India's Cup of Tea

TABLE OF CONTENTS Page
Executive summary .................................................................................................3
Background .............................................................................................................4
Analysis ...................................................................................................................5
PESTEL analysis………………………,………………………………………..5
a. Political factors……………………………………………………5
b. Economic factors…………………………………………………6
c. Social factors……………………………………………………...6
d. Technological factors…………………………………………….6
e. Environmental factors………………………………………...….7
f. Legal factors…………………………………………………...….7
Porter’s five forces analysis…………………………………………………..…7
1. Competition from substitutes………………………………………..7
2. Threat of entry………………………………………………………...7
3. Rivalry between established competitors…………………………..7
4. Bargaining power of customers……………………………………..8
5. Bargaining power of suppliers……………………………………....8
Summary ..................................................................................................................9
Recomendation.........................................................................................................9
Reference................................................................................................................10

EXECUTIVE SUMMARY
Tea is a beverage that is enjoyed by many people around the world and has major production in four countries being China, Kenya, Sri Lanka and India. India is the world’s fourth largest producer of tea. The purpose of this report is to analyses the external Indian tea industry. The analysis is carried out by considering the PESTEL analysis tool to understand the macro environment in addition to PORTERS five forces analysis tool to explore the micro environment surrounding the tea industry. Furthermore, the report concludes with a recommendation to improve production of the Indian tea industry thus ensuring its growth and survival of the industry.

BACKGROUND
India is the world’s largest producer, consumer and exporter of tea. In 1823 tea plants were discovered in India’s north-eastern region in the state of Assam. Fifteen years later the first Indian tea from Assam was exported to Britain in 1838. India ranks with the world’s top four exporter of teas and has complete control over the Darjeeling and Assam orthodox teas Grant, Butler, Orr, and Murray (2014). There are three types of tea which depend on the fermentation that the tea has gone through. Unfermented tea is known as green tea and is the healthiest option of the three. Oolong tea is partially fermented. Lastly there is black tea which is fermented. All types of tea come from the same green plant known as the camellia sinensis.
In 1954 the Indian government created the tea board to regulate the tea industry since it played such a crucial role to the economy. The board offers various incentives to protect tea workers such as welfare arrangements. It also assists with marketing, research and development.
Interestingly, India is the world’s largest consumer of tea, consuming 25 percent of all global production, the second largest producer of tea accounting for 30 percent of all global tea production and the fourth largest exporter of tea.
India’s tea industry incurs higher costs due to its implementation of social responsibility measures. The plantation labor act, 1951 states; that any tea grower who employs more than 15 workers or owns a plantation greater than 5 acres must provide a range of benefits to workers; with some tea growers offering even more incentives to encourage workers to remain working on the tea plantations instead of seeking work elsewhere Grant et al. (2014).
India has approximately 160,000 small growers who account for 26 percent of India’s tea production. Such proliferation of small growers led