BUSINESS ENVIRONMENT

Business Environment



Business Environment

Part 1

Question 1:

With the aid of statistics and practical examples provide an up-to-date account of the structure and operation of the global tea market with reference to the following variables:-

The production, consumption and exporting of tea

The tea plant is a species originated in the East that, at present, is cultivated and consumed in the five continents. With the same raw material (shoots and leaves of the above mentioned species) diverse final products are obtained, according to the method of industrialization, botanic variety, growing technologies, season, or crop type. The best known tea varieties are black tea, green tea, red tea and white tea.

Production

Tea growing takes place in the five continents, and each zone originates a product with differential qualities as a result of special agro-ecological conditions, farming techniques and industrialization. World production of tea shows a positive trend: from 2005 to 2009, it registered a 17% volume growth. This is related to record crops in China, Vietnam, Sri Lanka and Kenya. Volume growth in local production is the result of technological improvements such as: adjustments in fertilization and harvesting techniques, and incorporation of clone plantations with high productivity and product quality (Nowak et al., 2000).

Consumption

India maintains its position as world biggest tea consumer. In 2005, it consumed 757,000 tons, which represents 22.5% of world total. It was followed by China (20.1%) and by the Russian Federation (5.4%) in the third place. Then follow Japan 4.5%, Pakistan 4%, United Kingdom 3.8% and the United States (main destination of the Argentine tea) 3%. Considering variances registered in the biggest world consumers (India, China and Russian Federation), growth rates of 13%, 36% and 15% respectively can be observed in the period 2001-2005.The magnitude of local demand is far from figures registered in top world consumers. In our country, the estimated average consumption from 2000 to 2006 was 3,174 tons, with a 6% increase in 2005 and 2006.

Exports

There was a slight increase in the tea business volume worldwide in 2005, as global exports reached 1.53 million tons in that year compared to 1.52 million tons in 2004. In 2005, shipments from all major exporters increased, except for India, according to data from the Intergovernmental Group on Tea, FAO. Information from the same source indicates that Kenya continued to be the main exporter in 2005, exceeding the exports of Sri Lanka for two consecutive years. In Argentina, tea is the most exported infusion, considering tea, yerba mate and coffee. In 2006 tea had a share of 70.5% in volume and of 65.9% in total sales dollars. At the same time, our country sells around 90% of its tea production to foreign markets, where the United States and Chile stand out as predominant destinations (Hall, 1992).

The influence of individual growers on the price of tea Tea market is facing yet another paradox which could be explained in terms of glaring gulf between the price charged by dealers and retailers. A 2005 report for the International Labour Organization (ILO) notes ...