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Running Head: BUTTA PRIVATE LIMITED
1
A Report on the prospects of Butta Private Limited in the US Market
Group 1
School of Management,
Kathmandu University
(KUSOM)
BUTTA PRIVATE LIMITED
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A Report on the Prospects of Butta Private Limited in the US Market
Submitted By:
Group 1
Salim Lal Awale (17302)
Natasha Baidya (17303)
Ginish Jung Dahal (17307)
Raj Maharjan (17317)
Ajay Shrestha (17331)
Samip Dhungel (17338)
Submitted To:
Mr. Binayak Malla
Assistant Professor
School of Management,
Kathmandu University
MBA Spring 2017
Balkumari, Lalitpur
Date of Submission: 18th
January, 2018
BUTTA PRIVATE LIMITED
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ACKNOWLEDGEMENT
This project is accomplished through the help and support provided by many
individual and organization. We would like to take this opportunity to dedicate our
acknowledgement of gratitude and thanks to them.
First of all, we would like to acknowledge Kathmandu University (KU) for including this
project as a partial requirement of MBA program, providing all students with the opportunity
to enhance their knowledge and competence by means of scientific tools for analyzing and
solving business problem. Similarly, we would like to express our sincere gratitude and deep
regards to our Course facilitator, Mr. Binayak Malla for his continuous guidance, feedback
and encouragement throughout our project.
We would also like to offer our sincere gratitude towards Mr. Sabin Bhandari, co-founder of
Butta private limited for providing us insights and valuable information regarding the
organization and its offerings.
Finally, we would also like to express our sincere appreciation to all our friends for their
support, cooperation and encouragement as well.
Sincerely,
Group 1
BUTTA PRIVATE LIMITED
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ABSTRACT
T- shirt with art is a best combination for business market. Butta, a fairly young
company started off its services in September, 1st, 2015 registered under sister company of
Threadpaints. Butta is a creative marketplace based on ecommerce model where the art and
designs created by independent artist gets printed on T-shirt and other merchandise and gets
sold which offers 25% revenue sharing model as royalty to the artist. Basically, talking about
Butta, it is selling art as well.
Butta has been selling its products throughout the world but only in limited amount.
However, it has been serving its offering in countries like India, Australia,Germany and
United Kingdom. These servings are done on the basis of pre-order of the customers residing
in these countries. However, they have not been serving this market in larger context. They
have been selling their products at reasonable price delivering through postal service of Nepal
after the orders are made through their website.
However, a lucrative market exists in the United States considering 17.4 percent
imports of the product by US alone under HS Code 610910. Also, US ranks 8th
in ease of
doing business and have a score of 0.08 percent of concentration of supplying countries.
Butta has been placed in focused differentiation point in strategic clock. Talking about the
internationalization strategy, Butta should follow the global strategy and a market
development strategy in corporate level strategy to cater into the US market. Before selecting
the target market, Butta should analyze the PESTLE and CAGE analysis mentioned below as
well. Additionally, Butta could use informal entry with ecommerce model in the beginning
year followed with strategic partnership with various T-shirt brands, space and other goods in
US market. Butta could add international division in its organizational structure as well to
cater to the international market. However, they should also follow the business model of
spreadshirt.com which has a similar business model as that of Butta where they could be
selling products through mobile application in the future days with designs done by various
independent artists.
Keywords: PESTLE, CAGE,Strategic partnerships, Market Development strategy, Global
strategy,
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TABLE OF CONTENTS
ACKNOWLEDGEMENT ............................................................................................................ 3
ABSTRACT ................................................................................................................................... 4
LIST OF FIGURES ...................................................................................................................... 6
CHAPTER 1 .................................................................................................................................. 7
INTRODUCTION......................................................................................................................... 7
1.1 Company Profile ......................................................................................................... 7
1.2 Product Description ..................................................................................................... 7
1.3 Current Market Position in Domestic Market ............................................................. 8
CHAPTER 2 .................................................................................................................................. 9
TRIPS AND THE MARKET CHALLENGE ............................................................................ 9
CHAPTER 3 ................................................................................................................................ 10
POTENTIAL MARKET FOR BUTTA .................................................................................... 10
3.1 Potential Market Analysis ......................................................................................... 10
3.2. Ease of doing Business in USA................................................................................. 12
CHAPTER 4 ................................................................................................................................ 10
CULTURAL DIMENSIONS ..................................................................................................... 10
CHAPTER 5 ................................................................................................................................ 13
CORPORATE AND BUSINESS LEVEL STRATEGY ......................................................... 13
5.1 Corporate Level Strategy .......................................................................................... 13
5.2 Business Level Strategy: Base of Competitive Advantage ....................................... 14
5.3 Michael Porter‟s National Diamond Model .............................................................. 15
CHAPTER 6 ................................................................................................................................ 17
