International Business Ornamental Fish Industry in Sri Lanka

Acknowledgement
We would like to thank our lecturer Ms. Manjula Gunawardana who encouraged us to do this report. It gave us a broad understanding of the International Business module. Our appreciation extends to officials at Customs, Export Development Board, and Fisheries Department who gave us enormous knowledge and statistics to show us the industrial performances of the ornamental fish industry. Further, Mr. Wijayapura the owner of Aqua Nusuries and Mr. Perera of Lanka Ornamental Fish Export (PVT) Ltd. For giving us a broad overview on the suppliers (exporters) side of the industry. A special appreciation goes to Ms. Manjula and Mr. Boyagoda for helping us find relevant contacts. Without the knowledge and the understanding given to us by the above mentioned individuals this report would not be a success. Our gratitude is further extends to our parents, friends, and family for helping enormously in making the report a success.

Executive Summary
This report is an analysis of a potential market in the international arena. The first part of the report discuss about the Sri Lankan economy and the ornamental fish industry in Sri Lanka together with the world ornamental fish industry. Also a detailed analysis is provided on the report mainly discussing the Challengers, Barriers and risks in the domestic industry, Special Characteristics and trade terms of the industry, Import and export policies implemented by the Sri Lanka Government. We have also provided a country analysis for growth prospects, possible modes of entry to the foreign market with theories such as the porters 5 forces and the diamond theory together with the SWOT analysis. Finally, the report contains with a proposed international business strategy outline in order to avoid he challengers, risks and barriers in the international arena.

Table of Contents
Acknowledgement..i Executive Summary...ii 01.Outlook of the Sri Lankan Economy ........................................................................ 4 02.Ornamental fish industry of Sri Lanka...................................................................... 5 03. World Ornamental fish industry .............................................................................. 7 04. Challenges, barriers and risks in the domestic industry........................................... 9 05. Special Characteristics in the Ornamental Fish Industry ....................................... 12 5.1 Trade terms of the industry ................................................................................ 13 06. Export and import policies implemented by the Sri Lankan government ............. 18 07. Country analysis..................................................................................................... 19 7.1 Overview of the United States (US) performance ............................................. 19 7.2 United States Ornamental fish industry ............................................................. 22 7.3 Ornamental fish structure and value chain......................................................... 23 7.4 Performance of the US ornamental fish industry............................................... 24 7.4.1 Porters Five Forces ..................................................................................... 25 7.4.2 Diamond theory........................................................................................... 25 7.4.3 PESTEL analysis ........................................................................................ 25 7.5 Growth Prospects ............................................................................................... 25 08. SWOT Analysis of the Ornamental fish industry .................................................. 14 8.1 Ornamental fish Industry - Porters 5 Forces ..................................................... 16 09. Possible modes of entry to the market ................................................................... 27 10. International Business Strategy.............................................................................. 29 10.1 Ornamental fish Industry -Diamond Theory.................................................... 30 10.2 Challenges, risks and barriers of the International arena ................................. 32 11. Conclusion ............................................................................................................. 33 12. Recommendations .................................................................................................. 35 References .................................................................................................................... 37 Appendix ...................................................................................................................... 39

01. Outlook of the Sri Lankan Economy

As we talk about the Sri Lankan economy, it has shown a major improvement since the finishing of the civil war between the Tamil tigers and the Sri Lankan government which went on for 26 years and the war was ended in 2009 under the president Mr. Mahinda Rajapaksha. Talking about the economic environment in Sri Lanka is mainly about factors such as inflation, income, interest rates, wealth, employment and productivity. These factors will create a buying behaviour of the customers and or organizations. The rapid economic growth and development is basically seen through the infrastructure development, such as Southern Expressway, Katunayaka Colombo expressway, etc. also many other investment projects are going on which will help the country to increase the countries growth (The World, 2011). If we look in to the Sri Lankan Central Bank Reports the country have shown a slope on its growth when compared to 2010 and 2011. When we look at the gross domestic production (GDP) of Sri Lanka as for 2013, the central bank show a 7.80% growth rate. Other economic factors are given below, Inflation Interest rates Unemployment Exports Imports : - 4.70% as per 2013.12.31 : - 6.50% as per 2013 : - 3.80% as per 2013 : - 1031.80 USD million as per 2013 : - 1647.50 USD million as per 2013

One of the main important economic factor in a country is the balance of trade. A trade balance can be defined as the international trading point of a nations in products. If the trading countries exports are higher than imports there will be a trade surplus which means to say it a favourable balance of change. Sri Lanka as for November 2013 is holding a deficit of USD 615.70 million as for the Central Bank of Sri Lankan. Sri Lanka has being maintain a negative average of trade balance from 2003 to 2013 which amount to -926.48 million. Having a deficit in the trade balance means there are more imports to Sri Lanka than exports which is a downfall in the countrys economy. Further more information and graphs are shown in annexure 01

02. Ornamental fish industry of Sri Lanka

The industry has a proud history of sixty years, and was started in 1952. The country exports marine, fresh water, brackish water fish species and marine invertebrates. Sri Lankan exporters gain a competitive advantage over its competitors due to the fact that the country has fish which are bio-diversified, hence the industry is sustainable. The initial exporter of the industry was John Keels. However, with new competitors entering industry the company does not export any longer. Freshwater aquarium fish include the more colourful and additionally striking types of guppies, swordtails, platys thorns tetras, angels, gourami's, catfishes and so on. Within these freshwater species exported from Sri Lanka in the vicinity of 60-70% comprises of extremely popular extravagant guppies of which the high distinguished is there in the global market because of the quality and high diversity of the specific fish species when contrasted with other competitive countries. Sri Lanka has two monsoons, northeast (December to March) and southwest (June to October) monsoons. Since the country has a tropical weather the divers can catch fish alternatively in different parts of the country. When fish are exported to indicate the fish are healthy, a certificate issued by the Department of Animal Quarantine on health goes with every single shipment. There are around the range of 40 standard export organizations in Sri Lanka. Significant purchasers for the Sri Lankan ornamental fish are USA, Japan and the European Union. Ornamental fish keeping at homes and offices is a standout amongst the most wellknown side interests in the world. Some individuals accept that taking a look at these fish moving in tanks relaxes the mind. Indeed researchers accept that taking a look at the fish gives anxiety decreases. Helpful atmosphere and accessibility of coral reefs, sand bars, lagoons around Sri Lanka and the island comprise of inland water, for example, streams, waterways and reservoirs help for reproducing of marine, brackish water and freshwater species in Sri Lanka. This is the reason for which the country's ornamental fish are exported all around the world.

The ornamental fish export market is declining due high cost of production, long term strategies are not effective, non-preference in Western countries and economic crisis in the industry. Under this circumstance, the export of fresh and marine water ornamental fish has fundamentally upheld exports aside from in 2012 and now is indicating almost a 20% expansion in exports in 2013 up to August contrasted with the past year. (Source: Premadasa, 2013) The total contribution from exports are 0.4% to the economy, it carries a continuous share to economic growth.
The Fishery Department has categorised into the following categories due to high varieties of species in the Ornamental fish industry. Statistical data are depicted in Annexures 02.

There are four categories of graphs that are available in the Customs statistics they are Ornamental live fish restricted for export under the Act, Non Restricted Other Live
Ornamental Fish, Non Restricted Live Ornamental Fish, and other Varieties.

