Coir fibre industry - Group 12

BUS – 4328 Integrative Studies in Management – Group 12 Coir fibre industry

Department of Business Administration Page | i

Department of Business Administration

Faculty of Management Studies and Commerce

University of Sri Jayewardenepura

B.Sc. Business Administration (Special) Degree Year IV - Semester II

BUS 4328 Integrative Studies in Management

Industry Analysis Report

Coir Fibre Industry

Date of Submission

04th December 2015

Supervisory Lecturer

Mr.H.M.P.M. Kodikara

Submitted in partial fulfilment of the

B.Sc. in Business Administration (Special) Degree

Word Count

6905

Department of Business Administration


Department of Business Administration Page | ii

Faculty of Management Studies and Commerce

University of Sri Jayewardenepura

B.Sc. Business Administration (Special) Degree Year IV - Semester II

BUS 4328 Integrative Studies in Management

Group Formation Sheet

Group No: 12

Proposed Group Leader’s Name: L.A.K.M.A. Liyanarachchi

Name of the Student Index

Number

Registration

Number Signature

1.T.A.C.M.Gunawardana 9644 66568

2.A.P.Indramali 9677 66601

3.M.H.A.U.Irangika 9679 66603

4.L.G.M.Lakshan 9808 66734

5.L.A.K.M.A.Liyanarachchi 9817 66743

Date: Supervisory Lecturer Approval:


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Ethics Disclaimer Declaration

Group No: 12

Group Leader’s Name: L.A.K.M.A.Liyanarachchi

The undersigned group members herewith declare that the contents included in the Case study

proposal is meeting with the acceptable ethical standards, do not count for plagiarism and

finally, assure that the data/information contained in this proposal will be used only for the

intended academic purpose.

Name of the Student Index

Number

Registration

Number Signature

1. T.A.C.M.Gunawardana 9644 66568

2. A.P.Indramali 9677 66601

3. M.H.A.U.Irangika 9679 66603

4. L.G.M.Lakshan 9808 66734

5. L.A.K.M.A.Liyanarachchi 9817 66743

Date: Supervisory Lecturer Approval:


Department of Business Administration Page | iv

Table of Contents

1 INTRODUCTION .............................................................................................................. 1

2 METHOD ........................................................................................................................... 3

2.1 Sample ......................................................................................................................... 3

2.2 Data collection............................................................................................................. 3

2.3 Data analysis and procedure ........................................................................................ 4

3 CURRENT SITUATION OF THE COIR INDUSTRY IN KALUTHARA DISTRICT. . 4

3.1 In the case of Kaluthara district................................................................................... 5

3.2 SMEs result ................................................................................................................. 6

3.3 Large scale enterprises ................................................................................................ 8

3.4 Consumers ................................................................................................................... 9

3.5 EDB and CDA ........................................................................................................... 10

3.6 Super Markets ........................................................................................................... 11

4 DISCUSSION ................................................................................................................... 11

4.1 SMEs ......................................................................................................................... 12

4.2 Large scale enterprises .............................................................................................. 15

4.3 Consumers ................................................................................................................. 15

4.4 Super Markets ........................................................................................................... 17

5 KEY FINDINGS OF THE ANALYSIS ........................................................................... 17

6 CONCLUSION ................................................................................................................ 20

7 APPENDIX: ..................................................................................................................... 21

8 REFERENCES ................................................................................................................. 24


Department of Business Administration Page | v

Acknowledgement

We would like to express our very great appreciation to Mr. H.M.P.M Kodikara, supervisory

lecturer and Ms. Jeevani Senevirathe, the coordinator of the course for providing us with this

opportunity and the guidance and support given throughout this industry analysis.

Moreover, our gratitude goes to our friends at the Faculty of Management Studies and

Commerce of University of Sri Jayewardenepura who shared their knowledge and experience

to make this report a success.


Department of Business Administration Page | vi

List of Abbreviations

CDA – Coconut Development Authority

EDB – Export Development Board

IDB – Industrial Development Board

IMF – International Monetary Fund

R&D – Research and Development

SME – Small and Medium Enterprises

MNCs – Multi-National Companies

List of Tables

Table 1: Details of the participants. ......................................................................................... 23

List of Figures

Figure 1: User Preference .......................................................................................................... 9


Department of Business Administration Page | 1

ABSTRACT Globalization has been impressed all over the world and market

forces, employment as well as life styles have been hold the reins of the global

forces now. This has been resulted to give ground some of inherent diligences of

some countries. Sri Lankan Coir Industry is one of the affected industry by the

globalization. Large scale companies are getting the gain of the global

opportunities while small and medium scale is being marginalized by the global

forces. It is observed that the “Kaluthara District” has been opened up to this

hazard widely. Accordingly a qualitative study was conducted with the purpose of

“How Globalization affect to the Small and Medium scale enterprises of the Coir

Industry in the case of Kaluthara district” by using thirty three interviewers, using

purposive and convenient random sampling method. Accordingly it has been

observed that the Global market forces have been discoloured the small and

medium scale layer of the traditional coir industry. Today’s context, it is not an

argument that the consumer preferences, thinking pattern of the people,

employment, perceptions are impelling by the Global forces. The study suggests

Small and Medium scale Coir Industry of Kaluthara District has been marginalized

mostly by the Global coercion.

