Porter's Diamond and Sri Lanka's Tourism Industry: A Report

This report examines the competitive advantages of Sri Lanka's tourism industry, focusing on the application of Porter's Diamond framework. It explores the growth of the tourism sector, particularly after the civil war, and its contribution to Sri Lanka's GDP and employment. The report analyzes the factors influencing competitiveness, including factor conditions like infrastructure, natural resources, and human resources; demand conditions related to local and international tourism; and the role of related and supporting industries. It highlights strategic issues such as the need for skilled workforce, development of tourism products, and the importance of events and infrastructure. The analysis includes specific examples like the Galle Tourism Development and the impact of the Bandaranaike International Airport attacks. The report emphasizes the need for continuous improvement in various areas to enhance the competitiveness of Sri Lanka's tourism sector in the global market.

Part 1
One of the major foreign exchange earner sector and the main growth area in any of the country
is its tourism sector. Tourism sector is highly beneficial for the places with cultural and natural
resources in abundance. In the past five years the world tourism market has depicted a
tremendous growth of 3.7 percent and is even further suspected to show a growth of 4.9 percent
in the coming five years. It is expected that the Pacific region and Asia would record the highest
growth. Sri Lanka arrived in the international tourism sector in the 1960s era. Due to the
abundance of natural and cultural resources, the country has shown that tourism sector is one of
the most promising sector for the economic development of the country especially after the
periodical setbacks during the civil war along with the natural disasters and world terrorist
attacks. For instance, it was seen that the number of international tourists entering Sri Lanka
increased in 2008 accounting for 438,475 whereas the count was 18,969 in 1966. Particularly,
the Travel and Tourism contribution was seen to be around 7.5% of the total GDP of Sri Lankan
economy in 2009. In 2009, tourism contributed around 503,000 jobs, 6.2% of the overall
employment and these facts are expected to grow by 2020 to around 6.7% of the total
employment. Sri Lankan Travel and Tourism economy, out of the 186 registered countries of the
WTTC is ranked at number 87 worldwide and at 110 as per the contribution of tourism to the
national economies.
The strategic issue in the field of tourism industry of Sri Lanka is considered to be the
competitiveness. In contrast to the other regions in Asia and the world, the last five years of the
tourism growth in Sri Lanka are found to be highly flat. The tourism sector has realized that lack
of growth in due to the civil conflict in the nation and the sector has also recognized the other
serious constraints related to the tourism business and its operations in the way the business is

proceeding. This can be evaluated using the Porter’s model of the competitive advantage or the
Porter’s Diamond.
Porter’s model of the competitive advantage which is also known as the Porter’s Diamond is
used as a powerful methodology which can help to establish enterprise for achieving superior
competitiveness in this whole while world of globalized economy. This model does not define
the competitiveness of the enterprise present in a nation on the basis of the natural as well as
favorable factors nut also depends on the factors that are generated by negative and positive
synergies having an ultimate goal towards the productivity growth. Therefore this mode of
competitive advantage helps the companies to establish a new position on the basis of the
surroundings which further depend on the primary factors and the secondary factors. The
primary factors can be seen as the state of the productive elements like the condition of the
demand or the existence of the qualified human resources along with the variations,
characteristics and development of the associated sectors. Whereas the secondary factors are the
ones influenced by the primary factor like the action by local government.
The Porter’s model or the ‘Diamond of National Competitive Advantage’ has presented four
major elements of the nation that will help in shaping up of the local firms to compete so as to
hamper or may be support the competitive advantage namely: factor conditions, demand
conditions, related and supporting industries, firm strategy, structure and rivalry. Additionally
the role of government and the role of chance should also be taken into account for assessing the
competitive advantage of the nation.

1. Factor condition
The factor conditions include the factors like infrastructure which can be realized by the
government along with the human resources. The Sri Lankans are aiming to shape the policies
related to their civil aviation along with the domestic air travel so as to provide in the reforms for
improving their tourism-related infrastructure along with presented a unanimous voice towards
the policies like land planning, tourism planning, taxation, environmental protection, municipal
government etc.
The factors related to the airports infrastructure and related issues can affect the competitive
advantage of the Sri Lankan tourism can be seen by the attacks at Bandaranaike International
Airport in July 2001 depicting the damages that can be done to the tourism performance of the
country.

