some extend, if someone can

acquired the newly developed technologies to their businesses. So these are the strategies that

may need for the companies for long term success in their business.

So, when we are talking about technologies, Information Technology will hold a vital

role in International Floral Industry. With our industry analysis, we have realized that there is a

huge communication gap between buyers and the producers. Sometimes producers will get

wrong idea about the buyer’s requirements. And other hand, quick response to buyers is very

important to grab the orders when considering the European market segment. Since, that is very

important to use Internet and Other information technologies to achieve the success of the floral

business. In order to overcome this communication gap we hope to develop website (

www.evergreen.com) and affiliate it with EDB web site and many European Floriculture auction

websites to directly connect with our buyers.

To be succeeding in international floral business, need to achieve mass production with

the required standards to cater the orders. So in that case, agricultural technologies like tissue

culture, plant cloning and new cultivating methods are significantly important to achieve those

requirements or standards. As we said earlier, initially those will cost much to the company. But

with the long run, those are bringing more value to the company than what they spend to achieve

them.

Competitors –

In term of driving forces, there is a major impact to floral business from the competitors.

We are talking more about the competitors in the competitor analysis. When we are considering

the Sri Lankan floral industry which is mainly targeting European marketing segment, the main

competitors are China, India and Central America. In our industry analysis, we have found that

Central America is a major challenge to our floral industry in terms of price and quality. Because

the government in Central America is not charging taxes from their floral planters. Earlier, there

people grew poppy plants for the illegal drugs. So there government gave their people to money

and tax free imports and exports facilities for the floral business with the prior intention of

avoiding them from illegal drug business. Since that, they are exporting good quality floral

products with the competitive price. So in that context, we have to reduce our production cost to

compete with the competitors. Trying to reduce import cost is one method to reduce production

cost. So in this case, there is a role or a responsibility to the Sri Lankan government to reduce

taxes on imports which are related to the agricultural industry.

Key Strategic Success Factors

Location –

When we talk about the key strategic success factors in floral business, location is the

main and as well as the critical factor for the success of the business.

As we said earlier, we have been revealed for the floral market from Europe, mainly due

to low production cost and environmental conditions that we have. So, in order to reduce

production cost in floral production, we have to maximize the usage of natural resources like

water, sun rise and soil. Hence, location becomes a critical and most important part to start a new

successful business to increase the competitive edge against the competitors.

When selecting a powerful location for a business, we have to be concern about the

potential work force also. Floral business relatively needs to have higher number of work force.

But the same time, it should be at low cost in order to reduce production cost. So in our selected

location should be able to facilitate required work force easily with our cost concern.

To become successful in floral business, there should be good transportation facilities. On

one hand it will be a competitive advantage, since product and raw materials distribution can be

done in effectively. And other hand, it is critical need of having good transportation facility to

decline the product damages. When selecting a location, we have to be thorough about our

distribution channels like land freight, air freight or shipping and location selection should

provide the efficient and effective access for the distribution channels requirements. Hence

effective location is a one of major key success factor for the successful floral business.

Trade Relationship –

Good trade relationship becomes a key success factor for floral business, since it provide

competitive advantage for the business success. Because, when we consider the European floral

market, it is not cost effective and relatively impossible for Sri Lankan companies to do

advertising about their products or business. But strong customer relationship will be a powerful

and most effective advertising way for them. Because loyal customers will spread favorable

words of mouth about the company. So that will enable lot of advantages for the companies to

move towards the new customers.

For the successful business, not only the powerful customer relationship, but also we

need to have good relationship with other parties, who are supportive for the business. According

to our industry analysis, we have realized that major opportunity for companies to meet potential

new customer and promote their floral products is participating to the trade exhibitions. But it is

not easy to get this opportunity, since competition is high and have to pass the interviews also.

So having good relationship with BOI, company will be able to grab these opportunities before

the competitors. And the other thing is that we are trying to lose the dependability of EDB to

grab orders and willing to use our e-marketing web site to get market and customer intelligence

and directly to business with our buyers in both domestically and internationally.

Technologies and Standards –

Technological richness and expertise knowledge in agricultural sector will be key success

factors for the floral business. As we discussed in strategic driving forces, knowledge become a

critical factor for the business success. Technological richness will increase the effectiveness of

the expertise industry know how. Because, that might enable the companies to achieve

economies of scales and economies of efficiencies of their production and on time deliveries for

customers orders.