Key words: globalization; life style; coir industry; small and medium enterprises;

consumer preferences; qualitative study.

1 INTRODUCTION

The world Globalization was popular in 1980,s but nearly 1960’s first person who called the

world became “Global Village” is Marshal McLuhan. Nowadays the world is completely

becoming a globalized; year after year people develop more and more ways to close with each

other. In other words world is becoming so close to each other. Today we are at the stage that,

we can easily observe that the distance became too narrow between the countries. This is

happening due to the vast advancement in the technology, communication, transportation and

ways of trade flexibility in laws, rules and regulation. (Muhammad Nayab Gul Dahir et.all,

Globalization drivers effect on consumer likeliness around the world) A world integrated

through the market should be highly beneficial to the vast majority of the worlds’ inhabitants.

The market is the most powerful Institution for raising living standards ever invented. The

problem today is not that there is too much globalization but that there is too little. (Wolf, Why

Globalization works; Preface xvii) When it comes to Sri Lanka, Sri Lankan economy was



opened to the world during the British Colonization period…but, with the open economy in

1977, Sri Lankan economy was integrated with the world by promoting free trade agreements,

tariffs and import substitutes based on industrialization. (Karunathilake. H. N. S, The economy

of Sri Lanka) Consequently Globalization has been overridden its imperium towards some of

traditional attempts.

Small and Medium Enterprises (SMEs) are regarded as one of the main driving forces of

Economic Development of all economies because they generate new employments, introduce

new business methods and products, reduce poverty, inflation and income inequality and solve

the balance of payment problem. Therefore SMEs are considered as the backbone of economic

development of a country. (Sabaragamuwa University of Sri Lanka; Department of Economics

and Statistics: Government SME Development Programs of Sri Lanka)

This study flows on the Sri Lankan Traditional coir industry in order to explore the pressure of

the Globalization towards the industry forces with the objective of “How the Globalization

has been affected towards the Small and Medium scale producers of Kaluthara district

in the coir industry”. According to the evidences, the coir industry has been developed from

small and medium scale coir producers up to the wide exportation by large scale companies.

Kaluthara district was prominent in the coir industry earlier and now the area can be considered

as a well affected area by various forces. As per the observations prime movers of the industry

has been marginalized in today’s context. The study suggests that this marginalization has been

spring up mostly due to the Globalization consequences. Accordingly a sample has been

selected from Kaluthara area by including related stake holders in the industry. The

methodology used for the study is purposive and convenient random sampling method and

conducted semi-structured interviews in order to collect data from the participants.

Approximately thirty three participants were interviewed including twenty customers.

The study has been focused on to explore the consequences of globalization towards the SME

sector in the coir industry in relation to the Kaluthara district and present the key findings of

the industry analysis in relation to the objective of the study.



2 METHOD

Initially a background investigation was performed to identify the industry condition and its

current situation and then we performed a pilot survey to identify the scope of the study and to

gather primary data. From this stage we selected Kaluthara district as our focused area in the

industry analysis. As the final stage of this study, qualitative methods were performed and

different types of stakes holders were subjected to semi structured interviews. Such an

approach is valuable in identifying and gaining insight into emerging and complex issues, and

allows for a richer understanding of the globalization impact on SME sector in Kaluthara

district.

2.1 Sample

Purposive and convenient random sampling to select participants was applied. The focus of

selecting specific participants was to understand the situation of the area and to have a different

voices of the industry. Selecting various stakeholders in the coir industry, study could show

how different behaviours of various stakeholders are influenced to the SMEs in coir industry

in Kaluthara district, and to have the different perceptions on the industry (refer the appendix

04 in page no 23).

2.2 Data collection

During the study various voices were interviewed and under the SMEs there are many factors

were considered due to higher impact and direct link with the study objectives. With the

purpose of identifying the key strategies used in the global market and pressure from the large

scale enterprises to the SMEs we interviewed experienced person from Hayleys coir Fibre

Company. Consumer study was performed to identify the changes of consumer perceptions in

a globalized society. Finally we interviewed from few different person who are indirectly

combine with the coir industry.

The semi-structured interviews were conducted using both English and Sinhala languages since

the most people have no good education background in the selected industry.

Secondary data, in the form of the coir industry statistics (IDB, EDB, CDA and census report

2002 and 2014 on agriculture), other literatures articles, researches and books, where the

important sources of research information, Newspaper articles, where the industry issues were

noticed during the past years, and the web sites. There sources provided a bigger picture of the

industry and its phenomena.



2.3 Data analysis and procedure

Since the semi-structured interviews were conducted, interviews were recorded and analysed

using a theoretical background. Purposive sample were used to analysis the study in deeply for

the SMEs, with a structured and emergent questions. Secondary data were used to interpret the

core findings with the literature and prove the raw data in meaningful way. Also notes were

taken right after the interview describing the core, feelings and thoughts of the interviewer and

problems encountered during the interview.

