Harvard Case - Norlha: Scaling Up Sustainable Luxury on the Tibetan Plateau
"Norlha: Scaling Up Sustainable Luxury on the Tibetan Plateau" Harvard business case study is written by Haitao Yu, Diane-Laure Arjalies. It deals with the challenges in the field of Strategy. The case study is 14 page(s) long and it was first published on : Apr 12, 2019
At Fern Fort University, we recommend Norlha adopt a multi-pronged strategy to scale its sustainable luxury business while maintaining its ethical and environmental commitments. This strategy involves a combination of organic growth, strategic partnerships, and targeted investments in technology and infrastructure.
2. Background
Norlha is a social enterprise based in the Tibetan Plateau, producing high-quality, sustainable cashmere products. Founded by a group of Tibetan women, Norlha empowers local communities through fair wages and ethical sourcing practices. The company faces the challenge of scaling its operations while maintaining its commitment to sustainability and social responsibility.
The main protagonists of the case study are:
- Tsering Wangmo: Founder and CEO of Norlha, leading the company's growth and sustainability efforts.
- The Tibetan women: The core of Norlha's workforce, benefiting from fair wages and empowerment through the company's operations.
- The Tibetan Plateau: The unique environment where Norlha sources its cashmere, presenting both opportunities and challenges for the company's sustainability.
3. Analysis of the Case Study
Norlha's success is rooted in its competitive advantage based on environmental sustainability, ethical sourcing, and unique product quality. This advantage is further strengthened by its strong organizational culture focused on community empowerment and social responsibility.
Porter's Five Forces analysis reveals the following:
- Threat of new entrants: Moderate, as entry barriers include specialized knowledge of cashmere production and strong ethical sourcing practices.
- Bargaining power of buyers: Moderate, as Norlha caters to a niche market of luxury consumers willing to pay a premium for sustainable products.
- Bargaining power of suppliers: Low, as Norlha directly sources cashmere from local herders, fostering a strong relationship and ensuring ethical practices.
- Threat of substitutes: Moderate, as synthetic fibers offer a cheaper alternative, but lack the luxury and sustainability appeal of Norlha's cashmere.
- Competitive rivalry: Moderate, as Norlha faces competition from other luxury brands, both sustainable and traditional.
SWOT analysis reveals:
Strengths:
- Sustainable and ethical practices: Strong brand image and competitive advantage.
- High-quality cashmere products: Unique and desirable in the luxury market.
- Strong organizational culture: Empowering local communities and fostering loyalty.
- Growing demand for sustainable luxury: Market opportunity for expansion.
Weaknesses:
- Limited production capacity: Restricts growth potential.
- Lack of brand awareness: Requires significant marketing investment.
- Limited access to technology and infrastructure: Hinders operational efficiency.
- Dependence on local cashmere supply: Vulnerable to fluctuations in production.
Opportunities:
- Expanding into new markets: Targeting international luxury consumers.
- Developing new product lines: Diversifying beyond cashmere to offer a wider range of sustainable luxury goods.
- Leveraging technology and analytics: Improving production efficiency and customer engagement.
- Strengthening partnerships: Collaborating with other sustainable brands and organizations.
Threats:
- Fluctuations in cashmere prices: Affecting profitability and product pricing.
- Increasing competition from other sustainable brands: Eroding market share.
- Negative environmental impacts: Potential for criticism regarding cashmere sourcing.
- Economic instability in the region: Threatening supply chain and operations.
Value chain analysis highlights the importance of ethical sourcing, skilled craftsmanship, and strong brand marketing in Norlha's value creation.
Business model innovation is crucial for Norlha's growth. This can be achieved through:
- Direct-to-consumer sales: Leveraging online platforms and building a loyal customer base.
- Strategic partnerships: Collaborating with luxury retailers and online marketplaces.
- Product diversification: Expanding beyond cashmere to offer complementary sustainable luxury goods.