03. World Ornamental fish industry

The industry is a far reaching and global element of international trade, fisheries, aquaculture and development. Ornamental fish sector and the influence on people and aquatic groups are known wrongly and unappreciated. Statistics show that world ornamental fish worth in 2003 in ornamental fish industry was US $3 Billion, with exports worth at US$200 million. (Source: FAO 2005). The largest exporter being Singapore with 25% of market shares. When comparing from 1985 the international trade in exports of ornamental fish has grown at an average rate of 14% per year (Source: FAO 2005). Many developing countries own 65% of the total ornamental fish exports. Ornamental fish industry can contribute to the economic growth of a country, further developing the aquatic resources, however, undergoing constant challengers from external and internal factors. The leading importer is US having 25% of the market share. To uniform or decrease in production from several people catching fish, individuals are searching for different methods to connect with aquatic biodiversity. One helpful alternative is to harvest without destroying the environment and culture of ornamental fish. In developing nations the harvest of fresh and marine ornamental fish provides income in zones where less number of employments exists. The world demands for ornamental fish are of farmed product (90%) and wild collected product (10%). Frequently, freshwater fish gives 90% of the total output and marine contribute 10% in value. Although the marine fish output is mostly wild caught, freshwater fish yield is primarily farmed. (Source: Daily News, 2005) Ornamental fish industry face many challengers such as need for conservation and sustainability, the benefits gained should be equitable, issues triggered by habitats, catching fish in a harmful manner, different trade patterns and discovering exotic species. Many freshwater ornamental fish are bred confined when compared with about 25 of the total 8,000 in the case of marine fish. But, alternatives are done to breed and domesticate various high value marine fish. Several NGO related to the industry educates importers, buyers and retailers on how to handle the ornamental fish to sustain the environment.

Further the industry uses dry corals to decorate and as living items for tanks. Under the approval of Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) due to the reason that hard coral will not be sold to buyers. Hence this is an overview of the world ornamental fish industry.

04. Challenges, barriers and risks in the domestic industry

Ornamental industry in Sri Lanka is one of the developing industry. Since the country is situated in a bio-diversified location, it has so many advantages towards the industry. However, there are several challenges which the industry has to face due to the vulnerability of the industry. Following are some of the challenges faced by this industry. 1. Quality of supply and holding facility ornamental fish industry is developing

at a lower rate. Reason for this low development rate is the lack of knowledge regarding the quality and lack of holding facility. The quality of fish depends on how well the industry is able to meet the expectations of the world market. In order to compete with the world market, industry should be in a position to meet all the international standards. Improving the quality of the supply is one of the most important issues when it comes to ornamental fish industry which also depends on the overall success of the industry. Government is encouraging new businesses to expert ornamental fishes so that they can increase their foreign earnings, however if the new businesses doesnt have a proper procedure, facilities and expertise about the industry and also if it doesnt agree with the expectations of the world market, it will not only reflect a bad reputation on the country but also destroy the market. So it is important to maintain a good flow in order to sustain in the market. 2. Packing method - This is another area which is still in the process of developing.

The current packing methods which are in use are underprivileged compared to the packing methods in foreign countries. The only way to overcome this challenge is to do some research in packing methods to determine a proper way to transport the fish in a dormant level inside the bag until they reach the desired destination. So that it has a low level of stress which is healthy for the fishes and also it will be easy for the customers as well to dispose the fishes in a healthy manner. The reason for fishes to get diseased easily once they get to the customer is because of the health issue. It totally depends on the method that they use to carry. 3. High competition European market is the direct competition for Sri Lankan

ornamental fishery industry, other than that there are several competitors such as the US and Japan which are also fairly large compared to Sri Lanka and also they have a lot of competitive advantages such as using advanced technology to hold fish and taking

them to export. Due to these reasons Sri Lanka is facing so many problem to export ornamental fishes to other countries like South America which has a large market for ornamental fishes. There are several nations which has restrictions to import ornamental fish, countries such as China, India and so on. These countries wants to encourage their domestic market in order to appreciate domestic industry they have put trade barriers to export fishes into their country. 4. Establishing a market In Sri Lanka there are more breeders than exporters. In

order to become an exporter you need to have some specific standards such as having more than two varieties, buyer normally prefers an exporter who has more than two varieties ( 30 or more) so in order to become an exporter you need to at least have around thirty fish varieties, if not you cant survive in the market. There were several exporters who only exported guppies, which is now reducing gradually since buyers prefer to buy guppies from an exporter who has other varieties of fishes including guppies. 5. Lack of exporters government wanted to encourage this industry since this is

one of those which havent got affected even during the period of economic recession. In order to encourage the industry they always give certain subsidiary to the new comers, but due to some political issue the number of breeders got increased massively than the exporters. Risks 1. Vulnerability live fishes are easy to capture, breeding them and maintaining

them is the hardest, but also very risky. There are so many factors to be considered in order to make sure that the fish survives. Sudden changes in the temperature or in illumination will affect the fish. According to Mr. Sathyendra Wijayapura who was the former President of Association of Live Tropical Fish Exporters Sri Lanka, fishes which are captured in the deep sea are used to the dark environment so when they are taken up to the top, sudden change in the environment and in the illumination will affect them, due to this there is a high probability for the fish to be weak or to be dead. So they should be very careful when they bring them back to shore. Sometimes even when they take all the precaution there are chances where fish dies.

2.

Payments this is another reason for the industry to be at risk. They have a

delayed payment system for all the exports so they will receive money only after the shipments reach the customer. Not all the exported fish is alive till they reach the customers, there are situations where some fishes which are weak when they are exported and as soon as they reach the customer they might end up dead, customers will not pay the exporters for a dead fish. So this will be a huge loss for them. And there is no proper insurance scheme for this business which will cover the loss. 3. Not entering in to contract as mentioned above exporters dont get in to

contracts as it is in other businesses, buyer contacts their supplier mainly because of their good name in the business, if not for that there wont be any contract between the supplier and the buyer. Also suppliers never prefer to get in to contracts with importers because they dont like to depend on the exporters from another country. 4. Sudden changes in the market most of the domestic exporters dont have much

varieties in fish. There are situation where the buyers suddenly change their orders due to the change in customers expectation. This will affect the exporters as a whole specially the Sri Lankan exporters, as there are only few exporters who do the business in a large scale margin, all the other exporters are small scale so when these types of sudden changes occur they will get affect.

05. Special Characteristics in the Ornamental Fish Industry

When talking about the ornamental fish industry the industry contains 4 types such as, Marine fish, Freshwater fish, Brackish water fish and Marian invertebrates. All the above mentioned industries are self-regulated industries by the industry owners. There are no parties intervening this process. In any industry in the world there are rules and regulation and legal issues implemented by organizations, countries and the local authority. When it comes to exporting ornamental fish the industry owns have to face many legal and rules and regulations. Sri Lanka is most popular for exporting Guppies as well as other fish, the fisheries department of Sri Lanka has announced in the gusset, types of fish can be exported and types of fish which cannot be exported. Most of the endangered species are restricted from the exporting without special permission and some are prohibited due to legal reasons. More than the exporting countries there are tight rules and regulations form importing countries and many organizations intervene the business with many rules, regulations and standards. One of the main areas which imports look in to is the quarantine procedures taken by the exports. Especially countries such as Australia, United Kingdom look in to these standards very carefully. Quarantine procedures are used for separation and restriction of well fish who man be exposed to a communicable disease if the fish becomes sick. Industries which is certified by the quarantine department will be allowed to export fish without any issue. Company also should have a good alliance with the OIC. This is an institute which will monitor quarantine of the fish which is ready to export. In the Sri Lankan ornamental fish industry the industry norms is to play the supplier after reserving the shipment. When Sri Lanka exports fish, the payment is reserved only after the customer who ordered get the product. Due to this reason the industry is mostly based on 100% capital. If fish die or if fish was not up to standard the buyer will not pay for the damage. Some fish exporters get an advance payment depending on the capability and confidence the buyer has towards the business goodwill and its name.