3 CURRENT SITUATION OF THE COIR INDUSTRY IN KALUTHARA

DISTRICT.

Sri Lankan coir industry descends with a long ancestral history, even though there is no specific

evidences could be found that who had introduced the coconut tree in to Sri Lanka. Moreover,

there were lack of evidences for who was the initiate producer of coir product. However

producing coconut related products have been developed as an industry all over the coastal

areas of Sri Lanka.

According to the legends, it is said that, anglers have being used beach-seines, which were

made using coir fibre. In the past, spouse of the anglers were engaging retting coconut husks

and beating them to get coir, spinning twines and they were used to make seines, twines and

other products in their off-seasons and covered up their living cost.

Day by day they realized that producing coir and coir related products would be a good income

source for them and they endeavoured to manufacture coir as a raw material and other coir

related products by gathering as small groups. These small groups formed as “coir

cooperatives” for further growth of their production.

Gradually, the industry expanded all over the country and with the development of the industry,

small scale coir manufacturing was grew into medium scale with developing capacious “coir

Mills” in large coconut lands.

These small and medium scale producers together fulfilled the local demand by producing coir

fibre, coir pith, coir dust and related basic products such as coir mats, mattresses, brooms and

brushes etc.

In 1870, Sri Lankan coir and coir based products were started to export to United Kingdom at

the colonial era with the impact of the industrial revolution.



By early 90’s Sri Lanka has been the world primary supplier of coir Fibre which can be crafted

into a range of semi-finished and finished products together with India, Sri Lanka accounts for

almost 90% of global coir exports. Although Sri Lanka has traditionally been the leader

exporter of coir fibre and coir pith, India holds the dominant position in terms of revenue

generated by the industry, given the higher value component of each coir exports. In present,

Sri Lankan fibre exportation has recorded 32.7% from the total coconut based exportation.

(Refer the Appendix 02 in page 21)

And also there is a slight increase in coir based products in relation to past statistics. (Refer the

Appendix 01 in page 21)

In Sri Lankan context, large portion of total value addition of coir industry has been contributed

by only few key players of the industry such as Silver Mill Holdings Ltd, Jafferjee Brothers,

Hayleys Group, Jacobi Carbons Lanka Pvt Ltd and Canro Exporters through exporting.

However the lesser part of the total added value is contributed by many small and medium

entities. Thus, it could be revealed that there is a high income disparity between large scale and

SMEs within the same industry. Therefore in the contemporary society, SME sector in Sri

Lankan coir industry has been marginalized mostly due to the pressure of globalization.

According to the background investigation and the pilot survey that were carried out Kaluthara

district selected as the most affected area.

3.1 In the case of Kaluthara district

Coir industry is one of the major livelihoods among the rural poor people in Kaluthara district,

over several hundred years especially along the coastal line of Kaluthara area. Pothupitiya

(Pothupitiya East, Pothupitiya West, Pothupitiya Central) Wadduwa, Molligoda, Waskaduwa,

Kudawaskaduwa (Kudawaskaduwa North, Kudawaskaduwa East, Kudawaskaduwa West,

Kudawaskaduwa South), Delduwa, Nugagoda, Mahawaskaduwa (Mahawaskaduwa South,

Mahawaskaduwa North) are the most popular areas for coir industry in Kaluthara district.

There are eight distinct categories of people engaging in the coir industry. They are: i).

independent producers who own pits; ii). Those who do not have pits but buy soaked husks;

iii). Labourers who worked in other pits coir mills and coir factories; iv). Producers who

produce value added coir products; v) subcontracting modality for agents; vi). Collectors; vii).

Export companies; and viii). Members of organized groups.



According to the statistics early 90’s the aggregated coir production of the Kaluthara district

has been reduced in greater scale and it is observed that the coir production has being declined

over the past years. (Industrial Development Board - Kaluthara district)

3.2 SMEs result

Many stakeholders as mentioned above, are involving in coir industry in Kaluthara district as

small and medium enterprises, and most of them have negative perception on their business

growth.

Coir pits owner

One person who has his own coir pits said:

“In those day I had good income/earning from our pits, however now it is useless

thing. We cannot gain benefits but we have to scarify our time, money, lands for

those coir pits. I had 5 to 7 acres of coconut lands with these pits but, I sold most

of them”

Along the coastal belt there were many coconut lands and coir pits in past days and sometimes

some producers had their own coir pits. It was very beneficial and profitable to have their own

coir pits. Majority of producers used Bristol fibre for their production which was produced

through those pits. Sometimes people/producers buy soaked husk from other people however,

nowadays those pits owners used to lease, rent out or sell their lands to hotels and restaurants’

premises.

Especially this Kaluthara district is one of beautiful costal area in Sri Lanka. Hence tourism

and hotel industries have become foremost industries in this area. Thus, those coconut land

owners/pit owners have inclined to sell or rent out their lands for those hotel & tourism

industries.

