Running head: CASE STUDY WEEK THREE

Submitted by:
Niraj Kharel
Submitted to:
Dr. Sushil Raj Sharma
Bus 590: Business Strategy

CASE STUDY WEEK THREE

January 28, 2015Multinational environment in Sri Lanka

Multinational companies are those companies who operate their business in more
than one country. Their ownership, management and control are spread in several countries. The
parent company controls the operations of the host country or subsidiary. There are various
factors a parent company most consider and properly analyze before moving and operating in a
foreign market.
Sri Lanka Introduction
With a population of 20.7 billion and 7.2% growth rate Sri Lanka recently has become a
place where investors want to put their money in. The country has witnessed a huge political
change recently with the end of 26 year long civil war in 2009. Since then there has been no
terrorist attacks which is the result of Government victory over Tamil forces. Sri Lanka is now
focusing in long term strategic and development of a favorable trading environment. No one
wants to invest in a country with severe political risk and uncertainty and with an end of civil
war foreign investment has grown rapidly in the country.
Multinational environment in Sri Lanka
Political environment:
With the end of civil war and governments free market economic policy has attracted
many investors. The present president of Sri Lanka is Mahinda Rajapaksa and at present there is
no any credible opposition. The political fear can be the Tamil tigers again reviving for a conflict.
To attract the investors from India and China the Sri Lankan government has leveraged its
external relations and strategic geopolitical locations. On the other hand the governments failure
to meet European Union demands regarding Human Rights led to the EUs decision to withdraw
the countys preferential tariffs system.

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Economical environment:
Sri Lanka is one of the fastest growing economies of the world. The countrys economy
has seen a high annual growth at 6.4% over the course of 2003 to 2012 at is still increasing. Its
growth is now more than 7%. End of the civil war was the main reason behind the growth
because after the war the manufacturing and service industries flourished and also the FDI came
into play. Sri Lanka is building its strategy to offer relatively better infrastructure facilities to
foreign investors compared to most of its regional partners. Sri Lanka stands at 69th position in
the ranking of 189 economies on the ease of trading across border.
Socio-cultural factor:
With the increase in tourism sector Sri Lankans got an opportunity to learn variety of
languages, including European languages such as French, German, Italian, and Spanish, as well
as Japanese and Chinese. Korean language is also taught on the island because many citizens
aspire to work in Korea for part of their careers. With its unique mixture of linguistic skills and
professional qualifications, Sri Lanka offers investors the opportunity to deliver high-end
finance, accounting, legal, and other services in multiple languages. The increasingly productive
and healthy workforces who have good basic skills have played a vital role in helping the
country to approach a middle-income status. It has a 4.1% unemployment which is again good
when we compare it with the regional standard.
Technological factor:
Sri Lanka has a significant knowledge service industry. There are more than 60,000
people working in IT related job. There are several renowned international firms such as HSBC,
IFS, Motorola, HP subsidiary MphasiS, RR Donnelley, and WNS who have established R&D, IT,
and BPO centers in Sri Lanka. Also, Sri Lanka-based firms provide advanced services to

CASE STUDY WEEK THREE

companies like blue-chip global clients, including Google, Lenovo, Microsoft, Nokia, JPMorgan,
the London Stock Exchange, Santander Bank, and Emirates Airlines. The country has various
software development centers, large-scale call centers, and transaction processing centers.
Furthermore, Sri Lanka has made starting a business more easily by computerizing and
expediting the process of obtaining a registration number for the Employees Provident Fund and
Employees Trust Fund.
The country has also reduced the time taken in export of goods by implementing the
ASYCUDA World electronic data interchange system. It has also introduced an electronic
payment system for port services. Telecommunication is one of the fastest growing industries in
Sri Lanka which has around 2million internet users.
Legal factor:
There are several mixes of laws in Sri Lanka. Sri Lanka has made its legal system
together with a common framework, laws as diverse in their origin as those of Rome and
England, Holland and South Africa, Arabia, South India and old Ceylon. The countrys legal
system is mainly influenced by English common law and Roman-Dutch owing to its colonial
history. Recently Sri Lankan government have bought various laws such as the introduction of
age discrimination and disability discrimination legislation, an increase in the minimum wage
and greater requirements for firms to recycle which are examples of relatively recent laws that
affect an organizations actions.
Environmental factor:
Sri Lanka has different temperatures in different places. The country is mostly a tropical
region. Recently with the increased number of development projects the countrys stress lies on
deforestation, pollution, filling the marshy lands and finding of unauthorized buildings.

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Sri Lankans environmental concerns lies further more on deforestation; wildlife

populations threatened by poaching and urbanization; soil erosion; coastal degradation from
mining activities and increased pollution; freshwater resources being polluted by industrial waste
and sewage runoff; waste disposal; and air pollution in Colombo and other cities due to
emissions from motor vehicles and factories and other industrial establishments.
Conclusion
Sri Lanka in recent days has shown a great promise to the investors. The country has built
a favorable environment for business operations through a flexible trading system with low
tariffs, with a stable political system, with an increasing growth rate and with a concern for
environmental issues.

Reference
(n.d.). Retrieved from http://www.forbes.com/sites/jonspringer/2014/10/30/ten-reasons-to-investin-sri-lanka/
(n.d.). Retrieved from http://www.marketresearchreports.com/countries/sri-lanka
(n.d.). Retrieved from http://www.marketresearch.com/MarketLine-v3883/Country-Sri-LankaPEST-Insights-8251835/

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(n.d.). Retrieved from http://www.scribd.com/doc/92328838/PESTEL-Analysis-of-SriLanka#scribd

(n.d.). Retrieved from http://www.srilankanwaterfalls.net/about/issues.htm
(n.d.). Retrieved from http://www.thesundayleader.lk/2012/07/08/environmental-protection-andsustainable-development-in-sri-lanka/