THE ORGANIZATION OF INTERNATIONAL BUSINESS ............................................... 17
6.1 International Strategy ................................................................................................ 17
6.2 Market Selection ....................................................................................................... 18
6.3 Entry Modes .............................................................................................................. 20
6.3 Organizational Structure ........................................................................................... 22
CHAPTER 7 ................................................................................................................................ 24
SUMMARY AND RECOMMENDATIONS ............................................................................ 24
REFERENCES ............................................................................................................................ 26
APPENDICES ............................................................................................................................. 27
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LIST OF FIGURES
Figure 1: Concentration of Importing country and average distance for product HS code
610910...................................................................................................................................... 11
Figure 2: List of importing market for Product HS code 610910 by Nepal ............................ 11
Figure 3: Ease of doing business in USA on various factors ................................................... 12
Figure 4: Hofstede Cultural Dimensions of US in comparison with Nepal ............................ 10
Figure 5: Ansoff Matrix ........................................................................................................... 13
Figure 6: Bowman's Strategic clock ........................................................................................ 14
Figure 7: Michael Porter‟s National Diamond ......................................................................... 15
Figure 8: International strategy ................................................................................................ 17
Figure 9: Organizational structure ........................................................................................... 22
Figure 10: Supply chain of Butta ............................................................................................. 23
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CHAPTER 1
INTRODUCTION
1.1 Company Profile
Butta is a sister company to Threadpaints, an e-commerce company that initially sold
T - shirts with their own designs. When buyers wanted t-shirts with custom designs,
Threadpaints Could not cater to them under the same brand as they were heading towards
becoming a clothing solution to suit the taste of many. So, it gave birth to a start up namely
Butta, a fairly young company, which was established on September 1st, 2015.
Butta is a creative marketplace where arts printed on everyday usable can be sold and
bought. The designs are created by independent artists and are printed on various products
such as T shirts, Sweatshirts, Mugs, bags and other merchandises. They have a 25% revenue
sharing model as royalty to artist. The core value proposition of Butta is the freedom to
consume art in different forms. Butta is an open platform where artists can upload a creation
on a product of their choice. There is however a certain level of filter in order to ensure that
the design that have been uploaded do not infringe on any Intellectual property rights.
1.2 Product Description
The general information about T-shirt, which is the main product for Butta private
Limited is as below:
HS CODE: 610910
Product Name: T-shirts, singlets and other vests of cotton, knitted or crocheted
HS Code National Level: 6109.10.00
Specific Product Name: T-shirt
Country of Origin: United States of America
Price: The price for Butta T-shirt varies according to quality of cotton and design. Normally,
Butta T-shirt range from a price of Rs. 800 – Rs. 2000.
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1.3 Current Market Position in Domestic Market
Nepalese market is flooded with various brands of t-shirts. Generally Nepalese youth
are attracted with international brand because of quality and design. Nevertheless Nepalese t-
shirts brands are also witnessing fast growth in recent years. Brands like Phalano, juju, butta
and maicha wah baucha have become trendsetters among both the fashionist and general
consumers. Earlier, Nepalese youth were mostly focus on imported apparels. But considering
the current market Nepalese brand are attracting consumer over foreign brand. Design like
Mandala. Om, Buddha and national flags are popular design among youth. Most of the
market is occupied by brands like juju and Phalano luga. And when you consider Butta it has
less than 1 percent of the total t-Shirt market. Although increasing demand of customize art
t-shirt, the company is not able to grab the potential market. The brands like juju are already
opening the outlets in various place but butta has not been able to open outlets in various
place, they are using online platform and recently only they have opened outlets in pokhara
and itahari. Low promotional activities is the main reason Butta is not able to compete with
its competitors.
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CHAPTER 2
TRIPS AND THE MARKET CHALLENGE
Intellectual property rights are the rights given to people over the creations of their
minds. They usually give the creator an exclusive right over the use of his/her creations for a
certain period of time. Intellectual property rights are traditionally divided into two main
categories:
1. Copyright and rights related to copyright
2. Industrial property
In Butta‟s case the applicable right is of Copyright, which protects intellectual rights of
the artists. Copyrights are the rights granted to authors of literary and artistic works. The
main purpose of protection of copyright and related rights is to encourage and reward creative
work. The TRIPS agreement was amended as late at January 2017. The TRIPS has protected
graphic work for 50 years from its publication.
One issue Butta may face will be from the blurred lines of the „fair use policy‟. Butta has
a couple of t shirts that involves the use of an image from a copyrighted movie, TV show or
computer game. They need to contact the copyright owner, and ask to have, or buy, a limited
permission to use the image on the t-shirts. Since, Butta works with artists, and the artists
have to send in their creations. All the times, these artists do not send original work, or are
absolutely honest about the ownership of the designs. Such a case had happened when
someone sent in a Bhairav design and the company assumed it was original work. Later, they
found out that the design belonged to someone else. Later, they paid the royalty for the sales
of the t-shirt to the original artist.
