Adoption of Strategic Management Practices and Their Impact on Profitability among Tea Smallholders in Galle District

Abstract

This study investigates the adoption of strategic management practices (SMPs) and their impact on the profitability of tea smallholders in Sri Lanka’s Galle District. Despite their critical role in the tea industry, smallholders face challenges such as fluctuating market prices, rising costs, and limited access to technology, necessitating strategic approaches to enhance financial sustainability. Using a quantitative, descriptive research design, data were collected from 350 smallholders through structured questionnaires, focusing on five SMPs: business planning, market research, cost management, product diversification, and resource optimization. Statistical analyses, including Pearson correlation and multiple regression, revealed significant positive relationships between each SMP and profitability, with cost management and business planning showing the strongest effects (β = 0.403 and 0.381, respectively). Key findings indicate that smallholders adopting SMPs achieve higher net profits and income stability, though barriers like low financial literacy and inadequate training limit widespread adoption. The study applies Resource-Based View, Strategic Management, and Diffusion of Innovations theories, validating their relevance in smallholder agriculture. Practical implications include the need for targeted training, improved extension services, and policy support to promote SMP adoption. The findings contribute to the literature by addressing empirical gaps specific to Galle’s tea sector and offer actionable recommendations for stakeholders to enhance smallholder profitability and sustainability.