5.1 Trade terms of the industry

In any industry there are trade terms, they can be defined as the understanding among the buyer and seller with the discounts, payment period, delivery, and return terms, medium of transaction and trade documents (business dictionary, 2014). When talking about ornamental fish industry, the industry always prefer or would like direct payments. These payments are most likely reserved by telegraphic transfers because of the convenience. One of the main important things in this industry is that the money for the trade should be advanced before the trade occurs. Transportation of the fish is mainly done though air, because of the low amount of water and less amount of oxygen the fish may die or undergo stress. Most of the time when fish are air freighted the supplies pay air freight for the weight of the water. For a 3 inch fish 1.5L water will be provided. The 1.5L of water will whey almost 1.3Kg and the fish with only way about 50gm. Most of the payment is done for water weight not for the fishers weight. The transported water will be used in small quantities for getting the fish used to the imported countries water. Many discounts are given for the customers who buy more than 100kg of ornamental fish. Fish such as Gappis are given discounts to encourage the buyers to buy more from Sri Lanka.

06. SWOT Analysis of the Ornamental fish industry

Strengths Sri Lanka is a country with different Geographical locations which facilitates the expansion and the sustainability of the Ornamental fish industry. Sri Lanka is also having rich bio diversity and a tropical climate which helps the fish to breed in natural substances. Most of the Expertise such as the exporters of this industry is having a religious background; therefore no harm is done to the fish while respecting all living beings. Present government policies and the government officials prominently supports this industry, therefore it is easy to perform activities among the international arena. Having a set of good expertise such as exporters, diverse, breeders who can go further innovations in the industry. Sri Lanka is known for the finest quality production and has a reputation for its trustworthy exporters in the Ornamental fish industry. To some extend the Sri Lankan exporters of this industry are born with the necessary skills, technology to match with the international standards. Weaknesses There are few of the old colonial days rules which are still followed by the government such as the wild life act which would eliminate certain activities of the ornamental fish industry. E.g.: Export of Endemic breeds is not allowed in Sri Lanka. Some exporters in Sri Lanka do not practice the hygiene facilities to keep the fish safe. No certain criteria for export guidelines are given to the exporters. Facilities of research and development of this industry is poor. Ornamental fish exporters are lack national priority.

Opportunities Most of the exporters of this industry do this as a hobby and hobbies never tend to get fed up, therefore this industry will never die. Mind soothing Industry, therefore the exporters are very dedicative towards what they do Continuous opportunity to explore. Government Policies impure with the exporters. Sri Lankan Exporters have the ability to directly transact with the ornamental fish suppliers without any intermediation of a third party. Threats There are limited sources in obtaining financial assistance because of the risk of the ornamental fish industry. Destruction of the corals by the divers Dynamite fishing and the netting system fishing would disrupt the bottom of the lagoons, therefore the resources will be limited Also Bad fishing habits would disrupt the breeding grounds for the ornamental fish. Since only few airlines provide the facility of exporting the fish there is a need of few more airlines for exporting. High rate of air freights which are caused due to the risk of exporting them would create more expenses for the exporters.

6.1 Ornamental fish Industry - Porters 5 Forces

Bargaining power of customers The power of the buyer is mainly to drive the prices or the quality of the product/service. When we consider the ornamental fish industry of Sri Lanka the fluctuations in the price is certainly high because the suppliers purpose of purchasing is to export. Therefore they purchase in large amount which is sometimes a high proportion of the entire business of the supplier. Situations like this the buyers will keep a profit margin and sell it back to the exporters at a higher price. The quality and the standards of the fish, credit worthiness, prompt payment terms, regular orders(weekly/once in two weeks) are also some other power of the buyer. If the required quality or the standard is not met the buyer will have the right to reject the fish. Bargaining power of suppliers This is the bargaining power of the suppliers In order to change the prices. In the Ornamental fish industry, when there are large numbers of substitute products the suppliers have less bargaining power over the producers. This is due to the competition among the substitute products. High levels of competition among the suppliers act to reduce prices to the producers. On the other hand low concentration of suppliers means there are many suppliers with limited bargaining power while more diverse the distribution channels become the less bargaining power the single distributor will have. Also when the suppliers are reliant on high volumes, they have less bargaining power, because the suppliers can always threaten to cut volumes and hurt the suppliers profits. Experience in the industry, extensive variety to offer, willing to extend long credit period, prompt delivery, Well established facility to cater the orders are few other bargaining power of the suppliers. Threat of entry The main threat of a new entrant to a business is the competition. According to the suppliers of the ornamental fish industry there are many threats of entry. Some of them are the need of high capital requirement in order to compete in the market, weak distribution network of fish would create high expenses to move around and some fish are not delivered to the end customers on time, Advance technology makes it difficult for new competitors to enter into the market because they need to develop those

technologies before competing in the market, Patents that cover certain technologies would make it difficult for new competitors because best business methods of the industry are patented, If the existing competitors have the best geographical locations, new competitors will have a competitive disadvantage, When the barriers of entry to the industry is high it will be difficult for the new entrants to enter in to the industry, Economies of scale would help the producers to produce at a low unit cost but when a new entrant is entered to the market, they will have a higher cost of production due to having a small economy of scale. Also the prices of the fish can be low depending on the method exporting such as FOB (free on board) or C & F (cost and freight). Rivalry In the ornamental fish industry there are about 75 exporters in Sri Lanka. Each of these exporters exports different varieties of ornamental fish. But the competition among the varieties of fish tends to be low which means that fewer firms are competing for the same customers and resources. When industries like these start to grow revenue quickly they are less likely to compete, because the total industry size is also growing. According to the view of the suppliers in this industry it that even though the competition in the industry is low but the exporters compete in terms of the quality and the standard of the product rather than the price. Threat of substitutes Threat of substitutes is across industries. When we consider the ornamental fish industry the main substitute product is the plastic ornamental fish. In other words a limited number of substitutes means that the customers cannot be easily switch to other products of similar prices and still receive the same benefit. Therefore the plastic ornamental fish industry is not a threat for the live ornamental fish industry.

07. Export and import policies implemented by the Sri Lankan government
In order to encourage ornamental industry at the same time to protect the fish, government has implemented a set of policies. Regulations are implemented in the import due to invasive varieties such as Tilapia being introduced to our waters which can become a predator. Following are the regulation which must be cited as Export and Import of Live Fish Regulations. 1. No one is allowed to export these live fishes which are Chaetodontidae,

Pomacanthidae, Labridae, Ephippidae, Haemulidae, Pomacentridae and Scorpaenidae. 2. No one is allowed to export these species of live fishes unless if the person gets

a direct permission from the Director of Fisheries and Aquatic Resource in order to export. Fishes such as Chaetodontide, Cyprinidae, Claridae, Belontidae and

Mastacembelidae. 3. No one is allowed to import any species of live fishes which fall under these

family. Ictaluridae and Characidae. 4. All the applicants in order to get permit under the Regulation 2 should be made

to the director in the form of A (Annexure 1) and with the fee of one thousand rupees. 5. All the permits issued under the Regulation 4 should be in the form of B

(Annexure 2). Unless its revoked earlier it will be valid only for six months from the date of issue and its subjected to the term and conditions specified. 6. Anyone who gets the authority issued by the Director is permitted exports all

the live fish which were imported and which were not included in Regulation 1 and 2. 7. All the applicants made under Regulation shall be in the form of D (Annexure

3) and will be subjected to all the specialized term and conditions. 8. No one is allowed to export or import live egg, roe and spawn of any fish unless

they get the authority permitted by an issue from Director himself. 9. All the application should be made up in the form of E (Annexure 4) if they are

under Regulation 8.

