Running Head: BUSINESS MODEL IN CHINA CHYANGRA PASHMINA PRODUCTS 1

BUSINESS MODEL IN CHINA – CHYANGRA PASHMINA PRODUCTS

Submitted by:

Aabhash Shrestha (177095)

Gaurav Bhattarai (177011)

Akriti Bhujel Chhetri (177017)

Riya Bhochhibhoya (177014)

Richa Adhikari (177002)

Group 4

KATHMANDU UNIVERSITY SCHOOL OF MANAGEMENT

Pichhe Tole, Gwarko, Kathmandu

Submitted to:

Dr. Kalyan Sharma

Faculty of Doing Business in China

Bachelor of Business Administration (BBA-Honors)

DATE: April 24, 2021

BUSINESS MODEL IN CHINA CHYANGRA PASHMINA PRODUCTS 2

Table of Contents

Introduction.................................................................................................................................................3
Background – Nepal and China Relationship...........................................................................................3
Business Model – Pashmina Industry......................................................................................................3
China and Nepali Pashmina Industry...........................................................................................................3
Chinese Culture and Pashmina................................................................................................................3
Pashmina Industry in Figures...................................................................................................................3
Chinese Area of Focus for Business in China............................................................................................5
Feasibility Study – SWOT Analysis...............................................................................................................5
Strengths.................................................................................................................................................5
Weaknesses.............................................................................................................................................5
Opportunities..........................................................................................................................................5
Threats.....................................................................................................................................................7
SWOT Table in Gist..................................................................................................................................8
Conclusion...................................................................................................................................................8
References...................................................................................................................................................9
BUSINESS MODEL IN CHINA CHYANGRA PASHMINA PRODUCTS 3

Introduction

Background – Nepal and China Relationship

China is the second largest trading partner of Nepal. It surrounds northern border of

Nepal. Nepal and China officially established diplomatic relation in 1955. At present, Nepal and

China enjoys friendly and cordial relation by respecting each other's sovereignty, territorial

integrity and independence. Nepal primarily exports handicraft products, pashmina, tea, wheat

flour, noodles etc. to China and imports ready-made garments, footwear products, chemical

fertilizers, electrical goods, machinery parts, pipes, raw silk, telecommunication equipment and

television equipment and parts from China.

In 2017/18, total exports to China stood above US$ 23 million. During the same period,

import from China stood above US$ 1.5 billion. Trade deficit of Nepal with China has been in an

increasing trend. In the year 2019/20, Nepal’s export earnings from China decreased around 29

%. Although, China has given zero tariff entry facility to over 8,000 Nepali products since 2009,

Nepal hasn’t been able to bring the trade deficit down. Nepal regularly participates in various

trade fairs and exhibitions organized in China. According to the exporters, Nepal has not even

been able to capitalize on its potential of exporting agro and livestock products due to lack of

internationally accredited labs in the country.

The import-export gap with the northern neighbor has been widening due to low exports

from Nepal. Addressing this issue, we have planned to export authentic chyangra pashmina in

china where we would stand as a luxury and quality product.

BUSINESS MODEL IN CHINA CHYANGRA PASHMINA PRODUCTS 4

Business Model – Pashmina Industry

Resources: Production Process and Facilities:

Chyangra wool, Chemicals, etc Machines in Nepal rather than Tibet

The imported pashmina yarn costs Rs.

14,000-15,000 per kg
Unique Proposition: Customer Segment:

High quality and luxury product Targeted to mid and high income level groups

China and Nepali Pashmina Industry

Chinese Culture and Pashmina

According to historians, during the rule of Chinese emperor Cheng, scarves were made of cloth

and were used in order to identify the officers and the ranks of the Chinese warriors. But then

with the passage of time women too began to use them, and today it is a completely new avatar.

At present the Chinese are adapting fast fashion and inclined towards luxury goods. Thus, the

demand of pashmina is high in Nepal.

Pashmina Industry in Figures

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Trend of Export of Pashmina

3000000

2500000

2000000

1500000

1000000

500000

From the above graph, it is seen that the trend of export of pashmina to the international

countries is decreasing. Pashmina is one of the top 10 foreign currency earners for Nepal. Nepal

exported pashmina products worth Rs1.43 billion in the first seven months of this fiscal year,

according to TEPC. According to Nepal Rastra Bank records, export revenues stood at Rs2.45

billion in fiscal 2016-17, which came down to Rs2.28 billion in fiscal 2017-18. Shipments in the

first eight months of fiscal 2018-19 ending mid-July were valued at Rs1.52 billion, down 1.14

percent year-on-year.