However, if some of their designs are widely imitated they can take a hint of what works
with most people, like they say, imitation is a form of flattery.
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CHAPTER 3
POTENTIAL MARKET FOR BUTTA
3.1 Potential Market Analysis
Butta is already exporting small scale of t-shirt in foreign country through indirect
export. In the initial phased Butta wants to promote its product to Nepalese people. Their
main motive is to sell Nepalese art to Nepalese people around the world than occupy the
foreign market. Butta have the unique model of promoting art and design though t-shirt
which can be the core competency for the company. They want to expand their business in
USA and have also name their website as Butta.us. Present of huge number of Nepalese
population in USA more than 70000 and America being the country that cherish art and
present of huge population who prefer pop culture can make it a potential country that Butta
should definitely penetrate.
With the help of trade map we are going to analyze the market of USA comparing to
other. Trade map developed by ITC is an important tool for exporting company which can
help in identifying potential market to penetrate. In order to export any product in global
market the first thing that company should know is the HS code which refers to Harmonized
coding system where numeric values are given to product in order to have standardization in
global trade.
HS code for T-shirt: 610910
Among the various countries the top five countries that export T-shirt are USA,
followed by Germany, United Kingdom, France and Spain. Referring to Annex 1, we can see
that USA alone imports total of 4,189,922 thousand USD worth of T-shirts which represent
almost 17.4 % of world imports and top the list of the largest importer when it comes to T
shirt related product. The importing growth rate is also increasing by 1 percent per year. If
you look at ease of doing business USA ranks in 8th
place. USA does not require any non-
tariff requirement for t-shirt related product while it have 16.5% MFN duties applied toward
T-shirt import. Although having such high hate of duties, availability of huge market and
looking at the importing nature we can see that USA would be idle country for entering and
doing business for t-shirt related business.
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Figure 1: Concentration of Importing country and average distance for product HS
code 610910
From the above diagram, you can see USA have 0.08 (less than 1.18) which is lowest
compared to other competitive country. It determines that the market of USA has a very
large number of suppliers each with a very small share. Having more diversified market than
concentrated market is good for company like Butta as they can easily enter such market.
Figure 2: List of importing market for Product HS code 610910 by Nepal
From the above bar chart and Annex 1 we can see that Nepal represent only 142
thousand USD worth of export to America which is not even 1% share of the t-shirt market in
America.( see annex 2). It is seen that Nepal export 2876 thousand worth of t-shirts in 2016.
United Kingdom is the largest importer for Nepalese t-shirt having 74.3 % of the Nepalese
BUTTA PRIVATE LIMITED
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export. Although America being the largest importer, Nepal is not being able to utilize it. It
only exports 148 Thousand USD worth of t-shirt which is merely 5% of export. One of the
reasons may be the average tariff faced by Nepalese company which is 16.5% ad valorem
tariff which refers to Duty or other charges levied on an item on the basis of its value and not
on the basis of its quantity, size, weight, or other factor.
3.2. Ease of doing Business in USA
United States ranked 8 in ease of doing business among 190 economies in 2016 and
has move up to 6 in 2017.
Factors USA ranking
a) Starting a Business in India: 49
b) Dealing with Construction
Permits
36
c) Getting Electricity 49
d) Registering Property 37
e) Getting Credit: 2
f) Protecting Investors 42
g) Paying Taxes 36
h) Trading across the boarder 36
i) Enforcing Contracts 16
j) Resolving Insolvency 3
OVERALL RANKING 6
Figure 3: Ease of doing business in USA on various factors
Higher up the country in the list, the less amount of time it takes to set up outlets,
acquire fund, buying property and several other factors that can contribute to opening up a
business in a country. Having favorable bilateral treaties between the two countries makes it
easier for company like Butta to enter the market of USA. And USA has a strong intellectual
property right which will be helpful for company to protect their art and design from
infringement.
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CHAPTER 4
CULTURAL DIMENSIONS
Culture is a very important factor to consider before entering a foreign market. We
should not underestimate the effect of cultural differences. We need to invest significant time
and energy in order to understand the culture of the local market we are planning to enter.
Our t-shirts need to add value and meet the desires of the local markets and for this it is
essential to understand about who lives in the community and what they value.
As a t-shirt company with unique and creative designs we need to consider the following:
Do our-shirts provide a need or desire by the local consumers?
Are there language and cultural differences? How will we overcome these?
Are there religious or lifestyle considerations that could affect our business?
How will we market the product or service?
What if our product and designs doesn't translate well to the local community?
To analyze the cultural dimensions of the US market, we are using the Hofstede
cultural dimension model and comparing it with that of Nepal to study the difference between
two markets.