10.

Director has the authority to revoke any application which comes to his table, if

he is not satisfied with applicant or if it has violated any terms and conditions. (Fisheries and Aquatic Resources Act, No. 2, 1996) Health certificate is required by the government which will be issued by the National Plant Quarantine Service (Department of Agriculture) when shipping the product abroad or when it comes into the country. Exporters also need permission from Export Development Board (EDB) in order to enter into the international market.

08. Country analysis

8.1 Overview of the United States (US) performance
The history of US has the heritance to European colonization from 16th to 18th centuries. Colonial economies developed into 13 small and independent farming economies that

joined to form US in 1776. Within 230 years US developed integrated, industrialized economy that is equal to quarter of the world economy. US was able develop because of a large combined market, a supportive political-legal system, vast area to cultivate, many natural resources and entrepreneurial qualities and commitments invested on material and capital. Further technologies and industrial factors effect massively. US faced many difficulties in order to be in the positions they are today. From 1990s till late 2000 began Globalisation and a World Giant. Throughout the 1990s, the national debt expanded by 75%, GDP climbed by 69%, and the stock market system as measured by the S&P 500 developed more than triple. The US economy developed massively during these few years with hardships however in 2008 the country faced a massive recession. This was due to housing bubbles in California and Florida and the fall in prices of housing and the construction industries. Due to this many countries that did business transactions with US collapsed too. In 2009 the US President Barack Obama agreed to a contract with American Recovery and Reinvestment Act of 2009, this helped them to recover from the crisis. The recent United States economic performance from the perspective of Bureau of Economic Analysis (BEA). The Gross Domestic Product (GDP) released in the 3 rd quarter of 2013 shows that a 4.1 percent growth and in the 4 th quarter of 2013 there is 3.2 percent growth rate. This shows that the output produced by labour and property located in US has increased from 3rd quarter to the 4th quarter. (Source: BEA, 2013) The personal income of in December 2013 its 0.0 percent (individual income) and in November 2013 its 0.2 percent (individual income) this shows that the real disposable individual income has decreased. (Source: BEA, 2013) Industry Economic Accounts, when comparing with 2012 the industries that increased the level of GDP in US were finance, insurance, real estate, rental, and leasing. In 2013, total 20 to 22 industry groups lead to 2.8 percent rise in real GDP. (Source: BEA, 2013). International Economic Accounts, the Balance of Payments in US, in the 3 rd quarter of 2013 it was recorded of -$94.8billion and in the 2nd quarter of 2013 it was recorded as -$96.6 billion. The current account deficit decreased by $1.8 billion from third quarter to the fourth. (Source: BEA, 2013) State personal income, shows that personal income growth has decreased to 1.1 percent in the 3 rd quarter 2013, from 1.2 in the second quarter 2013. (Source: BEA, 2013)

US consists of many sectors in the economy, these sectors contribute for more than 67.8% of GDP. In 2007 it was recorded that the service sector contributed toward country nearly 78.5% and the industrial sector contributed about 20.5% to GDP. (Source: Timimi, 2011) Few sectors are transportation, insurance, retail trade, manufacturing, utilities, education, food and accommodation, etc. The economic drivers in the US are mainly exports done by small businesses. The Commerce Department supports small businesses to export goods to other markets. As a result the economy has grown by 40% over the past four years. Exports have reduced unemployment in the US. Additionally, innovation has led the US economy by creating many products to the world market. Apple products were first invented by Americans and currently its the brand leader in mobiles all around the world. US have many service industries that contribute to the economy. Education is one of the best services that are provided. US has many natural resources such as oil, mine etc. these are key drivers to the US economy. Macroeconomic policies US economy follows two macroeconomic policies they are Monetary and fiscal policies. The Federal Reserve System is controlling the monetary policy. The tools used to control the monetary policy are the Interest Rates and Money Supply. US mostly use interest rates to stabilise the economy. The Fiscal policy tools used to control the economy are government spending and taxation. When US faced recession, to overcome the decline in the economy government spending was increased to help company and people recover from the loss.

8.2 United States Ornamental fish industry

Ornamental fish industry is most popular in the State of Florida, recording 95% of all ornamental produce in United States. The US ornamental fish industry consists of 200 producers who altogether raise more 800 varieties of fishes. In 2003 Florida was able to raise around US$47.2 million from ornamental fish. (Source: University of Florida, 2010). Floridas ornamental fish industry mainly focuses on Hillsborough, Polk, and

Miami-Dade countries with extra farms all around the southern part of the state. Since Florida has a warm weather and is closer to the airport it has an advantage in breeding the fish. Most of the farms are situated in Florida, as a result suppliers buy each others fish for exporting purposes. Many farmers use earthen pond culture but, Miami-Dade famers practice above-ground tanks and small ponds dug into the coral rock bed. Additionally a general technic is used to recirculate the system with new technology to increase production and decrease the water usage. Ornamental fish industry in US jointly breeds hundreds of different species and different kind of fish from different geographic regions. Some farmers in Florida are only specialised in breeding one kind of fish and some breed wide range of fishes. Fish can be categorised as egg-laying species and live-bearing species. There are different technics in breeding these fish. USA imports ornamental fish from all around the world, as cost of maintaining, breeding and climatic changes hinder the process, there by country prefers to import fish. Since US is geographically large the demand for the ornamental fish keep rising. Neighbouring countries Mexico and Canada, too export to US but they cannot cope to the demand. Hence the country imports from Singapore, Malaysia, Thailand, Philippines, Vietnam, China, Japan and Sri Lanka. In 2008, the country faced a massive recession causing a huge downturn to all the industries. However, recession did not affect the ornamental fish industry as Americans believe that looking at fish tanks helps them to reduce mental stress.

8.3 Ornamental fish structure and value chain

Ocean

Collectors

Middleman

Wholesale Exporters

Wholesale imports Livestock Package in US Aquaculture

Retails

Online retails

Retails

Consumer

Consumer

Consumer

(Source: Wijayapura, 2014)

8.4 Performance of the US ornamental fish industry

United States considers ornamental fish industry to be a cash cow to the country in the aquaculture economy. The largest importer in ornamental fish is US with 25% market share. Most ornamental fish are provided by Southeast Asia accounting to about 75% freshwater fish. The country imports approximately 1500 different species annually. US mostly demand for Guppy, Neon Tetra, Platy, Siamese fighting fish, Goldfish, Chinese Algae-eater, Short finned Molly, Cardinal Tetra, Glassfish, Tiger Barb. Americans mostly prefer Guppy fish as its mostly famous in the aquariums The imports recorded in US for ornamental fish was approximately 201 million fish amounting to $44.7 million, imported. The Los Angeles port handles 39% of all aquaculture trade, Miami 22%, New York 16%, Tampa 6% and Honolulu 6%. Fresh water is amounted to about 96% of the total capacity and 80% of imports. (Source: Wiley Online Library, 2007) Florida is the only State that produces ornamental fish to US. However, due to high cost of production the price per fish tends to increase, leading to decrease in demand. Further the fluctuating weather makes it hard for the farmers to increase output. As a result the country imports ornamental fish to cope with the demand. When considering the prices customers prefer imported fish as they are cheaper when comparing with the US ornamental fish. Hence this is the performance of the US ornamental fish industry.