Pashmina exports(in Rs. Billion)

3
Pashmina exports(in
2.5
Year Rs. Billion)
2 2015/1
1.5 6 2.17
2016/1
1
7 2.45
0.5 2017/1
0 8 2.28
2015/16 2016/17 2017/18 2018/19
. 2018/1
9 1.53
2018/19*(until mid-
July)
BUSINESS MODEL IN CHINA CHYANGRA PASHMINA PRODUCTS 6

Chinese Area of Focus for Business in China

We would commence our business in Guangzhou which lies in Guangdong province. It is

the third-largest city in China with a population of more than 12 million. It is in the southern

province of Guangdong, which borders Hong Kong through the city of Shenzhen. It is also a

national historical and cultural city, an international business center and an integrated transport

hub. The city has well equipped infrastructure, strong industrial base, pleasant environment for

the business. The city additionally has a good level of intellectual property (IP) awareness and

government support for IP protection and enforcement as the high proportion of Chinese national

patents are filed by the companies. The city is also included in The Greater Bay Area (GBA)

plan, a political initiative which is expected to reach USD 3.6 trillion by 2030. It aimed at

creating one of the largest urban areas both in size and population to offer regional competitive

advantages which can be plus point for our business as well.

Feasibility Study – SWOT Analysis

In order to understand the feasibility of Pashmina business in China, we have conducted a

SWOT analysis which is elaborated as follows:

Strengths

 Internationally recognized:

Pashmina is one of the most recognized Nepalese product and preferred by international

consumers. It can be amplified with the fact that 95% Pashmina considered for

exportation as Nepali pashmina products are branded under the trademark Chyangra

pashmina which represents high quality.

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 High Quality Pashmina:

Nepalese Pashmina has been accounted for the best product for its softness and

durability. It is the highest grade, finest cashmere in the world featuring the rare fibers of

the Chyangra mountain goats of the Nepalese Himalayas due to which it has gained a

wide popularity in the international market.

 High demand in China:

The demand of Nepalese Pashmina is comparatively high in China after USA after

signing the agreement with One Belt One Road International Trade Platform of CIC

Mutual Trade Investment Company for sale of Nepali pashmina in China. The company

has agreed to purchase between 200,000 and 500,000 pieces of pashmina shawls every

year.

Weaknesses

 Lack of processing plants:

In order to produce the pashmina, the wool is collected from Nepal and further sent for

processing in foreign nations such as Tibet as they have suitable technologies required

and again the processed wool is imported back to the country as the raw material to

produce exportable goods. This along with the import duty of 5% and 15% for raw wool

and refined pashmina, adds up to the cost of pashmina producers.

 Traditional manufacturing methods:

Although the traditional manufacturing methods, quality and designs are unique selling

points for Nepalese products in niche market, due to this, it takes a lot of time to produce
BUSINESS MODEL IN CHINA CHYANGRA PASHMINA PRODUCTS 8

the Pashmina. Similarly, there is no possibility of mass production as the methods are

traditional.

 Decline in Pashmina Shipments:

Although Nepal’s Pashmina industries have the high level of market in the international

market and also best-known exports; has been unraveling in recent years. This might be

because of a surge in a cheap counterfeit, lack of processing facilities, shortage of skilled

labor, over-production and under cutting. Nepal exports pashmina to 47 countries of the

world as stated by Pashmina Industry Association and also in order to boost exports; the

government has been providing cash incentive to exporters of products listed as having

high export potential. Despite the government support, pashmina shipments have been

declining every year.

Opportunities

 OBOR and huge demand in China:

The demand of Nepalese Pashmina is comparatively high in China after signing the

agreement with One Belt One Road International Trade Platform of CIC Mutual Trade

Investment Company for sale of Nepali pashmina in China. The company has agreed to

purchase between 200,000 and 500,000 pieces of pashmina shawls every year.

 Geo Specific Himalayan Goats:

The Himalayan Goats through which pure Chyangra Pashmina is produced is found only

in few parts of the world including Jammu, Kashmir and few parts of Nepal. Manang,

Mustang and Dolpa districts are the only the largest producers of pashmina among the 14

districts in the country where this product is produced in Nepal. These three districts

produce at least 4 tonnes of pashmina equally. As per a study conducted four years ago
BUSINESS MODEL IN CHINA CHYANGRA PASHMINA PRODUCTS 9

(2015 A.D.) by the Enhanced Integrated Framework (EIF), a wing under the World Trade

Organization (WTO), there are 50,000 goat farmers only in Nepal, each with 15-20

animals. A goat can produce enough wool to make up to two pashmina shawls during a

season.