Since we are mainly focusing European floral market, companies need to achieve

standards certificates for their business and for their floral business. Before the exporting

products, company has to get quality certificate for the products from the Sri Lankan Plant

Quarantine Institute. There is a quality standard for the floriculture sector growers, traders, and

florists call MPS (Millieu Programma Sierteelt) Standard. To get these standards, company has

to change their business practices, environmental concerns, labour rules and salaries according to

the standards that defined in MPS Standards. By achieving these standards, company can gain

substantially high recognition toward the company and that will be enabled them to move and

become success in Europe market. So, become a successful and competitive player in floral

industry, these quality standards are critical for the company.

Conclusion of industry analysis

From the Macro analysis we can identify that the industry of Floriculture is a lucrative

industry to invest and with the increasingly popularity towards green products it possess rapid

industry growth. It only requires nominal amount of initial capital and little expert knowledge to

begin. PESTEL analysis provide us good insights of the how Political, Economical, Social

factors are affecting to the industry with the Technological factors as an enabler under the legal

framework which influenced mainly from Environmental factors.

Porters five forces will provide us the insights to Micro environment, how the industry rivalry

affects, in this context due to the unsatisfied demand rivalry is not intensified and thought there

is large number of synthetic substitutes buyers are more concern on Green products .Supplier

power is not powerful due to the supplier concentrate on is high and they can only provide law

supplies for the farms. Buyers are powerful in Sri Lankan context due to the less buyer contacts

Sri Lanka has with foreign buyers. Large numbers of firms are willing to enter and they are

already preparing blueprints to exploit the curativeness.

SWOT analysis provides basic but important understandings to internal potential to exploit the

opportunities and to mitigate the threats. It helps to convert weaknesses to Strengths and use

those strengths to exploit Opportunities and to pose threats to rivals and to mitigate the threats

from the rivals.

Strategic Group map, BCG matrix and GE will provide who the actual rivals are that we have to

directly dealt with Key Success Factors we have identified helps us to sustain in the industry but

we have to build our own unique strategies to possess Sustainable competitive advantage.

Finally, Floral Industry is emerging industry for Asian developed counties and its’ natural

climate and access to raw material and cheap labor makes it reality to acquire foreign currency

for the firm and country as a whole.

Business Description

Vision

Our vision is to provide perfect quality and service regards to all of our products and

become the market leader in worldwide.

Mission

Our mission is to apply efficient, reliable methods to meet our customers’ needs for high-

quality cut flowers and foliage products in domestic and international market concerning close

attention to environment and for socially responsible business practices.

Goals

Increase year-round production and supply of high quality fresh cut flowers

Produce and deliver high quality foliage products to both international and domestic

markets.

Sell product at a low cost keeping the quality standards.

Provide diverse and attractive natural cut flowers and foliage product to attract

international and local market.

Establish profitable business and good reputation in the floriculture industry for premium

quality cut flowers.

Create regular well established network with international buyers directly.

Reduce environmental problems using standard fertilizers and using biological controls.

Productive work force with low turnover, through careful selection criteria and give

relevant technological skills and management practices to them to increase productivity

and quality.

Crate a good brand image about the organization and good recognition for Sri Lankan

floricultural Products.

Create business network with preferred Sri Lankan manufactures and distributors to gain

more orders from overseas markets and to reach for new markets.

Start green house production plant to produce different and high quality foliage and cut

flowers according to customer requirements.

Promote cut flower products in local market.

Objectives

Short term

Firm start as a partnership and short term objectives are

to create an acceptance and capture more buyers from overseas

markets through exhibitions and from available contacts and

getting help from EDB (Export Development Board). Also

manufacturing high quality fresh cut flowers and foliage and

sending it to customer, build up good customer basis for the

products in the market. The great variety of plants that can be

grown as cut flowers allows firm to choose those which are well-

adapted to the farm site and grown without large offsite inputs. So to diversify the products try to

apply latest technologies and methods from the beginning of establishment. This variety also

makes diversity in both production and marketing possible. And the high value of specialty cut

flowers can increase farm income.

Complete partnership formation process

Obtain capital from bank.

Finalize required equipment and farm physical facilities.

Finalize recruitment for required workforce and complete giving required training to

them.

Lease vehicle required for distribution.

Find suppliers and customers

Entering to agreements with distributors, suppliers and with middlemen

Start/open the business

Get required assistant from EDB and government (Department of Agriculture)

Start a web site to enhance the service

Complete first order within first 2 months

Establish an association with other cut flower and foliage growers.

Conduct exhibitions in the local market to promote products.