8.4.1 Porters Five Forces This theory was introduced by Michael Porter, it describes the outline for an industry and the analysis. The theory further addresses five forces that determine the competitiveness in an industry and its attractiveness. For further information refer Annexure 03. 8.4.2 Diamond theory This model describes the competitive advantage that one country has against another. This competitiveness is shown through industries. When Sri Lanka is entering the US they need to analyse the competitiveness. More details are provide in Annexure 05. 8.4.3 PESTEL analysis This analysis helps to understand the external factors that affect the industry. The model looks in to political, economic, sociological, technological, environmental and legal aspect of the ornamental fish industry. To understand the information refer to annexure 06.

8.5 Growth Prospects

The growth prospects when entering the US market is, the country is geographically large hence the demand for ornamental fish keeps increasing leading high levels of importers entering to the country. The international suppliers do not fear about the cash payments getting delayed as the country is well financed. Further the US buyers ordering patterns are in large quantities, resulting in higher profits for the international suppliers. Hence entering to US will gain the local suppliers high revenue. In 2008, US faced a recession making many industries collapse. This caused massive amount of stress to people. However, ornamental fish industry didnt face a decline as Americans consider looking at fish tanks relaxes the mind and reduces mental stress. Therefore the demand for ornamental fish increased rapidly. Thus, a major reason for Sri Lanka to enter the US market is the demand for the fish will continue to remain high. The major producers of ornamental fish in the US are Florida; as the States climate fluctuates constantly, the farmers find it hard to reap the production continuously. Hence the country is not self-sufficient with the ornamental fish production. Therefore

Sri Lankan exporters can enter the US market as Sri Lanka has a tropical climate and can breed fish sufficient for US customers. The cost of producing ornamental fish in the US is elevating as the resources needed to produce are expensive, specially the labour costs. Due to this the prices of ornamental fish produced in US are rising. In turn the prices of imported ornamental fish are decreasing making the demand for imported fish rise. In advance the largest importer in the world for ornamental fish is US having 25% of market share; making Sri Lanka export to the largest buyer will prosper the local ornamental fish companies. Americans have a preference towards fish which are rare, vibrant, eye catching and fish that have several other sophisticated qualities. Since Sri Lanka is surrounded by the sea and is tropical, divers catch different types of rare fish. Henceforth, when local fish are sent to US it will be attractive in the US market and the demand for Sri Lankan fish will rise enabling the suppliers to receive large profits. Therefore these are the growth prospective for the Sri Lankan firms when entering the US ornamental industry.

09. Possible modes of entry to the market

In order to gain entry into an international market companies should be able to select the best possible mode of entry. There are several modes of entry which will get into the international markets such as Exporting, Franchising, Joint venture, Acquisitions and Mergers, Licensing and International Agents (www.marketingteacher.com). Licensing In this mode of entry a business leases the right to use the intellectual property (copy right, technology and brand name) of a domestic country to a foreign country. Domestic business will be charging a loyalty fee for that particular business in a foreign country to use their intellectual right. In this domestic business can enjoy the income without working much hard (www.scribd.com). International Agent They are the people who represent the local business in other nations and market them. This mode of entry is one of the riskiest method where the agent can destroy the business by disclosing all the information to the competitor or by performing in a way which will destroy the reputation of the local business (www.marketingteacher.com). Franchising This mode of entry is a specialized form of licensing where a franchisor from a local business lease his trademark to another business (franchisee) for a loyalty fee. In franchising, franchisor will assist the business in continues basis by providing guidelines. In some cases, franchisor provides all the supplies. Joint venture In this mode, two or more companies get together to start up a business entity. Both companies will be sharing the benefits gained from the business. However there are some negative aspects as well due to the involvement of tow companies. Acquisition and Mergers Permanent and voluntary combination of business is called as acquisition and mergers. In this all the operation will be integrated with those of another. Once it is integrated it will be named under one common name with new amendments. Exporting Basically the product you produced and stored will be sent to a country for the purpose sales. This is one of the easiest mode to enter into an international market. Exporting can be done either directly or indirectly. Direct exporting is where the

business itself will send the product directly to the importer whereas in indirect exporting, there will be a third party to coordinate between exporter and importer. Out of all these entry modes, we have identified that ornamental fish industry only uses exporting mode of entry in order to get into the international market. As mentioned before it is the easiest mode of entry to enter into the international market with less risk. Ornamental fish business are doing both direct and indirect exporting but mainly direct where the exporter himself will contact the buyer and sell the fish to him. Unlike other businesses, in this industry fishes are not re-exported, due to this issue imports normally dont buy fish from an exporter. According to exporter, America has a huge market for ornamental fish because of that Sri Lanka primarily targets the US market and then Japan. Theres a special demand for Guppy fish among all the nations especially in US, it can be found easily in SL. Exporting is an easy mode of entry for all the new business to involve in the international market. New exporters can learn about the international market through various sources such as Internet, Magazines and also through international exhibition where they can gain more knowledge about the industry. Visit the international exhibitions Each year OFI (Ornamental Fish International) conducts an international exhibition, where you can get to know about the industry very well. It is easy for new exporter to visit this exhibition and get an idea about the industry where he/she can identify the area which will help them to improve. Internet - this is one of the easiest way where you can get all the information about the industry very well. Now a days you can even find the weaknesses of your competitors one you go to their website. Cost wise, no need to spend a single rupee in order to get all the information about the industry. Magazines there are several magazines where you can get all the information about the industry which is less costly compare to visiting an international exhibition. Magazines such as Aquarium Fish International, International Transport of Live Fish in Ornamental Aquatic Industry and Tropical fish. These magazines include the types of fishes each country exports which will help you to identify the marker which has not been taped yet.

10. International Business Strategy

International business strategy is the strategy through which the firm sells its products/services in different countries. Majority of the businesses now a day transact with the international arena, at least with one international partner around the world. When engaging with the international trade it is a must to study the culture, business practices, political conditions, norms and beliefs, legal systems and other complications of the country which you perform transactions in order to achieve Excellency in business. In the international arena there are many methods in which you could perform business. For an industry like ornamental fish, the best is exporting and getting collaborating with legal institutes or legal bodies. USA, is the destination in which large amount of ornamental fish is been exported due to the reasons mentioned in the previous topics. In which U.S.A is considered as the largest buyer of Ornamental fish. As mentioned in the country analysis the main risks involved in doing business with USA are the risk involved in credit terms. Since there is very less amount of financial assistance given to the exporters in Sri Lanka, there is also risk of settling the payments on time, risk of the proper hygiene of the fish, risk of changes in the weather and delay in the fish to arrive to the destination on time. In order to overcome the above risks and challenges the international strategy could be to collaborate with a legal institution such as working with the advisory committee of the EDB (Export Development Board) in order to get a proper content procedure which would help to minimize the risks of the exporters. The distribution of the ornamental fish also takes a vital place in the exporting procedure. The only method exporting the ornamental fish is the airway. In distributing the fish the exporter itself should be able to do the packaging. So far the current method of packaging is not up to the best quality therefore as a strategy exporters could be to collaborate with the Sri Lankan Export Development board together with the tourism protection board in order to obtain knowledge and advice regarding packaging and industry. Also to expand the assortment of the ornamental fish which are not available in Sri Lanka, the individual exporters and import fish as a strategy and then re-export it to

different destinations while receiving the product at the best price by giving them the indication of the prices that are offered by the other countries. Finally In order to have a strong relationship between the exporter and the customer, as a strategy the exporters could participate in international exhibitions and international trade fairs.