Figure 4: Hofstede Cultural Dimensions of US in comparison with Nepal
1. Power Distance
Power distance explains the attitude of the culture towards the powerful inequalities.
BUTTA PRIVATE LIMITED
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The higher the power distance, more the less powerful members expect and accept unequal
distribution of power. We can see a power distance of 40 in US which is moderately low
which explains that individuals in US resist inequality of any kind and they put emphasis on
equal rights in all aspects of American society and government.
Therefore the implication to us could be to make sure that our designs and prints don‟t
support any type of inequality and give power to specific group. The American premise of
“liberty and justice for all” needs to be taken into consideration.
2. Individualism
The index shows that US with a score of 91 has very high individualism. Thus
dimension measures the degree of interdependence a society maintains among its members.
The fairly low power distance in combination with one of the most individualist cultures
explains that the society is loosely knit where there is expectation to look after themselves
and not rely on authorities for support.
Currently what Butta has been selling in the Nepalese market is slightly different from
its competitors due to the unconventional prints that reflect the nature of the person.
Customers can customize and design their own prints as well. Therefore, this is going in-line
with the individualistic culture that Americans have and thus, they need to present the same
distinctive and free-will factor on their designs and prints to attract and tap the American
market.
3. Masculinity
A high score in masculinity indicates that the society will be driven by competition,
achievement and success while a low score which is the feminine values gives more
importance to caring for others and quality of life. US have an above average score of 62
which shows its inclination towards masculine values and that they strive to be the best.
In the case of Nepal with a score of 40 Nepalese is considered to be a feminine society.
Hence, we can see a sign of love and empathy for others in their prints. In the case of US
Butta should be take the masculine values into consideration while deciding on the prints to
make them available to the American market. Prints with a sign of achievement and
competition might work more than prints having a sign of love and compassion.
4. Uncertainty avoidance
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The uncertainty avoidance dimension explains the way that a society deals with the
fact that the future can never be known. US has a score of 46 in this dimension which is just
slightly lower than average. Therefore we can say that there is fait degree of acceptance for
new ideas, innovative products and willingness to try something new or unique. Americans
tend allow the freedom of expression. At the same time, they do not require a lot of rules and
are less emotionally expressive than higher-scoring cultures.
Therefore the new and exciting concept of Butta and expressing themselves in the
form of art can be appealing in the American market. Like the Nepalese market is accepting
the new idea of expression and love for art the American market can also be more assertive to
try something new and different than the normal Tees with conventional designs available in
the market.
5. Long Term Orientation
This dimension explains the extent to which societies link with their own past while
dealing with the present and future challenges. The US score normative with a low score of
26 in this dimension. This clarifies that the American society prefers to maintain time-
honored traditions and norms while viewing societal change with suspicion. Many Americans
have very strong ideas about what is “good” and “evil.”
The US market might prefer a sign of culture and history that they believe are the
reasons for their existence on the T-shirts and this is the same for the Nepalese. So this needs
to be taken into consideration while Butta decides on the prints and arts.
6. Indulgences
This dimension explains the extent to which people try to control their desires and
impulses, based on the way they were raised. The US scores as an indulgent society with a
score of 68 which means that the extent of socialization is high and they like expressing
themselves with others without any restraint.
The Americans have a „work hard and party harder‟ kind of attitude. Therefore there
are high chances that the hippy, cool and in trend designs and prints is going to attract the
Americans and be successful at creating an impact. They would also want to buy new prints
as they are made available.
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CHAPTER 5
CORPORATE AND BUSINESS LEVEL STRATEGY
5.1 Corporate Level Strategy
In terms of the strategic direction a company can take there are four options four ways
a company can do that. We look at the Ansoff Matrix and decide on our strategy.
Market Penetration
Product Development
Market Development
Diversification
Figure 5: Ansoff Matrix
Market development involves offering the existing products to new markets. It does
entail some product development. In terms of packaging and services. The market
development for Butta will take two forms.
1. New segment: In the long run the company wants to not only serve the Nepali residents in
the host country but the native population in that country as well.
2. New Geographies: The prime target for the company is going to be the urban population of
some of the prominent art centered cities. Cities such as New York, and Philadelphia are
known for their art culture. These cities with more liberal political inclinations are going to be
segments where the company can find opportunities. Also, places where Buddhism is
increasing can be more beneficial for the company.
Products
New
Existing
Markets
Existing New
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5.2 Business Level Strategy: Base of Competitive Advantage
Figure 6: Bowman's Strategic clock
To identify the business level strategy of Butta, our group asked two simple questions
based on source of competitive advantage and scope of operations (Michael Porter) to the
founder, Sabin Bhandari:
i. What does your company compete on i.e. cost or uniqueness?
ii. Does your company serve a broad market or a narrow market?