Long Term

There are good market opportunities and long term potential on which to anchor

successfulness. The demand for cut flowers and foliage products in the global market is not

fulfill by the current growers who are in the international market. Also the industry has an

increasing domestic demand due to the growing tourism industry as well as changing preferences

and improved buying capacities of high and medium class consumers. There is also a need to

upgrade and/or improve the cut flower industry for cost-efficiency in various operations in the

input supply and distribution, farm production, postharvest, processing and marketing for it to be

competitive in the global market.

Build up very strong brand awareness and reputation for the EVERGREEN products in

international and local markets.

Expand the business by opening up new branches/ appointing new agents in overseas

countries to get direct access to customer and to increase and sustain access to export

market.

Build up well organized distribution channels in international and in domestic market to

deliver fresh cut flowers and foliage.

Increase the market outlets and enhance the import competitiveness of cut flowers in the

domestic market.

Start new plant in new location to produce diversified cut flowers and foliage

Acquire latest technologies and concerns on R & D; develop new and better varieties and

improved production technologies of foliage to meet different customer requirements.

Also to reduce production costs and enhance production arrangements.

Achieve for required international quality MPS (Milieu Programma Sierteelt or

Floriculture Environment Project has been established by the Dutch floricultural sector)

standards focus on environmental, social and quality aspects.

Market Orientation

Market Segmenting

For Ever Green as a high quality specialized Floriculture Company correct market

segmentation is priority importance. When taking the market segment to target we have to

consider following areas.

Accessibility to the segment

Sustainability of the segment

Accountability/measurability of the segment

Geographic Segmentation

When taking geography to consideration, we can see that the market for floriculture

greatly exists in Europe (EU). And next it is United States (US). In the EU the greatest

floriculture consumption is at Netherland, Sweden, Belgium, UK, Austria etc. So Ever Green can

have a sustainable and substantial opportunity by going to European market.

Demographic Segmentation

When taking demographics in to consideration in EU we can see that our final customers

will be business organizations who look for decorative green plants and the individuals who are

interested in having greener environment around their homes.

As we will be providing high quality foliage products to the market it is important for us to reach

the quality conscious customers. And for that we got to reach the growers who are doing these

sales as highly reputed organizations. And we can use whole sellers in this industry as another

target market. As the strength of the wholesalers (35% of total sales) is higher than the growers,

whole sellers will be our primary target.

And we must make sure those organizations are well knowledgeable in the area of floriculture

sales. So the age of the organization should be more than 2 years.

Psychographic Segmentation

As current trend in the world, especially the EU’s is towards the green protection, our

target should be green conscious individuals. And we must keep in mind that they will be ready

to spend any amount to a plant if it has beautiful green in it, with the mix of natural look and

feel.

Lifestyle

As organizations are currently moving towards greener environment in their office area a

frequent purchase is happening because of this. This is an area we had to target. For that we

might need to send less priced foliage plants with higher quantity.

So Ever Green’s market segment will be as following,

EU market, targeting Netherlands, Belgium, UK and Austria (Because they are the biggest

markets) is the geographical area for us to target.

Whole sellers and growers will be our target market with high reputation and wider audience.

Ramya Horticulture

Quality/Creativity

PriceHL

L

H

Ever Green

Green PlantsOmega Green

Décor Foliage

Mike Flora

Ultimate customers will be

Green conscious individuals Large commercial organizations

Market Targeting

As our product is a high quality creative indoor decorative product, we had to make sure we

deliver our products to different customers using different foliages. So we will be using

differentiation Strategy. That means different plant types to different customer segments.

Market Positioning

We will be positioning our product as a high quality, high creative product with medium price

level.

Marketing Strategy

In order to formulate the Ever Green’s marketing strategy we will be using Ansoff’s market

strategy combined with the Porter’s generic strategies.

Product Development Strategy

As the management of the company is having knowledge in the market, we can assume we are

entering in to an existing market. Yet our product which is incorporated with Ever Green’s brand

can be considered as totally new product. Whether there are other foliage brands our brand will

be new to them. So obviously our marketing strategy will be Product development strategy.

In order to get successful in product development, Ever Green will need to do product

modification and product innovation. New designs of foliage plants to attract the customers,

introduction of new plants, innovative plants which will have longer life span are some examples

for this product development. Throughout this time, it is important to make sure that we inform

the customers about our new products. In this process it is important to have a clear and correct

understanding about our customers and their need and wants.

In the porter’s generic forces we have three strategic options to take. This will be,

Differentiation strategy Cost leadership strategy Focus strategy

As Ever Green is a floriculture company, who provides high quality foliage plants with new

variations we have to use differentiation strategy in this context. Yet we must remember that due

to the recession in the EU we have to consider and play in the Cost leadership strategy also. So

the right mix will be differentiated reduced cost foliage products.