Labours

“It is very difficult to survive with this amount of wages and it is only Rs. 300 per

day that we can earn. Me also is going to leave this place in coming month because,

society do not give good sight on these works. Most of them recognize us as pol leli

thalana eka”



Coir fibre industry has become less attractive industry for the labours who are in SME sector

when comparing to the history. This has happened mainly due to the less payments, less social

recognition and the changes of mind sets of the people. In present society, living standard of

the people has been changed drastically. Therefore, every person willing to have better

recognition from their living environment. So then, labours working in this coir industry seek

different job titles in the society such as industries of garments and the hotels.

Coir millers and coir production factories.

The traditional production of fibre from the husks is a laborious and time consuming process

occurred in coir mills and coir factories. After manual separation of the nuts from the husks,

the husks are processed by various retting techniques and generally in a pond of brackish water

or in a salt backwaters or lagoons. By retting the fibre they are softened and can be decorticated

and extracted by beating which is usually done by hand by labours of the coir mills. These

stages can be identified as the operation procedures within a coir mills. Coir mill owner said:

“We cannot directly provide our coir fibre to the market because, the quality is a

vital market requirement”

There are many health hazard in involving these operating activities in coir mills. In traditional

coir mills in equipment for fibre extraction and cleaning, they used to use less advanced;

traditional manual technologies. These traditional coir mills and coir factories still using less

complex tools, equipment and machineries. Therefore, in present most of coir millers and small

coir factories tend to sell their products to subcontractors or collectors. Since, the quality and

the technology have been the critical success factors in the industry.

Domestic, small and medium producers

“We have no any idea about other than this. Because, we are doing this industry

since our fathers and grandfathers times. We have to buy raw materials from millers

in smaller quantities at a higher prices than the big companies and we generally

make brooms, brushes, carpets, twines and mats etc...”



In the case of Kaluthara district majority of domestic producers are from the poorest group of

the societies. Most of the small and medium producers are not changing their products and

operations. They carry out their traditional activities without market opportunities and threats.

They engage in these activities traditionally, even they do not have enough earning from that.

Hereditary, coir fibre has been used for making basically yarns, brooms, brushes, coir twines,

mats and carpets.

Now, there are over 500 families involved in the coir industry within the Kaluthara district and

90% of them are women. A female person who engages in traditional coir industry earns only

Rs.1,500 to 3,500 per month. That is not even enough to fulfil their basic subsistence and their

role in coir industry is largely focused on the initial stage of supply chain, associated with

“uncleansed”, labour incentive works with low profit margins. In Kaluthara district women’

work typically involves heavy, manual processes (manual spinning fibre into handmade yarns

and making brooms and brushes).

These domestic producers have to buy their raw materials from millers at a higher price due to

the low availability of raw materials of around Kaluthara district. As well as these domestic

and SME producers are facing decreasing demand for their basic products and they have to

face threats arising from synthetic products and materials.

3.3 Large scale enterprises

“Right now we have good customer base and they normally come to us because of

our quality and our capabilities and they know that we are delivering on time and

our these varieties of products”

Regarding the large scale enterprises with good stable export market currently operates with a

better position and with a better customer base. They already have created a good image on

their products in customers’ minds. They use various types of strategies in order to survive in

the global market such as quality and the innovative products. Accordingly they are having

good R&D team and good technology basis to face these requirements in the global economy.

In relation to the SME sector, they procure only raw materials from the SME since they mainly

focus on the quality of the products. Therefore SMEs’ do not have an opportunity to add value

to the raw material only have to earn money for their raw materials from the large scale

enterprises end.



3.4 Consumers

As per the objective of this study, the analysis suggests that the prevailing chaotic

circumstances faced by Small and medium scale producers in the coir industry have been

mostly rooted by the effect of “Globalization.”

Consumers play a key role with regard to an every product since the buying patterns of the

consumer are ever dynamic. According to the obtained Consumer voices, they are more prefer

Synthetic products rather than the traditional coir items.

“Now there are so many products which can be used very easily rather coir

products and synthetic products are durable, fair price and more comfortable with

usage. As well as now many of houses have been finished with floor tiles and

synthetic products are more compatible with the floor finished houses”

Accordingly consumers are always act in order to be maximized their satisfaction and they

always expect high quality products for a fair price. Hence they concern about the market trend

and act on upon the market synergies. They always like to be adopt with the environment.

Source: Authors

According to the perception of majority of housewives they have been used to buy all

consumption goods from supermarkets and try to be in line with current society behaviour

patterns.

“We are not full time housewives and have to balance our working life also. Hence

the time and comfort are very important. As well as actually we do not like

traditional products such as coir brushes or Brooms. We are always ready to accept

innovations for all our needs.”

80%

20%

U s er p re f erence

Prefer for Synthetic Products

Prefer for Coir Products

Figure 1: User Preference



The modern Sri Lankan society consists mostly with the newly rich middle layer people and

the tendency to be updated and awareness are high inside these society and they are open to

the changes of the society more and more rather than the lower or upper rich class people. (Ravi

Bamunusinghe, Today’s middle class: An insight into the contemporary middle class of Sri

Lanka). Therefore most users willing to purchase from super markets rather than from small or

medium sellers. Hence consumers could see the latest substitute products for the traditional

products also they try to buy these products and tools from that kind of modernized places.