 Government Assisted Business:

The government of Nepal has listed Pashmina products under Nepal Trade Integration

Strategy (NTIS) products as of which it has been providing the incentives of 3-5 percent

to the exporters of Pashmina. Besides, Nepal Pashmina Industries Association (NPIA)

also assists people residing in high hills for Chyangra farming for production of top

quality Pashmina, ensure quality of Pashmina by providing Pashmina trademark and

protecting the rights and privileges of Nepali Pashmina sector.

 Luxury Branding in China:

Nepali pashmina products are being exported under the collective trademark of

“Chyangra Pashmina”. This branding has helped the Nepali pashmina to set its brand in

the international market as a high quality, handcrafted and luxury pashmina product in

comparison to its competitors.

Threats

 Market accessibility:

In a research, it was estimated that 37% of products that pass for the US market fail in the

China market as the market environment in China is completely detached from most

other economies in the world, making it difficult to access the Chinese market. 

 Culture and language barrier:

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Due to the culture and language barrier the business can face several misunderstandings

and miscommunication in China as the local people might not possess the strong

understanding of both Chinese and English language. 

 Strict regulations:

Lengthy administrative procedure in order to take permit, register and get license from

the government and additionally, the Chinese government provide standard business

license detailing the activities that the firm is permitted to undertake. And also, the

government has set the strict testing and standard requirements specially for the imported

goods, foreign manufacturers. 

 Counterfeit Products:

Intellectual Property Rights (IRP) challenges as 80% of the world's counterfeit goods

come from china. Counterfeit products harming the image of authentic Nepali pashmina. 

SWOT Table in Gist

Strengths: Weaknesses:

 Internationally recognized  Lack of processing plants

 High Quality Pashmina  Traditional manufacturing methods

 High demand in China  Decline in Pashmina Shipments

Opportunities: Threats:

 OBOR and huge demand in China  Counterfeit Products

 Geo Specific Himalayan Goats  Market Accessibility

 Government Assisted Business  Cultural and Language Barrier

 Luxury Branding in China  Strict Regulations

BUSINESS MODEL IN CHINA CHYANGRA PASHMINA PRODUCTS 11

Conclusion

Therefore, in conclusion, as China is rich in culture and tradition and pashmina itself is a

famous product in the country, our business definitely has a scope in the Chinese market.

Commencing a pashmina retail store in China is a challenging task however, there is a huge

opportunity in front of us with the new Chinese young culture being attracted towards luxury and

quality clothing.
BUSINESS MODEL IN CHINA CHYANGRA PASHMINA PRODUCTS 12

References

Rauniyar, Ganesh. (2018). Pashmina Enhancement and Trade Support (PETS). Retrieved from:

http://www.intracen.org/uploadedFiles/intracenorg/Content/About_ITC/How_ITC_Work

s/Evaluation/Final%20Evaluation%20of%20Pashmina%20Enhancement%20and

%20Trade%20Support%20in%20Nepal.pdf

Rijal, Prahld. (2019). Nepali and Chinese officials stress road connectivity to boost tourist

arrivals from China. Retrieved from:

https://kathmandupost.com/money/2019/12/13/nepali-and-chinese-officials-stress-road-

connectivity-to-boost-tourist-arrivals-from-china

Shrestha, Ayam. (2017). Processing center sought to reduce pashmina wool imports. Retrieved

from https://myrepublica.nagariknetwork.com/news/processing-center-sought-to-reduce-

pashmina-wool-imports/

The Kathmandu Post. (2019). Processing of pashmina wool starts in Nepal. Retrieved from:

https://kathmandupost.com/money/2014/01/13/processing-of-pashmina-wool-starts-in-

nepal

Wikipedia contributors. (2019). Pashmina. In Wikipedia, the free encyclopedia. Retrieved from:

https://en.wikipedia.org/wiki/Pashmina
BUSINESS MODEL IN CHINA CHYANGRA PASHMINA PRODUCTS 13

Rough

Exports of Chyangra

Pashmina products

were nearly US$30

million in 2013

Exports of Chyangra Pashmina

products reached to US$50

million

Similarly, export of tea, pashmina and noodles increased by two-folds in the first 11 months compared
to the same period of fiscal 2016-17.The country exported tea worth Rs 27.4 million, pashmina (Rs 72.7
million) and noodles (Rs 80 million), according to

Feasibility Study

1. OBOR and huge demand in China

2. Geo Specific Himalayan Goats
3. Government Assisted Business
4. Luxury Branding in China