10.1 Ornamental fish Industry -Diamond Theory

Factor conditions Factor conditions are the factors of production needed in the ornamental fish industry specially when exporting them to different destinations. In Sri Lanka the availability of the sea and fresh water is very high as we have very rich geographical locations. Therefore sea and fresh water are a must to be around the ornamental fish farms. When storing the fish, it should be spacious and the tanks should contain different ornaments such as corals, pipes etc. as a need of the fish. Also Fish who flights with different other species should be kept separately. Fish food is another important factor in maintaining the required health of fish and to avoid the aquatic diseases of fish. Demand conditions If a product is to create a demand internationally, first the product should have a demand in the native country. In Sri Lanka the ornamental fish is having a relatively high demand in the domestic market as most of the citizens here believe that ornamental fish is a mind smoothing activity where as some grow them as a hobby. When we consider the International market demand for ornamental fish it is also relatively high since the mail exporting destinations are U.S.A and Europe, and there was not much of an effect in the export of ornamental fish during the recession period in the Europe because it is a mind smoothing. Therefore the domestic demand of ornamental fish always help the industry to compete successfully in the international arena as Sri Lanka have the best quality and different species of fish at competitive prices with prompt deliveries. Related and supporting industries The main supporting industries of the ornamental fish industry in Sri Lanka are the Live corals, sea weeds, live rocks, plastic ornaments and ceramic ornaments such as trees, houses etc. These are highly integrated with the ornaments fish industry because it

facilitates the exporters to send the above mentioned items together with the ornamental fish. Firm strategy, structure and rivalry The nature of the ornamental fish industry can be identified as most of the companies being registered as private limited companies except one company in Singapore which is a public limited company. There are about 75 exporters Island wide out of which only 35-40 are active exporters while having 10-15 very regular exporters suppliers carry out business internationally. Therefore the competitions among the exporters are not high but the very regular exporters compete in term of quality and the hygiene of the fish which leads the country to have quality products in the international arena

Other events Role of the government In Sri Lanka there are many institutions which support the ornamental fish industry. Among those the important institute is the department of commerce. This is the institution which issues the generalized preferential agreement certificate (GSP) this is an agreement between Sri Lanka and the world trade organization. This certificate allows the exporters can obtain trade rebates in exporting Ornamental fish. Also the ministry of fisheries together with the export development board helps to develop this industry. Changing events The main changing events in the ornamental fish industry are the exhibitions, conferences and the trade fairs which take place internationally. Export Development Board gives its fullest support in participating the exporters in these events internationally in order to have a better relationship with the exporters and the buyers. Also events such as recession, currency fluctuations affect the industry to some extent.

10.2 Challenges, risks and barriers of the International arena

Challenges Offering a better product than what the importer is presently receiving. To be competitive in price in order to secure the market because if the prices are high the importers might switch into the exporters. To establish a long lasting business relationship for the mutual benefit in other words to have a healthy relationship with the importers and the exporters. To offer the widest range of varieties of ornamental fish to satisfy the customer needs. Packing densities to be increased in order to overcome the high freight charges.

Risks and barriers Non-payments of the invoices since the payments are done after receiving the fish by the importers, therefore the importers might ignore the payments of the invoices. Reporting of the dead fish on arrival without proper proof where the exporter might have to bare a loss in this case.

Losing a regular customer at short notice due to not signing of contracts.

11. Conclusion
In this report we have analysed the positives and the negatives of the industry and how it will prosper the local industries. When it comes to Sri Lankan ornamental fish industry, exporters have to go through so many challenges and barriers such as quality of the product, packing method, high competition, establishing a market and also due to lack of exporters in the domestic industry. Negativities involve in this industry is relatively high due to these reasons like vulnerability of the fish, late payment methods, not entering into the contract with buyers and sudden changes in the market It could be identified that there are a lot of strengths in the ornamental fish industry because Sri Lanka is enjoying very rich bio diversity. Also there is a good international market for ornamental fish as the fish is of high quality and the prices of fish are quite reasonable. The main problem or the threat is the high freight charges which are sometime unaffordable for the exporters. Also destruction of the corals through bad fishing habits would also be a threat as the breeding grounds of the fish is destroyed. Even though there is a threat of entry but with time the exporters would get adopted to the market. This industry has no competition from the substitutes .therefore the demand from the international market is high. But when dealing with the international arena there are challenges and risks that the exporters should face. The biggest challenge is to compete in the market at competitive prices, while the risk/barrier is the non-payments of the invoices. Also Sri Lanka is blessed with most of the factors of production and demand conditions while supporting the industries such as live corals, sea weeds etc. When looking at country analysis, we can say that Sri Lanka entering the US economy is good as the local industry can prosper as US is geographically large and the demand in US keeps increasing. Hence the growth prospective is vast In order to overcome the barriers/risks and challengers and to expand business internationally an international business strategy was proposed. Through this the exporters could collaborate with the legal bodies in order to benefit some services such

as experiencing international trade fairs, exhibitions. Finally by entering the US economy the industry can flourish immensely.

12. Recommendations
Sri Lanka is a county which surrounded by the Indian Ocean, this island consist with beautiful beaches and many natural resources. Sri Lanka is filled with eye catching mind blowing fish with beautiful colours. These fish are exported to countries such as USA, UK, Germany, etc. This generates a great amount of income to the country also the flow of foreign currency will have a high inflow to the country. This industry can be improved by in many other ways. Given below are some recommendations for improvement and the betterment of the industry. Sri Lanka is still in the process of developing the business in to a major export.

Still the industry is many exporting ornamental fish. The industry and increase the productivity by starting up farming corrals and other kinds of sea plants which can be exported to other countries for a higher demand. Also this will the erosion or corrals and will reduce sea erosion. Participation at international exhibitions such as InterZoo will keep the exported

safe in the market. This will provide an opportunity to exporters to retain existing business in Europe and establish new businesses. Participating exhibitions in Japan, Middle East, etc. will help the industry to

reach more countries. This will also increase the inflow of foreign currency to Sri Lanka and more people will enter the market and will be able to supply to the demand. The government also place a major role in the industry in many ways. Set of

policies are not properly made for this industry also the government lack in standardization of the industry. Export Development Board and the Fisheries Ministry should fund and motivate the industry to find new aquarium products which can be exported to other countries such as fresh seaweeds and corrals. The government can also encourage the exporters by providing insurance

facilities and other risk baring facilities, which will encourage the local fish export more fish without any risk also implementing standards on the industry will cause the government to reduce risk in giving insurance and other risk baring facilities. Sri Lanka lacks in technology when it comes to transporting fish abroad.

International countries use new technology to decreas e the fishs momentum for a

shorter period of time, which means fish can be transported to longer and grater destinations without any problem. The government should find buyers for this market in the international sector

and then encourage the breeders to start breading fish. The government mainly encouraging breeders to breed more fish but they do not make an effort to find buyers for the product. Visiting international pet and aquarium exhibitions to understand what markets

Sri Lanka can cater and what are the new ways of breeding fish. Also the new technology can be introduced to the industry. As for now Sri Lanka do not use the international exhibition to improve the industry. Then the participants from the country opens up a stall and market very low amount of products in the exhibition which will make no improvement to the industry, instead will be stagnated with the current situation.