The natural and cultural resources of Sri Lanka like the exotic beaches provide a competitive
edge to the tourism industry of the country. This is one of the key variable of the country’s
tourism industry. Furthermore, the factor conditions of the Sri Lankan tourism industry include:
a. The welcoming nature of the people
b. A strategic location that is highly accessible for the markets that are considered to be
tourist-generating markets of Asia and Western Europe.
c. Serene Environment ranging from beaches to rainforest and finally to the mountains.
d. Diverse and highly unique flora and fauna
e. Multicultural heritage of the foods, customs and arts
f. High literacy rate with high English literacy
g. Amusing history with seven ancient World Heritage Sites with highly varied colonial
connections.
The external markets of the Sri Lankan tourism industry are spread across the major regions like
Western Europe and Asia. The ideological commitment of Sri Lanka towards liberalization as
well as the open economy which will be a major impact to the dynamics of the industry over the
long run.
The location is a very critical issue in this aspect. The Sri Lankan tourism industry faces a strong
competition from the countries like Indonesia, India, Maldives, Thailand, Malaysia etc. An
annual increase in the international tourism has been to be 8 percent to 3 percent. Furthermore an
important need of highly educated and skilled work force for the industry is an identified
concern.

The Sri Lankan Tourism Board in 2010 has hired almost 38,000 as well as indirect employment
of around 53,000. Furthermore, it has been estimated by WTTC that around 217,000 jobs as well
as indirect 330,000 jobs whose combination represents around 7 percent of total employment of
Sri Lanka.
2. Demand conditions
It has been argued by Porter (1998) that the local firms that are able to compete in the market
place by their home demand conditions can do this in two methods through improving their
competitive advantage. First of all is the composition of the home demand along with the
characters of the home that the buyers require. These characters are described as demanding
buyers by Porter (Czinkota et al 2002).
The internal demand of the Sri Lankan industry offerings are seen to rise in following decades.
The advantage for Sri Lanka exists due to the offering in terms of the competitive value
proposition and the varied services concerning the other related countries. Furthermore, the
tendency of the local tourists are seen to accept the latest offering which is offered by tourism
which can make up for the demand. Various regulatory standards for the trade and the
environment related to the tourism in the country are exacting in nature. Due to the low
encouragement given to the stimulation of demand as well as the innovation, the intellectual
property rights along with the safety standards are less than desirable for the online transactions.
The industry requires internal demand conditions for becoming competitive globally for that the
avenues for experimentations is highly recommended.
Sri Lanka should develop high-quality tourism products which can command a premium price.
The products that are expanded for niche markets in Sri Lanka includes the
 Ecotourism

 MICE (Meetings, incentives, congresses and events) tourism
 Adventure tourism
 Cruise tourism
 Ayurveda tourism
 Golf
Various indigenous event events must be organized for attracting the visitor from outside as well
as within the country which can stimulate the demand in the higher manner. Some of the key
events that can be highlighted from time to time in Sri Lanka are the Sigiriya Sound and Light
Show and other related festivals. Further things to be kept in mind include creation of the Galle
Tourism Development Corporation and development of Domestic Tourism which further
includes
• Reposition the domestic tourism product, which must develop some welcoming
centers or few staging areas for facilitating the tours and can help in providing the
information to the tourists and travelers. Further a site enhancement program must be

developed for improving the attraction facilities as well as the management. Furthermore
a national events calendar must be prepared for stimulating the enthusiasm and interest
for domestic travel.
• Organize a domestic tourism transport network, which can incorporate a national
tourism signage system for way finding and for sites, further an approach must be built
for scenic byway designation and for tour routing.
• Develop a domestic travelers’ information system, which can help in incorporating a
Tamil Sri Lanka Guide along with Sinhala teaching guide and further a quality rating
system for accommodations that can help to cater the domestic traveler.
3. Related and Supporting Industries
According to Porter, presence of the related and supporting industries which are successful
internationally is the third most important determinant of the competitive advantage. This factor
will help in creating competitive advantage in various ways which can help in providing early
and preferential access to the ongoing coordination and an integral working relationship amongst
the suppliers leading to the proximity of technical personnel and managerial along with the
cultural similarities tending for facilitating open and free informational flow (Porter 1998).
Sri Lankan Tourism Board is planning to develop Galle which is a historic city on the South
West Coast, and combines the cultural tourism and beach attraction. This city has an intense
potential to be an international destination, center for business meeting and yachting marina. The
place is expected to become a center for shopping, cultural excursions, dining, and entertainment
for tourist at the beach resorts. Furthermore, the place embodies the rich history of Sri Lanka
colonization by the British, Portuguese and Dutch. The Galle Fort has even earned the World
Heritage Site due to the best example of European presence in all of Asia.

The presence of related and supporting industries aids that the industry can provide will add to
the value and will also transfer the value to the tourists ultimately providing the competitive edge
to the tourism industry globally. The related and aiding industries includes all the traditional
souvenirs, local suppliers of food, suppliers for the construction and building food, media and PR
firms and service providers for the financial services. The activities and services which includes
the attractions and world-class accommodations along with the major hotel chains which
represent the boutique hotel, bars and entertainment areas, restaurants and boutiques, museums,
plastic arts, theater, events, living heritage experience and festivals are the major factors of the
related and aiding industries.