a report on the prospects of butta private limited in the ... · butta has been selling its...

Running Head: BUTTA PRIVATE LIMITED

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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


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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


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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


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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.


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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


22

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)


23

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


24

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.


25

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.


26

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|


27

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


28

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

a report on the prospects of butta private limited in the ... · butta has been selling its...

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