Differentiation Strategy

Differentiation of Ever Green’s marketing is the focus in this strategy. This will be on

differentiating our product, quality and communications from our main competitors. For this it is

important for us to develop a Unique Selling Proposition (USP). The USP that Ever Green will

be having is the quality of the plants and the distribution channel relationship. So it is important

for us to improve this. As the export industry is mainly depends on trust and commitment

towards the trade relationships we have to have differentiated relationship for our channel. And

for our end consumers we have to give a true green product. This will create a switching cost for

them.

Following differentiations are about to be presented;

High quality products with guaranteed reasonable life span Service staff who will monitor the product till it reach the growers/customers Just-in-time product sourcing

In a situation of high orders within very short time period we will be purchasing products

from other small growers in Sri Lanka. And we will be making sure that they will

conform to our product standards and quality dimensions.

Competitive costs with the competitors Flexibility on designing foliage plants for customer requests

Growers in EU are requesting for different styles (body of the plant), and in the

companies had to fulfill these needs in order to win the orders.

Marketing Tactics-Marketing Mix

Product

Foliage product will be high quality. This is the one USP for Ever Green. We have to do

continuous development for improve our plants. Not only the plants, but also improvements had

to be done on the quality of the nurseries. We have to have a product portfolio to have a better

competitiveness. Time-to-time the plants that are demanded by the customers/clients differs. So

it is important for us to track the market changes.

We have to make sure the packaging is also changing according to customer needs and wants. As

package provides protection and convenience to customers we have to design new packages.

The medium that the plant will be grown is an artificial material. So it is important to us to

continuously improve and to check this material. This must not include any sort of substances

that are prohibited by the EU.

And we had to make sure that the plants are accordance with the environmental standards in both

Sri Lanka and EU countries. The checking should be done for any type of funguses, viruses or

pests that can be transfer through the plants. This is important as reveal of any type of harmful

substances or species would be harmful to the whole export industry in Sri Lanka.

For future product development, establishment of R & D department is also proposed.

Price

For Ever Green’s plants, the price will be competitive pricing. We will use competitor

pricing method. The strategy will be the market penetration. This means we will try to get the

high market share (the higher broker relationship with the higher grower relationship which will

lead to higher end customers) within a very short period. Yet our prices will be competitive with

major players like Omega Green, so we won’t be seen like a cheaper products supplier.

The risks involved in penetration pricing are, it will be hard for us to raise the prices after we get

the market share. And as our plants are more quality wise improved than our competitors the

comparing our price with competitor is not reasonable. We will be putting more investments on

plant designing and grower support.

Place

We will be creating two types of channels in this process. That will be,

Directly to grower Indirectly to grower

Yet as our company is a new player we will initially use only one marketing channel. When

evaluating the foliage product distribution channel, brokers are the strongest party. And as our

knowledge on the EU and its growers are very poor, we will be concentrating on getting brokers

to our plant distribution.

Indirectly to grower Channel

There will be previously negotiated commission being given to the broker.

And as the business grows well, we will be moving in to creating relationship with the growers

and doing direct business with them.

Our products will be available at internet. The website will allow clients to purchase and pay

online. This will make the purchasing easier and convenient, for brokers.

Dumo Broker Grower End Customer

Promotions

Communicating to our customers is the main objective in our marketing campaign. For

this it is important to identify our customers. Our target markets are growers and the brokers. Our

ultimate target will be organizations and individuals who use them as decorations.

Our marketing strategy will create product pull. Yet there will be push strategies also

implemented.

Advertising

To reach our target market we will use trade magazines. We will put glossy

advertisement and advertorial to reach growers and brokers. And we will use internet to put

digital banners. We can put our items in Amazone.com site to get targeted by potential buyers.

Direct Marketing

This is the best tool we can use to communicate with our trade customers. Direct e-mails,

e-catalogs etc can be used in this. E-mails will be cheap yet more effective as we can send

pictures and many attachments with almost no cost. And we can send e-catalogs about our

foliage product range. And having an interactive feedback form in it could obviously help us to

improve our service quality.

Public Relations

Exhibitions are the main Public Relations (PR) item that Ever Green can use. As Export

Development Board of Sri Lanka is organizing and inviting the Sri Lankan companies to these

types of exhibitions we must be aware about their activities.

During Exhibitions we will be able to meet our potential brokers and growers. We had to use a

well knowledgeable work force as sales representatives.

Sales Promotions

In the initial stage of our business the focus should be on getting the attention and build

relationship with our channel. So we have to use sales promotions on building these

relationships.