References
Ornamental Fish, [Online] Available at: http://www.srilankabusiness.com/ [Accessed on 23rd January 2014] Bartley,D.,Ornamental fish, [Online] Available at:

http://www.fao.org/fishery/topic/ [Accessed on 23rd January 2014] Premadasa, T.K., Oranamental live fish exports need national priority., [Online] Available at: http://www.ft.lk/2013/11/01/ornamental-live-fishexports-need-national-priority/ [Accessed on 28th January 2014] Wijayapura, S,. 2014. Ornamental Fish Industry. Interviewed by: Abayawardana, S,. Thempana,. Santhiran, V,. Ranasinghe, T,. Interviewed at: Aqua Nurseries. 14 January 2014. 10.30. U.S. Economy at a Glance: Perspective from the BEA Accounts , [Online] Available at: https://www.bea.gov/newsreleases/glance.htm [Accessed on 2nd January 2014] Timimi, K,. (2011).Different Sectors of the US Economy ,[Online] Available at: http://www.economywatch.com/world_economy/usa/ on 2nd January 2014] Pritzker, P,. (2013). Driving Exports Is Key t o Growing Small Businesses and the American Economy, [Online] Available at: http://www.linkedin.com/today/post/article/ [Accessed on 2nd January 2014] Smith, K, Behrens, M, Max, L, & Daszak, P 2008, 'U.S. drowning in unidentified fishes: Scope, implications, and regulation of live fish import' , Conservation Letters, 1, 2, pp. 103-109, Academic Search Complete, EBSCOhost, [Accessed 4 February 2014.] Chapman, F, A,. Fitz-Coy, S, A,. Thunberg, E, M,. Adam, C, A,. 2007, United States of America Trade in Ornamental Fish , [Online] Available at: http://onlinelibrary.wiley.com/ [Accessed on 2 February 2014]. Ploeg, A,. 2004. The Volume of the Ornamental Fish Trade. [Online] Available at: http://www.ornamental-fish-int.org/files/files/ February 2014]. [Accessed on 2 [Accessed

Perera, V,. 2014. Ornamental fish industry. Interviewed by: Abayawardana, S,. Thempana,. Santhiran, V,. Ranasinghe, T,. Interviewed at: Lanka

Ornamental Fish Export (PVT) LTD. 1 February 2014. 2.00. Weerakoon, D,. Senaratne, A,. (2003). Prospects for ornamental fish and aquatic plants exports from Sri Lanka. [Online] Available at:

http://archives.dailynews.lk/2005/05/27/fea08.htm [Accessed 2014].

on 6

February

Tradingeconomics.com. 2014. SRI LANKA BALANCE OF TRADE. [ONLINE] Available at:http://www.tradingeconomics.com/sri-lanka/balance-

of-trade. [Accessed 01 February 14]. Tradingeconomics.com. 2014. Sri Lanka Indicators. [ONLINE] Available at:http://www.tradingeconomics.com/sri-lanka/indicators. January 14]. Businessdictionary.com. 2014. Trade Terms. [ONLINE] Available [Accessed [Accessed 23

at:http://www.businessdictionary.com/definition/trade-terms.html 29 January 14].

Gunawardana, M,. 2014. International Business Strategies. [Lecture Notes] (Personal communication, 14 January 2014] Central Bank of Sri Lanka, 2013. Annual report 2012-2013, Sri Lanka: Central Bank. What is the Fed: Monetary Policy. [Online] Available at:

http://www.frbsf.org/education/teacher-resources/what-is-the-fed/monetarypolicy [Accessed on 7 February 2014] Premadasa, T.K (2013). Ornamental live fish exports need national priority [ONLINE] Available at: http://www.ft.lk/2013/11/01/ornamental- live-fishexports-need-national-priority. [Accessed 07 February 2014]. Modes of Entry into International Markets. (2014). Modes of Entry into International Markets. [ONLINE] Available at: http://www.marketingteacher.com/lesson-store/lesson- international- modes-ofentry.html. [Accessed 05 February 2014]. Modes of Entry into an International Business. 2014. Modes of Entry into an International Business. [ONLINE] Available at:

http://www.scribd.com/doc/22242895/Modes-of-Entry-Into-an-InternationalBusiness. [Accessed 06 February 2014]. International Business: Entry Modes in International Business. 2014. International Business: Entry Modes in International Business. [ONLINE] Available at: http://vhmb1987internationalbusiness.blogspot.com/2010/09/entry- modes- ininternational-business.html. [Accessed 04 February 2014]. Fisheries and Aquatic Resources Act, No. 2 of 1996 . Sri Lanka: State Printing Corporation.

Appendix Annexure 01.

Sri Lanka Balance of Trade.

Sri Lanka GDP

Sri Lanka Exports

Sri Lanka Imports

Annexure 02
Ornamental live fish: Restricted for export under the act
Ki l ograms (Kg)

Ornamental live fish:Restricted for export under the act

46608

50000

45000 40000
35000 30000 25000 20000 15000 10357 8222 10004 1000 10000 6458 1230 4708 2273 5000 905 750 600 0 12877 12759 15773 18468 15440

29642
19577

27106 20031 17286

1862 1152
JAPAN NETHLDS U.S.A.

10158 4697 3613

11722 2541 1596

JAPAN U.S.A. HG KONG
5244

9195 6004 4832

U.S.A. U.ARB.E U.KING.

7043 2777

JAPAN U.S.A. GERMANY

2004

2005

2006

2007

2008

2009

U.S.A. JAPAN GERMANY

JAPAN GERMANY FRANCE

JAPAN NETHLDS U.S.A.

2010

2011

U.S.A. U.KING. U.ARB.E

JAPAN FRANCE U.S.A.

2012

2013

The above graph shows the top 3 exporters of restricted ornamental fish by Sri Lanka, also this graph shows the sum of fish they have exported for the top 3 countries. As we can see in the above graph the rapid increase in exports of restricted live ornamental fish. Since 20ll the amount of exports have decreased in a major way. But looking at 2012, the graph shows the total amount of restricted life fish has increased. In 2013 there were no restricted live fish exported due to uncertain factors. In 2010 the exports have increased due to the economic recession. Although the recession was taking place in USA the amount of exports has not decreased which means to say that the industry has being affected by it. The above graph also shows that from 2004, Sri Lankas highest exports were done to Japan until 2009. USA since 2004 was engaging in major exports from Sri Lanka on restricted live fish. The country have increased the amount of exports and in 2010 the highest number of exports were done to USA. From there onwards USA has being the largest restricted ornamental live fish exporter in Sri Lanka. 2011 and 2012, United Arab and United Kingdom has derived in to the top 3 by having more exports from Sri Lanka

Non Restricted Live Ornamental Fish

Non Restricted Live Ornamental Fish

600000
518584

500000 Ki l ograms (Kg) 400000 300000

236078

464433

488450
400798

513393 459113

414027

419781

428162

296715
269698

312208

230436

252679

261823 187785

282597

200000 100000 0
U.S.A. U.KING. ITALY U.S.A. U.KING. GERMANY
108781 74922 123991 70744 113886 77849 103647 66715 99811 61537 123257 47496 42926 77928 104674 92616

152007 52761

71370 68511

42051

U.S.A. U.KING. GERMANY

U.S.A. ITALY FRANCE

U.S.A. U.KING. GERMANY

U.S.A. U.KING. GERMANY

U.S.A. U.KING. GERMANY

U.S.A. U.KING. GERMANY

U.S.A. U.KING. GERMANY

2012

2004

2005

2006

2007

2008

2009

2010

2011

The above graph shows the top 3 exporters of restricted ornamental fish by Sri Lanka; also this graph shows the sum of fish the country has exported during 2004 to 2012. The reasons for having different countries over the years are due to the demand factors. From 2004 until 2006, the exports have risen at a lower rate. Reason for the rise was because after the Tsunami affected Sri Lanka many existing firms output decreased, in turn new suppliers entered the market with low prices and low quality fish. Starting 2007 to 2009, with the low prices existing in the industry the demand for fish increased however, the suppliers could not cope with the demand, hence they supplied to the market with existing fish. In 2010, the output increased, the reason was after the war ended the divers were able to catch fish in the northern sea and areas where the war was taking place. Further the number of breeders increased. Starting from 2011 to 2013 the quantity exported have decreased compared to 2010 as the weather conditions were adverse and was not favourable for catching fish.