Corporate governance plays a vital role in maintaining Norlha's ethical and sustainable practices. This includes transparent financial reporting, stakeholder engagement, and a strong commitment to social responsibility.
4. Recommendations
Short-term (1-2 years):
- Invest in technology and infrastructure: Upgrade manufacturing processes, implement information systems for inventory management and customer relationship management, and improve online presence.
- Expand online sales channels: Leverage e-commerce platforms and social media marketing to reach a wider customer base.
- Develop new product lines: Introduce complementary sustainable luxury goods, such as scarves, accessories, and home furnishings, leveraging existing craftsmanship and sourcing practices.
- Strengthen partnerships: Collaborate with luxury retailers, online marketplaces, and other sustainable brands to increase brand visibility and market reach.
- Invest in brand marketing: Develop a comprehensive marketing strategy targeting luxury consumers, emphasizing sustainability and ethical sourcing.
Long-term (3-5 years):
- Expand production capacity: Invest in new facilities or partner with local artisans to increase production volume while maintaining ethical standards.
- Diversify sourcing: Explore alternative sustainable materials and production methods to reduce reliance on cashmere and mitigate environmental risks.
- Develop a global strategy: Target new markets, particularly in Europe and North America, leveraging online platforms and strategic partnerships.
- Invest in leadership development: Empower local women to take on leadership roles within the organization, fostering a culture of innovation and growth.
- Strengthen community engagement: Implement programs to support local communities and promote sustainable practices, further enhancing Norlha's social impact.
5. Basis of Recommendations
These recommendations are based on a careful consideration of Norlha's core competencies and mission, external customers and internal clients, competitors, and attractiveness based on quantitative measures such as ROI and market potential.
Key assumptions:
- Continued demand for sustainable luxury: Consumers are increasingly willing to pay a premium for ethically produced and environmentally friendly products.
- Technological advancements: Continued innovation in manufacturing processes, information systems, and online platforms will support Norlha's growth.
- Government support for sustainable businesses: Continued policy support for ethical sourcing and sustainable practices will benefit Norlha's operations.
6. Conclusion
By adopting a strategic approach that balances growth with sustainability, Norlha can scale its business while maintaining its ethical and environmental commitments. This strategy will allow the company to reach a wider audience, strengthen its brand image, and further empower local communities.
7. Discussion
Alternative options:
- Mergers and acquisitions: Acquiring smaller sustainable brands or partnering with existing luxury companies could offer faster growth but require careful integration and cultural alignment.
- Outsourcing production: This could increase production capacity but might compromise ethical and environmental standards and potentially weaken Norlha's brand image.
Risks and key assumptions:
- Fluctuations in cashmere prices: This could impact profitability and require adjustments to pricing and product development.
- Competition from other sustainable brands: This requires continuous innovation and differentiation to maintain market share.
- Negative environmental impacts: Careful sourcing and production practices are essential to avoid criticism and maintain the brand's reputation.
8. Next Steps
- Develop a detailed strategic plan: Outline specific goals, timelines, and resource allocation for each recommendation.
- Establish a dedicated team: Assemble a team with expertise in marketing, technology, finance, and operations to implement the strategy.
- Monitor progress and adapt: Regularly review progress against key performance indicators and adjust the strategy as needed.
By taking these steps, Norlha can successfully navigate the challenges of scaling its business while remaining true to its values and contributing to the well-being of the Tibetan Plateau and its communities.
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Case Description
Norlha Textiles was a yak wool enterprise located on the Tibetan Plateau in China. Founded in 2007, the company designed and produced yak wool textiles made by Tibetan nomads and sold globally to customers that included such luxury brands as Hermès, Louis Vuitton, and Yves Saint Laurent. In 2015, the company employed 120 local people, enabling them to adapt to the modern world while preserving their local traditions. Also in 2015, the local government invited the company to expand its model to another nomadic community on the Tibetan Plateau. Although this seemed to be a good opportunity to grow the company's influence, the chief executive officer hesitated, reflecting on the pros and cons. Was such a partnership the right opportunity to grow the company?
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