We came to know that Butta‟s establishment was a response of parent company
Threadpaints to cater the need of a niche market. When buyers wanted t-shirts with custom
designs, Threadpaints could not meet them under the same brand. The way for Butta,
meaning designs, was paved to meet this gap. Rather than competing on price, we found out
that Butta tries to achieve competitive edge by offering something unique in the market i.e.
artistic/ custom made products. In addition, it also serves a narrow market composed of
customers who are keen towards art and want a personalized product.
We have also tried to utilize Bowman‟s strategy clock that further divides Porter‟s
generic strategies into 8 sub-strategies.
The perceived product/ service benefit is high. The reason for this is that it positions
itself as a platform that allows artists to express themselves and bring Nepalese arts to life. In
turn, it provides its customers with unique and personalized products. These are important
value addition done by the company.
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The prices of Butta‟s products are also high as it charges a price premium for the value
additions and as such the prices of its products are higher than that of competitors. These
facts helped us establish that the company is following a focused differentiation strategy.
Butta is narrowly focused on a single market and thus is able to understand and serve market
better. Special needs (personalization and artistic) make it difficult for other big competitors
such as Juju, KTM city, Phalano etc. to serve the needs of Butta‟s target market. This will act
as a barrier to entry. The other advantages that Butta can leverage from following focused
differentiation strategy is that it can charge premium prices and also develop tremendous
expertise about goods and services they offer.
5.3 Michael Porter’s National Diamond Model
We are using the Porter Diamond Model to establish how Butta can translate national
advantages into international advantages.
Figure 7: Michael Porter’s National Diamond
1. Factor Conditions
Butta‟s strength lies in its great team of creative minds and art enthusiasts who can innovate
and upgrade with time. Similarly, it has outsourced efficient and low cost labors and plant for
production having reasonable productivity which can also be one of the reasons for creating
an international competitive position. .However, the US market is huge Butta lacks physical
infrastructure and faster shipment facility which they should expand as the market expands in
US.
2. Related and supporting industries
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In Nepal there are many competitive dealers who supply fabrics from China, India, and
Bangladesh. Therefore, Butta has been able to enjoy high bargaining power with the
suppliers. The supporting companies of Butta also include Nepalese stores and franchises that
are gaining huge popularity in the US market like Himalayan Java, Bajeko Sekuwa etc. with
whom whom we will be forming a strategic alliance. Major ecommerce sites in US like
Amazon, e-bay etc. where we will be putting our t-shirts can also be buttas supporting
industry for increasing demand and sales.
3. Home demand conditions
The buyers in the US are sophisticated and less price sensitive. They like wearing what
best reflect their personality and in-trend designs. Attire businesses in US are expected to
improve and innovate constantly else they won‟t be able to sustain in the market. Unlike
Nepal there is fast fashion and fast delivery in US as directed by the customers. There will be
a huge competition in the US market that will definitely drive innovation and quality. They
need to differentiate and customize their product and anticipate follow the trend to compete in
the US demand conditions.
4. Firm strategy and rivalry
Butta should compete with them on the Nepalese art and stories behind the art. They
should target the niche market of art loving consumers who would definitely want to support
art by wearing them. Most of the T-shirts sold in US are via the online retailers like Amazon
and major department stores like Walmart. Therefore, a separate website for the US market as
well as mobile based application will compliment the way business is done in the US and
help to gain competitive advantage at the same time. In their website and application special
focus should be given to stories behind each art and artists which needs to be backed by
effective digital marketing strategies.
The apparel industry in US is already successful and stable with many rivals. Therefore
it should try to lifestyle brand and cater their target market and not be mainstream attire. It
needs to encourage its artists to follow the trends and demands of the US market and present
art in such a way that it successfully maintains a brand value in the American market.
However, Butta should be very strict to inspect that their designs do not infringe on any
persons or companies‟ trademark rights and copyrights.
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CHAPTER 6
THE ORGANIZATION OF INTERNATIONAL BUSINESS
6.1 International Strategy
There are four main international strategies available:
1. Global
2. Complex Export
3. Multi domestic
4. Simple Export
The t-shirt industry is especially prone to the global-local dilemma. This is going to be
tricky for Butta. One hand t-shirt business is one of the most localized businesses, however,
the competitive advantage of Butta comes from being uniquely Nepali. By hiring Nepali
artists and creating a blend of Nepali art heritage with modern popular sensibility and culture,
designs on Butta shirts create a strong differentiation. Here we are suggesting a Global
Strategy for the Company, with only minor localization.
In reality any one strategy cannot be distinct; we are recommending a transition from
simple export to move towards a global strategy. It is mostly going to be dependent on the
geographic concentration.