U.S.A. U.KING. GERMANY

2013

Non Restricted Other Live Ornamental Fish

Non Restricted Other Live Ornamental Fish

2000 1800 1860 1635

1600
1400 1200 1000

800
600 400 275 300 210 200 0

785

810 700 350 120 60

700 585 350

203
23

200

270

350 350

70
AUSTRIA

AUSTRIA

QATAR

2004

2005

2006

2007

2008

2009

2010 2011 2012

The above shown graph shows the non-restricted other life fish exports to various countries. These live fish cannot be described since there are many varieties exported in minor amounts to different countries. Due to rapid changes in HS cords in Sri Lanka some years data such as, 2005, 2010, 2012 and 2013 are not recorded. In 2007 the highest exports from Sri Lanka was recorded amounting 1806 kg of other ornamental live fish as many suppliers entered the industry as the demand for nonrestricted other live. By considering the graph, it illustrates that there is no specific

country that has constant imports of live fish. Some of these fish noted in the statistics and are highly expensive and some are hard to breed. In each year demand varies and because of the high competition in the market the amount of fish supplied by Sri Lanka has being less.

GERMANY

FRANCE

JAPAN

NETHLDS

SWEDEN

NETHLDS

U.S.A.

CANADA

MALDIVE

MALDIVE

AUSTRAL

U.S.A.

Other Varieties

The above graph shows the exports of other live fish carp, life fish Eels and restricted fish under the fisheries ordinance. By understand this graph, it shows Singapore has a high demand for ornamental eels. Most of these eels are fall under the category of marine fish. Most of the carps are demanded by USA and Maldives. These fish are high in cost and hard to bread without proper facilities. From 2004 to 2009 theses fish has not being accounted as a major export from Sri Lanka. In 2012 and 20 13 fish which was restricted under the fisheries ordinance have being exported to Qatar and Switzerland. 2013 there a 3705 kilograms of restricted species under the Fisheries Ordinance have being exported to Qatar. This is due to the farming in Qatar is more expensive. Due to this reason they have imported from Sri Lanka and re-exported the fish to other country. Also due to the excess demand Qatar had to import fish from Sri Lanka.

Annexure 03
Porters 5 forces

Rivalry among existing competitors- High When looking at the export competition in the US ornamental fish market there are many competitors from developing and developed countries, such as Singapore, Malaysia, Thailand, Philippines, Vietnam, China, and Japan. Japan, China and Singapore being the giant in the ornamental fish exporting countries. The biggest threat to Sri Lankan exporters is Singapore as they export more than double when comparing with other countries. Singapore is in the top 5 rankings in ornamental fish exports. The market share in 2004 was 19.8%. Since there are new entrants to the industry Singapore will find it difficult to remain as the market leader. Threats of new entrant - High The data shown by the FAO statistics reveals that in 1976 there have only been 28 exporters, and in 2004 there are 146 exporters. The threat of entry keeps rising. Many countries enter the industry as it provides many jobs to the people. However, when there are many suppliers in the market the price per fish decreases and its difficult improve on quality.

Bargaining power of the buyer- High This will be mostly benefited by the buyers who have been in the industry for a long time, through relationships that the buyer and suppliers have made over the years help the buyer to receive the best price for the fish that they buy. If the supplier considers the buyer as a loyal customer the credit period the buyer receives will increase. Threat of substitute products- High There are many substitute products for ornamental fish such as plastic fish tanks that operate with the use of electricity. Further, Singapore has expanded their market where

they breed fish and they genetically inject hormones to glow. These fish are very popular around the world. Bargaining power of suppliers- High The buyer has identified the finest suppliers in the industry, which cater with quality at a lower price. Further the buyer prefers suppliers that have a wide variety of fish. Most importantly the buyer looks into whether he could extend the credit period after purchasing the fish. Additionally, buyer checks whether the delivery has been done without harming the fish.

Annexure 04
Diamond theory
Firm strategy, structure and rivalry The ornamental fish companies worldwide are private limited companies except one ornamental fish company in Singapore which is a Public limited. Many countries promote the ornamental industry as it gives employment for low income earners. Further to reduce the balance of payment deficit the government encourages small firms to export. Since ornamental fish imports are increasing in US, Sri Lankan exporters will face a heavy competition.

Demand conditions The demand conditions in ornamental fish in US are that Americans need the best quality in products. The fish should be healthy until it reaches the end customers. Hence the fish need to be in clean water so that it wont get bacterial infections. Further, Sri Lankan suppliers should sell the fish at competitive prices as US suppliers cost of production is high. Low prices can increase demand for Sri Lankan producers.

Additionally, Sri Lankan produces should sell different variety of species in the US market. Americans consider fish tanks to be a stress reliever therefore they prefer different types of fish to be in their tanks.

Related and supported industries Industries that benefit from ornamental fish industry are the live/dead coral, aquatic plants, sea weeds, and live rocks suppliers, additionally, the ceramic and plastic ornaments that are inside the fish tank. These are used to decorate interior of the tanks. Hence these industries benefit from the ornamental fish industry. Factor conditions The factors of production needed for ornamental fish industry when exporting to US are the adequate technology needed to keep the fish alive as US weather constantly changes. Further the availability of fresh water and sea water is essential around the farm. The space allocated for the fish should be spacious and there should be many tanks, for instance all fish cannot stay in the same pond as they fight with each other. Further the availability of food is a necessary factor to be considered. Moreover the buyers need to have a better understanding of the nutrition and aquatic diseases of the fish to have a healthy production of ornamental fish

Annexure 05
PESTEL Analysis
Political The political factors that affect the ornamental fish industry in the US are the high political pressure on the import firms and the breeders, such as taxes and tariffs. Further the rules and regulations standardising the fish, this means all the fish should be at the same quality standard. Moreover, government support given to the breeders and suppliers are less as no incentives are given. Henceforth these are the political factors affecting the industry. Economics Cost of producing ornamental fish in US is high, due to the constant change in the climate and the costly technology use to breed the fish; the prices of the fish are rising. As a result the demands for import fish are increasing, creating a deficit in the balance of payments account. Further the labour cost of US is high in turn the firms find it hard to employ people, leading to high levels of unemployment in the economy.

Sociological The awareness created in the local industry is less as few people in US are aware of the production of ornamental fish. Further the US suppliers produce a limited number of species to the market. Moreover the waste water that are used for the fish are not managed well. Technological The cost of adopting new technology to the industry is high since it increases the overall price of fish. Further training the staff to use the technology is costly. Additionally maintaining the technical maintenance of the facility is costly. However, if the US suppliers use technology in their farms they will be able gain competitive advantage. Environmental US constantly face bad weather such as tornedos and floods resulting in an unproductive result for the farmers. Moreover the lack of insufficient sewage management in the country, the environmental harm increases. Legal The act and policies given for the ornamental fish industry are not recently updated. Additionally the lack of monitoring in fish handling is less leading to a failure in the end product; finally the customer will buy unhealthy fish from the market.