For this we will use following techniques,

Discounts for bulk purchases Higher commissions Trade competitions Information sharing

This is very important action to do with the grower. We can inform them about the

newest trends in the market and about new types of plants.

Process

We had to make sure all the unnecessary documentation processes are removed. This will

encourage our customers to interact with us. Flexibility in decision making is important in this

case. Short decision making time is important for winning orders from buyers.

People

We have to give our staff excellent training and development. Knowledge on plants,

foreign markets, and new planting methods are essential training areas in developing our staff.

Physical Evidence

In all our documents (receipts, catalogs etc) and in our website we have to use our logos

and corporate colors and “Green” color to give a feeling about the company.

Development and Production Plan

Land, Building and Facilities

Following table will explain about the land, building which needs and facilities that we are

utilizing for the production.

Land

Location NegomboAddress 4/12, Mudliar Mendis Road, Negombo.size 30 Acres-(50millon)Owned or Leased Owned

Buildings & facilities

Greenhouse-Alpha 12000 m2Greenhouse-Beta 8000 m2Greenhouse-Omega 4000 m2Greenhouse-Gamma 2000 m2Total cost Rs.700,000.00 Cooler House 100,000.00Packing Area 60,000.00Preparation Area 15,000.00Fertilizer warehouse 30,000.00Equipment warehouse 10,000.00Labour rest room 9,000.00Vehicle garage 15,000.00Field office room 150,000.00

Total cost Rs. 1,089,000.00

Equipments

Heating and climate control 642,500.00Irrigation system 100,000.00Recycling system 50,000.00Lighting System 90,000.00Co2 Emitters 150,000.00High Pressure mist 600,000.00Auxiliary power generation 300,000.00Spray equipments 40,000.00Processing equipments 300,000.00Total Cost Rs. 2,272,500.00

Materials and Supplies

The main problem will be the procurement of the row materials since new technology

like tissue culture is not affordable to us at the initial stage of the business and the materials are

procured through traditional plant node plantation and when necessary we hope to obtain from

the rural domestic individual growers.

Production Strategies

Production or operations strategy means the pattern of decisions that we, EverGreen

occupied to produce floricultures

Mainly we can adhere to 3 strategies

In-house production

Outsourcing production

Always produce in house and outsource when needed.

We are highly comfortable with the 3rd option it gives us flexibility and cost advance. . We

would highly conscious about following characteristics when deciding our production strategy.

1) Quality-

EverGreen as a company with an intention to provide quality products to fit our customer

requirements, hopes to achieve it through a skilled workforce, adequate technology and effective

utilization of quality standards. We hope to maintain our quality standards throughout the

production of final output using Total Quality Management concepts (TQM).

2) Speed-

This strategy entails delivering products and services as fast as to our brokers,

wholesalers and end customers on their demand .We have identified that the foreign buyers place

orders to producers after they got the order from their customers and to process the order we

have to have efficient communication system and supply chain management system. We hoped

to achieve it by provisions such as spare capacity, rapid supplies and effective control of work

flow within the company and procuring products from other domestic scale growers in the area

as far as they conform to our quality standards.

3) Dependability-

This means doing things on time or keeping the delivery schedule promised to the

customer. It is attained by effective scheduling, maintaining spare capacity, reliable equipment

and commitment of the employees. We hope to establish and enhance quality relationship with

our freight forwarding company to get their support in any contingencies. Dependability also can

be improved with our domestic or small scale suppliers by outsourcing growing breeds providing

nodes and other knowledge to them and pest controlling.

4) Flexibility-

This involves being able to respond to changes in the product design, production volume

and variety and delivery time require by the customer. Since we are highly conscious on Quality,

Speed and Dependability of our business it provides us flexibility to customize the requirements.

We will be encouraging our employees to suggest new designs to products and their feedback

will be always appreciated and rewarded.

5) Cost:

Cost-efficiency is achieved by better capacity utilization, reduced overheads,

multipurpose equipment and higher productivity through enhancing the employee satisfaction.

This is the most crucial factor when determining the production strategy because it determines

the final price for our products and profit margin.

Overhead controlling plays major role when reducing unnecessary cost. We have free water

supply from the River flows nearby our farm but still water needs to be pumped to crops and we

have designed our farm layout and wastewater recycling system to minimize the water

requirements. Gage of the greenhouse net, sun shading techniques and our climate control unite

will control the humidity in the greenhouse and it will reduce the electricity to activate pumping

system.Our production strategies will make us order winners rather than order qualifiers due to

the higher customization we offer to customers in product, delivery and service.