High
Low
Global
Complex Export
Multi-domestic
Simple Export
Dispersed Concentrated
Figure 8: International strategy
Co
ord
inatio
n o
f Activities
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6.2 Market Selection
We have already selected the Market we want to enter. This is because of multiple
factors. One is the company‟s desire to enter the USA. The second Factor is that USA is the
largest importer of T-shirts worldwide. This is seen from the Trade Map. The third factor is
that the American market is more culturally attuned to consumption of t-shirt and art on t-
shirts and also because it is a huge market. USA is the center of the global pop-culture. Butta
shirts have designs that play with the pop-culture. And USA is the center of the global Pop.
The final factor is that, the company is receiving demand from the states and has informally
already entered the market through informal export. Informal export is done in piece by piece
basis through the traditional (snail)mail service.
We have also conducted a PESTLE analysis for the American Market.
1. Political Analysis:
Threat of terrorism
Slowdown of economy
Progressive taxation system
Ranks 18 in 176 according to corruption perception index
Politically stable
2. Economic Analysis:
GDP close to a quarter of world total.
US dollar is recognized as a global currency.
The US economy expanded an annualized 3.2 percent on quarter in the third quarter
of 2017, slightly below a second estimate of 3.3 percent.
3. Socio-cultural Analysis:
The US remains an inequitable society, with the richest quintile making six times as
much money as the poorest quintile
The current population of the United States of America is 325,700,370 as of Sunday,
January 14, 2018, based on the latest United Nations estimates.
83.4 % of the population is urban (270,683,202 people in 2018)
The median age in the United States is 37.8 years.
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4. Technological Analysis:
Home to one third of the world‟s scientists and engineers, and accounts for one third
of global R&D expenditure.
Technological innovation within the private and educational sector has been
increasing, with each sector accounting for 70.0% and 14.0% of innovations,
respectively.
High bandwidth of internet with more than 80% of people using internet.
5. Legal Analysis:
Highly regulated market requiring rigorous compliance with rules and regulation.
U.S. copyright protection follows “original works of authorship,” giving the owner
exclusive rights to sell or reproduce their work.
Ranked 6th in ease of doing business and 49th in starting a business.
6. Environmental Analysis:
Focus on trade centric rather than considering environment
Cotton dye to be considered
To gauge the relative distance of the American market we have done a CAGE
comparison between India, USA and Australia. We have included India because it is the
closest market and Australia because it has a a high growth in Nepali population, which is
one of the target segment for the company.
The CAGE (cultural, administrative, geographic, and economic) framework offers a
broader view of distance and provides another way of thinking about location and the
opportunities and concomitant risks associated with global arbitrage.
USA AUS IND
Cultural Distance Far Far Close
Language
English, would not be a
problem for Butta
English, would not be a
problem for Butta
Hindi and Nepali have
shared heritage
Religion Christianity Christianity
Similar religious
traditions
Ethnicity Different Race Different Race
Higher racial
similarities
NRNs 59,490 24,636 above a million
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6.3 Entry Modes
We recommend a staged international expansion with the strategy for five year. The
following are the ways a company can enter foreign market, we will not describe each
individual point, but will only discuss on our own option
1. Exporting
2. Wholly owned subsidiary
3. Franchising
4. Licensing
5. Joint Venture/ Strategic Alliance
Current Status
Informal Entry: In the United States, Goods valued under $2500 does not need to be
cleared by a custom. This is mostly applicable for personal Import. Since the purchase is
going to be online, the goods will be mailed to the buyer separately. The current status of
export for the company is Informal Entry or Indirect Export. The company receives its order
on its online form, and uses the snail mail to deliver the parcel to its intended customers.
The customers pay for the shipping. Through snail mail it reaches the customer in about two
weeks.
Future Prospect
Administrative Far Far Close
Trade Bloc
NAFTA, North
America South East Asia, SAFTA, Bilateral ties
Currency USD AUD Rupee
Political system Democratic Democratic Democratic
Geographic
Distance Far Far Close
Distance Physical Remoteness Physical Remoteness Shared border
Sea Links yes, via India Yes, Via India Not necessary
Economic Distance Far Far Close
GDP 18.57 trillion USD 1.205 trillion USD 2.264 trillion USD
Consumer income
difference Large Large Not much
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If we have to state our choice for mode of entry, it is JV/Strategic Alliance. But we
recommend a phased approach to this. Strategic alliances make sense for Butta since Butta is
a company that is based on strategic alliance between the tshirt producers and the artists.
Butta‟s appeal is towards art lovers within a niche market. It might be better for the company
to prepare a plan for the longer run, and not only focus on stray orders.
Timeline
Year 0 Year 1 Year 2 Year 3 Year 4
Informal
Entry
E-commerce in
host country
Strategic Partnership for
branding, space and other
goods
Export only
Designs
Explore other
opportunities
Year 0: This is what is happening right now. The company is relying on Informal Entry. Up
to informal packages addresses to individuals the US custom allows purchases worth USD
2500 to pass without trouble.
Year 1: The first move would be to create a website that is targeted for international
customers. Butta website is listes as Butta.us. This is a good domain. The company can also
consider listing it‟s products on more popular online marketspaces such as Amazon. Doing
this can increase the visibility of the product.
