Potentials and Challenges of the Internationalization Process of Sri Lankan Cinnamon

Abstract

Cinnamon is a renowned export commodity in Sri Lanka from the colonial time. The glory and the demand for Ceylon cinnamon is continuing with a contribution of 85% to the global market. Despite the spices exports declined by 11.3% in year 2018, demand for cinnamon is still growing yet reported as lagging behind in respect to the world demand. Thus, the market share at the international market is gradually dwindling. Hence, this study tried to unravel the strategies adopted by existing cinnamon exporters in internationalization, especially focusing on potentials and challenges. Data were gathered through a mixed method approach by administering a questionnaire (n=15) and in-depth interviews (n=5) with cinnamon exporters in Matara, Galle and Colombo districts employing convenient sampling technique. Data were analyzed using descriptive statistics and Wilcoxon Signed Rank test. Results revealed that most of the exporters entered the international market through direct exporting (67%) via contacts. Availability of market information (W=3.118, p=.002), branded products (W=2.664, p=.008), managerial motivation (W=2.439, p=.015) and lucrative nature of the business (W=2.0, p=.046) were the significant proactive motivating factors towards internationalization. On the other hand, consumer feedback (W=3.326, p=.001), order inquiries from foreign customers (W=3.159, p=.002), digital media (W=3.085, p=.002), company recognition (W=2.680, p=.007) and rivalry (W=2.432, p=.015) are also significant reactive reasons for the sustenance in the international market. Lack of technology (W=2.529, p=.011), insufficient information about overseas market (W=2.245, p=.025) and smuggled low quality products (W=2.820, p=.028) were highlighted as significant constraints for the industry expansion. These barriers have hindered the competitive advantage in the cinnamon market. Therefore, proper branding mechanisms (W=2.951, p=.003),value additions to exports (W=2.657, p=.008), effective customer service (W=2.257, p=.024), ecommerce platforms (W=2.058, p=.040), hygienic packaging (W=3.564,p<.001), standard labeling (W=3.393, p=.001) and quality standards (W=3.434, p=.001) are suggested as significant crucial factors to capture the international market. In fact, the study suggested to establish business incubators for addressing these issues and challenges while encouraging new cinnamon exporters to explore the potentials of the industry at the international market.