Construction Production schedule

This would be the farm establishment, development and first production harvesting schedule for

next 9 months.

TaskWeeks

1 2 3 4 5 6 7 8 9 10 11

12 13 14 15 16 17 18 19

20 21 22 32

33 34 35 36

Blueprint and DesignAuthority permits & LicenseLand PreparationEquipment ProcurementMaterial Purchase/receivingBuilding FoundationGreenhouse and otherElectricity standby powerCooler, Climate controlIrrigation systemRecycling systemWaste management systemCleanup and otherProcure crop materialsNurture breedingStart harvesting

Cultivated Harvest

IN-House

Outsourced

Qualified Harvest

Seasonal weather patterns

Pest and Diseases

Barriers

Climate Control

Pruning/Handling

Co2, Mist control

Biochemical Control

Trained/Knowledgeable staff

Control Measures

Environmental Assessment and Safety Plan

An environmental assessment plan for the floricultural business has been completed using

resources such as the municipality, the city and local Ministry of agriculture specialists. We

EverGreen project management team are well aware of the issues of federal and provincial

legislation that passes the responsibility for cleanup of environmental. Also, relevant permits,

licenses, health and safety requirements, environmental approvals, rodent safety controls, water

quality controls, and soil conservation required when operating, constructing or expanding the

unit has been followed.

Farm safety is a major concern for the operation. We make a through effort to be complete safety

checks of the machinery handling, and the operations at key times in the production cycle

following guidelines defined through the provincial and national farm safety initiatives.

Overview for the Production strategy

Inventory Management

Inventory management is vital when it comes to agricultural based production due to

perish ability .But though plotted plants tend to survive in their pots, cut foliages tend to perish

with the time and therefore need to harvest when the order is placed utilizing the JIT (Just in

Time) concept. Cut foliages have to conform to some constraints of height, number of branches

in demanded node places and those foliages cannot be store in cooler due to high cost involved

for it and in order to meet the quantity demands we have designed good initiatives to strengthen

the relationship with our suppliers.

Packaging and Quality Assurance

Consumers today are concerned about safety and traceability within the organic

production. They now demand produce that has been grown, handled, packaged and transported

to the highest standards of quality and hygiene, in a clean and environmentally friendly manner. 

HACPP is one of the major standards we need to qualify to export to EU. The Bord Bia

Specification for Horticulture Producers certification is operated in accordance with EN45011

requirements.  EN 45011 is the standard for the European accreditation of bodies who are

involved in certification. The Bord Bia Horticulture Quality Assurance Scheme sets out the

requirements for Best Practice in fruit and vegetable production, packing and processing as well.

We are planning to conform to this scheme by:

Cropping practices, Quality and Hygiene Standards in relations to personnel and premises,

Pack house, Cool chain facilities, Crop protection products usage and storage, Record

keeping, Maintaining appropriate documentation, Traceability, Implementing

environmentally friendly practices, permitted pest /disease controllers, permitted fertilizers

usage,

We also have to get the testimonials from the Sri Lankan quarantine department certifying that

the products are free of disease, fungi’s and other viruses to export form Sri Lanka and we have

designed our blueprints considering those aspects as well.

Human resource management strategy

At the initial stage, company believes to recruit a production and facility manager, marketing

manager, supervisor, 15 production workers and a driver under one CEO. Stakeholders of the

company vote to select the CEO and select the marketing and production managers among them

according to the Knowledge, experience and qualifications. According to the size of the order

requirement, company wishes to hire temporary workers in order to full fill the orders.

Organization HR functions managed by the CEO. Other stakeholders of the body support at the

initial stage of HR process. Organization HR functions basically consist with,

1. Human resource planning

2. Recruitment

3. Selection

4. Training and development

5. Performance evaluation

6. Compensation

CEO and other stakeholders identify the HR needs of the company and then plan what type of

positions that they need to conduct the business further. They prepare the job descriptions and

job specifications for production manager, marketing manager and supervisor to specify the

duties and responsibilities of them and to identify ideal candidates.

Job Description for Marketing Manager

Position: Marketing Manager

Department: Marketing

Reports to: CEO

Summary: This position is concerned with the overall marketing and sales activities of the

company.

Duties and Responsibilities : Organize promotional campaigns, Develop Customer relationships,

Represent the organization at official functions on behalf of CEO, Conduct market researches

and develop the market plan, Prepare market plans to approach International market, Deal with

customer complaints, Give ideas for new product developments, Study competitor strategies and

their behaviors.