“Coir Brooms and Brushes are very low in terms of durability and with the time

cannot be use easily because of removing most of coir from the tool. As well as we

are not interested with coir as a fertilizer because there are many manures are

available at the market specialized for different cultivation.”

Hence the demand for traditional coir products have been declined day by day and producers

have been given up their traditional manufacture since sufficient demand will not be created

for their products from the consumers. It is observed that traditional coir products are vanishing

and variety of substitutes have been replaced by the Global trade and this has been affected to

a severe fall back of the whole coir industry.

3.5 EDB and CDA

“According to the statistics presentation of the authorities, there is an increase in

the exportations of coconut based products. This was recorded as USD 351.92 MN

in year of 2015 while, USD 167.03 MN in year of 2005. Therefore as an average it

is USD 18.489 MN increment per annum for the past 10 years.” (Refer the appendix

01 in page 21)

These authorities concerned on the industry value as a whole but, these authorities did not focus

on the various parties who involve in this industry. Nevertheless, it is inevitable to identify the

disparity of the contribution to above stated value. There are 140,000 people are currently

engaging in this industry, as an average per person income would be the Rs. 30,000 per month

however, according to the survey findings male person earns Rs. 10,000 while female person

earns Rs. 3,000 per month. Hence, SME sector in the industry would not be able to take the

advantages of the international market and the new technologies.



3.6 Super Markets

Generally at present, super markets have every kind of goods under one roof. Hence coir

products and synthetic/plastic products are also could be bought at the super markets.

According to the data gathered from Arpico super market in Kaluthara demanding pattern and

selling conditions could be identified to the coir products and substitutes at the super markets

context.

“I think it is a considerable decrease in demand in coir products because many

substitute products are there and most of the times consumers bought those

products rather than traditional coir products.”

It could be understand, demand for the coir products are decreasing gradually because of the

alternative products in the market and changes in consumer behaviour and the mind-sets in a

dynamic society.

4 DISCUSSION

The industry analysis investigated the effect of globalization to Small and Medium Enterprises

in Sri Lankan coir industry; in the case of Kaluthara district. A qualitative study was performed

among various stakeholders within the coir industry in Kaluthara district and related other

parties outside the coir industry in Kaluthara area. Withal, in depth, semi – structured

interviews were carried out through the pilot survey as primary data gathering method same

time published researched and several archival were used as secondary data gathering and data

driven case study was applied.

The key finding/result that, the SMEs in Kaluthara district coir industry have been marginalized

due to the pressure of the globalization. Various stakeholders in coir fibre industry have been

affected due to the globalization in different manner. Findings of the industry analysis are line

with the existing literature. Further, this analysis reveals how globalization affects to SMEs

sector in Kaluthara coir industry as explained below.

According to the literature globalization; the international integration of product and factor

markets. This process of globalization began long time ago since the international movement

of goods and persons became feasible. (H. N. Thenuwara)

Sri Lanka also has been a trading post since the era of ancient kings. Many foreign traders have

visited Sri Lanka by searching of new goods to exchange with their goods. Greed and superior

war power had made Sri Lanka as a colony of the Europeans during the colonial rea. Country

was integrated with the result of the world.



The economic policy change of 1977 brought in several fundamental changes to the economy.

The policies supporting 'self-sufficiency' were affected due to the liberalisation of the economy.

The consumer and producer choice was for imported consumer goods and production inputs,

thereby causing a heavy damage to domestic industries that were surviving under import

barriers. The two decades since 1977 have sharpened Sri Lanka's export competitiveness.

"Trade liberalisation was culminated in Sri Lanka accepting Article VIII of the IMF in March

1994. Sri Lanka has evidenced sharp increases in export earnings as well as import expenditure

during the past two decades [globalization & Sri Lanka: The Economic impact Dr. H.N.

Thenuwara].

Moreover Kaluthara is a major city where belongs to western province in Sri Lanka. It is very

close to the metropolis in Sri Lanka. Therefore, this Kaluthara district has been got high

pressure of globalization. In Kaluthara district, mainly traditional coir industry is drastically

affected changes in social and economic aspects due to the globalization.

4.1 SMEs

Coir pit owners

Kaluthara is very famous for the tourism industry as well as people who living in coastal areas

of Kaluthara district are used to engage in tourism industry. It is more profitable for them rather

doing any other activities. [Ceylon Today, 2014]. Globalization has resulted in increasing the

diversity and boosting telecom and tourism sector of the world (Nigam, 2009). With the growth

of tourism industry in day by day, value of coconut lands within the coastal belt in Kaluthara

area started to demand dramatically [Ceylon Today, 2014]. Therefore, coconut land owners/pit

owners used rent out or sell their lands for these hotels and restaurants in order to gain higher

benefits than keeping their lands as coir pits. As the time passes, the scope of globalization is

increasing [Globalization & its impacts on world economic development; Muhammad Akram

Ch.] and tourism industry highly interrelated with the growth of globalization.