Year 2: Year three is when the company should take the physical leap. Strategic partnership
can be started with two types of partners.
1. Click Partners: Online partners like YouTuber‟s and other Content creators can
help the company gain brand recognition. The company can provide them with merchandise
for their channela nd the company can instead get word of mouth advertisement.
2. Brick Partner: Nepali owned businesses can be the company‟s offline partners.
Special focus should be on Nepali companies operating a franchise in USA, such as Bajeko
Sekuwa, or Himalayan Java. The partnership should be to place few t-shirts in these places.
For example, If the company enters into an agreement with a coffee shop than ideally, people
who come to buy the coffee will buy t-shirts, and people who come in just for the t-shirt will
also buy coffee while at the store.
Year 3: Because exporting to USA is going to be subject to tariff, it is ideal if the company
can only send the designs and use cheaper tshirt that they buy in the host country itself. This
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can only be done if they find a partner who is willing to take the design and produce it and
sell it. Another option for the company is to license the use of their design. After all, the goal
at butta is to sell Art.
Year 4: The company once it operates in an international market will gain valuable insight
and will discover challenges and opportunities. After a couple years of working the company
can look for other lucrative markets. It can also tweak its business model if necessary.
6.3 Organizational Structure
Vertical differentiation:
Considering the Butta‟s structure in itself, it has relatively flatter hierarchy. Since it
consists of a team of only 16 core members, decisions are participative in nature. Major
decisions are taken through meetings while core members are empowered to make routine
decisions.The mode of entry in the U.S. market for Butta is to enter into a strategic alliance
with a U.S. based t-shirt printing company. For this purpose, it would make sense to
centralize some of the decisions and decentralize others depending upon the type of decision.
Decisions regarding major financial expenditures, legal issues, partnerships, channels etc
should be taken by international division of Butta which is situated in Nepal. The U.S. based
t-shirt firm will make operational decisions relating to production, human resource
management and marketing. Butta should maintain centralized control over their core
competency and major decisions and decentralize minor decisions to the U.S. based firm.
The major reason for following the centralized structure is to avoid over reliance on the
strategic partner and to maintain power and control with the firm so that the strategic partner
would not be able to by pass Butta.
Figure 9: Organizational structure
White space
Domestic division
General Manager
Threadpaints
Domestic Division
Sabin Bhandari
Butta
Domestic Division
General Manager
Little Things
International Division
General Manager
U.S.
General Manager
(Threadpaints, Butta, Little things)
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Horizontal Differentiation:
The Company “Whitespace” is still at its infant stage when it comes to expanding
abroad. It has created a separate brand called “Little Things” to cater to the needs of foreign
market and it is already exporting to a handful of countries like India, Australia etc. Butta is
also looking forward to export to countries like U.S. and Australia after realizing the demand
for artistic t-shirts from Nepalese people residing in those countries. The company noticed
that many orders in their websites were made by Nepalese people residing in these countries.
In addition, many Nepalese students studying abroad purchase dozens of t-shirts from Butta
when they return to Nepal so that they can later give it to their friends in the foreign country.
As a consequence, Butta has already started exporting informally through courier and postal
services. According to Sabin Bhandari, the cost per t-shirt charged by postal service is
approximately Rs. 500.
Since the company is still at its infancy, it makes sense to group all their international
activities into an international division. The international division would be then responsible
to handle all the export related activities of all these three brands incorporated under
Whitespace. This international division would be organized on the basis of geography. There
would be a general manager who is responsible for managing sales of all three products in a
country. In other words, for managing sales in U.S., there would be a general manager
responsible for it. If Butta expands to Australia, a different general manager needs to be
appointed.
Figure 10: Supply chain of Butta
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CHAPTER 7
SUMMARY AND RECOMMENDATIONS
Butta is a t-shirt manufacturing company which promotes art of Nepal. And there are not
many reasons why a person staying in United States should buy a t-shirt that has art which is
unknown to them. So, what we recommend to the company is to include a short story in the t-
shirt itself. It may be a small tagline as well which will to tell a story of the art. That is
instead of just printing the art of Buddha, Butta can also write “The enlightened one” or
“From the birth place of Gautam Buddha” in the t-shirt. Every art has a story to tell and all
the buyers may not be able to understand the art and at the same time so a short story or a tag
line will go a long way to make an art successful. Butta is encouraging the art of Nepal to sell
t-shirt in United States but there might be artist residing there as well and they may want to
print their own art in the t-shirt so Butta should encourage local artist to upload their art to be
printed as well. It will bring the feeling of oneness of the company to the people of US. The
encouragement of artist is the way to success for the company so Butta should motivate there
artist to produce quality art by providing trainings and the like.