Job Specifications: Ideal candidate should be:

- Below 30 years of age with experience in Marketing and sales.

- Should posses a degree in Management stream.

- Should have a professional qualification in Marketing and Sales.

- Having an excellent command of the English language.

- Able to deal with local and international customers.

Job Description for Production and Facility Manager

Position: Production and Facility Manager

Department: Production

Reports to: CEO

Summary: This position is concerned with the overall production activities of the

company.

Duties and Responsibilities: Develop production plans and drive employees to achieve that plan,

Facilitate R&D and new product development, Identify training needs and conduct worker

trainings, coordinate with suppliers and buyers, Assure the quality of the products

Job Specifications: Ideal candidate should be:

- Below 35 years of age with at least two years experience in Floriculture

sector.

- Should posses a degree in Agriculture stream.

- Should have an updated knowledge about the industry and products.

Job Description for Supervisor

Position: Supervisor

Department: Production

Reports to: Production and Facility Manager

Summary: This position is concerned with the overall supervision of activities done by lower

level employees of the company.

Duties and Responsibilities: Supervise lower level workers, Make schedules in order to

accomplish the production plan, Train workers, Support the production manager to manage

production activities

Job Specifications: Ideal candidate should be:

- Below 35 years of age with at least one years experience in Floriculture

sector.

- Able to deal with lower level employees.

Stakeholders of the company decide to recruit marketing manager among them as there is one

person is qualified to handle that position. They appoint that person as the marketing manager

from the consensual decision from them.

The selected marketing manager put newspaper advertisements to recruit production manager

and supervisor. CEO and marketing manger screen the CVs of candidates and call to selected

candidates for interviews. CEO, marketing manager and a member of board of directors

participate in the interviews. Company selects the best candidates for production manager and

supervisor after conducting interviews.

Company recruits production workers and driver through personal contacts.

Summary of Human Resource Plan

Position Function

Owner, CEO of the company HR management, Finance management,

Supplier relationship management, Build

relationships with EDB, Legal affairs

Production and facilities manager Production management, Facilitate R&D and

new product development, Conduct worker

trainings, Coordinate with suppliers and

buyers, Quality management

Marketing manager Organize promotional campaigns, Customer

relationship management, Represent the

organization at official functions on behalf of

CEO, Conduct market researches and develop

the market plan

Supervisor Supervise workers, Scheduling, Train workers

Production workers (15) Cultural and harvest activities

Driver Transport raw materials from suppliers and

finished products to buyers, Other travel

facilities for executives

CEO

Production & Facilities Manager

Production workers

Part time worker Driver

Supervisor

Marketing Manager

Organizational Structure

Labour and Training Goals

Target Barrier Response

High productivity Work knowledge,

experience, attitudes,

proper supervision

Evaluate

performances, job

design, training

programs, attention to

employee concerns

Employee safety Work knowledge,

work conditions

Training programs,

employee manuals,

awareness and proper

supervision

Low staff turnover

ratio

Demand for skilled

workers by

competitors,

dissatisfied employees

Training

opportunities,

performance

evaluations, attention

to employee concerns,

compensation and

better salaries,

Production manager and supervisor identify the training needs of production employees

and then conduct training programs for them. CEO directs production manager and supervisor

for training sessions at the outside to gain new knowledge about the industry. (E.g. training

programs conducted by the EDB.)

CEO evaluates the performances of production manager and marketing manager at each six

months. CEO sets the objectives for marketing department and production department by

dividing the organizational objectives. Then compare the actual performance against with

established goals at the end of six month. Production manager evaluates the performances of

supervisor and production workers and the end of six month. CEO and production manager

prepare performance evaluation reports and forward them to the board of directors.

CEO and board of directors decide the rewards for better performances such as salary increments

and bonuses. CEO will personally advice for employees who have poor performances and

motivates them to increase their productivity.

Financial Plan

When we start our floral company, member of the Company consider about the how

much money needed to start the business and when does need to start the profitable one. We

create the financial plan of our Company. Mainly focus about the business income, cash flow

and financial situation.

Our member of the company does not have an enough financial situation to start the business So

we decide to get the loan from well reputed banks in Sri Lanka.

Bank Name Interest Rate (%)

Uses of Funds

In first year of our company, we does not concern about more Profit. But In the second year we

are more concern about the Profit. We hope to invest additional income for buying new

floriculture planting materials and R&D purpose for improve the quality of Floriculture

Products.

Internal Control and Monitoring

Our Financial documents are handling by Priyamali Bandara and Secondary regular check will

be done by Manjula Batagalla. Financial Reviews are distributed every member in our Company

and Bank which we get the loan by annually.