Labours

Another aspect of Globalization giving rise to concern is that an increasing proportion of the

world labour force is engaged in activities that are linked to international trade and capital

flows. The traditional nature of work might disappear due the rapid advances in technology,

while at the same time creating new and innovate occupations in favour of the highly

specialized professions. (Eddy Lee, Globalization and Employment: Is anxiety justified:

International Labour Review, Vol 135, 1996)



Globalization spread all over the world and reached local communities, where traditional

values used to prevail. These values are changing under its influence and people always try to

match their life style with compared to global forces. Due to the change in the professional

structure, the young generation, already much better educated, joined the service. Undertaking

such work requires different operating characteristics than working in industry. (Urszula

Swadzba: The impact of Globalization on the traditional value system)

In the aspect of labours they do not interested to engage their traditional jobs furthermore.

Especially these kinds of jobs are moving from one generation to generation. But it has been

observed that most of traditional labours who are engaging in the coir industry, always make

their effort in order to provide a proper education background for their children and they do

not like to endow their job to the next generation. Especially women who are working in the

coir mills, do their job in order to get an additional income to cover up education expense of

their families.

Almost all the poor labourers expect to convey a high social recognition and better education

background for their children and they do not wish them to be worked in coir Mills. As well as

a labour will get only Rs.300 per day and it will not be sufficient to fulfil even own day needs.

Therefore they could not be covered their day to day living cost as well.

In most of the cases, labours were recognized as they are having inferior ideas regarding their

own because of their jobs that, they are engaging in.

Coir mills and small coir factories

Globalization is mainly driven by two factors; the liberalization of economics worldwide and

the emergence of new technologies. Where, the latter act both as a driving force on enabling

factor. Globalization is opening up new windows to new opportunities for countries and firms.

But, at the same time it also poses several challenges. While some people have been able to

catch up themselves with the new technologies. Many of others have failed to overcome these

challenges and feel marginalized [globalization of technologies, 2002]. Therefore, these

technology revolution is leading to restructuring of economies and societies worldwide with

the growth of globalization. Therefore, quality of goods and services provided by business, are

highly concerned with those high advanced technologies.



Traditional coir mills and small coir factories are still using less advanced, conventional manual

technologies and less advanced machines and equipment, therefore they are not in line with the

present technological era. But, the large scale enterprises in coir industry has taken advantages

of this technological revolution.

Moreover these traditional coir mills and small factories cannot cope with this technological

changes therefore, they have not been able to fulfil the present market requirements. While

other substitutes and large scale enterprises have got the competitive advantage through this

technology. Due to those technological challenges, small coir factories and coir mills in

Kaluthara area have to give their production to intermediaries with earning low profit margin.

Domestic producers

With the liberalization of the economy in 1977, Sri Lanka entered into the era of globalization.

Because of the export illusion and rush for garment exports and other economic activities; the

traditional industries received a step motherly treatments [globalization of Sri Lanka – Dr. S.

Colombage]. As well as globalization eliminates protection of the domestic producers and

intensifies competition [globalization & Sri Lanka: The Economic impact Dr. H.N.

Thenuwara].

This globalization competition helps countries through the process of “creative destruction”

where the old firms are replaced by new firms as the economy discards old goods and services

in favour of new goods and services [globalization & Sri Lanka: The Economic impact Dr.

H.N. Thenuwara]. However it has created harmful situation to domestic producers in traditional

industries. Domestic producers in Kaluthara district have been doing hereditary activities. They

are still producing very basic products. Therefore, demand for their traditional goods have been

declining drastically. Hence, it has been emphasized that there is a need of focusing on

innovations and proper adaption for new technologies which help them to improve their

competitiveness to meet the challenges of globalization [The status of SMEs in Sri Lanka &

promotion of their innovation output: Dr. Seeth I. Wickramasinghe].

Since, Kaluthara is a congested city which is belong to western province in Sri Lanka, low

availability of raw material have created another barrier to domestic producers in Kaluthara

district. But, it have not been a matter for large scale producers because, they procure their raw

material from North Western province. Moreover, this domestic producers are another category

which is highly affected by the effect of globalization.



4.2 Large scale enterprises

In present large scale companies in the world market, for good or bad, are major influences on

our lives. As such, of the 100 largest economies in the world, 51 are corporations while only

49 are countries, based on a comparison of corporate sales and country GDPs. In this era of

globalization, marginalized people (SMEs) are becoming especially angry at the motives of

large scale corporations, and corporate-led globalization is being met with increasing protest

and resistance.

According to the study findings: Exports have been increased during the past years (Statistics

in EDB and CDA). Coir and coir related products have become the major portion in coconut

based exportation; it has recorded 33% in year of 2014 (Refer appendix 02 in page no 21). In

same time most of foreign buyers demand Sri Lankan coir fibre and related products ((Refer

appendix 03 in page no 22). These things mainly due to their heavy key strategies such as,

innovations, quality aspects and the marketing campaigns since, these were the key attributors

where the industries were expected. In 1977 Sri Lankan foreign exchange restrictions were

drastically modified and the foreign exchange regime liberalized. Implementation of free trade

zones, infrastructure development programs and tariff deduction programs were occurred

during this period. With these opportunities foreign investors and locally established

companies were dominated in their industries and SMEs were marginalized: SMEs only used

to satisfy their basic needs such as raw materials and basic products. In early coir industry

SMEs were the main contributors but the emergence of the large scale enterprises and its

different strategies SMEs had to depend on these companies.