To sum up, following points should be considered:
1. There is a great power in storytelling and Butta should capitalize on this. It should
speak out loud the stories behind the art and artists so that the product becomes
something that is more than just a t-shirt. It should learn from Umano, a t-shirt
company that prints art done by children and tells stories in the process.
2. Youtube channels like Paradygm TV, smz official, Kichhyvlogs etc. are increasingly
growing in popularity as well as viewership. Butta can send t-shirts and other apparels
as gifts to these Youtubers so that the products get featured in their channels. This
would help to create brand awareness about Butta among the vast internet audience.
3. To create a buzz and gain talented artists, it can also collaborate with K.U. School Of
Arts, Shrijana College of Fine Arts, E-Arts Nepal etc.
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4. Artists create the designs and buyers wear the t-shirts containing those designs. It
would be a great value addition if buyers could to create own design and wear them.
This will push the company towards a true mass- customizing company.
5. Butta should introduce schemes such as group discounts, festival discounts, etc. and
host contests and sponsor events regularly to keep up the hype for Butta‟s products.
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REFERENCES
International Trade Center. (2017, January 12). Trade Map. Retrieved January 12, 2017, from
Trade Map fof International Business Development:
https://www.trademap.org/Country_SelProductCountry.aspx?nvpm=1|842||||6109|||1|1|
1|1|1|1|
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APPENDICES
ANNEX 1
List of importer
Product: 610910 T-shirts, singlets and other vest of cotton, knitted or crocheted
Importers
Select your indicators
Value
impor
ted in
2016
(USD
thous
and)
Trade
balance
in 2016
(USD
thousan
d)
Quanti
ty
import
ed in
2016
(In
tons)
Unit
value
(USD/u
nit)
Annua
l
growt
h in
quanti
ty
betwe
en
2012-
2016
(%)
Share
in
world
impor
ts (%)
Averag
e
distanc
e of
supplyi
ng
countri
es (km)
Concentrat
ion of
supplying
countries
Average
tariff
(estimat
ed)
applied
by the
country
(%)
Ease
of
doing
busine
ss
rankin
g
Number of
non-tariff
requireme
nts
applied by
the
country
World
2314
4668 4189922 0 100 5072 0.08
United
States of
America
4015
714
-
3582908 366979 10943 1 17.4 6422 0.08 13.3 8
Germany
2440
130
-
1321866 132104 18471 0 10.5 5041 0.18 4 17 6
United
Kingdom
1564
253
-
1025611 95125 16444 0 6.8 5413 0.12 4 7 6
France
1323
375 -799442 72874 18160 4 5.7 5714 0.15 4 29 6
Spain
1131
798 -444004 75498 14991 5 4.9 5211 0.2 4 32 6
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ANNEX 2
List of supplying markets for the product Exported by Nepal in 2016List
Product: 610910 T-shirts, singlets and other vests of cotton, knitted or crocheted
Importer
s
Select your indicators
Value
exported
in 2016
(USD
thousand)
Trade
balanc
e 2016
(USD
thousa
nd)
Share
in
Nepal
's
expor
ts (%)
Quant
ity
export
ed in
2016
(tons)
Growth
in
export
ed
value
betwee
n 2012-
2016
(%,
p.a.)
Rankin
g of
partner
countri
es in
world
imports
Share
of
partner
countri
es in
world
imports
(%)
Averag
e
distan
ce
(km)
Concentrati
on of all
supplying
countries of
partner
countries
Average
tariff
(estimate
d) faced
by Nepal
(%)
Ease of
doing
busine
ss
Total 2876 -10289 100 0 33 100
United
Kingdom 2136 2136 74.3 92 139 3 6.8 5413 0.12 0 7
Germany 268 267 9.3 6 11 2 10.5 5041 0.18 0 17
United
States of
America 148 133 5.1 5 -7 1 17.4 6422 0.08 16.5 8
France 92 92 3.2 4 -3 4 5.7 5714 0.15 0 29
Belgium 22 22 0.8 1 30 9 3.1 4370 0.14 0 42
Australia 22 22 0.8 8 -3 12 1.8 8709 0.31 0 15
Ireland 17 17 0.6 1 31 0.6 5535 0.17 0 18
Slovenia 14 14 0.5 1 14 47 0.2 2289 0.14 0 30
Spain 13 13 0.5 1 -27 5 4.9 5211 0.2 0 32
Japan 13 13 0.5 1 -23 6 4.9 3503 0.33 0 34
Czech
Republic 13 13 0.5 1 -14 21 1 4578 0.18 0 27
Denmark 12 12 0.4 0 19 1.3 4631 0.21 0 3
Austria 11 11 0.4 0 -16 11 1.9 1784 0.26 0 19
Switzerla
nd 11 11 0.4 0 11 24 0.8 4521 0.11 0 31
Italy 10 10 0.3 1 -14 7 4.3 3822 0.09 0 50