Beginning Statement of Assets, Liabilities and Owner’s Equity

Gross Margin Plan for Cut foliage

Gross Margin Plan for Plotted plants Plan Summary

Gross Margin Plan for Cut Flowers.

Projected Income StatementProjected Cash Flow

Planned Capital, Sales & Purchases

Ending Statement of Assets, Liabilities and Owner’s Equity

Planning Package for Evergreen Company

Income Statement

We prepare the income Statement for to show the projected income for m sales for the future

years. Normally Company income is reported on a cash basis.

Year1 Year2 Year3 Year4 Year5

Income From Sales(RS) Auction  16 0 000  263 500  378 800 387 410 658 900Wholesale 36 1740  478200  456980 591230 536780Cash  2 20000  332100  341110 456980 731000Total Income(Sales) 74 1740 1073800 1176800 1435620 1926680

ExpensesPlants and Fertilizer 95600 103000 75000 66320 67890Repairs, Maintenance, Transportation 166000 120000 56200 42360 78120Labour 270000 250000 241300 236210 157810Materials 334000 114400 223600 114400 102300Property taxes ,licenses 36000 36000 25000 25000 25000Legal, Accounting, Office 25000 15000 25000 7500 3500Insurance 45000 45000 45000 45000 45000Advertising & Promotion 15000 27000 17800 7500 8570Operating Interest 4500 1500 3600 1500 2200Loan Tern Interest 45000 45000 37000 32000 15000Total Expenses 1036100 756900 724500 577790 505390Excess Income Over Cash Expenses -294360 316900 452300 857830 1421290AdjustmentsLess Depreciation 3500 1200 3620 2270 2700Net Income(Rs) -296860 315700 448600 855560 1418590

Cash Flow Summary

Accurate Cash flow Planning is essential for the company like us because inadequate working

capital is main cause for the failure of the business. So we plan to do a accurate cash flow plan

for first 5 years.

Year1 Year2 Year3 Year4 Year5

OCF

Net Income -296860 315700 448600 855560 1418590

Add Interest Paid 45000 45000 37000 32000 15000

EBIT -251860 360700 485600 887560 1433590

Less Tax - - - - -

Add Depreciation 3500 1200 3620 2270 2700

-248360 361900 489220 889830 1436290

CS

Ending Fixed Assets 80785 67943 85278 71236 53261

-Beginning Fixed Assets 0 77856 80821 80745 57752

Add Depreciation 3500 1200 4457 9509 4491

84285 -8753 - - -

NWC

Cash 220395 332100 340111 456980 731000

Bank 47236 20123 12369 18563 12123

Investment On Premises - - - - -

267631 352223 352480 475543 743123

Cash Flow From Assets -600276 18430 136740 414287 693167

Year1 Year2 Year3 Year4 Year5

Interest Paid 113 000 113000 113000 113000 113000

Net Borrowings 235690 13567 - - -

Cash Flow to Creditors -122690 99433 113000 113000 113000

Year1 Year2 Year3 Year4 Year5

Profit Shared - - - - -

Net Equity Raised 133612 269784 123698 - -

CF to Share holders -133612 -269784 -123698 - -

Projected Statement of Asset Liabilities and Owners Equity

Here we prepare the projected statement of assets and liabilities at the end of the each year for

the next 5 Years.

Assets

Current Assets Year1 Year2 Year3 Year4 Year5

Cash 367631 452223 252480 275543 643123

Account

Receivable

- - - - -

Inventory 20785 21456 75612 11236 46789

Total Current

Assets

388416 473679 328092 286779 689912

Fixed Asserts

Cost 117516 143873 90278 59207 53261

Less Depreciation 3500 1560 5929 9509 1525

Total Fixed 121016 145433 96207 68716 51736

Building and Equipments

Total Assets 509432 619112 424299 355495 741648

Liabilities and Equity

Current Liabilities

Operating

Loan 11745 8692 10472 4563 15647

Account

Payable

- - - - -

Total Current

Liabilities 11745 8692 10472 4563 15647

Non Current Liabilities

(More than ten Years)

Mortgage - - - - -

Total Long

term

Liabilities

417564 496851 311258 258369 578632

Total

Liabilities

417564 496851 311258 258369 578632

Equity 80123 113564 102569 92563 78936 147369

Total Liability and Equity

Total 509432 619112 424299 355495 741648

Financial Performance Indicators of Evergreen

In this section we Profit, Risk and Growth ratios for our business. These Performances can be

measured using Financial Statement and Other Guidelines.