4.3 Consumers

A world integrated through the market should be highly beneficial to the vast majority of the

worlds’ inhabitants. The market is the most powerful Institution for raising living standards

ever invented. The problem today is not that there is too much globalization but that there is

too little. (Wolf, Why Globalization works; Preface xvii)

When it comes to Sri Lanka, Sri Lankan economy was opened to the world during the British

Colonization period…but, with the open economy in 1977, Sri Lankan economy was integrated

with the world by promoting free trade agreements, tariffs and import substitutes based on

industrialization. (Karunathilake. H. N. S, The economy of Sri Lanka)



Accordingly the case has been evaluated with the perceptions of each and every stake holder

clusters related to the coir industry.

Globalization has been provided the flexibility of having many consumption alternatives at

reasonable prices and created a slew of expectations. A positive aspect of globalization is the

increase in variety of goods available to consumers and the decrease in prices. (James Scriven,

The impact of Globalization on the consumer)

Now most of the people prefer globally branded products instead of their local brands. People

buy most of the products which will globally renown either they get more satisfaction from it

or either they get maximum value from it. If we go three or four decades back we could find

people were the extremist type of approaches means they were more patriotic towards their

country, they did not buy foreign products and they always preferred to buy those products that

belong to their mother countries. Therefore the globalization have been changed consumers’

culture and thinking pattern in different way to the past. The perception of the people was very

lean towards the foreign products, but as the globalization increases the buying behaviour of

the people is converting towards global products. (Muhammad Nayab Gul Dahir et. all,

Globalization drivers effect on consumer likeliness around the world)

Accordingly as described above, the global markets and products have been positioned in

consumer minds and they tend to use these products widely. Therefore regarding the coir

industry, consumer preference have been declined towards these basic product items since their

perceptions have been changed by the global products and modern purchasing patterns due to

the globalization.

In most cases; it has been observed that the user preferences have been captured by imported

substitutes for coir such as plastic fibre etc. These substitutes are imported from countries such

as Denmark, France, This international trading also created due to the globalization and its

effects. As a result of the globalization, industrialization also spread in the world because of

this industrialization some companies like Magnum International, Marine Group & Co. try to

produce these coir substitutes by using the new technology.

Globalization and its impacts have been drastically changed the consumers culture, thinking

pattern, purchasing pattern, living standard and the quality of the life. Therefore most of the

coir fibre related producers have faced difficulties in their businesses since the modern society

people use to buy new plastic and synthetic products rather than the traditional coir products.



4.4 Super Markets

Globalization is a shorthand expression for a variety of processes encompassing worldwide

integration of financial systems, trade liberalization, deregulation and market opening, as well

as pressures towards cultural, economic and social homogeneity. (For a critical evaluation of

Globalization as threated in International Business, Clark and Knowles, 2003)

In global context, innovative and quality products are launched by global producers to the local

market at a low prices. With compared to coir products those imported products could be

inexpensive, more durable, more attractive, and having more features than coir products.

Moreover in the global context, these products consist with latest technology hence, at present

most of the consumers buy those synthetic/plastic products rather than traditional coir products.

Therefore there is a considerable decline in demand for coir products. It has directly negatively

affected to the endurance of the SMEs who produced those coir products locally.

5 KEY FINDINGS OF THE ANALYSIS

Through the development of globalization world is getting into on identical culture that is

understand by every nation, we may call it intermixing of culture. People of the world

especially in the rich countries are getting less conscious about their national culture and they

have started to emerge in the world culture. The effect of globalization on SMEs has received

a keen attention.

The key finding/result that, the SMEs in Kaluthara district coir industry have been marginalized

due to the pressure of the globalization. Various stakeholders in coir fibre industry have been

affected due to the globalization in different manner.

SMEs in Kaluthara district are in less ability to survive in an increasingly competitive global

environment and they have less capacity to leverage information as a resources and to benefit

from the value of information.

SMEs in coir industry in Kaluthara area are with less informed on business trends and market,

Business environment, legal and regulatory aspects, business management, consumer needs

and business opportunities, linkage and business partnerships. So, these limited access on

opportunities, current relevant and adequate information is a notable constraint to SMEs in

Kaluthara district. But, those are very vital things to be considered in a global economy.



However large scale production enterprises in coir industry have been able to survive with

rapid growth of globalization, they behave strategically in these dynamic environment.

Globalization would bring about concentration of power in a few global MNCs (in Sri Lanka

has created wide range of alternatives). Also globalization harms the environments because of

massive exploitation of natural resources, most of the large scale producers’ focus in

exportation illusion with globalization.

With the emergence and the spread of the free trade agreements and FDIs in relation to the Sri

Lanka resulted many industrial zones and many manufacturing factories in Sri Lanka.

Therefore, SMEs sector is getting affected by them and now a day many SMEs are getting

failure.

Moreover, due to the globalization, consumers have varieties of increasingly plastic products,

synthetic products and many other alternatives with low price than the traditional products.

Therefore impact of globalization goes beyond providing consumers with choices. Therefore,

consumers’ culture is being flooded with new and different ideas and beliefs with the pressure

of globalization.

Globalization would standardize customer tastes and reduce diversity. That is why they are

now used to buy products from a convenient place without going to various places for the

various needs.

Social and economic transformation has been occurred due to the globalization. Therefore,

behaviour, beliefs, values and norms have been changed with the comprehensive global

society.



SME responses to challenges

Throughout the study we have identified how globalisation directly affected on the SMEs and

with the globalization process how other stakeholders contributed to this situation. We

identified few steps to response to these challenges.

Reunion of co-operatives and bargain for the raw materials collectively.

There were several coir co-operatives in Kaluthara district historically. But, it comes to

the last few years there were no any co-operative for the coir industry in Kaluthara district.

However SMEs in coir industry have managed this situation from this year. Because they

have built a co-operative for the coir industry. The major purpose of this is to bargain to

the raw material as whole. From this they try to get raw material from various areas at a

low prices as the large scale enterprises are doing currently.

Maintaining a better relationship between co-operative and the Industrial Development

Board in Kaluthara district.

Since the SMEs do not have proper technological information and the market information,

they try to obtain these through the IDB in Kaluthara district. This effort has been succeed

since, there were several seminars conducted by the IDB’s officer in order to enhance the

knowledge on the market, the new technology and the new products in the market.



6 CONCLUSION

Globalization has been spread all over the world, by communication and advance technology.

Sri Lankan economy opened up to the Globalization at the colonial period and it circulated the

whole country with the open economy in 1977. Globalization has been generated thousands of

benefits for an economy as well as some warnings for some aspects.

Small and medium scale coir industry in Sri Lanka has been influenced by the globalization

and it is observed that ‘Kaluthara District’ has been victimized by Global forces more and

more. Accordingly carried out this study with the objective of ‘how globalization affect small

and medium scale coir industry in Kaluthara District’. Qualitative study was conducted by

using approximately thirty three participants. Data were gathered by using qualitative

interviews from the purposive and convenient random sample. Accordingly, it can be observed

that the global forces oversee the life style of the people, decision making pattern of the

consumer, employment etc.

Therefore small and medium scale enterprises of coir industry in Kaluthara have been

marginalized by the global forces while the large scale is obtaining the gain through advance

technology. But this marginalization will be influenced to the large scale in the long time since

they are the essence of the coir industry in Kaluthara District. It can be concluded that the small

and medium scale coir producers of Kaluthara District have been influenced by the global

forces and generated an enormous threat to the traditional coir industry.



7 APPENDIX:

Appendix 01 – Export performance - Coconut sector - 2005 - 2015 / September

Source: Website of Export Development Authority

Appendix 02: Composition of exports coconut sector - (in US$ million) 2014


50%

33%

17%

C o mp o s i t io n o f ex p o r t s co co n u t s ec t o r - ( i n U S $

mi l l i o n ) 2 0 1 4

Coconut Kernel Products

Coconut Fibre Products

Coconut Shell Products and

others

16

7.0

3

18

6.7

5

22

0.8

2

26

2.5

8

26

9.7

8

27

7.0

2

42

2.9

1

36

0.5

1

36

0.1

4

53

7.5

2

35

1.9

2

0

100

200

300

400

500

600

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Val

ue

in U

S$

Mil

lio

n

Export performance - Coconut sector - 2005 - 2015 /

september

Export performance - Coconnut sector - 2005 - 2015 / september



Appendix 03: Major Markets - Coconut Sector - 2014


0

10

20

30

40

50

60

70

80

90

100

1

Major Markets - Coconut Sector - 2014

China Germany United Kingdom

Mnetherlands Japan Pakistan

Canada Australia Iran (Islamic Republic of)



Appendix 04: Sample of the interviewees in the study

Table 1: Details of the participants.

Type of stake holder (category) Age Gender Experience

SME sector

Owner of a coir mill 60 years Male Full time – 34 years

Owner of a coir pit 57 years Male Full time – 23 years

Domestic producer 1 48 years Male Full time – 15 years

Domestic producer 2 52 years Male Full time – 18 years

Labour 1 (female) 41 years Part time

Labour 2 (female) 35 years Part time

Labour 3 (male) 26 years Male Full time – 5 months

Labour 4 (male) 49 years Male Full time – 20 years

Small domestic seller 44 years Male Full time – 11 years

Kaluthara area coordinator from IDB. 45 years Male Full time – 8 years

Consumers

20 consumers in western province Various Various

Large scale sector

Wasantha Kalyana (Deputy General

Manager - Hayleys coir fibre company)

51 years Male Full time – 21 years

Other Authorities

Raveendra Wijesooriya - Industrial

Development Board – Kaluthara

44 years Male Full time – 17 years

Other stakeholders

Synthetic and plastic sellers (Arpico super

centre)

Various Various

Source: Authors



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